- Pawnshop operator and cash advance provider Cash America International Inc. boosted its second-quarter guidance Monday, as economic woes and turmoil in the lending industry sent more consumers to its pawn shops.
- The news sent Cash America shares up $4.37, or 14 percent, to $36.47 in afternoon trading, after peaking at $36.90 earlier in the day. Over the past 52 weeks, the company's shares have traded between $26.17 and $48.86.
- Cash America said it now expects to post a second-quarter profit of 62 cents to 64 cents per share, up from previous guidance of 51 cents to 54 cents per share.
- Cash America said its pawn lending business benefited from higher-than-expected revenue from pawn loans and higher gross profit dollars on the sale of merchandise.
- In addition, the company said its online cash advance product offering posted strong revenue growth and lower-than-expected loan losses. (online payday loans? Now that's scary - you don't even need to show up anymore even though there are 100s of these places now sprouting up)
- Cash America also said Monday that it has not yet closed any of its locations in Ohio as a result of a new state law there that caps payday loan interest at 28 percent. The company said in May that the change in state law could force it to close up to 139 of its Ohio locations. (for those unfamiliar with this type of business - many times the interest rates run in the 100s of % - I've seen up to 500%)
- Payday loans are short-term, unsecured loans offered to cash-strapped consumers that typically mature in two weeks or on the borrower's next payday. The loans are often priced at a fixed-dollar fee, but the underlying annual interest rate is usually near 400 percent or more. (I cannot stress again, the typical blog reader does not realize what a good sized portion of our populace has been doing the past decade to get by, and now it will start going upstream to higher and higher income strata - these companies also cater big time to the very underpaid military; many times these shops are sitting right outside a military base)
[Jun 22: Americans Running Out of Places to Hide Debt - Now Credit Cards Go]
[Apr 30: MSNBC - Americans Tapping Attic for Spare Cash]
2 comments:
I have a friend who is in the pawn shop business locally; he specializes in collectables and coins; he is absolutely crushing it. He comes from a family of professionals (doctors and lawyers) and he was once a lawyer himself until he went into the pawn shop business 20 years ago. Now he is a top of the pile.
I've talked to a few people in the business because I saw the way things are heading in the country. I was looking more at the cash advance side of the business - if you drive through any middle class town now and really look for the signs they are EVERYWHERE. I don't know anything about the pawn side of the business but I assume it is also good when I read stories of peopel bringing in family jewelry so they can pay for gas.
On the cash advance side it is outrageous fees but the % of people who simply default is also high. But its in many ways a lot better business than catering to 650 FICO scores at 14-23% interest... when you can charge 400% interest all you need is the guy to pay for a few time frames (most people never "catch up") - so they try to pay for a few pay periods and then eventually crack. Now as more people who have been more "credit worthy" start turning to this sort of business I assume the payouts will be even better because a greater % of them might actually pay the whole thing off!
Again, unless you are actually looking for it you don't realize how many there are - one day when I was driving I made it a practice to specifically look for these businesses - they are not in the upper 10-15%ish type of towns but when you move to 'blue collar' areas they are literally like 7-11s.
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