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Rent-A-Center Expands in Alabama

Zacks Equity Research

Rent-A-Center Inc. (RCII), the largest rent-to-own operator in the U.S, announced the opening of a new store in Northport, Alabama.

The company, through its latest store, will offer furnishings, electrical devices, electronics and computers. With the inclusion of this new store, Rent-A-Center will conduct operations through 58 locations in Alabama.

The move reflects the company’s strategic approach of leveraging an extensive network of stores to effectively penetrate into its target markets, which in turn facilitates it to generate healthy sales and gain competitive advantage over its rivals, Aaron’s Inc. (AAN) and Advance America.

Rent-A-Center plans to open approximately 35 domestic rent-to-own stores for 2012. Through the year, the company targets to open 40 rent-to-own locations in Mexico and 6 in Canada. Moreover, the company aims at 300 domestic RAC Acceptance kiosk additions.

Earlier this week, the company hiked its dividend by 31% to 21 cents (or 84 cents annually) from 16 cents a share (or 64 cents annually). The company announced that the increased dividend will be paid on January 24, 2013 to stakeholders of record as on January 3, 2013.

Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase schemes that allow customers to own the merchandise upon the completion of the rental period. Due to continued tightening of the credit market, customers view rent-to-own as a more flexible and viable option compared to credit. However, the sluggish recovery and a fragile job market may make customers reluctant to enter new rental-purchase deals.

Currently, we maintain our long-term ‘Neutral’ recommendation on the stock. Moreover, Rent-A-Center retains a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.

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