These 2 Consumer Stocks Are Falling Further After Hours Wednesday

Investors showed no signs of regaining confidence in the near-term direction of the stock market on Wednesday, instead concentrating on the worsening situation in Eastern Europe. After seeing gains briefly in the opening minutes of the trading day, major market benchmarks all started losing ground, and final losses for the S&P 500 (^GSPC -1.11%), Dow Jones Industrial Average (^DJI -0.77%), and Nasdaq Composite (^IXIC -1.49%) sent the measures to their worst levels in the past six to 12 months.

Data source: Yahoo! Finance.

Adding insult to injury, some stocks with exposure to the consumer sector kept losing ground even after the market closed. Both Rent-A-Center (RCII -2.70%) and eBay (EBAY -1.57%) rely on healthy levels of consumer activity, and both saw sizable declines in after-hours trading following the release of their respective financial reports.

Image source: Getty Images.

Rent-A-Center can't deliver the goods

Shares of Rent-A-Center didn't do all that well in the regular session, falling 8%. However, the rent-to-own specialist saw its stock plunge more than 30% after hours as investors reacted negatively to the company's fourth-quarter financial report.

Rent-A-Center's numbers didn't seem all that bad on their face. Revenue soared more than 63% year over year due largely to a major acquisition. Even accounting for that purchase, pro forma sales were up 10.5% as the company's business segment performed well. Although extraordinary expenses weighed on net income, adjusted earnings of $1.08 per share were up 5% from year-ago levels.

However, investors focused largely on the issues that plagued the consumer side of the business. Rent-A-Center cited the winding down of pandemic-related government relief and elevated inflation levels that sapped customers' ability to buy and make payments. That showed up in higher delinquency and loss rates, which in turn affected bottom-line performance. Moreover, supply chain disruptions hurt Rent-A-Center's ability to get key products, and CEO Mitch Fadel expects these challenges to last for the foreseeable future.

As a result, Rent-A-Center's guidance was somewhat disappointing. Calls for 2022 revenue of $4.45 billion to $4.6 billion would be flat to down slightly from 2021 levels, and earnings of $4.50 to $5 per share would be down markedly from $5.57 per share last year. That reflects consumer challenges, and investors haven't been willing to give companies like Rent-A-Center the benefit of the doubt lately.

eBay misses the bid

Elsewhere, shares of eBay fell 7% in after-hours trading. The online marketplace and auction site saw solid earnings but fell short of expectations on future guidance in its fourth-quarter report.

Again, eBay's backward-looking numbers weren't bad on their face. Revenue moved higher by 5% to $2.61 billion. Net income rose 10% to $647 million, producing adjusted earnings of $1.05 per share.

However, eBay's outlook was particularly poor. The company expects to see organic revenue drop 5% to 7% in the first quarter of 2022, with adjusted earnings of just $1.01 to $1.05 per share. For the full 2022 year, revenue of $10.3 billion to $10.5 billion would be flat to up just 3% year over year, and earnings of $4.20 to $4.40 per share on an adjusted basis would offer only limited growth from 2021's final bottom-line total of $4.02 per share.

eBay benefited from the rise in online shopping during the pandemic, but as people return to brick-and-mortar locations, eBay faces the loss of customers and weaker sales growth. That's a recipe for a weaker stock price in the current environment, and the company will have to fight to regain its positive momentum.