So, it can find your volume too. So, we’re excited about some of those things that once we get Acceptance Now done of how can some of those same tools help Rent-A-Center drive more volume and with lower losses as well. So the underwriting is a real — there’s two things that we really loved about Acima three years ago when we bought it, about the organization that — had built was the underwriting capabilities. And we’re seeing that, and then the sales team I was talking about earlier, the way it was such a diverse growth vehicle versus only going after a certain type of account. We got competitors that only that we — and there’s some good competitors that go after just the SMB accounts. And then there’s other competitors that only go, we only compete with when we’re going after the big accounts and, but we’re in all of them, whether it’s one team’s on the small accounts, another team’s on the regional accounts, another team on the big accounts, the enterprise accounts, you’d call them.
And even though we see different competitors in each one of those buckets, we’re the only one in every one of those games. And it feels really good. And that’s the way — it seamless built on that small SMB business. We’ve added the enterprise team, and those were the two things we loved about it. The way they approached the sales and the great sales team, some of the great people they have on that team and have had since the beginning as well as the underwriting. And we’re seeing the fruits of all those things now.
Bradley Thomas: That’s very, very helpful. If I could squeeze in one more here, just on how to think about gross margin and modeling it for the year. Fahmi, it strikes me that probably mix towards the Acima away from rack would be one of the more powerful drivers just in terms of how the margin rate on a consolidated basis plays out. But anything else we should think about, as we think about baking the cake on the gross margin for the year?
Fahmi Karam: Yes, I think that’s right between the mix of Rent-A-Center and Acima for looking into 2024 for Rent-A-Center, expect to have gross margins to be relatively flat year-over-year. For Acima, the guide has us coming down a little bit year over year especially in the first half of the year. We have some tough comps in Q1 and Q2 compared to 2023. And we talked about the early payout options and fewer customers electing that. We expect that to continue this year, but maybe not to the same degree more normalized. If you look at Q1 of last year, the gross margin expanded almost 500 basis points or over 500 basis points. And so, we don’t expect it to do that again in the first quarter of 2024. But it’ll be close to that. We expect it to be slightly down from that. So it’s more of a cadence of first half being a little bit lower than 2023 and then catching up in the second half of the year.
Operator: Our next question will come from the line of Anthony Chukumba from Loop Capital Markets. Your line is open.
Anthony Chukumba: I wanted to focus just a little bit on the Rent-A-Center business. You had a nice sequential improvement in terms of comps. You mentioned in your prepared remarks some new product categories, jewelry and tires. I guess my question is, how much do you think that jewelry and tires contributed to that sequential improvement in your fourth quarter Rent-A-Center comp? And also related to that, do you think that credit tightening above you contributed to either the Rent-A-Center comp improvement or the really strong GMV growth in Acima? Thanks.
Mitch Fadel: Sure, Anthony, good morning. Rent-A-Center — those new products that we put in the fourth quarter, pretty really small contribution. I would give them a little bit of credit, but not much quite honestly, but a little bit. And obviously we expect them to grow in 2024. But it was pretty late in the year. So, the thing about the thing probably that helped Rent-A-Center more than that is overall the extended aisle that we added to all year adding products in not necessarily new categories, but new — a lot more product offerings on the website where instead of going through the — let me give you an example. The 20 living rooms maybe that we had on a fast ship to our stores that our stores could get on a weekly basis from say, an Ashley Furniture from the manufacturing side of Ashley Furniture.
Now the customer can shop the all of Ashley’s products on the website and the special order anything on there through our Rent-A-Center store. So I think the extended aisle on there, there’s so many more products, like 6,000 more products or something. I mean, it is a huge number more products on there and that’s really where the growth of Rent-A-Center is coming from. As I mentioned, in my prepared comments over 30% more web visits, 16% more orders coming through there. And that’s what tighter underwriting as well. So, when I say orders coming through, those are orders that — those are approved orders coming through, and we got 16% more. I think the extended aisle is more the story in Rent-A-Center. I think certainly the demand is there, the consumer’s still under pressure.
And the good part about that business, the reason it turned 50 years old last year is when the consumer’s under pressure we get more trade down and when things are better we get better performance from our base. And that’s the resiliency of the business of why it goes through very well through any cycle. But the second part of your question, I think tightening above us has to be helping when we look at vantage scores and people ask us, all the time about trade down and we saw it early last year in the scores coming through, then it kind of leveled off. We’ve seen them go back up just a couple of points though in the last say, well, maybe six, eight weeks. They went up early last year leveled off. Now, we’re seeing them tick up again a little bit here recently.
