Aaron 4Q revenue up 14.3% but costs send profits down
By Larry Thomas -- Furniture Today, February 24, 2008
Atlanta — Rent-to-own powerhouse Aaron Rents said its fourth-quarter revenues jumped 14.3% but profits fell more than 18% due to increased operating costs and an aggressive store-opening program.
The company, which had 1,560 franchised and company-owned stores at the end of 2007, said it also had higher than normal collection expenses at many company-owned locations.
Total revenues for the quarter ended Dec. 31 were $388.6 million. Of that amount, $285 million came from rentals and fees, up from $249.1 million in the comparable 2006 period. Same-store sales were up 3.9%.
Net income of $15.5 million in the latest quarter was down from $19 million a year ago.
Charles Loudermilk Sr., chairman and CEO, said Aaron's had a net gain of 215 stores, a 16% increase for the year.
"Although new store start-up expenses will continue into 2008, we expect to see improved profit trends later in the year as we grow at a more measured rate," Loudermilk said.
For the full year, total revenues rose 12.7% to $1.49 billion, while net income grew 2.1% to $80.3 million.
In a conference call with the investment community, Loudermilk said the company has started cutting costs and making operations improvements that should deliver a better profit picture.
Ken Butler, president of Aaron's Sales & Lease Ownership division, noted that in furniture, the company recently has "stretched terms and cut pricing" and already is seeing a pick-up in the category.
At year end Aaron's had 987 company-owned Sales & Lease Ownership stores and 480 franchise stores in the division, 62 rent-to-rent stores, 27 company-owned Rimco stores and four franchised Rimco units.
Aaron's said it will open 55 to 75 company-operated stores and 70 to 90 franchise stores this year. However, officials said they also will merge or sell some existing stores that do not meet profit goals.
Aaron expects corporate revenues to reach about $1.7 billion this year.
| Aaron Rents | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/31 | 2007 | 2006 | Change |
| (a) Includes pretax franchise royalties and fees of $10.4 million in the 2007 quarter, $8.9 million in the 2006 quarter, $38.8 million in the 2007 year and $33.6 million in the 2006 year. (b) Based on average shares outstanding of 54.8 million in the 2007 quarter, 54.9 million in the 2006 quarter, 55.1 million in the 2007 year and 53.4 million in the 2006 year. |
|||
| Revenues (a) | $388,611,000 | $339,869,000 | 14.3% |
| Operating income | 27,491,000 | 32,633,000 | (15.8%) |
| Net income | 15,492,000 | 19,041,000 | (18.6%) |
| Earnings per share (b) | 0.28 | 0.35 | (20.0%) |
| Year ended 12/31 | 2007 | 2006 | Change |
| Revenues (a) | $1,494,911,000 | $1,326,592,000 | 12.7% |
| Operating income | 137,324,000 | 134,439,000 | 2.1% |
| Net income | 80,275,000 | 78,635,000 | 2.1% |
| Earnings per share (b) | 1.46 | 1.47 | (0.7%) |
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Aaron’s revenues climb 14.3% in fourth quarter
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