Dive Brief:
- Rent-A-Center CEO Mark Speese has once again stepped down as top executive of the company, the rent-to-own retailer said in a press release Tuesday.
- Speese, a one-time employee who went on to start his own rent-to-own retailer that ultimately acquired Rent-A-Center, said in a statement that he decided to leave after several months of operational improvements at the retailer. The timing also comes as the company, under pressure from activist investors, explores selling itself. In the same release announcing Speese's resignation, Rent-A-Center said it was still committed to the search for "strategic alternatives."
- Replacing Speese is Mitchell Fadel, a current board member and former president and chief operating officer of Rent-A-Center. Fadel's appointment is effective immediately, the company said. Fadel has worked in various positions with Rent-A-Center for more than 30 years, according to the release.
Dive Insight:
Speese's departure from Rent-A-Center is not exactly shocking. Changes in chief executive are fairly routine for companies trying to fend off activist shareholders. (One recent example: Jerry Storch abruptly left Hudson's Bay in November amid calls for change from an investment fund.)
Speese stepped back in as CEO last April, after Robert Davis — who replaced then-retiring Speese in 2014 — resigned. In June, investors voted Speese out as board chairman, replacing him with then-lead director Steven Pepper. Speese held on to the CEO spot — until now.
It all points to a still-uncertain future for the rent-to-own center, which Moody's Investors Service in April included on a list of retailers expected to see its operating income decline. The retailer and peers like Aaron's, which treat a purchase as a lease and can ultimately charge much more than the list price for furniture, have also been criticized by consumer advocates for what they say are predatory business models.
Much of the investor pressure has been led by Engaged Capital, which disclosed a 12.9% stake in February in a letter that also accused the Rent-A-Center board of being "asleep at the wheel" and urged a sale of the furniture and electronics rent-to-own company. Later in the month, the hedge fund nominated five people for three open positions on the board of directors.
Glenn Welling, Engaged Capital's founder and chief investment officer, wrote in December 2016 that Rent-A-Center's chief differentiator — its rent-to-own business — helped make the company "Amazon-proof," but that its reputation for predatory lending practices was an Achilles heel. Welling also criticized the abrupt departure at the time of then-CFO Guy Constant.
The pressure has only intensified since. The company has been in turmoil, with Constant's exit quickly followed by the sudden departure of Davis, and now Speese. Rent-A-Center has tried to improve long-term performance in part by adding more full-time employees, shifting its product mix to include more "aspirational" products and "streamlining" the collections process for delinquent payments, according to the company's most recent 10-K.
