Rent-A-Center (RAC) wants its customers to rent while it buys. The firm became the #1 rent-to-own chain nationwide through a slew of acquisitions. It owns and operates some 3,000 stores (down from 3,400 in 2006) throughout the US, Canada, Mexico, and Puerto Rico under the Rent-A-Center, Get It Now, and Home Choice names, and franchises 215 through subsidiary ColorTyme. The stores rent name-brand home electronics, furniture, accessories, appliances, and computers. While customers have the option to eventually own their rented items, only about 25% ever do. The company has exited the financial services business (launched in 2005) and stopped making new loans in 2011. RAC is expanding in Canada and Mexico.
Outside the US, RAC operated 28 stores in Canada and more than 50 locations in Mexico at the end of 2011, accounting for less than 1% of total annual sales. Expanding its international arm, the firm plans to add 10 stores in Canada and about 60 RAC shops in Mexico in 2012. It entered the Mexican market in 2010.
The company operates through four segments: Core US (with about 3,000 stores it accounted for 91% of 2011 sales); fast-growing RAC Acceptance (750 stores in about 35 states and Puerto Rico); International (80 stores in Canada and Mexico); and 216 ColorTyme franchises. RAC Acceptance is the firm's growth engine, increasing its store count from 82 locations in 2009 to 750 by the end of 2011. RAC Acceptance targets consumers who do not qualify for financing from traditional retailers. Indeed, when a shopper is refused credit by a third-party retailer, RAC Acceptance purchases the item from the retailer and the rents it to the credit-impaired customer. RAC Acceptance expects to add 200 kiosk locations in 2012.
RAC's 2011 sales increased by 5.5% vs. 2010, while net income declined 4% over the same period. The increase in sales was driven by robust growth of the company's RAC Acceptance business, which saw its sales surge more than 900% from $18.2 million in 2010 to more than $193 million in 2011. (In 2010 RAC acquired The Rental Store for $75 million and combined it with its RAC Acceptance business, greatly boosting its presence and revenue.)
RAC climbed to the top of the US rent-to-own industry through the acquisition of more than 3,300 stores between 1993 and 2006. (Its purchase of rival Rent-Way in 2006 eliminated one of the firm's primary competitors.) Since then, RAC has been in what it calls a "store consolidation" phase during which it has closed or merged hundreds of redundant stores in overcrowded markets. While RAC plans to continue opening and acquiring locations in new and existing markets, it doesn't anticipate a return to its prior bout of acquisitiveness. International growth is also on the table. Indeed, the company opened its first five locations in Mexico in 2010. It also plans to continue expanding in Canada. Also, to grow sales and attract new customers, the rent-to-own chain has been expanding its offerings of upscale brands (Sony Electronics, Ashley Furniture) while pursuing acquisitions. – less