Saturday, August 30, 2014
Inquirer Daily News

DFC Global lowers earnings forecast, shares fall 22 pct.

The Berwyn-based operator of pawnshops and check-cashing stores said financial results for its latest quarter have been hurt by uncertainty over payday lending in the United Kingdom.

DFC Global lowers earnings forecast, shares fall 22 pct.

It’s bad enough when a stock loses 10 percent of its value over the course of one quarter. It’s even worse when the same stock loses twice that amount in one day.

As I wrote in the Sunday Inquirer, DFC Global Corp. was worst performer in terms of stock performance among the Philly 50 local stocks so far in 2013.

The 10.2 percent drop in the price of DFC’s common stock between Dec. 31 and March 28 came during a quarter when the Standard & Poor’s 500 index rose a robust 10 percent.

On Monday, DFC disclosed disappointing preliminary results for its third quarter and shares dropped 21.6 percent, or $3.60 per share, to close at $13.04. That made the Berwyn-based operator of pawnshops and check-cashing stores the worst performer on the Nasdaq.

In a conference call with analysts, DFC chairman and chief executive Jeff Weiss referred to the uncertainty over payday lending in the United Kingdom, where it operates about 600 locations.

Last November, a payday lending industry association announced new lending standards that it expects members -- of which DFC is one -- to abide by. One change: Payday loans, which are meant to be cash advances lasting 30 days, will be restricted to a maximum of three rollovers -- or extensions in 30-day blocks.

The voluntary standards came in response to efforts by the U.K.’s Office of Fair Trading to crack down on what it called “widespread irresponsible lending” in the 2 billion pound sterling payday loan market.

With DFC and other lenders adhering to a three-rollover maximum for loans, many consumer loans are coming due and borrowers can’t repay them. Some payday lenders continue to provide unlimited rollovers, Weiss said.

“We believe this transition is causing a temporary ‘credit crunch’ for consumers in the United Kingdom,” Weiss said in a statement.

As a result, DFC reduced its operating earnings guidance for its full year to between $1.70 to $1.80 per share from the estimated $2.35 to $2.45 per share that management had forecast as recently as late January.

Mike Armstrong Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
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