(RCII) Rent-A-Center Expands in Texas

To further strengthen its operational roots in the state of Texas, Rent-A-Center Inc. (RCII), the largest rent-to-own operator in the U.S, opened an additional store in Austin. 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 277 locations in Texas.

The residents of the region will now have an additional option of purchasing goods with flexible payment options (freedom to pay weekly, biweekly or monthly). Moreover, the company offers a lifetime recall service, which facilitates its customers to re-rent the same or a comparable item and receive payments.

The move was in line with 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.

Moreover, the company is taking prudent steps to optimize rental merchandise levels in accordance with sales trends. Rent-A-Center implemented a centralized inventory management system, including automated merchandise replenishment. Moreover, a new centralized purchasing system allows better management of rental merchandise.

Going forward, the company remains optimistic about its future growth as it opens stores in international markets and accelerates the rollout of RAC Acceptance kiosks.

Management anticipates earnings to be within $3.00 to $3.20 per share range in 2012. Revenue growth is expected to be roughly 7% to 10% for the year, attributable to a low single-digit jump in the Core U.S. and more than $300 million contribution from the RAC Acceptance business. Comparable-store sales are expected to be within 2.5% and 4.5%.

The current Zacks Consensus Estimate for the third quarter of 2012 is 68 cents, representing a year-over-year growth of 12.5%. Estimates for 2012 and 2013 are $3.15 and $3.55, reflecting annual growth of 8.14% and 12.95%, respectively.

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

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Read the full analyst report on “AAN”
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