Aaron's, Inc. (AAN)

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Aaron Rents, Inc. (RNT)

Q1 2008 Earnings Call

April 23, 2008 10:30 am ET

Executives

Charles Loudermilk – Chairman, CEO

Robert Loudermilk – President, COO

Gilbert Danielson – Executive Vice President, CFO

Ken Butler – Director

Lee Wilder – Investor Relations

Analysts

John Baugh – Stifel Nicolaus & Company, Inc.

Laura Champine – Morgan, Keegan & Company, Inc.

Arvind Bhatia – Sterne, Agee & Leach

Joel Havard – Hilliard Lyons

Laura Richardson – BB&Y Capital Markets

Presentation

Operator

Good morning ladies and gentlemen and welcome to the Aaron Rent first quarter earning call. At this time all participants on a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Gil Danielson. Mr. Danielson, you may begin.

Gil Danielson

Thank you for joining us this morning. I am going to turn the call over briefly to Lee Wilder, who does investor relation work for the Company and she will read our standard Safe Harbor Statement and she will turn the call over to Charlie. Charlie will have a few comments and then Ken and then me.

Lee Wilder

Good morning, the Company's earnings release issued yesterday and the related from 8K are available on the Aaron Bruce website www.aaronrents.com in the Investor Relations Section. This webcast will be archived for replay there as well.

With us today are Charlie Loudermilk, CEO, Robert Loudermilk, President, Ken Butler, President of Aaron Sales & Lease Ownership and Gil Danielson, Chief Financial Officer.

Before we discuss the results, I would like to read the Company's Safe Harbor Statement.

Except for the historical information and that is discussed today our forward looking statement 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 demands 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 10K. Including without limitation the Company's projected revenues, earnings and store openings for future periods.

I will now turn the call over to Charlie Loudermilk.

Charlie Loudermilk

Thank you again for the interest in the Company. I am quite pleased that the first quarter 2008 exceeded our earnings expectation. It seems like the Company is back on track. Our write offs, we have been working very hard on that and it is now down to 2 to 2.5%. The big number that I see in this is that we have a nine cent new store drag last quarter and of course when you reopen 250 stores in about 18 months, we expected a large new store drag. That drag should be less and less each month thereafter because these stores are getting older. As we all know, the first month when a store opens our largest loss. It decreases as time goes on.

The Company is doing very well; I am very pleased that our people have responded to our call for this being the year of the profit; last year was the year of the store openings and this year is the year of the profit. They are responding well and from the Chairman, I can tell you I am pleased.

Ken.

Ken Butler

Yes, thank you Charlie.

Once again, I want to thank all of our fellow associates, franchisee and vendor partners for their effort not only this last quarter but for the last 18 months. Our people have risen to every challenge that we presented for them and I am very grateful for their efforts.

These past 18 months, we have been going full throttle opening new stores. This past quarter, we saw the beginning of the slow down as we opened 27 new stores.

We also worked with franchisees by acquiring 13 new franchise stores and we sold 11 back to franchisee.

We are looking at areas of the country; we have strong management in looking at areas that we may be weaker and seeing might be better suited to franchise.

We are also looking at every store’s performance and we have closed 25 under performing stores during the quarter. We fully absorbed the losses in the quarter associated with these store closings.

The conclusion of this is that we are pulling any leads we may have in the system and will continue to focus on improving profitability. We will continue to do this the next two quarters and allow our management team to strengthen our bench and look to eliminate much of the new store drag we are currently experiencing.

We look to begin a normalized expansion plan at 10 to 12% new store growth in 2009. We are already seeing our bench replenished in our new internet based training we call e-university is showing positive results.

This quarter, we gained a record first quarter 36,000 new customers, which is slightly ahead of our then record customer growth in the first quarter of ’07.

In the first week of April, we attained a new milestone by adding our one millionth active customer on lease. Our business in April is ahead of last year and we are optimistic for our growth this quarter with the tax rebates beginning in May.

On the write off side of things, I am real pleased with the quick turn around our team has accomplished by going back to a paper system versus a paperless system and we have immediately posted better operating results in our collection and write off areas.

Read the rest of this transcript for free on seekingalpha.com