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Aaron Rents, Inc. (RNT)
Q3 2008 Earnings Call
October 29, 2008 10:30 am ET
Gilbert L. Danielson – Executive Vice President & Chief Financial Officer
Robert C. Loudermilk, Jr. – President & Chief Executive Officer
William K. Butler, Jr. – Chief Operating Officer
R. Charles Loudermilk, Sr. – Chairman of the Board
John Baugh – Stifel Nicolaus & Company, Inc.
Dennis Telzrow – Stephens Inc.
Arvind Bhatia – Sterne, Agee & Leach
John Baugh – Stifel Nicolaus & Company, Inc.
Kris Rapplejay – Suntrust Robinson Humphrey
Laura Champine ��� Morgan Keegan
Laura Richardson – BB&T Capital Markets
Jordan Hymowitz – Philadelphia Financial
John Harlowe - Barrow Hanley
Joel K. Havard - Hilliard Lyons
[Mike Smith - Kansas City Capital]
Previous Statements by AAN
» Aaron Rents Inc. Q4 2008 Earnings Call Transcript
» Aaron Rents, Inc. Q2 2008 Earnings Call Transcript
» Aaron Rents, Inc. Q1 2008 Earnings Call Transcript
I will now turn the call over to Mr. Gilbert Danielson.
Gilbert L. Danielson
Well, thank you for joining us today. Today Charlie Loudermilk, Chairman, Robin Loudermilk, CEO, Ken Butler, Chief Operating Officer and myself, Gil Danielson, Chief Financial Officer is on this call. The company’s earnings release issued yesterday and related Form 8-K is available on our website, www.AaronRents.com in the investor relations section and this webcast will be archived for replay there as well.
Before we discuss the results I would like to read the company’s Safe Harbor Statement. Except for the historical information, the matters discussed today are forward-looking statements of the company. As such they will involve a number of risks and uncertainties including factors such as changes in general economic conditions, competition, pricing, customer demand and other issues that could cause actual results to differ materially from such statements including the risks and uncertainties discussed under risk factors in the company’s 2007 annual report on Form 10-K, including without limitation the company’s projected revenues, earnings and store openings for future periods.
We’ll now begin our comments. Robin will have a few opening comments; then Ken will follow up from that and then Charlie will add some comments and then at the end I’ll add some further information and then we’ll take questions from the participants.
Robert C. Loudermilk, Jr.
As you can probably tell we’re quite pleased that our third quarter of 2008 exceeds our revenue and earnings expectations. Even in these difficult recessionary times, customers seek our stores to acquire the basic home furnishing products. As credit tightens further and more Americans experience income challenges, I believe we will continue to see an increase in our business as more and more individuals see the value of the Aaron’s non-credit based monthly pay programs.
Same store revenues in both company operated and franchise stores was once again strong even though as best we can tell over 100 of our system stores were affected by the Hurricanes Gustav and Ike. This is a direct result of the hard work of all of our associates to quickly recover from the devastation and once again provide products and services to our customers in these areas.
Our earnings were negatively impacted in the quarter by at least $0.01 to $0.02 per diluted share by the effect of the hurricanes. These financial results continue to be negatively impacted by the new stores’ startup expenses we call drag we have opened in the last year or so. This new store drag is a price we pay to create new revenues and earnings for future quarters. As we have slowed down our new store growth this year to a 10% to 12% range, this new store drag will return to more normal levels in the future periods.
As announced earlier we are in the process of completing the sale of our Aaron’s Corporate Furnishings division. Again, I want to thank all of our Corporate Furnishing associates for their hard work over the past 50 years. This will allow us to focus on our faster growing large market Aaron’s sale/lease ownership concept. As we’ve always said, be successful in this business and Ken will certainly attest we have found many times we must focus on the renting and renewing from our existing customer base.
Our plans the next several years are to grow an average store base in the rage of 10% to 12% a year. The net store growth this year will be less in 2008 as we consolidate and sell some stores that have not been achieving acceptable profit goals. This slower growth will be a more consistent, predictable and efficient manner and should improve future profit margins and overall financial performance.
We again thank your support in the company and I’ll now turn the call over to Ken.
William K. Butler, Jr.
Good morning. The best description of the quarter is to relate it to a football game and we had a tremendous lead until late in the game and lost our momentum as three hurricanes hit us within a short period, affecting hundreds of stores on the Eastern seaboard to the Gulf Coast of Louisiana and Texas and turned into tropical storms that impacted our business all across the Midwest. In spite of that we remain focused and still won the game.
It should not have been as close as the score indicated. We have quickly recovered from these events as we are having a record month in October in terms of new customer growth. During the quarter we gained 25,747 new customers and that is the largest customer gain in a third quarter going back the last five years.