UPDATE 2-First Cash Q1 profit meets market view; shares rise

(Adds details, analyst comments, share movement)

By Supantha Mukherjee

BANGALORE, April 22 (Reuters) - First Cash Financial Services Inc (FCFS.O: Quote, Profile, Research) reported a 25 percent drop in quarterly profit, which was in line with market expectations, and backed its earnings outlook for 2008, sending its shares up as much as 12 percent.

The payday lender said its results benefited from strong consumer credit demand that were partly offset by poor performance at its automotive dealerships, Auto Master, which incurred a store level loss of $3.4 million, reducing first-quarter earnings by 7 cents a share.

The pawn business showed better results than expected, driven by stronger merchandise sales, including scrap gold sales, which benefited from higher gold prices, Stephens Inc analyst Dennis Telzrow said by phone.

A payday loan is usually for a few hundred dollars, with a term of two weeks and an interest as high as 800 percent. The company's pawn stores advance money to the customers against the security of pledged goods.

The company said appropriate strategic actions have been taken to reduce Auto Master losses in the second quarter and return it to profitability in the second half of 2008.

In the Auto Master business, the loss rate was a little bad but the company has indicated that the trends will improve in the second quarter, said analyst Telzrow, adding that people are probably taking it optimistically given the company's expectations.

Q1 EARNINGS