Yuna Sohn

Yuna Sohn asked about the downward trend in gross margins across segments, particularly for Rent-A-Center, inquiring if it was driven by product mix, consumer behavior, or inventory. She also sought clarification on the cadence of credit tightening actions from 2025 and their expected impact on credit and growth throughout 2026.

Answer

CFO Hal Khouri explained that Q4 2024 benefited from in-period workers' compensation adjustments. Current margin pressure stems from competitive top-line pressure, increasing cost of goods (e.g., tariffs impacting furniture), and credit tightening (reducing higher-margin customers). He expects margin improvement in H2 2026 as historical vintages flow through. CEO Fahmi Karam reiterated that delinquencies for Rent-A-Center and Acima are stable, with Acima's underwriting changes working as intended, guiding to a 9.5% loss rate for 2026. This comes at the cost of GMV growth in H1 2026, with a rebound expected in H2. Rent-A-Center is stable, operating comfortably with a 4.5-5% loss rate and mid-teens margins.

Yuna Sohn inquired about the downward trend in Rent-A-Center's segment gross margins, specifically asking if it was driven by product mix shifts, consumer behavior, or inventory, and sought clarification on the cadence of credit tightening actions and their impact on growth throughout 2026.

Answer

CFO Hal Khouri explained that Rent-A-Center's Q4 2024 margins benefited from in-period labor cost adjustments not present in Q4 2025. He cited competitive top-line pressure, increased cost of goods (including tariffs impacting furniture), and credit tightening (reducing higher-margin customers) as drivers for margin pressure. CEO Fahmi Karam added that delinquencies for both Rent-A-Center and Acima are stable, and the intentional underwriting changes at Acima are working, leading to a projected loss rate of 9.5% for 2026, albeit impacting GMV growth in the first half.