Despite the repetitious programming, I'm hooked on the home-makeover shows on HGTV. The housing re-dos help me see the potential in my own home.
I immediately thought of those shows when I saw the results from Rent-A-Center (NASDAQ:RCII) this morning, as well as when competitor Aaron Rents (NYSE:RNT) came through with its results last week. While Aaron exceeded analyst expectations by posting profits of $0.39 a share, Rent-A-Center wasn't so fortunate and saw earnings slip to $0.56 a share from $0.58 a year ago.
Why the earnings reports made me think of these makeover shows is that it seems the rental companies are missing out on an opportunity. One of the common themes cropping up in the shows is that of renting furniture to display during an open house. Setting a good stage for the home can help prospective buyers see the potential. With the housing market in the doldrums and sellers far outnumbering buyers, being able to set your home apart from the competition will give you an edge.
Rent-A-Center could easily capitalize on this situation, because it has more than 3,000 stores nationwide, double the 1,570 storefronts that Aaron sports. Sure, there are a number of local rental stores out there, but the Motley Fool Inside Value recommendation is by far the industry leader. Plus, using this tactic would also help minimize the stigma associated with the rent-to-own industry.
Anyway, despite the seemingly poor results from the furniture and appliance renter, there's a lot to like in the report. Unlike the plummeting sales at retailers that sell furniture, such as La-Z-Boy (NYSE:LZB), Bassett Furniture (NASDAQ:BSET), and Ethan Allen (NYSE:ETH), Rent-A-Center managed to post a positive same-store-sales figure of 0.9%.
Moreover, not only does it rent furniture and the like, but it also has some 300 stores offering financial services to customers. The services typically take the form of payday loans, an industry itself under the gun, but adding this niche to its portfolio makes it an avenue for securing additional revenues. Its typical target demographic for its furniture and appliance rentals would be a natural fit for further financial services, such as debit cards and money-transfer services. Nor would larger players in those fields, such as Advance America (NYSE:AEA) and CompuCredit (NYSE:CCRT) feel the pinch.
Still, by also marketing its traditional services to more affluent homeowners, the company could expand its customer base while also bringing in additional revenues. Regardless, Rent-A-Center looks as though it will be able to prosper in this tough market, even without the housing market to build on.
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