Aaron revenues up, earnings down
By Clint Engel -- Furniture Today, March 3, 2002
ATLANTA — ATLANTA — Aggressive expansion with a big acquisition of former Heilig-Meyers stores pushed Aaron Rents revenues up 8.7% last year but took a bite out of the bottom line.
This year, the company said it will slow its expansion significantly to digest that growth and strengthen profitability as the newest of its 650-plus units mature.
Net income for the rent-to-rent and rent-to-own company dipped 68.5% in the fourth quarter to $2 million from $6.3 million for the same period a year ago. Revenues grew 7% to $140 million, mainly in the rapidly growing Aaron's Sales and Lease Ownership division (Aaron's evolved version of rent-to-own). Revenues in the division were up 20% for the quarter to $107.2 million and same-store sales rose 5% for the quarter and 7.7% for the year.
For the year, Aaron's total revenues grew 8.7% to $546.7 million while net earnings fell 54.7% to $12.3 million. Rapid store openings hurt profit last year, the company said. Start-up costs typically drag down earnings until the new stores build up a customer base.
Also, the company took a one-time $5.6 million non-cash charge related to the rent-to-rent division, for future lease obligations on closed stores and the writedown of inventory and other assets. The rent-to rent division now has about 75 stores.
Last year Aaron opened a net 117 stores to give it 648 at year's end, including 209 franchised units — a 26% increase on top of 24% growth in 2000. Much of the 2001 growth came from the acquisition of some 83 former Heilig-Meyers stores and leases as the Richmond-based retailer — operating under Chapter 11 bankruptcy protection — closed its flagship division.
"We are pleased with our record expansion of stores in 2001," said Charlie Loudermilk, Aaron chairman and chief executive officer. "Although this rapid opening of new stores affected earnings during year, it has set the stage for strong future revenue and earnings growth."
The company expects revenues this year will exceed $610 million for Aaron and $800 million systemwide, including revenues from franchised Sales and Lease Ownership stores.
The company said it expects to open about 30 stores this year, including 20 franchised units.
| Quarter ended 12/31 | 2001 | 2000 | Change |
|---|---|---|---|
| Revenues(a) | $139,985,000 | $130,788,000 | 7.0% |
| Operating income(b) | 4,424,000 | 11,857,000 | (62.7%) |
| Net income | 2,001,000 | 6,348,000 | (68.5%) |
| Earnings per share | 0.10 | 0.32 | (68.8%) |
| Year ended 12/31 | 2001 | 2000 | Change |
| Revenues(a) | $546,681,000 | $502,920,000 | 8.7% |
| Operating income(b) | 26,113,000 | 49,531,000 | (47.3%) |
| Net income | 12,336,000 | 27,261,000 | (54.7%) |
| Earnings per share | 0.61 | 1.37 | (55.5%) |
| (a) Includes non-rental revenues of $38.6 million in the 2001 quarter, $37.1 million in the 2000 quarter, $143.3 million in the 2001 year and $143 million in the 2000 year. (b) Revenues minus cost of sales, operating expenses and depreciation of rental merchandise. | |||
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