Rent-A-Center shares jump 10 percent following layoff announcement

Shares of Rent-A-Center Inc. rallied 10 percent on Thursday as the Plano company announced cost savings coming from extensive layoffs among its corporate staff.

Rent-A-Center said Wednesday that will the item will reduce its corporate headcount by 250 positions, or 25 percent. Including general in addition to administrative expenses, the layoffs are anticipated to produce roughly $28 million in annual run-rate cost savings, with about $20 million saved in 2018.

The retailer has unveiled a strategic plan to create $65 million to $85 million in annual cost savings.

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Severance charges in addition to some other one-time costs related to the workforce reductions are anticipated to total around $3 million during the first quarter.

The company’s corporate cuts come after the item eliminated its chief operating officer position last month, an effort to bring direct control of all operations under CEO Mitch Fadel, who was named to the role in January.

“Rent-A-Center is actually implementing initiatives to reduce costs in addition to improve performance. While major reductions in work force are difficult, we are confident that will Rent-A-Center will be better positioned for long-term growth in addition to profitability,” Fadel said in a prepared statement. “Additionally, we remain focused on delivering a more targeted value proposition in addition to look forward to building on our momentum coming from our January in addition to February performance.”

In conjunction with the workforce announcement, Rent-A-Center reiterated that will its board is actually continuing to look at “strategic alternatives to maximize stockholder value, including evaluating a sale of the company.”

Rent-A-Center has received bids to acquire the company in addition to is actually engaged with potential buyers. the item expects to decide whether to pursue a sale during the second quarter.

RCII shares rocketed upward in November on news that will Vintage Capital Management LLC, an Orlando private equity firm specializing within the defense, manufacturing in addition to consumer sectors, made a $693 million bid to buy the rent-to-own company.

Vintage also owns Buddy’s Home Furnishings, another rent-to-own concept for furniture, in addition to its past investments include RAC competitor Aaron’s (NYSE: AAN).

At the time, Rent-A-Center said the item was reviewing the “conditional, non-binding proposal.”

“There can be no assurance that will the board’s exploration of strategic in addition to financial alternatives will result in any particular action or any transaction being pursued, entered into or consummated, or the timing of any action or transaction,” the company said in a prepared statement.

Some of Rent-A-Center’s larger stakeholders have applauded its efforts to explore strategic alternatives. Engaged Capital, which owns roughly 16.9 percent of Rent-A-Center’s stock, wrote in a letter last year:

“Engaged Capital commends the company’s board of directors on initiating a long overdue strategic alternatives review process to unlock value for all stockholders. Engaged Capital believes that will Rent-A-Center remains an attractive acquisition opportunity. We believe the company’s strong cash flow generation, liquidity in addition to leadership position within the attractive rent-to-own industry combine to underpin potential transaction cost ranges that will could allow both stockholders in addition to a potential acquirer to realize significant value.”

Rent-A-Center’s stock closed at $7.65 per share on Wednesday, however was trading up nearly 10 percent as of 4:30 p.m. As of the closing cost, the stock is actually trading down nearly 15 percent over the past 12 months.

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