From Home Furnishing Business
Rent-A-Center Chairman Quits After Dispute with Board, Q3 Loss
Struggling rent-to-own operator Rent-A-Center (NASDAQ: RCII) said Chairman Steven Pepper resigned after the board of directors voted to “explore strategic and financial alternatives” that could include the sale of the company.
The company said Pepper’s resignation, which was announced a few minutes before Rent-A-Center reported a third-quarter loss of $12.6 million, occurred because he disagreed with the decision to explore alternatives.
Pepper has been a board member since 2013, and became chairman in June after longtime Chairman Mark Speese and two other directors were ousted following a proxy battle with activist investor Engaged Capital.
The company didn’t immediately name a replacement for Pepper.
In a statement, Rent-A-Center said the decision to explore strategic and financial alternatives was “in the best interests of the company and all of its stockholders.”
“Throughout the review process, which will be overseen by the company’s directors, the Rent-A-Center management team will maintain its focus on executing the company’s comprehensive strategic plan to continue improving results across the business,” the statement read. “We believe the efforts announced today will facilitate the board’s determination of the best path forward for maximizing value for all company stockholders.”
No timetable was given to complete the review, and the board also voted to suspend its quarterly cash dividend until the review is finished.
The quarterly loss, which equals 24 cents per share, reversed a profit of $6.18 million or 12 cents per share in last year’s third quarter.
Third-quarter revenues fell 7.2% to $644 million. Same-store sales at its core U.S. rent-to-own stores fell 5.1%.
Revenue from the core U.S. stores was down 8.1% to $442.8 million, while revenues from its Acceptance Now business, which offers rent-to-own options to consumers in traditional retail stores, was down 5.2% to $184.3 million.
The company said the revenue shortfall at Acceptance Now was due to the loss of two major customers – HH Gregg, which closed all of its stores following a Chapter 11 bankruptcy filing, and Conn’s, which switched its rent-to-own financing program to Progressive Leasing, a unit of arch-rival Aaron’s Inc.
Revenues at the core U.S. stores declined due to a lower store count and disruptions from hurricanes Harvey, Irma and Maria, the company said.
The third quarter included costs of $1.7 million due to damage from Hurricanes Harvey and Irma, and $200,000 from Hurricane Maria, which devastated Puerto Rico.