Aarons 2013 Annual Report Download - page 16

6
• Developing and expanding the HomeSmart weekly pay concept - In 2010, we opened our first HomeSmart store and
had 81 Company-operated stores open at the end of 2013. We expect revenues from our HomeSmart division to
increase as these recently opened stores add customers and start-up losses in existing stores diminish as the stores
mature. We plan to open additional HomeSmart stores in the future assuming acceptable financial returns can be
achieved.
• Exploring international expansion - In 2011, we purchased 11.5% of newly issued shares of common stock of a U.K.
based rent-to-own company. As part of the transaction, the Company also received notes and an option to acquire the
remaining interest in the U.K. company at any time through December 31, 2013. We did not exercise this purchase
option, but the Company is in discussions with owners of the U.K. company to extend our relationship into 2015. We
may pursue additional attractive international opportunities as they present themselves.
Business Segments
Our major operating and reportable segments are Sales and Lease Ownership, HomeSmart, Franchise, Manufacturing and, prior
to its sale in January 2014, RIMCO. All of our Company-operated stores are located in the United States. Our franchise
operations are located in the United States and Canada. Additional information on our five reportable segments may be found
in (i) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (ii) Item
8. Financial Statements and Supplementary Data.
Sales & Lease Ownership
Our Aaron's Sales & Lease Ownership operation was established in 1987 and employs a monthly payment model to provide
durable household goods to lower to middle income consumers. Its customer base is comprised primarily of consumers with
limited access to traditional credit sources such as bank financing, installment credit or credit cards. Customers of our Aaron's
Sales & Lease Ownership division take advantage of our services to acquire consumer goods they might not otherwise be able
to without incurring additional debt or long-term obligations.
We have developed a distinctive concept for our sales and lease ownership stores including specific merchandising, store
layout, pricing and agreement terms all designed to appeal to our target consumer market. We believe these features create a
store and a sales and lease ownership concept that is distinct from the operations of both the rent-to-own industry generally and
of consumer electronics and home furnishings retailers who finance merchandise.
The typical Aaron's Sales & Lease Ownership store layout is a combination showroom and warehouse comprising 7,500 to
10,000 square feet, with an average of approximately 9,000 square feet. In addition, we are testing a smaller concept in urban
markets comprising 4,500 to 5,000 square feet. We select locations for new Aaron's Sales & Lease Ownership stores by
focusing on well-maintained shopping plazas with good access that are located in established working class neighborhoods and
communities. We also build to suit or occupy stand-alone stores in certain markets. We place many of our stores near the stores
of a competitor. Each Aaron's Sales & Lease Ownership store usually maintains at least two trucks and crews for pickups and
deliveries. We generally offer same or next day delivery for addresses located within approximately ten miles of the store. Our
stores provide a broad selection of brand name electronics, computers, appliances and furniture, including furniture
manufactured by our Woodhaven Furniture Industries division.
We believe that our Aaron's Sales & Lease Ownership stores offer prices that are lower than similar items offered by traditional
rent-to-own operators, and substantially equivalent to the “all-in” contract price of similar items offered by retailers who
finance merchandise. Approximately 95% of our Aaron's Sales & Lease Ownership agreements have monthly terms with the
remaining 5% being semi-monthly. By comparison, weekly agreements are the industry standard. In addition, we believe our
agreements generally provide for a shorter time to customer ownership of the merchandise.
We may re-lease or sell merchandise that customers return to us prior to the expiration of their agreements. We may also offer
up-front purchase options at prices we believe are competitive with traditional retailers. At December 31, 2013, we had 1,262
Company-operated Aaron's Sales & Lease Ownership stores in 29 states.
HomeSmart
Our HomeSmart division began operations in 2010 and was developed to serve customers who prefer the flexibility of weekly
payments and renewals. The consumer goods we provide in our HomeSmart division are substantially similar to those available
in our Aaron's Sales & Lease Ownership stores.