Rent-to-own News - Aaron's reports record Q1 revenues

Aaron’s, Inc. Monday, announced revenues and earnings for the three months ended March 31, 2009.

For the first quarter of 2009, revenues rose 15% to $474.0 million compared to $412.7 million for the same quarter a year ago.  Net earnings from continuing operations were $35.4 million versus $22.6 million in 2008, a 57% increase.  Diluted earnings per share from continuing operations were $.65 compared to $.42 per share for last year’s quarter, a 55% increase.

“We are pleased with these record revenues and earnings and that once again our results exceeded expectations,” said Robert C. Loudermilk, Jr., president and chief executive officer of Aaron’s.  “Our business has been especially strong in recent quarters as more consumers are finding it extremely attractive to use the Aaron’s option of obtaining basic home furnishings necessities with no credit checks and the ability to return the merchandise at any time. Although we have done well through the years in different economic environments, both good and challenging, we believe the current conditions have helped accelerate the number of customers coming into our stores.  We currently see no indication that this trend will diminish in the foreseeable future.”

Same store revenues (revenues earned in Company-operated stores open for the entirety of both periods) increased 12.3% during the first quarter of 2009 compared to the first quarter of 2008.  Same store revenues also increased 7.9% for Aaron’s Sales & Lease Ownership stores open over two years at the end of March 2009. The Company had 760,000 customers and its franchisees had 395,000 customers at the end of the first quarter of 2009, a 20% increase in total customers over the number at the end of the first quarter a year ago (customers of our franchisees, however, are not customers of Aaron’s, Inc.).  The customer count on a same store basis for Company-operated stores was up 17% in the first quarter compared to the same quarter last year.

As previously announced, on November 6, 2008 the Company consummated the sale of substantially all of the assets of its Aaron’s Corporate Furnishings division.  The Company no longer includes the revenues and expenses of the Aaron’s Corporate Furnishings division in its continuing operations, and now reports the net earnings or loss of the division as discontinued operations.  Prior periods are restated to reflect this change in accounting treatment.

Division Results

The Aaron’s Sales & Lease Ownership division increased its revenues in the first quarter of 2009 to $469.3 million, a 15% increase over the $406.3 million in revenues in the first quarter of 2008.
A net loss of $209,000 from discontinued operations was recorded for the first quarter of 2009, compared to net earnings of $2.2 million in the first quarter of 2008.

Components of Revenue

Consolidated lease revenues and fees increased 15% and franchise royalties and fees went up 19% during the first quarter of 2009 compared to the same period in 2008.  Non-retail sales, which are primarily sales of merchandise to Aaron’s Sales & Lease Ownership franchisees, increased 9% for the quarter versus the first quarter of last year.  The increases in the Company’s franchise revenues and non-retail sales are the result of an increase in revenues of the Company’s franchisees, who collectively had revenues of $193.6 million during the first quarter of 2009, a 16% increase over the 2008 quarter.  Same store revenues for franchised stores were up 15% for the first quarter compared to the same quarter last year.  Revenues of franchisees, however, are not revenues of Aaron’s, Inc.  The Company’s other revenues in the first quarter of 2009 and 2008 included a $5.7 million and $2.3 million gain, respectively, from the sale of Company-operated stores.

Store Count

During the first quarter of 2009 the Aaron’s Sales & Lease Ownership division opened nine new Company-operated stores, acquired seven franchised stores and one franchised RIMCO store, acquired the accounts of five third party stores, closed nine stores, and sold 23 Company-operated stores to five separate franchise entities.  The Company also opened ten new franchised stores.  The franchised store count increased by 37 stores during the quarter due mainly to the previously announced conversion of the stores of Kelly Rentals, Inc. to Aaron’s franchised stores as well as the above-mentioned sale of 23 Company-operated stores to franchisees. 

During the first quarter the Company awarded area development agreements to open 71 additional franchised stores. At the end of March 2009 there were 300 franchised stores awarded that are expected to be opened over the next several years.
At March 31, 2009 the Aaron’s Sales & Lease Ownership division consisted of 1,011 Company-operated stores, 532 franchised stores, 11 Company-operated RIMCO stores, and seven franchised RIMCO stores.  The Company also had 16 Aaron’s Office Furniture stores.  The total number of stores open at the end of March 31, 2009 was 1,577.

mevans@rtohq.org