Loan segment continues to drive Easyhome's growth

Michael J. Knell -- Furniture Today, March 14, 2013

MISSISSAUGA, Ontario — Easyhome, Canada's largest big ticket home goods leasing merchant, reported record revenues and strong earnings for the last three months of 2012, driven almost entirely by the expansion and growth of its short-term consumer loans segment.

The company said revenues for the quarter were C$51.7 million, up 4.9% gain from the comparable period in 2011. Net income was C$3.8 million or 32 Canadian cents per share, compared with C$2.6 million or 22 cents per share - a 45.4% jump on a per share basis.

Same store revenues were up 9%.

On a segmented basis, Easyfinancial revenues increased 40% to C$10.9 million as the consumer loans portfolio jumped to C$70.7 million at the end of December, up from C$47.6 million a year earlier.

Easyhome's core merchandise leasing operation recorded revenues of C$40.2 million, a 2% decline from the prior year's C$41 million. The company attributed the drop to the reduced number of stores - some 13 stores were closed in the first half as part of a restructuring effort - as same-store revenues for the segment climbed 2.7%.

Franchising operations recorded revenues of C$500,000, relatively unchanged from the same period last year.

At the end of the fourth quarter, Easyhome completed a 15-store swap with U.S. leasing giant Rent-A-Center. Under the revenue-neutral deal, Easyhome exchanged 15 corporate stores in the U.S. for 15 of RAC's stores in Canada.

"The additional financing that was secured at the beginning of the fourth quarter allowed us to continue growing our Easyfinancial business, improving profitability now and into the future," Easyhome president and CEO David Ingram said in a statement.

"Additionally, we are encouraged by the improved operating results of our leasing business," he said. "The restructuring activities that we completed earlier in the year are beginning to positively impact results and the exchange of stores that was completed at the end of the quarter will benefit the operating income of our leasing business throughout 2013."

For the full year, Easyhome had revenues of C$199.7 million, up 6% from 2011.

Net earnings were C$10.5 million or 93 cents per share, compared with C$9.6 million or 81 cents per share - a 14.8% improvement on a per share basis.

Same store sales for the year climbed 8.9%, thanks primarily to growth in the consumer loans segment. Excluding the loans segment, same store sales were up on 1.3% for the year.

Ingram said Easyhome's focus will be on growing its consumer loans segment, whose portfolio is expected to reach C$95 million to C$100 million by year's end. The segment will continue to be the company's chief source of growth for both revenue and profit, at least for the foreseeable future, he said. He said many players in the small loans (under C$5,000) market in Canada have left the field, leaving Easyhome as the only national player in the segment.

He said he expects Easyfinancial will open between 25 and 35 locations in 2013, most of them standalone units.

Ingram forecast little growth in Easyhome's core leasing business, however.

"The company's view of the North American economic situation suggests that 2013 will be another challenging year, particularly impacting the purchasing decisions of consumers," Ingram said.

Because of this, he said Easyhome will focus on its existing stores and doesn't plan to open any new corporate stores in 2013, although it will add to its U.S. franchise network in the coming months.

"This was our 11th consecutive year of growing revenues and producing positive net income," Ingram said, adding Easyhome is targeting revenue growth of between 8% and 12% for 2013.

Easyhome has 191 leasing stores (including nine consolidated franchise locations), 100 Easyfinancial locations and 49 franchise locations, mostly in the U.S.