And then it is not all just about that score either, right? Some of it is mindset if the customer goes into Rent-A-Center because they don’t want to commit maybe to a contract and they’re just rent it and see what happens to their finances over the next few months. So it’s a much more flexible, uh, way to acquire things, obviously because you have return at any time. It’s a much more flexible way to acquire things for your home than a revolving account or finance contract where you can’t just give it back to the retailer. So, I think trade downs part of the story, not just when you look at vantage scores or credit scores or something like that, I think mentality is always part of the trade down when the economy worsens. So I think that’s certainly part of it, and both the Acima side and the Rent-A-Center side.
Anthony Chukumba: And then just real quickly, you mentioned going exclusive with Ashley Furniture. Can you just remind us, I guess how many LTO providers did they have previously? And when did you go exclusive and do you think that was a meaningful contributor to Acima GMV growth?
Mitch Fadel: Of course, Ashley also has a lot of licensees, so when we say exclusive of them, we’re talking about corporate stores, which I think there’s over a 100 corporate stores. We were splitting them. There was two LTOs in there before now there’s just us. And the website was split between two LTOs and now it’s just us. So we’ve been with them a long time, but we’re splitting the account and now it’s a 100% ours, I don’t know the number. I mean, I imagine it was probably worth a couple of points of the 19% though two or three. I’m looking at –, 2% or 3% probably out of the 19. It’s not insignificant. But it’s not the whole thing either. There’s a lot of growth out there.
Operator: We come from the line of Alex Fuhrman from Craig-Hallum. Your line is open.
Alex Fuhrman: Mitch, you mentioned that you’ve been having some success adding merchants to Acima that aren’t fully integrated with the platform. Can you talk a little bit about how that works and what categories that you’ve been able to do that in? And just over time, I mean, how much growth could that potentially unlock for you?
Mitch Fadel: Well, you’re asking me to get technical now, Alex, but I’ll do the best I can. Yes, the only — when I mentioned the unaffiliated merchants, I’m talking about the Acima marketplace where you can go on there and you’ll see a partner. We were just talking about Ashley. You’ll see a partner like Ashley where we’re certainly integrated with them and so forth. Then you’ll see another partner on there like Best Buy where we’re not fully integrated with them, we don’t — we’re not on their website, but yet our customers can shop Best Buy and put it on Acima lease if they go at it through Acima, through the Acima marketplace. We can take unaffiliated partners like that and put them on there. So when you say, what’s the growth potential of that?
I mean, it’s almost any retailer out there. The largest retailers in the world you can put on there and then our customers can shop there. So, we’ve got some already that are unaffiliated. I mentioned, Best Buy, and there’s a few others on there that are unaffiliated, but more will be added really every quarter. And of course we’re partial to the ones we’re affiliated with to put on there as well. Not every single one of our partners wants to be on there. They’d just rather us be their partner in their stores, but most do, and so we put them on there, and you can find any of our partners on there, even local partners through something we call find a store. If you are shopping in one particular area, you can find one of our partners there. But as far as nationwide ones to answer your question, really the sky’s the limit as far as how much we can add there.
And like I said, it doubled in the fourth quarter the GMV from it.
Fahmi Karam: Now, the way we think about it is just giving customers more choices and more options. And we really want to be fulsome in our product category lineups. We want to make sure they have access to all the major categories, whether it’s furniture, electronics, appliances, and all of the above. So, when we look out to round out the unintegrated with the integrated it’s making sure that we have all the product categories kind of filled out.
Operator: Our next question will come from line of Hale Holden from Barclays. Please go ahead.
Hale Holden: On the growth potential to change credit card late fees, does that change your outlook for the private label credit cards that you’re looking at this spring or the economics around that potential launch?
Mitch Fadel: Good morning. No, it doesn’t. I think, all of the credit card providers are finding ways to maybe offset some of those rule changes and our partnership is no exception to that. We’re even more bullish about the opportunity just based on the feedback we’re getting from some of our retailers and specifically the more the larger retailers around the benefit of having two products under one umbrella and one integration. So, if anything, we’re more bullish about the opportunity.
Operator: Thank you. And I’m not showing any further questions in the queue. I’d like to turn the call back at over to Mitch Fadel for any closing remarks.
Mitch Fadel: Thank you, Victor. And thank you everyone for your continued interest in our business. As we discussed today, we’re awfully proud of what we achieved last year. We look forward to updating you across the year on our progress in 2024. We certainly believe our team’s focus on the customer and on our retail partners and new partners and existing partners and so forth will continue to create opportunities for growth that at Upbound, whether you’re talking to Seymour, the Rent-A-Center side and create value for our investors. So we appreciate you, we appreciate all of our hardworking teammates out there in the field. And with that, I’ll just wish everyone a great day, and operator, you can now disconnect. Thank you everyone.
Operator: Thank you for participating in today’s conference. This does include the program. You may now disconnect. Everyone have a great day.
