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Rent-A-Center Beats Forecast

Guidance looks solid.


(RCII) - Get Rent-A-Center Inc Report

fourth quarter earnings fell 19.6% from the year-ago period, due to increased expenses and lower sales.

The rent-to-own operator earned $33.5 million, or 48 cents a share, in the quarter, compared with $41.7 million, or 55 cents a share, a year ago. Adjusted for items including restructuring and hurricane expenses, earnings were $35.1 million, or 50 cents a share, in the most recent quarter. Analysts surveyed by Thomson First Call were expecting earnings of $31.6 million, or 44 cents a share, in the most recent quarter.

Fourth-quarter revenue fell 0.4% from a year ago to $583.2 million. Analysts were expecting revenue of $575.2 million.

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The drop in net earnings is primarily attributable to a decline in same-store sales as well as an increase in operating expenses related to new store openings, acquisitions and fuel costs. The fall in revenue, the company said, was due to a drop in same-store sales of 0.2% apart from closing and merging of 114 stores with existing Rent-A-Center stores and sale of 35 stores. Factoring in the opening of new stores, there was a net reduction of 27 stores during the quarter.

The Texas-based company expects earnings of 48 cents to 52 cents a share, including stock option expense, on revenue of $591 million to $599 million for the first quarter 2006. Analysts are expecting earnings of 49 cents a share on revenue of $620.9 million.

For fiscal 2006, the company expects earnings of $2 to $2.10 a share, including stock option expense, on revenue of $2.33 billion to $2.36 billion. Analysts are expecting earnings of $2 a share on revenue of $2.3 billion.

"Our 2005 earnings were negatively affected by the weakness in our same store sales, which we believe reflects, among other things, higher fuel and energy costs that ultimately suppressed customer demand, and also believe that product evolution, particularly in low-end consumer electronics, placed additional pressure on our business," the company said. "We will continue to focus on improving our store operations, including using our resources prudently and focusing on driving more customer traffic from our advertising initiatives."

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