Investors took the Rent-A-Center Inc (NASDAQ:RCII) stock to the cleaners after the rent-to-own specialist admitted that a flaw in its new point of sale (POS) system affected sales.
The stock tanked 28.73% to $9.18 on Tuesday, on volume of 11.98 million shares, and touched off a new 52-week, and 20-year, low of $8.00.
The company helps consumers acquire durable products such as consumer electronics, appliances, computers, furniture and accessories under flexible rental purchase agreements and is a leader in the rent-to-own industry.
Preliminary numbers for the third quarter ended on September 30 released by the company revealed that core US same store sales declined about 12%.
Earnings per share is estimated in the range $0.05 to $0.15. That’s far removed from analysts expectations of EPS of $0.39.
The company reported a loss of $0.08 per share in the year-ago quarter.
Rent-A-Center Inc (NASDAQ:RCII) red-faced after POS glitch
What spooked investors further was the company’s admission that it might be a while before it could recover from the systems glitch.
“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,” said Robert D. Davis, Chief Executive Officer of Rent-A-Center, Inc. “While we expect it to take several quarters to fully recover from the impact to the Core portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement.”
The company will provide more details of the glitch only when it releases its earnings report for the third quarter of 2016 on October 26.
However, investors will doubtless be assailed with some déjà vu.
The company had a disastrous Q2 earnings report as well, and surprise, the POS was a problem there too:
“Core U.S. same store sales decreased by 6.7 percent driven by the impact and acceleration of the point of sale system rollout,…(etc. ..etc).”