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Rent-A-Center Opens Two Stores

Zacks Equity Research

Rent-A-Center Inc. (RCII) announced the opening of a new store each in Dinuba, CA and Bellefontaine, OH. The company conducts operations through 157 locations in California and 167 locations in Ohio.

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.

During the recently concluded quarter, the largest rent-to-own operator in the U.S, opened 6 new Core U.S. locations, acquired 6 stores and consolidated 10 stores with existing locations, bringing the total store count to 2,974. The company also opened 112 RAC Acceptance stores, consolidated 10 stores with existing locations and closed 1, resulting in 1,254 stores.

Twenty two international locations were opened and 2 stores consolidated with existing locations during the quarter, bringing the count to 168 stores. Rent-A-Center Franchising International, which is a wholly owned subsidiary of Rent-A-Center, added 4 new locations and closed 12 locations, with the total store count remaining at 213.

For 2013, management plans to open approximately 60 rent-to-own locations in Mexico. Moreover, the company aims at about 365 domestic RAC Acceptance kiosk additions.

Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase schemes that allow customers to own the merchandise upon completion of the rental period. Due to continued tightening of the credit market, customers see 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, Rent-A-Center holds a Zacks Rank #5 (Strong Sell), highlighting the company’s lower-than-expected third-quarter 2013 results and trimmed outlook. The quarterly earnings came in at 51 cents a share that missed the Zacks Consensus Estimate of 63 cents, and fell 23.9% from the prior-year quarter. Management now envisions 2013 earnings in the band of $2.80 to $2.85 per share, down from a range of $3.03 to $3.15 per share forecasted earlier. 

Other better ranked stocks in the finance-leasing universe worth considering are BlackRock Kelso Capital Corp. (BKCC) and Horizon Technology Finance Corp. (HRZN), both of which hold a Zacks Rank #2 (Buy).

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