Aaron's earnings dip 11.9% on store closure charge

Revenues rise 6.6% in second quarter

Jay McIntosh -- Furniture Today, July 27, 2010

ATLANTA — Revenues grew 6.6% for rent-to-own merchant Aaron's in the second quarter and earnings declined 11.9%, a drop that was expected as the company took a charge for its previously announced move to shut down its rent-to-rent stores.

Earnings came to $24.4 million or 30 cents per share, compared with $27.8 million or 34 cents per share in the 2009 second quarter.

Revenue of $445 million was up from $417.3 million, partly because of a 2.4% same-store gain at company-owned stores. For stores open more than two years, the same-store revenue gain was 1.1%.

Aaron's took a charge of $7.1 million or 5 cents per share in the quarter for expenses related to the closing of its unprofitable Aaron's Office Furniture rent-to-rent division. It closed eight Aaron's Office stores in the second quarter and will close the remaining four this year.

"The results for the quarter were in line with our current guidance, and closing the office furniture stores is a positive going forward, as we will now be able to concentrate all our efforts on our proven and growing Aaron's Sales & Lease Ownership business," said Robert Loudermilk Jr., president and CEO. "Although revenue growth has slowed somewhat in recent months, our sales and lease ownership business continues to grow in revenues and numbers of customers, and our plans to open additional stores are unchanged."

For the third quarter, Aaron's said it expects revenues, excluding franchisee revenues, of about $435 million and earnings of 29 to 33 cents per share.

For the full year, the company says it expects earnings per share of $1.36 to $1.44, trimming 4 cents from the top of the range it forecast in June.

The company also said it expects new store growth of 5% to 9% for the year, with about an equal mix of company-owned and franchised stores. At the end of June there were 1,732 Aaron's stores, including 611 franchised stores.