Rent-to-own business Rent-A-Center announced a better-than-expected profit forecast and a new strategic growth plan Monday that has Wall Street excited.
The company said in a release it aims to drive growth, improve profitability and deliver enhanced stockholder value into 2018 through a plan focusing on better pricing and an improved digital presence. The stock rose more than 5 percent to above $10 per share on Monday.
The retail sector of the S&P 500 was also up more than 1 percent Monday, led higher by Rent-A-Center's gains.
Rent-A-Center said it expects its 2018 annual earnings to fall between $1.20 to $1.40 per share, topping analysts' forecast of 99 cents, according to FactSet.
Further, as a result of its new strategic plan the company said it expects free cash flow to hit $70 million to $90 million in 2018. 2019 free cash flow could reach anywhere from $110 million to $130 million, Rent-A-Center added.
"We recognize that significant improvement is needed," Rent-A-Center Chief Executive Mark Speese said in a statement. "We are renewing our focus on what made Rent-A-Center an industry leader — starting with enhancing the value proposition of our offerings to increase customer satisfaction and enable higher rates of ownership."
Speese had been serving as the company's interim chief executive, replacing Robert Davis, but Rent-A-Center confirmed in a Monday filing with the Securities and Exchange Commission that the founder would be taking on the role full time. Speese prior served as Rent-A-Center's CEO from October 2001 through January 2014.
Monday's announcement by Rent-A-Center means the company will not be heeding calls to put itself up for sale. Activist investment fund Engaged Capital has urged Rent-A-Center's board to start evaluating strategic alternatives, including the potential of a sale, according to Reuters. The firm has a nearly 13 percent stake in Rent-A-Center.
But now, with Speese on board as CEO, the retailer looks to move ahead with what Engaged Capital once called a "high-risk path," Reuters reported.
Even with Monday's gains, Rent-A-Center's stock is down more than 30 percent over the past 12 months and is down about 10 percent for the year.
RCII year-to-date performance
Source: FactSet
— CNBC's Gina Francolla contributed to this report.