Aaron's, Inc., a leader in the sales and lease ownership and specialty retailing of residential furniture, consumer electronics, home appliances and accessories, today announced record results for the three months and year ended December 31, 2010.
For the fourth quarter of 2010, revenues increased 9% to $484.4 million compared to $446.3 million for the fourth quarter in 2009. Net earnings increased 23% to $30.8 million versus $25.0 million last year. Diluted earnings per share were $.38 compared to $.31 per share a year ago, also a 23% increase.
For the year ended December 31, 2010, revenues increased 7% to $1.877 billion compared to $1.753 billion for 2009. Net earnings increased 5% to $118.4 million versus $112.6 million a year ago. Diluted earnings per share were up 5% to $1.44 for 2010 compared to $1.37 in 2009.
"Our results for the fourth quarter exceeded our guidance, with better than expected same store revenue growth and profitability," said Robert C. Loudermilk, Jr., President and Chief Executive Officer of Aaron's. "Although current business challenges and conditions affect us as they do other retailers, through the years the strength of the Aaron's business model has been proven resilient and has delivered consistent and superior financial results. Aaron's provides desired and needed basic home furnishings, and our customers' demand for these products continues to remain strong."
Same store revenues (revenues earned in Company-operated stores open for the entirety of both periods) increased 6.2% during the fourth quarter of 2010 compared to the fourth quarter of 2009. Same store revenues also increased 4.4% for Company-operated stores open for over two years at the end of December 2010. The Company had 912,000 customers and its franchisees had 502,000 customers at the end of the year, a 10% increase in total customers over the number at the end of 2009 (customers of our franchisees, however, are not customers of Aaron's, Inc). The customer count on a same store basis for Company-operated stores was up 7.2% in the fourth quarter compared to the same quarter last year.
The Company began ceasing the operations of its Aaron's Office Furniture division in June of 2010. During the fourth quarter, the Company closed one additional Aaron's Office Furniture store and currently has one store that is anticipated to remain open in 2011 to liquidate merchandise. The fourth quarter 2010 financial results include pre-tax charges to operating expenses of $893,000 and the annual results include pre-tax operating expenses of $9.0 million, or $.07 per diluted share after tax, related to the closing of this division.
The Company reacquired 1,478,805 shares of Common Stock in 2010 including 1,000,000 shares during the fourth quarter, and has the Board of Director's current authorization to purchase an additional 4,401,815 shares of Common Stock.
In the fourth quarter of 2010 the Company converted its non-voting Common Stock into voting Class A Common Stock on a one-for-one basis. The conversion was approved by a majority of the holders of both the Company's Common Stock and Class A Common Stock, each voting as a separate class. As a result of the conversion, all shares of the Company's Common Stock were converted into shares of Class A Common Stock, and the Class A Common Stock was renamed as the Company's "Common Stock."
Division Results
Revenues in the Aaron's Sales & Lease Ownership division increased in the fourth quarter to $481.7 million, a 9% increase over the $441.7 million in revenues in the fourth quarter of 2009. For the year, sales and lease ownership revenues were $1.861 billion, a 7% increase over the $1.734 billion recorded last year.
The revenues of the Aaron's Office Furniture stores were $1.6 million and $4.1 million in the fourth quarter of 2010 and 2009, respectively. The Aaron's Office Furniture division recorded a pre-tax loss of $495,000 in the fourth quarter of 2010 and a $1.3 million pre-tax loss in the fourth quarter of 2009. For the year, revenues of the Aaron's Office Furniture stores were $11.6 million compared to $16.5 million for the same period of 2009, and pre-tax losses were $11.6 million in 2010 versus $7.8 million in 2009. Included in the 2010 and 2009 fourth quarter and year-to-date losses are the charges related to closing this division mentioned above.
Components of Revenue
Consolidated lease revenues and fees increased 9% for the fourth quarter and 7% for the year compared to the previous year. In addition, franchise royalties and fees increased 10% in the fourth quarter and 12% for the year compared to the same periods last year. Non-retail sales, which are primarily sales of lease merchandise to Aaron's Sales & Lease Ownership franchisees, increased 11% for the quarter compared to the fourth quarter last year and 10% for the year. The increases in the Company's franchise royalties and fees and non-retail sales are the result of an increase in revenues of the Company's franchisees, who collectively had revenues of $215.5 million during the fourth quarter and $841.3 million for the year, 10% and 11% increases over the comparable respective 2009 periods. Same store revenues and customer counts for franchised stores were up 4.2% and 7.3%, respectively, for the fourth quarter of 2010 compared to the fourth quarter of 2009. Revenues of franchisees, however, are not revenues of Aaron's, Inc.
The Company's other revenues in the fourth quarter of 2010 and 2009 included $335,000 and $1.6 million of gains, respectively, from the sales of Company-operated stores. Other revenues for the fiscal year included gains from the sales of stores of $1.9 million in 2010 and $7.8 million in 2009.
Store Count
During the fourth quarter of 2010 the Aaron's Sales & Lease Ownership division opened 31 new Company-operated stores and 25 new franchised stores. The Company also acquired the accounts of two independent operators and sold three Company-operated stores to two different franchisees. In addition, during the quarter six Company-operated stores and one franchised sales and lease ownership store were closed, along with one Company-operated RIMCO store and one Aaron's Office Furniture store.
For the 2010 year, the Company opened 91 new Company-operated stores and 72 new franchised stores. The Aaron's Sales & Lease Ownership total net store count increased 8% for the year.
During the fourth quarter and fiscal year of 2010 the Company awarded area development agreements to open 53 and 120 additional franchised stores, respectively. At the end of December 2010 there were area development agreements awarded to open 282 franchised stores that the Company expects will open over the next several years.
At December 31, 2010, the Aaron's Sales & Lease Ownership division consisted of 1,138 Company-operated stores, 658 franchised stores, 11 Company-operated RIMCO stores, and six franchised RIMCO stores. The Company also had one Aaron's Office Furniture store. The total number of stores open at the end of 2010 was 1,814.
First Quarter and Full Year 2011 Outlook
The Company has updated its guidance for 2011 and expects to achieve the following at this time:
First quarter revenues (excluding revenues of franchisees) of approximately $530 million.
First quarter diluted earnings per share in the range of $.48 to $.52 per share, assuming no significant store or asset sales.
Fiscal year 2011 revenues (excluding revenues of franchisees) of approximately $2 billion.
Fiscal year 2011 diluted earnings per share in the range of $1.61 to $1.77.
New store growth of approximately 5% to 9% over the store base at the end of 2010, for the most part an equal mix between Company-operated and franchised stores. This will be a net store growth after any opportunistic merging or disposition of stores.
The Company will continue as warranted to consolidate or sell stores not meeting performance goals.
The Company also plans to continue to acquire franchised stores, convert independent operator's stores to Aaron's franchised stores, or sell Company-operated stores to franchisees as opportunities present themselves.