Recently, Rent-A-Center Inc. (NasdaqGS:RCII - News), the largest rent-to-own operator in the U.S,announced the opening of a new store in Desloge, Missouri. The company through its latest store expects to offer luxury furnishings, electrical devices, electronics and computers to the residents of this region.
The new showroom will feature brands like HP, Ashley, Sony, Serta and Whirlpool. Rent-A-Center now operates through 68 locations in the state of Missouri.
The people of Desloge will now have the benefit of buying goods with flexible payment options allows its customers to pay weekly, biweekly or monthly. Moreover, the company offers a lifetime recall service while facilitating its customers to re-rent the same or a comparable item and get payments.
Rent-A-Center, which competes with Aaron’s Inc. (NYSE:AAN - News) and Advance America, has an extensive network of more than 3,000 stores, which facilitates the company to effectively penetrate into its target markets and gain a competitive advantage over its competitors.
Moreover, Rent-A-Center’s business model called RAC Acceptance is gaining traction as it enhances consumers shopping experience. When the retailer denies the customer credit financing for a particular product, Rent-A-Center under its RAC Acceptance program acquires that product from the retailer and offers it to the consumer under a rental-purchase transaction.
However, the company’s business is seasonal in nature and typically generates stronger sales during the first quarter. The business is characterized by federal income tax refunds, which are used by the company’s customers to exercise early purchase option on the existing rental agreements. As a result, the company is exposed to significant risks if the quarter fails to deliver expected operating performance.
Rent-A-Center is slated to report its fourth-quarter 2011 financial results on Monday, January 30, 2012, after the market closes. The current Zacks Consensus Estimate for the quarter is 82 cents a share. For the quarter to be reported, the Zacks Consensus Estimate for revenue is $738 million.
Currently, Rent-A-Center retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the company’s fundamentals, we have a long-term Neutral recommendation on the stock.
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