Easyhome posts slim profit in third quarter

Revenue rises 9.2%, with same-store business up 1.8%

Michael Knell -- Furniture Today, November 11, 2009

MISSISSAUGA, Ontario — Easyhome, this country's largest furniture and appliance leasing merchant, saw a healthy uptick in revenue in the third quarter, although restructuring charges took a bite out of net earnings.

Revenue was C$42.5 million was up 9.2% from the same period last year, with most of the gains coming from the company's Insta-rent business and Easyfinancial, its payday loan division. Same-store sales growth for the period was 1.8%.

Net income was C$20,000 or zero cents per share, compared with C$1.5 million or 14 cents per share for the comparable 2008 period. But the company said that excluding restructuring charges of C$1.2 million or 14 cents per share, earnings were 8 cents per share.

"In the third quarter, we began to scale back our infrastructure, which had been constructed to meet higher consumer demand, to better reflect the realities of the market," Easyhome President and CEO David Ingram said in a conference call. "A number of spending cuts initiated in the third quarter decreased costs, but the majority of these reductions are not expected to flow through to the bottom line until the fourth quarter of this year."

The reorganization will include the closing of the company's administrative office in Edmonton, Alberta, as well as the realignment of senior management responsibilities and changes in store staff structures.

Restructuring charges in the quarter amounted to C$1.2 million.

Ingram said Easyhome's performance is likely to improve in the fourth quarter.

"Beginning in August, key performance indicators such as deliveries, receivables, and charge-offs have all improved, and customer demand has stabilized since July. Combined with rate increases in our television, computing and furniture categories, and cost reductions in advertising and marketing, we are cautiously optimistic that the worst is now behind us," he said.

The company also report that it franchising business met its targets for the quarter and is expected to have a total of 22 stores in operation by the end of fiscal 2009.

Easyfinancial's revenue increased from C$600,000 to C$1.3 million in the third quarter through solid same revenue store growth of 61% and the addition of four new kiosks, giving it a total of 20.

It also expects to operate 30 Easyfinancial kiosks across Canada by the end of the year.

For the first nine months of the year, Easyhome revenues climbed 9.6% to C$129.8 million. Net income for the nine month period was C$4.3 million, down 39.7%, as earnings per share fell to 41 cents compared with 68 cents.

Excluding the restructuring charge, earnings per share for the nine months were 49 cents.

In addition, Easyhome said that during the first nine months of 2009, it paid down some C$5 million of debt and invested C$3.1 million into Easyfinancial. In the third quarter, it also bought back 28,000 of its common shares for C$300,000.

Ingram also announced that next year, Easyhome intends to open between eight and 10 corporate stores, 25 to 30 franchise stores, and 25 to 30 Easyfinancial kiosks. It projects revenue growth of 5% to 7%.

At Sept. 30, Easyhome operated 237 stores, including 208 Canadian corporate stores, 13 U.S. corporate stores, 10 U.S. franchise stores, five Canadian franchise stores and one licensed Canadian store.