Rent-A-Center, Inc. RCII has issued additional updates in response of the impacts of the COVID-19 outbreak. Although most of its stores remain open as it offers household necessities, the company is not fully immune to uncertainties tied to the pandemic. Apparently, the pandemic impacted the company’s performance in March as it witnessed a 5% decline in revenues. In addition, the company has been cutting down on operating costs and monitoring all non-essential operating expenses. It also withdrew outlook for the current year and refrained from updating the same.
However, favorable trends at the start of first-quarter 2020 drove revenues for January and February by 4% year over year. Moreover, the company’s recurring revenue stream led year-over-year growth in total first-quarter revenues. Furthermore, management cited that sales are now stabilizing and the company is experiencing solid demand for essential products like appliances and computers. Also, its e-commerce has been robust, with more than double transactions.
In order to stay financially resilient amid such a crisis, Rent-A-Center has undertaken actions to curb operating expenses, through executive pay cuts, temporary employee furloughs, limited store hours and possible real estate leases renegotiation. Also, the company has cut capital spend and inventory purchases. In fact, management targets reductions of more than $150 million in operating costs, capital expenditures and inventory purchases for the second quarter, which are expected to somewhat mitigate the impact of COVID-19 on adjusted EBITDA margin and cash flow.
Meanwhile, Rent-A-Center ended the first quarter with cash of roughly $185 million cash and outstanding debt of approximately $362 million. It also has an additional $48 million on its asset-based revolver, with the potential to raise revolving and term-loan facilities. It had previously drawn an additional $118 million on its revolving credit facility. Furthermore, management has been reviewing capital plan with dividend and share repurchase program. However, it had earlier suspended repurchase of any additional shares following the buyback shares worth $26 million during the first quarter.
The lease-to-own operator’s shares have lost 45.9% compared with the industry’s 33.4% fall in the past three months. Rent-A-Center presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
All in All
Amid the coronavirus crisis, essential commodity players are now prioritizing actions to efficiently cater to the burgeoning demand. Also, companies are resorting to several proactive actions such as pay cuts, cutting down on expenses, and deferring capital and store projects in order to stay financially resilient during these times.
Big-box retailers like Target TGT, Walmart WMT and Big Lots, Inc. BIG have followed suit. These players have been undertaking actions to deal with the coronavirus-led demand spike. Target has prioritized its actions to resonate well with the prevailing crisis. It has shifted its certain strategic plans, including store remodels and other projects. The company has also increased the minimum wage by $2 an hour until at least May 2 and has decided to pay bonus to frontline team executives. Walmart had announced plans to temporarily hire 150,000 additional workers across its stores, clubs and distribution centers to cater to demand amid the coronavirus chaos. Big Lots is well on track to serve the community and has been making operational enhancements like adding curbside pickup service for online orders. Also, it has been encouraging early-hour shopping for senior and other vulnerable citizens as well as adhering to all safety protocols.
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