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Rent-A-Center to Open Store

Zacks Equity Research

Rent-A-Center Inc. (RCII), in an attempt to expand its operational roots in the state of Pennsylvania, announced the opening of a new store in Wind Gap. The new store will provide the residents of the region an additional avenue to own luxury furnishings, electrical devices, electronics and computers and will feature brands like HP, Ashley, Sony, Serta and Whirlpool.

Rent-A-Center leverages an extensive network of stores to effectively penetrate into its target markets, which in turn enables the company to generate healthy sales and gain a competitive advantage over its competitors.

Rent-A-Center, which competes with Aaron’s Inc. (AAN), currently operates through 154 locations in Pennsylvania.

The company’s business model is designed to facilitate the purchase of goods with flexible payment options, on a weekly, biweekly or monthly basis. Moreover, when the consumer is denied credit financing for a particular product from the retailer, 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.

The RAC Acceptance program is gaining traction and remains a significant contributor to the company’s top-line growth. Revenues from the RAC Acceptance business more than doubled during the last quarter and the company expects to add 200 domestic RAC Acceptance kiosks in 2012.

Rent-A-Center continues to expect top-line growth of between 7% and 10% in 2012, attributable to a low single-digit jump in the core U.S. division and a more than $300 million contribution from the RAC Acceptance business. Management expects a comparable-store sales increase of between 2.5% and 4.5%.

Currently, we have a long-term Neutral recommendation on the stock. Moreover, the company has a Zacks #3 Rank, which translates into a short-term Hold rating.

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