Aaron Rents to fall short of 2007 store-opening goal
Construction delays blamed; earnings will be at low end of projections
By Furniture Today Staff -- Furniture Today, September 25, 2007
ATLANTA — Mainly because of construction delays, some 50 to 75 of the 250 stores that major rent-to-own merchant Aaron Rents had planned to open this year will be pushed into 2008, the company said Monday.
And largely because of the effect of the delays on operating costs, Aaron’s earnings in the third and fourth quarters “will probably be at the low end of our earnings guidance or somewhat below it,” said Chairman and CEO Charlie Loudermilk.
In July, the company had estimated it would earn between 31 cents and 35 cents per share in the third quarter on revenues of $355 million, and $1.50 to $1.60 per share for the full year, excluding a one-time gain in the first quarter from a parking deck sale.
Loudermilk said the goal to open 250 stores this year included a combination of company-owned and franchised stores.
“At the end of September 2007, we anticipate over 115 of these stores will be completed,” he said. “However, it is evident now, due primarily to construction delays, that all of these stores will not be ready to conduct business by the end of the year. Although hard to exactly predict, we anticipate that 50 to 75 of these additional stores will be pushed into 2008.”
He said that operating costs as a percentage of revenue will be higher than expected in the third and fourth quarters as the company continues to build resources in anticipation of adding stores.
“In addition, we have seen collections a little slower and associated writeoffs higher than expected so far in the third quarter. We anticipate that operating cost pressures will subside as revenue is generated as the new stores open, and also that collection trends will shortly return to more normalized levels,” Loudermilk said.
He added that third-quarter revenues should be up 13% from the comparable period a year ago, with revenues in the Aaron’s Sales and Lease Ownership division rising 15%. Same-store revenues in the division should be up close to 5% and same-store “core rental revenues” will rise about 7%, he said.
Aaron’s plans to announce its third-quarter earnings and give updates on the store opening plans and earnings guidance on Oct. 24.
The company has over 1,450 company-owned and franchised RTO and rental stores in the United States and Canada.
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