PRG Q1 2025: GMV guidance pulled, lease approvals down 300–400 bps
- Resilient Portfolio Management: Management emphasized that the credit portfolio remains healthy with write-offs tracking within the 6% to 8% annual target. Early performance indicators like 4‑week delinquencies suggest the team is effectively controlling credit risk despite macro headwinds.
- Effective Transition of Lost Big Lots Customers: Executives outlined a strategic plan to re-engage customers from the lost Big Lots partnership, successfully directing these customers to alternative retail partners. This highlights strong cross-selling and customer retention capabilities.
- Robust Growth in the Four Business: The Four business has delivered triple-digit GMV growth for six consecutive quarters and achieved positive adjusted EBITDA in Q1. This diversification into a different merchandise vertical reinforces the company’s strength and revenue potential.
- Weaker demand amid economic uncertainty: The transcript highlights a challenging macro environment that has lowered consumer confidence and pressured GMV performance, leading to a revised outlook and uncertainty for the rest of the year.
- Tighter credit conditions affecting conversions: The call noted a 300 to 400 basis point decline in lease approval rates year-over-year and observed lower post-approval conversion rates, which could impair revenue growth.
- Ongoing impact from the loss of a major partner: The exit of the Big Lots partner is cited as imposing a recurring $30 million GMV headwind per quarter, potentially continuing to affect overall performance.
-
GMV Guidance
Q: GMV outlook for remainder of year?
A: Management revised guidance due to a Q1 GMV miss and demand uncertainty, and they are not providing a GMV guide for the rest of the year. -
Credit Tightening
Q: How much did lease approvals drop?
A: They reported that approval rates fell by about 300–400 basis points compared to last year due to tighter credit and lower quality applications. -
Business Dynamics
Q: Differences between Four and Leasing?
A: The Four business has posted triple-digit GMV growth with its first positive adjusted EBITDA, while the Progressive Leasing segment faced softer demand. -
Big Lots Impact
Q: Is the $30M headwind consistent?
A: Management confirmed that the loss from Big Lots is roughly around $30 million per quarter, with seasonal consistency in its impact. -
Macro Impact
Q: How do tariffs affect spending?
A: They emphasized that tariffs and price shocks are concerning, but current consumer softness is driven more by waning confidence than tariffs alone. -
Trade Down Trends
Q: What’s the trade-down trend observed?
A: Management noted that trade-down behavior persists—albeit a bit more muted now—with no extra tightening from credit providers compared to late 2024. -
Retail Softness
Q: Did retail performance rebound from February?
A: They observed a slight recovery from February lows, but overall retail softness remains a key challenge amid broader macro uncertainty. -
Customer Transition
Q: Are Big Lots customers transferring effectively?
A: The team is actively directing legacy Big Lots customers to other partners, and early signs show success in retaining this customer base. -
Portfolio Growth
Q: Clarify lease portfolio growth figures?
A: They clarified that the lease portfolio was up 6.1% at the start of the quarter, finishing roughly a 2% increase by quarter end due to demand pullbacks. -
Credit Performance
Q: Any significant changes in credit performance?
A: Despite lower conversion rates, the portfolio remains healthy with write-offs staying within their 6%–8% target range, reflecting disciplined credit management.
Research analysts covering PROG Holdings.