Aaron to convert, close Sight & Sound retail units
By Clint Engel -- Furniture Today, April 13, 2003
Atlanta — Aaron Rents is consolidating its Sight & Sound stores, cutting the unit count in half by converting some to its rental-purchase concept and closing a handful of others.
Roughly half the 25 Sight & Sound stores will remain under that name but with Aaron's lease ownership option available in addition to pure retail sales, said Charlie Loudermilk, Aaron chairman and chief executive officer.
Three or four poor-performing Sight & Sound stores will be closed in the second quarter and their lease volume transferred to nearby Aaron's stores. The rest will be converted to Aaron's Sales & Lease Ownership stores, he said.
"Although our sales and lease ownership business is exceeding expectations, the retail sales performance of our Sight & Sound stores remains disappointing," Loudermilk said.
He added the company still believes offering lease transactions in traditional retail stores "has excellent potential, and we are encouraged by the lease volume we have been building" in the stores.
The best Sight & Sound store has developed more than 500 lease ownership customers, equal to about $70,000 a month in volume, he said.
"The retail sales environment, however, has been very difficult and we feel we can more effectively conduct this experiment with a lesser number of stores," Loudermilk said.
Aaron also said last week that its first-quarter earnings are expected to be in the range or slightly ahead of previous guidance of 38 cents to 40 cents per share. That reflects the revenue and earnings growth of Aaron's Sales & Lease Ownership division.
Guidance for full-year earnings remained unchanged at $1.55 to $1.65 per share.
When the 735-store Aaron announced last summer that it would acquire Oklahoma City-based Sight & Sound, the plan was to blend its Sale and Lease Ownership financing into the pure retail concept. If successful, it would open the door to a new avenue of growth for the second-largest U.S. rent-to-own player.
But Loudermilk later acknowledged that Sight & Sound had more operational problems than Aaron first realized and would lose more than $1.8 million this year. Earlier this year, it hired former Circuit City executive Kevin Leary as director of operations for Sight & Sound, counting on his strong retail background to help with the turnaround.
When the consolidation is completed, Aaron will wind up with Sight & Sound stores all primarily located in the Oklahoma City television advertising market — and all sharing the same marketing costs. The others will be closed or converted to Aaron's.
Loudermilk said Aaron always knew this type of merger and consolidation was necessary, but could not make too many immediate changes after the acquisition. He now projects that Sight & Sound will be profitable within two or three months.
"Always the question is whether you would do it again," he said. "The answer is, yes, we would do it again, and we wish we had known a lot more than we did (going into the deal).
"It's a lesson learned, but we will meet our earnings guidance even with the cost of restructuring Sight & Sound."
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