Rent-A-Center's Making a Habit of Lowering Guidance

Mid Cap Watch List member Rent-A-Center, Inc. (RCII) announced revenues and earnings for the quarter ended June 30, 2007. Total revenues of $724.2 million marked a $140.6 million increase from the same period in the prior year but were slightly below the consensus estimate. Diluted earnings per share were $0.58, an increase of 3.6% from the same period in the prior year but below the $0.60 consensus. According to management:

“Although our second quarter financial results for revenue and earnings per diluted share were within our guidance range and our same store sales increased 2.7%, the business environment has been very challenging as of late,” commented Mark E. Speese, the Company’s Chairman and Chief Executive Officer. “We believe that the financial challenges facing our customers have increased recently, resulting in a softer outlook for the balance of this year. As a result, we are lowering our guidance for the remainder of 2007.”

This is becoming a habit for Rent-a-center, which lowered guidance the last time they reported as well. The new guidance of $2.905 - $2.935 billion in revenue and $2.06-$2.14 in EPS compare to the prior lowered EPS target of $2.24-$2.32 and a consensus estimate of $2.31.

As a general rule, I prefer companies who keep revising guidance in the other direction.

RCII 1-yr chart: