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Aaron's Inc. (AAN) is a leading specialty retailer of consumer electronics, computers, residential and office furniture, household appliances and accessories. It sells and leases a wide variety of products such as widescreen and LCD televisions, computers, living room, dining room and bedroom furniture, washers, dryers and refrigerators. As of December 31, 2009, AAN had 1,679 sales and lease ownership stores, comprised of 1,082 company-operated stores in 31 states and Canada and 597 independently-owned franchised stores in 48 states and Canada. The company's strategic focus is on expanding sales and lease ownership business through opening new stores, expanding its franchise program, and making selective acquisitions. AAN has added 466 company-operated and 240 franchised sales and lease ownership stores since the beginning of 2005.


Company Overview


Chairman, R. Charles Loudermilk, Sr., established Aaron’s in 1955. He has held the position of Chairman since its inception. Mr. Loudermilk developed Aaron's, Inc. into a publicly traded company that today has more than 1500 company operated and franchised stores in the United States and Canada. [2]

Aaron’s operates under the names Aaron’s Sales and Lease Ownership, Rimco Custom Wheels Tires Accessories and More, Aaron’s Office Furniture and has 16 Fulfillment Centers and 11 manufacturing plants known as MacTavish Furniture Industries. [3]

Business and Financial Metrics

AAN leases and sells a wide variety of products. In a typical rent-to-own transaction, the customer has the option to acquire merchandise over a fixed term, usually 12 to 24 months, normally by making weekly lease payments. The customer may cancel the agreement at any time by returning the merchandise to the store, with no further lease obligation. If the customer leases the item to the full term, he obtains ownership of the item, though he can choose to buy it at any time. Aaron's rent-to-own method retails merchandise to lower or middle income consumers.

AAN also franchises its stores in select markets where it has no immediate plans to enter. Its franchise program provides additional revenues from franchise fees and royalties, allows AAN to grow more quickly, enables AAN to achieve economies of scale in purchasing, distribution, manufacturing and advertising for its sales and lease ownership stores; and increases its brand exposure.

Total revenues increased to $1.753 billion in 2009 from $1.032 billion in 2005, representing a 14.2% compound annual growth rate. Total net earnings from continuing operations increased to $112.9 million in 2009 from $51.7 million in 2005 representing a 21.6% compound annual growth rate. Included in 2009's revenues was $5.7 million gain on the sale of the Company-operated stores. [4]

In Q1 2010, company-operated stores showed store revenue growth of 4.4%, and customer growth of 7.4%. In addition, franchise stores experienced a 5.2% growth in same store revenues during this quarter. In total, corporate franchise customers were up 12% over the same period last year. [5]

Aaron's activity to promote growth:

  • Open more stores and seek acquisitions- Aaron's added a net of 45 company-operated stores in 2009. These sales and lease ownership stores were opened in existing and select new geographic markets. During the first quarter of 2010, the Aaron's Sales & Lease Ownership division opened 12 new Company stores. Seven Company stores were closed during this quarter.

In Q1 2010, AAN opened nine new franchise stores. AAN also acquired three franchise stores and one store from an unaffiliated operator and acquired the accounts of four third-party stores. One franchise store was closed during the quarter and also three Aaron's Office Furniture stores were closed.

In 2009, Aaron's acquired the lease agreements, merchandise and assets of 44 sales and lease ownership stores. Fifteen of these stores were subsequently merged with existing locations, resulting in 29 new stores from acquisitions. [6]

  • Increase revenues and net earnings from existing stores- The company experienced same store revenue growth from company-operated sales and lease ownership stores of 8.1% in 2009, 3.1% in 2008, and 3.8% in 2007.
  • Increase revenues from franchises- Aaron's franchise program allows the company to grow quickly and increase brand exposure in new markets. Franchise fees and royalties represent a growing source of company revenues. In 2009, Franchise Royalties and Fees were $52,941,000, representing 3% of total revenue. In 2008, Franchise Royalties and Fees were $45,025,000, representing 2.8% of total revenue.


