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Jan 21 (Reuters) - Payday lender Cash America International Inc CSH.N forecast a 15 percent drop in fourth-quarter adjusted profit, hurt by lower cash advance revenue, and cut its 2009 earnings outlook, sending its shares to their lowest levels in more than three years.
“Our transition to a new loan product in Ohio... proved more challenging than anticipated and led to a loss for our storefront cash advance business in the fourth quarter,” Chief Executive Daniel Feehan said.
Cash America, one of the top 10 providers of payday loans in the United States, said fourth-quarter earnings were also hit by higher loss rates for its online cash advance product and heavier discounting to clear inventory during the Christmas season.
The company said it would record a one-time expense of about $7.3 million in the fourth quarter related to store closures and elimination of management positions.
Cash America had reported net income of $26.3 million in the year-ago fourth quarter.
The company lowered its 2009 earnings forecast to between $3.10 and $3.30 per share from its prior view of $3.35 to $3.55 a share, citing changes in revenue in its Ohio locations.
Shares of Fort Worth, Texas-based Cash America fell $5.50 to $18.74 in late morning trade on the New York Stock Exchange. They touched a low of $18 earlier.
The company said in October that certain profitable markets for its cash advance product may be unavailable in 2009, specifically Pennsylvania, Minnesota, Florida and Ohio, due to expected regulatory changes.
U.S. states periodically review the laws regarding interest rates and lending terms on payday loans. A payday loan is usually for a few hundred dollars, with a term of two weeks to a month and an interest as high as 800 percent.
Cash America competes with companies like Ezcorp Inc (EZPW.O), Advance America Cash Advance Centers Inc AEA.N and First Cash Financial Services Inc (FCFS.O) in pawn and payday loan businesses. (Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Himani Sarkar, Deepak Kannan)