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From Home Furnishing Business

Tax Law Changes Reverse Q4 Loss at Rent-A-Center

A $77.5 million gain from the recently-enacted tax law helped struggling Rent-A-Center (NASDAQ: RCII) show a fourth-quarter profit of $34.8 million or 65 cents per share.

The rent-to-own operator, which hired financial advisers last year and is considering a sale of the company, had an operating loss of $54.9 million as revenues declined 6.6% to $639 million.

The company said sales at its core U.S. stores fell 6%, including a same-store sales decline of 3.6%. Revenues from its Acceptance Now business tumbled 9.1% due largely to the loss of business at HHGregg, which shut down following a Chapter 11 bankruptcy filing, and Conn’s, who switched its rent-to-own platform to rival Progressive Leasing.

Mitch Fadel, a longtime Rent-A-Center executive who rejoined the company in January as CEO, said the fourth quarter was “more challenging than expected” but said he is confident that a series of cost-cutting and merchandising initiatives will help turn around the company’s fortunes.

“I am excited to be back at Rent-A-Center to lead the organization through these challenging times and believe my experience spanning over 30 years in the business will be invaluable,” Fadel said. “I fully understand the headwinds the company is facing and will aggressively pursue a path that brings the company back to health.”

“In order to improve company performance, we are focusing our attention on reducing costs and improving cash flow. We also intend to improve traffic trends through a more targeted value proposition and customer centric approach,” he added. “In addition, we have also initiated efforts to more aggressively expand our franchising operations in order to enhance our brand in a more capital-efficient way.”

The company ended the quarter with 2,381 rent-to-own stores in the U.S. – down 25 from the beginning of the quarter – and 1,106 staffed Acceptance Now locations. That represented a net loss of 69 staffed locations.

The company said it closed 82 Rent-A-Center stores during the 2017 calendar year had a net loss of 325 staffed Acceptance Now locations.

For the calendar year, revenues fell 8.8% to $2.7 billion, and the company eked out net income of $6.65 million or 12 cents per share, due to benefits from the tax law. In 2016, the company had a net loss of $105.2 million or $1.98 per share.

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