Shares of Rent-A-Center (NASDAQ: RCII), a rent-to-own operator that provides consumers with the opportunity to obtain ownership of consumer electronics, appliances, computers, furniture and other products, plummeted to a new 52-week low of $8.00 on Tuesday.
The stock did manage to rebound more than $1 per share and closed the day at $9.18, down 28.73 percent. The reason for the large sell-off can be traced to the company’s preliminary third quarter results.
Rent-A-Center said that it expects its GAAP and adjusted earnings per share for the third quarter to fall in a range of $0.05 to $0.15 which is notably lower than the $0.39 per share Wall Street analysts were already estimating.
As if that wasn’t enough, Rent-A-Center also expects its same-store sales for the three month period to fall by 12 percent. The company added that Acceptance Now same store sales are expected to be essentially flat.
Moving on, core U.S. gross profit as a percentage of total revenue is also expected to be flat compared to a year ago as ongoing benefits from changes made to its sourcing model were offset by a clearance event which focused on previously rented products.
“Following the implementation of our new point-of-sale system, we experienced system performance issues and outages that resulted in a larger than expected negative impact on Core sales,” said Robert D. Davis, Chief Executive Officer of Rent-A-Center, Inc. “While we expect it to take several quarters to fully recover from the impact to the Core portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement.”
Rent-A-Center is scheduled to report its third quarter results on Wednesday, October 26 after the stock market closes and a conference call to discuss its results and outlook will occur the next morning.
The last time Rent-A-Center reported its quarterly results was on July 27, 2016. The company earned $0.41 per share in its second quarter on revenue of $749.62 million. Wall Street analysts were expecting the company to earn $0.49 per share on revenue of $782.12 million.
Including Tuesday’s notable decline, the stock has now lost nearly 40 percent of its value since the start of 2016 and more than 60 percent over the past year. The five-year chart paints an even more concerning picture as shares have lost close to 70 percent dating back to 2011.