Aaron's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Aaron's, Inc. (AAN)

Q2 2012 Earnings Call

July 24, 2012 05:00 pm ET

Executives

Lee Wilder - IR

Gil Danielson - EVP & CFO

Charlie Loudermilk - Chairman

Ron Allen - President & CEO

Ken Butler - COO

Analysts

TJ McConville - Raymond James

Matt McCall - BB&T Capital Markets

Laura Champine - Canaccord Genuity

David Magee - SunTrust Robinson Humphrey

Dillard Watt - Stifel Nicolaus

Chuck Ruff - Insight Investments

Sasha Kostadinov- Shaker Investments

Presentation

Operator

Good afternoon and welcome to the Aaron's, Inc. second quarter earnings conference call. Just to let you know, all lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end.

At this time, I would like to introduce your host, Mr. Gil Danielson. Thank you and have a good conference. You may proceed, Mr. Danielson.

Gil Danielson

Thank you everybody for joining us today. As usual, I am going to turn it over to Lee Wilder, who does the Investor Relations work for Aaron’s and she will read our standard Safe Harbor statement and then we’ll begin the conference call. So, Lee?

Lee Wilder

Good afternoon. My name is Lee Wilder and I assist in Investor Relations for Aaron’s. The company’s earnings release issued today and the related Form 8-K are available on our website www.aaronsinc.com, in the Investor Relations section and this webcast will be archived for replay there as well.

With us today are Charlie Loudermilk, Chairman; Ron Allen, CEO; Ken Butler, COO and Gil Danielson, CFO.

Before we discuss the results, I would like to read the company’s Safe Harbor statement. Except for the historical information, the matters discussed today are forward-looking statements of the company. As such they will involve a number of risks and uncertainties including factors such as changes in general economic condition, competition, pricing, customer demand, litigation and other issues that could cause actual results to differ materially from such statements, including the risks and uncertainties discussed under Risk Factors in the company’s 2011 Annual Report on Form 10-K, including without limitation the company’s projected revenues, earnings and store openings as well as store acquisitions and disposition activity for future periods.

Ron, Ken and Charlie will have a few comments and then Gil will add further information. Ron?

Ron Allen

Thank you Lee and thank all of you for joining us today. We’re quite to please to report another outstanding quarter. The Aaron’s management team is executing as planned. Our business continues to grow as expected and demand remains strong for the basic home furnishings we offer.

Our customers although they’re struggling for a long period of time now with these difficult economic times desire and need our products to continue their daily lives. The customer experience with Aaron’s is build on a very close relationship with their store associates and customer’s benefit from the superior service, the flexible payment plans, no credit checks and the overall attention we give them in helping fulfill their needs.

This has been the key to our success for so many years and as we said before, we believe high consumer credit is actually a positive for our business. However, higher employment levels are more than negative. These market conditions probably will not change anytime soon, but we see no reason at this time that Aaron’s should not continue to perform well in the upcoming quarters.

Now our HomeSmart stores are getting revenues and customers and results of the stores continue to be encouraging. There is still effort needed to perfect the model and our plans are unchanged for store openings; with just a few more stores expected to be open before the end of this year. We anticipate having enough experience with HomeSmart probably about the fourth quarter for this year to make more specific plans for its future development.

Recently, we have been employing additional resources to improve our recruiting, our training, our social resource functions to enhance our planning process and we started several new store selection and development initiatives and we’re continuing to improve our information technology to enable our associates to better serve our customers.

We are investing in these resources to strengthen and ensure the foundation is in place to meet our future growth objectives. And finally, I have been spending a significant amount of time recently, visiting operating management and associates in many regions and stores across the country.

Just last week, Gil and I spend two days with Michael Ryan our VP of Northern Operation and his team. I still have a lot of stores to visit and associates of me, but I can tell you, I have been extremely impressed with our management team and our associates throughout the organization. Aaron’s is truly a very special company with great people, a superior business model, a long history of outstanding financial performance and returns to our shareholders and I look forward to continue to report the company’s future progress.

Thank you again for your support and interest in Aaron’s and now Ken will talk about some of the results of the quarter and at the conclusion of Gil’s comments, we will be happy to answer any questions that you may have. Ken?

Ken Butler

Yeah, good evening everyone and as Ron mentioned, business remains strong, evidenced by another quarter of strong customer growth. For the three month period, we added another 44,655 customers to our portfolio representing a 14.2% increase over last year’s customer count.

All of this resulted in a robust 6.1% increase in same store sales in company source and a 7% increase in same store sales in the franchise community. Believe me we don’t take this success for granted, because I am proud of our fellow associates and franchisees who serve our customers each and every day. They continue to meet and beat every challenge and new initiative that we place before them.

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