Rent-to-own News - Aaron's shuts down office furniture division

Aaron’s Monday announced it is ceasing the operations of its Aaron’s Office Furniture division and reducing its 2010 earnings guidance.

During the second quarter the Company closed all but four of its Aaron’s Office Furniture stores and plans to have the remaining stores closed by September 30, 2010.

It is anticipated that the Company’s pre-tax earnings will be negatively impacted by up to $9.5 million, or approximately $.07 per diluted share, relating to the closure of the division.

The Company anticipates recording over 70% of this amount as a charge to operating expenses in the second quarter of 2010 and most of the remainder is estimated to be incurred and recorded by the end of 2010.

These charges will include the write-down and cost to dispose of office furniture, estimated future lease liabilities for closed stores, the write-off of leaseholds, severance pay, and other associated costs of closing the stores and winding down the division.

The Aaron’s Office Furniture division had revenues in 2009 of $16.5 million and a pre-tax loss of $7.8 million. For the first quarter of 2010 revenues were $3.9 million with a pre-tax loss of $1.4 million, and it is expected revenues will be less in the second quarter with comparable losses.

“When we sold our legacy residential rent-to-rent business in 2008 we decided to keep the 13 Aaron’s Office Furniture stores,” stated Robert C. Loudermilk, Jr., President and Chief Executive Officer of Aaron’s.  “At the time we believed there were still opportunities in the leasing and selling of office furniture.  However, the office furniture business is highly cyclical, and with the economic conditions of the last several years the stores have experienced declining revenue and have not been profitable.  With no growth or profitability in sight, rather than spending more effort attempting to build this business and incur additional losses, we concluded we should exit the office furniture market and concentrate our future efforts on our sales and lease ownership stores.”