Thread regarding Rent-A-Center Inc. layoffs

Outsider's Perspective

It's been interesting reading the messages on this board and I sincerely hope either things turn around or you can find a better opportunity.

I'm neither long nor short the stock, and came across the company while reading about the Vintage deal so I decided to dig in a bit and then also talked to a few stores (honestly, need to talk to more).

This is an outsider's perspective so I may be completely off base.

Core Stores: on the surface, the improve same store sales in 2018 looks like a turnaround story as it continues to increase, last quarter it was +8.8%. Overall revenue per location is also increasing. 2017 was a tough year, but even comparing to 2016, the last two quarters have been increasingly positive. Gross margins are down a little bit but operating margins are up nicely. On-rent per average store is also up strong in 2018.

I think the sales strength is due to two things: 1) increasing prices on appliance/furniture (either increasing directly or indirectly) and 2) the implementation of 6 month same as cash.

To the first point, I find this hard to continue considering 80% customers are repeat. I think the second point is interesting. My guess is that this could persuade more customers to purchase (vs just having the 3 month option), but when they inevitably don't pay it off within 6 months they are going to be hit with a much bigger (implied) interest expense as it accrues from day one. My guess is that this will lead to more charge-offs and the last two quarters have had the worst, 3.5%, over the last two years (2Q/3Q in 2016 were affected by the POS issue so this could be a one-time event). I could see this increasing.

On the margin side, it's being helped by all the cost cuts (which I think most will agree are not good for the long run) and then oddly a cut in advertising, which just seems weird. If people do go through with the 6 month same as cash and pay before the deadline, this just speeds up the number of new customers you need to find to replace the agreements.

I haven't dug into ANOW much, but I did a few checks and it seems (plus it was mentioned on the board) some of their customers are moving/testing out Progressive. ANOW cannibalizes the Core, and management says this is minimal, but Progressive is growing really fast and I think the tough part is as this continues to grow this will inevitably impact the Core.

At first I was thinking about buying some shares, but now I'm not so sure. Wishing everyone the best of luck.

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Post ID: @YpCf06d

9 replies (most recent on top)

For a Company that preys on people they sure are "lucky", 92 million settlement?

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Post ID: @YpCf06d-iyqf

I don't know about 39, but it sounds like vintage got the better deal. Vintage tripled their money on mere speculation of buying a sinking ship and turning it into the Titanic. Rac will have to do that on hard work alone, can they do it? NO, breakup fee to save the day.

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Post ID: @YpCf06d-esje

They do matter, 39 per by end of the year! Go get you some of that action!

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Post ID: @YpCf06d-efrg

So the fake sales and extensions don’t matter when numbers are concerned?

I’m confused.

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Post ID: @YpCf06d-eesr

I mentioned original poster, I was referring to the negativity in once of the replies.

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Post ID: @YpCf06d-5cbt

Nothing is going to change this summer. The business isn’t that hard at all. Summer is not going to crush the company. The original poster IMO has no idea what they are talking about. As long as they keep the product flowing, the sales will continue. RTO RAC can be better than Progressive. The negativity is annoying. The model works, you just need to have the integrity to operate it like it was designed. No smoke and mirrors in my piece of business.

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Post ID: @YpCf06d-5mmr

@YpCf06d-1pwq: I'm not an insider, I just read the filings, earnings transcripts, and talked to a few stores (but I need to talk to more). Why do merge stores fail? It seems like a good idea to merge a store with lower agreements into another, unless it puts too much work/stress on the existing team?

Why do you say the summer will crush RAC due to high credit and low sales, what will change this summer? Thanks for the comment!

@YpCf06d-1dgf: What's the obvious reason? It seems like both should be able to offer relatively the same offerings, but like you mentioned Progressive keeps beating them pretty easily so I don't get what the key difference is for a retailer to switch to Progressive?

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Post ID: @YpCf06d-1ojf

Progressive beats ANOW hands down, there is an obvious reason for that.

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Post ID: @YpCf06d-1dgf

Looks like you did your homework, you sound like an insider. Save your hard earned money, rac is famous for smoke and mirrors especially when it comes to numbers. Rac is planning to merge alot more stores but they have a shortage of capable SMs to carry out that tall order. I have seen my share of merged stores fail all around the Company. This summer is going to crush rac due to high credit and low sales, check back in August to see if you want to buy.

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Post ID: @YpCf06d-1pwq

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