Aarons 2015 Annual Report Download - page 16

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As discussed above, our Progressive segment offers its lease-to-own solution through the stores of third party retailers. Progressive consequently faces some
different risks than are associated with Aaron’s sales and lease ownership concept, which Aaron’s and its franchisees offer through their own stores. These
potential risks include, among others, Progressive’s:
• reliance on third party retailers (over whom Progressive cannot exercise the degree of control and oversight that Aaron’s and its franchisees can
assert over their own respective employees) for many important business functions, from advertising through assistance with lease transaction
applications;
• revenue concentration in the customers of a relatively small number of retailers, as further discussed below;
• lack of control over, and more product diversity within, its lease merchandise inventory relative to Aaron’s sale and lease ownership business, which
can complicate matters such as merchandise repair and disposition of merchandise that is returned;
• possibly different regulatory risks than apply to Aaron’s sales and lease ownership business, whether arising from the offer by third party retailers of
Progressive’s lease-purchase solution alongside traditional cash, check or credit payment options or otherwise;
• reliance on automatic bank account drafts for lease payments, which may become disfavored as a payment method for these transactions by
regulators;
• potential that regulators may target the virtual lease-to-own transaction and/or new regulations or legislation could be adopted (or existing laws and
regulations may be interpreted) that negatively impact Progressive’s ability to offer virtual lease-to-own programs through third party retail partners;
and
• indemnification obligations to Progressive’s retail partners and their service providers for losses stemming from Progressive’s failure to perform with
respect to its products and services.
These risks could have a material negative effect on Progressive, which could result in a material adverse effect on our entire business.
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We have a new strategic plan that, in addition to acquiring Progressive in 2014, includes focusing on profitably growing our stores; accelerating our omni-
channel platform; promoting communication, coordination and integration; and championing compliance.
While we have always engaged in elements of the new strategy, the new strategy calls for increased emphasis on certain elements while moderating the focus
on new store openings that had traditionally been a central tenet of the Company’s strategy. There can be no guarantee that the new strategy will yield the
results we currently anticipate (or results that will exceed those that might be obtained under the prior strategy), if we fail to successfully execute on one or
more elements of the new strategy, even if we successfully implement one or more other components.
We may not fully execute on one or more elements of the new strategy due to any number of reasons, including, for instance, because of the division of
management, financial and Company resources among multiple objectives, or other factors beyond or not completely within our control. The successful
execution of our new strategy depends on, among other things, our ability to:
• improve same store revenues in stores that may be maturing;
• drive recurring cost savings to recapture margin;
• identify which markets are best suited for more disciplined store growth;
• strengthen our franchise network; and
• successfully manage and grow our Aarons.com e-commerce platform
If we cannot address these challenges successfully, or overcome other critical obstacles that may emerge as we gain experience with our new strategy, we may
not be able to achieve our revenue or profitability goals at the rates we currently contemplate, if at all.
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