- EZCORP, Inc. (Nasdaq: EZPW - News) announced today that it expects earnings for the quarter ended June 30, 2008 to be approximately $0.25 per share, $0.04 per share better than its previously provided guidance of $0.21 and 56% greater than the $0.16 per share earned for the June 2007 quarter.
- For the fourth quarter and fiscal year ending September 30, 2008, EZCORP is raising earnings per share guidance to approximately $0.35 and $1.19.
- Commenting on these expected results, President and Chief Executive Officer, Joe Rotunda, stated, "In our June quarter, we realized stronger than expected sales gross profit in our U.S. EZPAWN operation and lower than expected levels of signature loan bad debt in our EZMONEY operation. While our pawn and signature loan portfolios grew during the quarter, their rate of growth was less than we typically see during this period -- leaving our loan balances at a lower than anticipated level going into our September quarter. All of these factors were influenced to some degree by the economic stimulus checks received by our customers during May and June."
Time to take a second scrub of the entire group - again, other names include First Cash Financial Services (FCFS), Dollar Financial (DLLR), and Advance America (AEA).The AP has a news story on this development as well... (always a bull market somewhere) Since I believe this is the early part of a much longer developing trend we need to look at these just as closely as we'd investigate Walmart (WMT) or Big Lots (BIG) - all playing off the same Pooring of America trend. Once the rebate checks run out, these guys should really see business take it to yet another level. Once again we are faced with the dilemna of do we buy the breakout or hope for the pullback that may never come. I waited on a host of natural gas plays to fall back yesterday and they are each up 5-9% today. Bah.
- Cash-strapped consumers desperate for deals are increasingly turning to pawn shops and payday lenders instead of the local mall and neighborhood bank. With credit drying up and gas and food prices rising, most retailers are seeing sales decline as shoppers cut back on discretionary spending. But for pawn shops, which offer used goods at low prices and allow consumers to sell their possessions for cash, consumers' pain has translated into big revenue and profit gains.
- Texas-based pawn shop operators Ezcorp Inc. and Cash America International Inc. both boosted their profit outlooks for the upcoming quarter this week. The companies also offer "payday loans," or short-term, high-interest cash advances to consumers on their paychecks. As more people struggle to cover the rising cost of gasoline and groceries, they are turning to payday lenders to help them bridge the days between paychecks.
- Cash America said it was helped by more merchandise sales, strong revenue from its online cash advance service and better-than-expected revenue in its pawn lending business. Pawn shops offer loans in exchange for goods that can then be sold if the customer doesn't redeem them.
- High gold prices may also be spurring shoppers to pawn their jewelry for extra cash, she said. At $927.30 on the NY Mercantile Wednesday, prices are down somewhat from their record-high of $1,000 in March, but still up sharply from last year's $650 an ounce.
- Roth's Elizabeth Pierce said even if the economy strengthens, pawn shops may continue to be popular. With more shoppers venturing into pawn shops, she said, consumers are seeing that the stores aren't necessarily the dodgy domains of the desperate that many perceived them to be. "If you need to replace something and you're looking for the cheapest alternative, you might be willing to put aside some of those preconceived notions about those businesses," she said. "It might raise awareness.
No positions (yet)
6 comments:
Once the rebate checks runout?? Obama is promising another $1k to everyone!
On a more serious note, I agree with your sentiment about these companies. I hate that they seem to prey on the poor, but they are definitely an opportunity.
I don't agree that they prey on the poor, they provide a service to the poor or people that have trouble managing their money. If you were lending out your money what interest rate would you charge for a short term loan to someone with lousy credit?
To make it a viable business you need to charge very high rates because the default rate is quite high.
I just think a lot of people get trapped in a long cycle in these things - they go in thinking it will be one pay period and they end up going on and on and on, and cannot find an easy way to escape.
But that probably speaks more to the lack of financial education that is prevalent in schools. Much like mortgages - people usually don't know (fully) what they are getting into. If they don't read the fine print in the $300K mortgage I doubt they'll be reading fine print in the $1500 loan.
If payday operations charged 40% they'd be out of business in a month with the default rate of the customer base. I am wondering what people in places like OH that capped the rate at 28% who used to use these things now do.
Marcus:
I agree with you for the most part. They do provide a service to people who are bad at managing their money. My question is, if more and more people are using this service then where are we failing as a society? You, TM, and I were presumably lucky enough to either have parents who taught us how to handle money or took it upon ourselves at some point, because it definitely wasn't the US public school system that built our money management skills.
I haven't even touched on people who are making it and doing their best, but have something happen that they need some quick cash for (commonly some medical issue), so they do the only thing they can and get one of these loans (often using their car as collateral). I hope I'm never in a situation where I have to chose between getting tossed on the street or putting my car up for collateral for a 40% loan to the pay the rent, because if you miss 1 payment then you lose your car and now what? You can't get to work, etc...
So, while I agree with you I also understand the other side.
"the lack of financial education that is prevalent in schools"
Spot on TM.
as someone who just came out of the public school system less than 1 year ago and is in college, I am amazed of the stupid financial decisions young adults (future middle class Americans if there is a middle class in 20 years) make. Many of them would be in decent financial shape but make stupid decisions to put themselves in the person who would need thrift lending.
There's too many young adults my age who are the future of this country economically, who tell me they'll be rich someday, because if the keep saving money in the bank at the 3% rate, in 30 years they'll have 3X the money. Then I say, but that is a negative real rate, you are losing money, and I get silence and opposition.
It is quite sad.
I won't even get into the things I see kids do with a credit card within the first 3 months they have it. Talk about digging a whole quicker than a gravedigger.
Mark, I think it all comes down to the American psychology. we think we are well off and never have to worry because it's all been good for the last 25 years because of borrowing. Americans isolate themselves from struggles of the rest of the world, because "we're better" even though most of us are in worse shape than other countries because we have a chronic oil addiction.
what I mean is that when you keep pounding that the last 25years was all borrowed prosperity, I keep thinking that its not only the borrowing issue that exists, but also the corresponding pyschology. The borrowing ability will disappear, but the psychology is hard to eliminate. Americans don't want to go back to the days when we weren't the best and could buy anything
As I watch "Kudlow & kool aid" now, I see the American psychology in its finest, as he defends that it is merely a psychological recession.
Denial is the worst, but 1st step to solution and unfortunately, as you outline each day, we are in denial with the fudged data
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