Atlanta — A heap of one-time charges sent third-quarter earnings sharply lower for Aaron’s, the leading lease-to-own furniture, CE and majap chain.
Net income fell 56 percent to $9.3 million for the period, ended Sept. 30 as special charges, costs and expenses piled up. These included $9.1 million for the retirements of Aaron’s CEO and COO; $6.9 million in restructuring charges for 44 store closings and the downsizing of its home office and field support operations; and $11.3 million in amortization expenses for last spring’s $700 million acquisition of Progressive Finance Holdings, which provides lease-to-own financing programs to other retailers.
Net revenues for the quarter rose 32 percent to $707.6 million for company-owned stores, while same-store revenues slipped 2.8 percent on a 3.9 percent comp decline in customer traffic.
“While our core business continues to experience challenges in the current economic environment, we believe consumers still need and want the household furnishings we offer,” said Gilbert Danielson, interim CEO and chief financial officer. “With our strengthened omnichannel platform, we are removing obstacles to doing business by meeting our customers where they want to do business with us, which we expect will increase demand and customer satisfaction.”
He added that the restructuring will save the company $50 million annually by the end of 2015, and that the new Progressive subsidiary “once again exceeded expectations and is rapidly growing its business.”
Broken out by division, revenues at Aaron’s Sales & Lease Ownership declined 3 percent to $501.7 million; revenues at HomeSmart, an acquired lease-to-own chain that accepts payments on a weekly, rather than monthly basis, rose 5 percent to $15.6 million; and Progressive generated $189.8 million in revenues and a pre-tax profit of $1.7 million.
Consolidated lease revenues and fees increased 42 percent, and franchise royalties and fees decreased 4 percent, reflecting a 2 percent decline in franchisees’ revenue, to $240 million, and a 2.5 percent decline in franchisees’ same-store revenue as traffic counts fell 4.1 percent on a comp-store basis.
Non-retail sales, comprised of merchandise sold to franchisees, declined 7 percent for the quarter.
During the period, the company closed 43 Aaron’s stores and one HomeSmart store; opened nine company-operated Aaron’s stores and six franchised stores; and acquired two Aaron’s franchised stores. Five Aaron’s franchised stores and one HomeSmart franchised store were closed, and the company awarded area development agreements to open six additional franchised stores, bringing the total of planned franchised locations to 142 over the next several years.
As of Sept. 30, the company operated 1,234 Aaron’s stores and 82 HomeSmart stores, and had 783 franchised Aaron’s locations and two franchised HomeSmart stores.
Looking ahead, the chain is projecting fourth-quarter net revenues of $740 million.
