Past profit levels should return by the end of this year, a company official says.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
BOARDMAN -- An unexpected downturn in business forced Rainbow Rentals officials to spend the past year overhauling a company that had been recognized as one of the best in the country.
They are convinced their work will pay off, but the proof isn't in yet.
The company's earnings and stock price continue to lag.
First-quarter earnings, which were reported last month, were off 60 percent and second-quarter earnings are expected to be off about the same amount.
Wayland Russell, company chairman and chief executive, said after the company's annual meeting Thursday that earnings for this year are expected to be slightly below last year's earnings of 69 cents a share or $4.1 million. Last year's earnings were down 19 percent from the year before.
The Canfield-based rent-to-own company was jolted by a one-day 40 percent drop in its stock price last year, which came after it announced it would not meet earnings expectations.
The stock now is trading at about $6 a share, compared with a 52-week high of about $14 a share.
Annual meeting: The company's disappointing year was evident by the change in how the company's annual meeting was staged.
Last year's meeting was held in a large room at the Holiday Inn in Boardman and plenty of local stock brokers and investors attended.
This year, company officials squeezed themselves into a small room with just a few tables. No brokers or investors attended.
Company officials said they didn't expect a crowd this year because they didn't promote the meeting as much and the investment community is more interested in companies that are doing well.
The company last year was named to Forbes magazine's top 200 list of best small companies.
It ranked 87th in last year's rankings after being at 161st the year before.
Overhaul: Russell said officials have reviewed all phases of the operation to bring the company back to where it was.
He said he expects profits to return to 1998-99 levels in the fourth quarter of this year.
The company blamed its sales decline last year on a staffing problem. Russell said a strong economy last year led employees to go elsewhere, which damaged store operations and customer relations.
The staffing situation has been resolved and the company already has improved itself, he said. Some of the measures have been costly, however, and have hurt earnings in the short term, he said.
For example, a new advertising campaign has been developed, pay of regional managers and account managers has been improved and the number of regional managers has been increased so they can operate with more hands-on management.
Russell said the company has scaled back its new store construction, but still intends to grow its store count by 20 percent to 30 percent by next year.
New stores and acquisitions will be included, he said. The company has 112 stores in 11 states.
The company also is working to boost its average sales back up to $1.1 million per store, he said. It has fallen to about $1 million per store.
Reducing delinquencies also is important to the company's bottom line, he said.
The company used to have a collection rate of 94 percent, but that fell to 93 percent last year. He said one percentage point makes a big difference, so he was pleased the rate climbed back to 94 percent in the first quarter of this year.
Director: At the board meeting, the company announced that Robert Glick, founder of Dots, was elected to the board of directors, which was expanded from five positions to six.
Glick, 54, founded the off-price women's clothing store in 1987. The chain now operates 260 stores.