Aarons 2011 Annual Report Download - page 4

The strength of the Aaron’s business model
was evident in our operating results for 2011
and remains the foundation for continued
growth. We achieved record revenues during
the year and our earnings, excluding certain
unusual items, were also at a record level.
The economic environment in which we operate
continues to be challenging with high rates of
unemployment in most of our markets, and our
typical customer remains credit-constrained.
We believe Aaron’s is well-positioned for this
environment. We offer consumers flexible lease
terms, affordable pricing, a broad range of products
and the ability to terminate a lease and return a
product at any time. We are proud of our business
model, our associates, our corporate values and the
2011 operating results.
For the second year in a row, the Company achieved
more than 10 percent growth in the number of our
customers. Customer count on a same store basis for
Company-operated stores and franchised stores was
up 6.4% and 4.6%, respectively, over a year ago. At
the end of 2011, we had over one million corporate
and over 550,000 franchise customers. Store traffic
has been strong, and our “Credit is Hard, Aaron’s
is Easy!” tag line has been an effective, distinctive
message to consumers in all parts of the country.
Revenues for 2011 crossed the $2 billion mark, an
8% increase compared to 2010. In addition, our
franchisees also reported an 8% increase in revenues
to over $900 million, although those revenues are
not revenues of Aaron’s, Inc.
Net earnings for the year were $113.8 million
compared to the $118.4 million earned in 2010.
Results for 2011, however, reflected certain unusual
items, including a $36.5 million charge related to a
lawsuit verdict. Fully diluted earnings per share for
the year were $1.43 compared to $1.44 in 2010.
In 2011, the Company opened 57 new Aaron’s
Sales & Lease Ownership stores and our franchisees
opened 55 new stores. We also added 68
HomeSmart stores during the year. At the end of
2011, we had 1,945 stores open — a combination
of Company-operated and franchised stores. Our
2,000th store will open in 2012 and there are many
exciting promotions planned for this significant
milestone.
In 2011, we expanded our new HomeSmart
concept which is based on a weekly payment model.
As a result of several opportunistic acquisitions,
HomeSmart has grown rapidly and by the end of
the year we had 71 stores in operation. These stores
are in a pilot phase but early results are encouraging
and we have experienced minimal cannibalization
from neighboring Aaron’s Sales & Lease Ownership
stores. Our focus in 2012 is refining HomeSmart
and evaluating the stores’ financial performance
and returns. We are optimistic and hopeful that
HomeSmart will prove to be a successful growth
opportunity.
Our Woodhaven Furniture Industries division
provides the majority of our upholstered and
bedding products. Woodhaven had a record year in
2011, manufacturing close to $90 million, at cost,
of furniture and bedding for our stores.
Aaron’s launched its first national advertising
campaign in 2011 and branding initiatives are a key
focus for 2012. In addition to brand development,
we are working to better educate the consumer on
the Aaron’s advantage and our distinctive placement
within the home furnishings industry.
In October, the Company purchased an 11.5%
interest in Perfect Home Holdings Ltd., a privately-
held rent-to-own company which provides basic
home furnishings through 45 stores in the United
Kingdom. Perfect Home is expected to double
its store base over the next several years and this
investment provides another avenue of possible
growth and international expansion.
The Company remains financially strong with
$274.4 million in cash and short-term investment
securities at the end of the year. During 2011, we
repurchased 5.1 million shares of Common Stock
for $127.2 million and have authority to purchase
5.3 million additional shares. Aaron’s is well
TO OUR SHAREHOLDERS
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