Aarons to close Office Furniture division

Revenues from lease and sale business unit had fallen over the past few years, retailer says

Jay McIntosh -- Furniture Today, June 29, 2010

ATLANTA — Aaron's Inc. said today it will close its money-losing Aaron's Office Furniture division to focus on its profitable Aaron's Sales & Lease Ownership rent-to-own stores.

Nine of the office division stores were closed in the second quarter and the remaining four will shut down by Sept. 30, the company said.

Aaron's also said it is reducing its earnings guidance for the second quarter and for the 2010 year, partly because of charges it will take with the Aaron's Office Furniture closure and also because revenue and customer growth in the RTO division was "a little less than expected" in the quarter.

The company said its pretax earnings will be affected by up to $9.5 million or 7 cents per share, related to the closure of the division. About 70% of the charges will be recorded in the second quarter and the rest will be incurred later in the year.

Aaron's said the Office Furniture division had revenues last year of $16.5 million and a pretax loss of $7.8 million. In this year's first quarter, it had revenues of $3.9 million and a pretax loss of $1.4 million. Second-quarter revenues are expected to be lower, and the loss about the same.

The closure of the office furniture division will mark Aaron's exit from the rent-to-rent arena, said Robert Loudermilk, president and CEO.

"When we sold our legacy residential rent-to-rent business in 2008 we decided to keep the 13 Aaron's office furniture stores," he said. "At the time we believed there were still opportunities in the leasing and selling of office furniture.

"However, the office furniture business is highly cyclical, and with the economic conditions of the last several years, the stores have experienced declining revenue and have not been profitable. With no growth or profitability in sight, rather than spending more effort attempting to build this business and incur additional losses, we concluded we should exit the office furniture business and concentrate our future efforts on our sales and lease ownership stores," said Loudermilk.

Aaron's is reducing its earnings guidance to a range of 29 to 33 cents per share for the second quarter, down from previous guidance of 37 to 41 cents, and to $1.36 to $1.48 per share for the year, down from $1.48 to $1.60.

Loudermilk said the Sales & Lease Ownership business is continuing to grow, but the economy is making many customers cautious. "Traffic in the stores has remained good and we still look forward to having an outstanding year," he said.

Atlanta-based Aaron's has more than 1,725 company-operated and franchised stores in 48 states and Canada.