Rent-A-Center (RCII 9.60) is the nation's largest rent-to-own operator, and for months now, it has also been the target of activist investment firm Engaged Capital, which is Rent-A-Center's largest shareholder with 16.9% of the stock outstanding based on the latest 13D filing.
Engaged said in February that it thought a sale of the entire company would be the most logical outcome of a strategic review process and it nominated a slate of five candidates to the company's board, two of whom it thought would be good candidates to replace Mark Speese, the founder and interim CEO of Rent-A-Center.
It will be interesting to see how the latest news out of Rent-A Center is received by Engaged Capital, as it involves a new growth plan (and not a sale of the entire company) and a new CEO who isn't new. Mark Speese is shedding the interim tag and will be taking on the CEO role full time.
The main tenants of the strategic turnaround plan are aimed at restoring growth, improving profitability, and maximizing value for all RCII shareholders.
The company's approach for doing so will revolve around five elements: enhancing the customer value proposition, restoring growth and profitability in the U.S. Core Business, building on the momentum to optimize and expand ANow, leveraging technology investments to expand into new channels, and improving results and creating value for shareholders.
Rent-A-Center provided some operating targets for 2018 and 2019 that sound promising, but only time will tell if the company can deliver on its hopeful expectations, which include low-single digits revenue growth and EPS of $1.20 to $1.40 for 2018 and mid-single digits revenue growth and EPS of $2.20 to $2.25 for 2019.
The EPS target for 2018 is comfortably above analysts' average expectation, underscoring Rent-A-Center's optimism in its strategic plan.
A turnaround plan of some kind was certainly in order. RCII shares have plummeted 34% over the last 52 weeks and are down approximately 75% from the highs they saw in 2013. Currently, they are trading 5.2% higher in pre-market action.