Warning...Hi M....hope you're well....does your footie still have an ou-wee?.....hope it doesn't hurt...
Mr. Pink called PLMD short on Friday morning...lol..pretty good call...
Message 16165262
Here's one even a tech-monster would love....$50 to $32 in three days?....oh my..
RCII ($50-$32) P/E 10...Warns for 3rd Q
Tuesday July 31, 4:22 pm Eastern Time
Rent-A-Center plunges on reduced profit view
(UPDATE: adds comments throughout from company spokesman; updates with closing stock price)
NEW YORK, July 31 (Reuters) -- Shares of Rent-A-Center Inc. (NasdaqNM:RCII - news), the No. 1 U.S. operator of rent-to-own stores, plunged over 25 percent on Tuesday after the company cut its 2001 and 2002 profit forecasts.
Rent-A-Center fell $12.12, or 25.2 percent, to $36.08 on Nasdaq volume of 6.1 million shares. Rent-A-Center shares have had average daily volume of 415,000 over the previous 90 days.
The Plano, Texas-based company, which operates 2,275 company-owned and 347 franchised stores nationwide, on Monday after the close of trading issued a second-quarter earnings report that included a reduced outlook for the remainder of this year and for next year.
Rent-A-Center said it expects to post third-quarter earnings of 68 cents to 70 cents per share, 2001 earnings of $2.87 to $2.91 per share, and 2002 earnings of $3.85 to $3.95 per share.
Wall Street analysts expected third-quarter earnings of 76 cents per share and 2001 earnings of $3.02 per share, according to Thomson Financial/First Call.
Also, they expected 2002 earnings of about $4.00 per share, according to company spokesman Peter Bates. That number differs from the First Call figure of $3.60 because of accounting treatment of goodwill amortization, he said.
Investors were disappointed by the lowered guidance, said Dennis Telzrow, an analyst with Dallas-based Hoak, Breedlove, Wesneski & Co.
KILLER CATEGORIES
``It's an expense problem, not a top-line problem (but) certain expense categories are much higher than expected,'' he said.
The problematic categories include worker's compensation insurance, where costs are rising about 40 percent; energy; and telecommunications, Telzrow said.
The expense for worker's compensation insurance will rise by about $1 million a month, from $28 million to $40 million a year, said spokesman Bates. Rent-A-Center learned in early July that it would need to pay higher rates for this insurance, and expects to better manage the claims process in the future by adding a few in-house staff, he said.
Also, about 500 Rent-A-Center stores have had to be converted to different telecommunications service following the bankruptcy of one of the company's vendors, Northpoint Communications Group Inc., a provider of high-speed Internet access, according to Hoak Breedlove's Telzrow. The conversion has caused rates per line in affected stores to rise to about $800 to $900 per month from about $100, Bates said.
The sharp selloff in Rent-A-Center shares may also reflect disappointment that lowered guidance came just two months after the company completed a public offering of 3.2 million of its shares, priced at $42.50 per share, Telzrow said.
``There are probably some credibility issues,'' he said. ``On Wall Street, you're guilty until proven innocent.''
The May 24 sale, which was lead managed by Morgan Stanley & Co., raised net proceeds of $39.7 million for Rent-A-Center. It also allowed certain shareholders to sell 2.2 million shares, producing gross proceeds of $93.5 million.
``The market is clearly overreacting'' because the lowered guidance followed soon after the May 24 sale, Bates said. ``Now there's doubt that we can hit'' its newly revised numbers, he said.
This doubt is mistaken, he said. ``We're posting positive revenue comparisons when very few other retailers are growing,'' Bates said.
Rent-A-Center is the largest of five companies that own 54 percent of the overall rent-to-own market of 8,000 stores, according to an April 16 press release by Standard & Poor's Corp. reviewing Rent-A-Center's credit status.
That market ``is highly competitive with moderate growth prospects and low barriers to entry,'' S&P said. Rent-to-own stores allow their customers to rent goods such as appliances, computers, and furniture, with the possibility of purchasing the goods at the end of the rental period.
Rent-A-Center may face ``future significant liabilities'' from various lawsuits, including a claim for monetary damages of $410 million for gender discrimination, S&P said in the April 16 release.
``We don't discriminate against anyone and we feel the class suit is meritless,'' Bates said.
Before today's plunge, Rent-A-Center shares were up 40 percent in 2001; they are now up about 4.6 percent. |
