Shares of Rent-a-Center plunged on Tuesday after the furniture and equipment rental firm preliminarily reported a sharp drop in same-store sales resulting from problems with a new point-of-sale system.
Rent-A-Center said sales at stores open at least a year fell about 12% in the third quarter, compared to a year earlier. It also reported that U.S. gross profit as a percentage of total revenue would be flat for the third quarter.
“Following the implementation of our new point-of-sale system, we experienced system performance issues and outages that resulted in a larger than expected negative impact on core sales,” CEO Robert D. Davis said in a news release.
“While we expect it to take several quarters to fully recover from the impact to the core [store] portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement,” he added.
In trading Tuesday, Rent-a-Center stock fell more than 28% to $9.18. Over the past year, it has declined about 65%.
“The company’s weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share,” TheStreet said.
Rent-a-Center also said Tuesday it expects third-quarter earnings between 5 cents and 15 cents per share, well below analysts’ expectations of 39 cents. It will report full third-sAYSquarter results on Oct. 26.
The Plano, Texas-based company owns and operates approximately 2,600 core stores in North America and about 1,915 Acceptance Now kiosk locations, and franchises about 225 rent-to-own stores.