As the COVID-19 outbreak advanced, Rent-A-Center reported that January and February sales trended positively, running about 4% up compared to the year-prior months. But March revenues trended down about 5% year over year as national efforts to contain the virus took hold.
In comparison to the business model of traditional household durable goods retailers, the company noted, its recurring revenue stream resulted in total revenue for the first quarter increasing versus the year-previous period.
Sales declined as most consumers heeded stay at home orders but are now stabilizing, Rent-A-Center maintained. Offsetting some of the pressure on revenue and collections, the company’s customers should benefit from the government’s CARES Act. Also, about 70% of customers engaged with the Rent-A-Center and Preferred Lease businesses have opted to participate in the Benefits Plus program, which enables eligible customers who become unemployed to keep their merchandise, with the company being reimbursed by up to $1,000 for rental payments.
Rent-A-Center has reduced operating expenses during the pandemic with initiatives including executive pay reductions, temporarily furloughing employees in stores and at its corporate office, reducing store hours in some cases, and where possible, renegotiating real estate leases. Rent-A-Center is targeting cost cuts of more than $150 million in operating expenses, capital expenditures and inventory purchases in the second quarter and believes the ongoing actions will partially mitigate the adjusted EBITDA margin and cash flow impact from COVID-19.
“The majority of our Rent-A-Center stores remain open to assist customers during this crisis,” said Mitch Fadel, CEO, Rent-A-Center. “In fact, about 75% are fully operational with about 25% operating with a closed off showroom and only a handful fully closed. We are seeing strong demand for essential products such as appliances and computers while our e-commerce transaction flow has more than doubled, partially offsetting the reduced activity due to stay at home orders. Although many of our Preferred Lease retail partners are closed, customers continue to be able to make payments online or over the phone, which drives ongoing payment activity during this period.”