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Jay McIntosh

Rent-A-Center revenues, profits decline in first quarter

PLANO, Texas — A slowdown in its core U.S. rent-to-own store business led to a 1.9% revenue decrease for Rent-A-Center in the first quarter, despite continued growth in its RAC Acceptance division and its Mexico stores, the company reported.

Net earnings of $46.5 million or 80 cents per share were down 10.6% from $51.9 million or 87 cents per share in the comparable period a year earlier. The company said its international growth initiatives reduced earnings by 6 cents per share in the latest quarter and 7 cents a year ago.

"I am very pleased with the progress being made in our growth initiatives," said Mark E. Speese, Rent-A-Center chairman and CEO. "RAC Acceptance revenues were over $127 million in the quarter, an increase of 45% and now represents close to 16% of our total revenues and 20% of our total operating profit. Mexico grew revenues over 150% in the quarter and added 20 locations, ending the quarter with 110 stores."

The company said it ended the quarter with 1,055 of the RAC Acceptance kiosks in conventional stores in the United States and Puerto Rico. It plans to open a net 350 more this year, officials said.

Speese said the core U.S. RTO business faced "macro headwinds" in the quarter. Chainwide same-store revenues were down 4.3% from a year earlier.

Total revenues for the quarter were $819.3 million, down from $835.3 million in last year's first quarter.

"In addition to our portfolio of agreements in our core U.S. business being down year-over-year going into the first quarter, we believe our core U.S. business was negatively impacted by the delayed issuance of federal income tax refunds, rising fuel prices and higher payroll taxes," he said.

"Trends in recent weeks have shown a period-over-period improvement in demand. Nevertheless, the quarter ending portfolio remains below our expectations and, as a result, we are lowering our guidance for the remainder of 2013," said Speese.

The company is now projecting 3.5% to 5.5% total revenue growth, with 1% to 2% same-store growth. It expects earnings per share in the $2.95 to $3.10 range, including about 25 cents per share dilution because of international growth initiatives. It posted earnings of $3.09 per share in 2012.

Rent-A-Center ended the quarter with 3,110 company-owned stores in the U.S. Canada, Mexico and Puerto Rico. In addition, there are about 225 franchised stores that operate under the ColorTyme name.

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