* Company outlines steps for turnaround plan
* Activist investors call plan risky
* Investors also against company's CEO choice
* Co forecast 2018 EPS above estimates
* Shares up as much as 9.4 percent
(Adds Rent-A-Center's response to Marcato Capital's letter,
April 10 The pressure on Rent-A-Center Inc
to auction itself increased on Monday after Marcato
Capital joined fellow activist investor Engaged Capital to force
the rent-to-own furniture retailer to pursue a sale rather than
a "risky" turnaround plan.
Earlier in the day, the company said it would not sell
itself, and instead outlined steps to boost profits and said
founder Mark Speese, its interim CEO since January, would take
over the role full time – moves that have not gone down well
with either activist investor.
The company said it plans to boost profit by improving
pricing, boosting the number of customers who ultimately own its
rented furniture, expanding its e-commerce offerings, selling
more high-end products and "rightsizing" its workforce, among
other moves. It also forecast 2018 profit well above analysts'
Rent-A-Center's shares were up 8 percent, adding to their 14
percent gain since mid-February, when Engaged Capital first
called for a sale. The company instead pushed its turnaround
Engaged Capital, which has a nearly 13 percent stake in
Rent-A-Center, responded by waging a proxy fight to gain control
of the board, which it accused of acting based on "personal
loyalty" to Speese, who is also chairman. It called the
company's latest plan a "high-risk path".
Marcato Capital Management LP, which said it owns 4.9
percent of the company's shares, said it believes Speese "does
not intend or desire to be the CEO for the long term."
"If the Board continues to resist a process to review
strategic alternatives now, Marcato plans to vote for Engaged's
director nominees at the upcoming annual meeting," the hedge
fund manager wrote in a letter to Rent-A-Center's board.
The company said Engaged Capital's pursuit of a "quick
flip", seeking a sale when its shares were at multi-year lows
and while it was in the midst of a turnaround, would "limit the
value creation opportunity for all stockholders."
"We are confident that executing the initiatives announced
today will drive enhanced stockholder value. The Board will
continue to evaluate opportunities with the assistance of its
independent financial and legal advisors," a spokesperson for
Rent-A-Center told Reuters.
The company said it expects these steps to result in a
profit of $1.20-$1.40 per share and sales growth in the
low-single digits for 2018.
Analysts on average were expecting a profit of 99 cents per
share and sales growth of 2.4 percent, according to Thomson
(Reporting by Sruthi Ramakrishnan in Bengaluru, Additional
reporting by Gayathree Ganesan; Editing by Savio D'Souza)