Aarons 2004 Annual Report Download - page 7

Aaron’s Sales & Lease Ownership stores are
normally three times the size of a typical rent-to-
own competitor’s store and feature more attractive
merchandising and store décor. The stores are
usually located in suburban areas and attract
generally higher-income customers than a traditional
rent-to-own business. Aaron’s product offerings are
generally new, whereas many competitors primarily
display rental returns. Professionally designed
and coordinated furniture suites produced by the
Company’s manufacturing division and other top
national manufacturers better serve the slightly
more upscale consumer and generate higher revenues
per customer than a traditional rent-to-own trans-
action. The Company’s line of accessories creates a
significantly more attractive showroom floor and
opportunities for add-on revenues. Aaron’s “Dream
Products” lineup includes highly popular big-screen
televisions and entertainment systems, stainless
steel refrigerators, leather upholstered furniture and
leading brands of appliances. Computers, a product
line expanded over the past few years, continue to
be a growth area, with the Dell and Hewlett Packard
brand names providing a competitive advantage.
The Company also is in the early stages of a
program to lease computers to customers referred
by Dell. These customers do not meet Dell’s credit
requirements, and this referral program gives
Aaron’s an opportunity to expand the distribution
of computers. We believe the Company’s broad
product line and commitment to service are the
keys to turning the majority of Aaron’s 530,000
customers into repeat customers and consistently
attracting over 30,000 new customers each quarter.
The Company’s marketing program is built around
the “Drive Dreams Home” sponsorship of NASCAR
championship racing, which serves the prime
demographic for Aaron’s products. To celebrate
the Company’s 50th anniversary, the Company
will award a grand prize of a 1955 mint condition
Chevrolet Bel Air to commemorate the year the first
Aaron’s store was opened. The “Drive Away in our
’55 Chevy” prize will be awarded at the Texas
Motor Speedway in November 2005.
Aaron’s Sales & Lease Ownership is a sponsor of
the #99 NASCAR Busch Grand National Dream
Machine driven by Michael Waltrip. In 2005,
Waltrip will drive the Aaron’s Dream Machine
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With the Aaron’s Sales & Lease Ownership
Division, the Company has pioneered a
unique form of specialty retailing which
is a hybrid of the best features of rent-to-own and
traditional credit retailing, the typical financing
offered by the home furnishings industry. The dis-
tinctive Aaron’s Sales & Lease Ownership concept
reaches and serves a broad market of lease owner-
ship, credit retail and rental customers, offering an
attractive method to lease and own quality home
furnishings, electronics and appliances. Data
compiled in the most recent U.S. census revealed
that over 57% of U.S. households have total annual
income under $50,000 with the median income
under $43,000 — this is the market Aaron’s serves.
The Aaron’s Sales & Lease Ownership program
attracts a slightly higher economic profile customer
than the typical rent-to-own consumer, illustrated
by the fact that over 40% of our customers pay by
either check or credit card. A typical rent-to-own
consumer does not qualify for a credit card account,
normally paying in cash, with weekly payments the
industry norm. Aaron’s lease ownership program, on
the other hand, is based on bi-monthly or monthly
payments, resulting in somewhat lower processing
expenses per customer as well as a slightly upgraded
account base. Aaron’s customers are typically credit-
constrained, but our losses, in periods of both eco-
nomic expansion and contraction, are consistently
between 2% and 3% of revenues.
Setting the standard for customer service, Aaron’s
offers consumers fast, easy, convenient shopping
and a broad range of top quality brand-name
products, rapid delivery and low-price guarantees
leading to the option of affordable ownership.
Because the transaction is a lease-to-own rather
than a credit relationship, Aaron’s customers are
automatically approved. The Company’s in-house
manufacturing and fulfillment capabilities facilitate
same-day or next-day delivery of merchandise.
Aaron’s customers pay no delivery charges, no
application fees, no repair fees, and no balloon
payments. Terms are fully disclosed: cash and carry
price, lease payment and total cost under the lease
ownership plan. Payment options include cash,
check and credit cards. The lease-to-own plan
requires no long-term obligation so a customer is
free to return merchandise at any time without
additional financial responsibility.
Aaron’s Sales and Lease Ownership
The Growth Formula