Rent-A-Center on Monday reported second quarter total revenues fell 3.2% to $655.7 million, from $677.6 million a year ago, primarily due to closures of certain locations, partially offset by a consolidated same-store sales increase of 3.7% percent. That topped the Zacks Consensus Estimate by 2.09%.
By segment, core U.S. revenues fell 0.3% to $455.7 million due to the rationalization of the core U.S. store base, offset by a same-store sales increase of 3.5%, according to a company press release. Acceptance Now revenues fell 12% to $179 million, primarily due to closures of the Conn's and HHGregg locations.
Net profit in the quarter reached $13.8 million, up from a net loss of $8.9 million in the year-ago period, according to the release.
Rent-A-Center appears to be righting the ship, stripping away expenses mainly thanks to store closures. The company's U.S. labor costs dropped by $5.8 million and other store expenses dropped $6.8 million, driven by lower store count. Adjusted EBITDA expanded by 470 basis points year over year to $61.2 million.
In its Acceptance Now appliance and electronics division, labor as a percent of store revenue improved by 290 basis points year over year, also driven by closures. Other store expenses, as a percentage of store revenue, improved 470 basis points versus the prior year, "driven by lower skip/stolen losses," which were down 170 basis points. Adjusted EBITDA in that division was $29.7 million and increased 400 basis points over last year, the company said.
The closure of underperforming stores would also serve to bolster the rent-to-own retailer's comp sales. But in a statement on Monday, Rent-A-Center CEO Mitch Fadel said results in the quarter could also be attributed to sequential customer growth and strong demand in its appliance and electronics side.
"We are extremely pleased with both the top and bottom line performances for the second quarter, across all operating segments," he said. "Positive consolidated same store sales of 3.7 percent improved sequentially in each month within the quarter and across all operating segments."
That will likely need to continue, considering that expense cuts can only go so far. Much of the company's turnaround will take place under cover of private ownership, with the acquisition by Vintage Capital Management set to close by the end of this year. Upon completion of the Vintage merger, Rent-A-Center will become a wholly-owned subsidiary of Vintage, and Rent-A-Center's shares of common stock will be delisted from NASDAQ and deregistered.
With that, Rent-A-Center will join the ranks of private equity-owned retailers. That group now includes Staples, taken over and broken up by Sycamore Partners last year, and hardware retail co-op True Value. The list includes dozens of others, including some of those firms that fell into bankruptcy with debt from leveraged buyouts still on their books, such as Toys R Us, Nine West, Claire's Stores, Payless, Gymboree and more.