In a cost-cutting measure, Rent-A-Center Inc. (RCII, Financial) announced Wednesday it is reducing its corporate staff by 25%, sending shares up more than 10% on Thursday.
Including general and administrative expenses, the Plano, Texas-based company said that by cutting approximately 250 positions at its main office, it expects to generate around $28 million in cost savings. The decision is part of a larger initiative that identified $65 million to $85 million in potential annual cost savings.
It also follows the company’s decision to eliminate the position of chief operating officer in late February, handing the responsibilities associated with that role over to CEO Mitch Fadel.
“As we outlined just two weeks ago, Rent-A-Center is implementing initiatives to reduce costs and improve performance,” Fadel said. “While major reductions in work force are difficult, we are confident that Rent-A-Center will be better positioned for long-term growth and profitability.”
Rent-A-Center said severance payments and other one-time costs related to the layoffs will total approximately $3 million for the first quarter.
The company also confirmed its board of directors is looking into different options to increase shareholder value, including a possible sale. While it has received several buyout offers, Rent-A-Center said the board is not expected to reach a decision until the second quarter.
After closing at $8.44 on Thursday, the stock was down nearly 0.6% on Friday morning. GuruFocus estimates the stock declined 7% in 2017. Year to date, it has fallen 19%.
Several guru investors have positions in the stock. With 3.73% of outstanding shares, Charles Brandes (Trades, Portfolio) has the largest holding among the gurus. Hotchkis & Wiley, Chuck Royce (Trades, Portfolio), Leucadia National (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
Disclosure: No positions.
