Aaron's Rips It in Q1April 27, 2012
Rent-to-own furniture, electronics and appliance retailer Aaron's (NYSE: AAN) reported record first-quarter sales and earnings.
For the three months ended March 31, revenue rose 10 percent to $586.9 million, net income was up 60 percent to $71.2 million, and same-store sales rose 4.8 percent, compared with the first-quarter 2011.
First-quarter 2012 earnings included a $35.5 million reversal of accrued lawsuit expense. During the period, Atlanta-based Aaron's settled a lawsuit with a former Aaron's associate who claimed she was sexually harassed by a former co-worker in 2006. The company recorded a charge of $36.5 million in the second quarter of 2011, which represented an accrual for the judgment and associated legal fees and expenses of $41.5 million, less insurance coverage of $5 million. The company's final settlement related to this matter was $6 million, and accordingly, the Company recognized $35.5 million of income in the first quarter of 2012 operating results.
Excluding the lawsuit-related accrual reversal, net earnings for the first quarter would have been $49.2 million, up 11 percent over the same period in 2011.
"We are quite pleased with the results for the quarter and feel we have an excellent start for the year," said Ronald W. Allen, president and CEO of Aaron's. "Our results exceeded expectations, revenue and customer growth is strong, and the HomeSmart stores are ramping up as anticipated. We are optimistic that customer demand for the basic household furnishings we offer, especially with our flexible payment terms, will continue to be quite good in upcoming months."
The company had 1,043,000 customers at the end of the most recent quarter, a 14 percent increase over the number at the end of March 2011. The customer count on a same store basis for Company-operated stores was up 8.6 percent in the first quarter of 2012 compared to the same quarter last year.
During the first quarter of 2012, the Company opened nine Company-operated Aaron's Sales & Lease Ownership stores, six franchised stores, and two HomeSmart stores. The Company also acquired three franchised stores and the accounts of nine third party stores. In addition, one store was acquired from a third party operator and converted to a HomeSmart store. Three Company-operated stores were closed during the quarter.
The company awarded area development agreements during the first quarter to open 11 additional franchised stores. At the end of March 2012, area development agreements were outstanding for the opening of 223 franchised stores over the next several years.