Business Segment



% of 2009 Revenues % of 2008 Revenues % of 2007 Revenues
Electronics 37% 35% 31%
Furniture 30% 30% 33%
Appliances 15% 15% 15%
Computers 14% 16% 17%
Other 4% 4% 4%


Electronics (37% of Revenue)

Aaron's offers a broad selection of brand name electronics. Brands include JVC®, Mitsubishi®, Philips®, Panasonic®, Sony®, Dell®, Hewlett-Packard®, Simmons®, Frigidaire®, and Sharp®.

Furniture (30% of Revenue)

Aaron's Office Furniture division leases and sells new and lease return merchandise to individuals and businesses, with a focus on leasing office furniture to business customers. The MacTavish Furniture Industries (renamed in 2010 as Woodhaven Furniture Industries to reflect their most popular brand of furniture) division supplies the majority of the upholstered furniture and bedding leased and sold by Aaron's.

Appliances (15% of Revenue)

Aaron's offers household appliances and accessories.

Computers (14% of Revenue)

Aaron's offers "state-of-the-art" computers. Because of the rapid development of technology, Aaron's strives to provide the latest products at affordable prices.

Other (4% of Revenue)

Key Trends and and Forces

Decline in the number of furniture stores

The decline in the number of furniture stores boosts rent-to-own sales. The rent-to-own industry offers customers an alternative to traditional methods of obtaining goods. In a typical rent-to-own transaction, the customer has the option to acquire merchandise over a fixed term, usually 12 to 24 months, normally by making weekly lease payments. The customer may cancel the agreement at any time by returning the merchandise to the store, with no further lease obligation. If the customer leases the item to the full term, he obtains ownership of the item, though he can choose to buy it at any time. Aaron's rent-to-own method retails merchandise to lower or middle income consumers. [9]

Risks in Collecting from Customers in a Weak Economy

Aaron's sells mostly to credit-impaired or low-income consumers. Since Aaron's sells and leases its goods, its sales can be high. However, it is hard to collect money from these customers, especially while the economy is struggling. The customers with bad credit will not always be able to pay for their products. [10]

Rising Oil Prices Increase Costs

Aaron's is affected by oil prices since it needs to transport its merchandise to customers. Shipping companies charge higher prices, making it more difficult for retailers to get their products to market and forcing them to raise prices. Shipping costs are increased with a rise in oil prices. [11]


Aaron’s and Rent-A-Center, Inc. are the two largest industry participants, accounting for approximately 4,900 of the 8,500 rent-to-own stores in the United States and Canada. Aaron's stores compete with other national and regional rent-to-own businesses, as well as with rental stores that do not offer their customers a purchase option. [12]

  • Aaron's, Inc. (AAN)
  • Rent-A-Center, Inc. (RCII): Rent-A-Center, Inc. (RCII) is the nation's largest rent-to-own (RTO) operator. RCII currently operates roughly 3,300 company-owned stores across the U.S., Canada, and Puerto Rico. This equates to roughly 40% of all RTO stores in the U.S. [13]
  • McGrath RentCorp (MGRC): McGrath RentCorp was founded in 1979 and is headquartered in Livermore, California. The Company is a diversified business-to-business equipment rental provider that is comprised of the following units: tanks, relocatable buildings, office equipment, electronics, and environmental test equipment. [14]
Name 2009 Revenue

(in hundred thousands)

2009 Net Income

(in hundred thousands)

Market Cap
Aaron's, Inc. $1,752.79 $112.88 1.65B
Rent-A-Center, Inc. $2,751.96 $167.86 1.59B
McGrath RentCorp $275.64 $33.32 550.58M



  1. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Business", p. 4
  2. Aaron's Corporate Profile
  3. Aaron's Corporate Profile
  4. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Business", p. 4
  5. Morning Star
  6. Morning Star
  7. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Business", p. 7
  8. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Purchasing and Distribution", p. 12
  9. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Industry Overview", p. 5
  10. AB Analytical Services
  11. Oil Prices
  12. Aaron's (AAN) Form 10-K, Fiscal year 2009, "Competition", p. 12
  13. Rent-A-Center
  14. McGrath RentCorp Corporate Profile
  15. Google Finance Related Companies
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