Aarons 2014 Annual Report Download - page 15

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5
PART I.
ITEM 1. BUSINESS
Unless otherwise indicated or unless the context otherwise requires, all references in this Annual Report on Form 10-K to the
“Company,” “we,” “us,” “our” and similar expressions are references to Aaron’s, Inc. and its consolidated subsidiaries.
General Development of Business
Established in 1955 and incorporated in 1962 as a Georgia corporation, Aaron’s, Inc., is a leading specialty retailer of furniture,
consumer electronics, computers, appliances and household accessories. Our store-based operations engage in the lease
ownership and retail sale of a wide variety of products such as flat-screen televisions, computers, tablets, living room, dining
room and bedroom furniture, mattresses, washers, dryers and refrigerators. Our stores carry well-known brands such as
Samsung®, Frigidaire®, Hewlett-Packard®, LG®, Maytag®, Simmons®, Philips®, RCA®, JVC®, Sharp® and Magnavox®.
On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC (“Progressive”), a
leading virtual lease-to-own company, for merger consideration of $700.0 million, net of cash acquired. Through our
Progressive business, we offer lease-purchase solutions to the customers of traditional retailers, primarily in the furniture,
mattress, mobile phone, consumer electronics, appliance and household accessory industries. Progressive has no stores of its
own but provides lease-purchase solutions through over 15,000 retail partner locations in 46 states.
As of December 31, 2014, we had 2,108 stores, comprised of 1,326 Company-operated stores in 28 states and the District of
Columbia and 782 independently-owned franchised stores in 47 states and Canada. Included in the Company-operated store
counts above are 1,243 Aaron’s Sales & Lease Ownership stores and 83 HomeSmart stores, our weekly pay sales and lease
ownership concept. In January of 2014, we sold our 27 Company-operated RIMCO stores and the rights to five franchised
RIMCO stores.
We own or have rights to various trademarks and trade names used in our business including Aaron’s, Aaron’s Sales & Lease
Ownership and Woodhaven Furniture Industries. We intend to file for additional trade name and trademark protection when
appropriate.
Like many industries, the rent-to-own industry has been transformed by the internet and virtual marketplace. We believe the
Progressive acquisition will be strategically transformational for the Company in this respect and will strengthen our business.
We also believe the rent-to-own industry has suffered in recent periods due to economic challenges faced by our traditional
rent-to-own customers. Accordingly, during 2014 we undertook a comprehensive review of our traditional rent-to-own (“core”)
business in order to position us to succeed over the long-term. As a result, we have implemented a strategic plan focused on our
core business as follows:
• Emphasizing same store revenue growth for our core portfolio through improved execution, optimization of
merchandising and pricing and an enhanced go-to-market strategy - Same store revenues (revenues earned in stores
open for the entirety of the measured periods) from our Company-operated sales and lease ownership stores resulted in
a decline of 2.8% in 2014 and growth of .9% and 5.1% in 2013 and 2012, respectively. We calculate same store
revenue by comparing revenues from comparable periods for all stores open during the entirety of those periods,
excluding stores that received lease agreements from other acquired, closed or merged stores.
• Enhancing and growing our online platform, as well as extending our assortment with online-only offerings - We
believe the re-launch of Aarons.com represents an opportunity to provide a unique offering in the lease-to-own
industry. We are focused on providing customers a seamless, direct-to-door platform through which to shop across our
entire product offering.
• Driving cost efficiency to recapture margin, including through selling, general and administrative cost savings and
rationalizing underperforming stores - During 2014, we undertook a rigorous evaluation of the Company-operated
store portfolio which, along with other cost-reduction initiatives, resulted in the closure of 44 underperforming stores
and the realignment of home office and field support.