Aaron’s Acquires Progressive, Cuts Guidance, Proclaims New Plan

Lease-to-own specialty retailer Aaron’s, Inc. today announced that it received strong support from its franchisees in connection with the company’s new strategic plan and acquisition of Progressive Finance Holdings, LLC. The statement comes a day after it disclosed the Progressive deal and issued a reduction in first quarter financial guidance.

On April 15, Aaron’s announced that it had acquired Progressive, a merchandise lease-to-own company with an expertise in Internet operations. Aaron’s stated that the deal provides it with an important entry point into the rapidly growing virtual rent-to-own market. Progressive provides point-of-sale lease and purchase programs to customers who do not qualify for traditional, FICO-based financing, Aaron’s related.

Progressive’s scalable software provides easy to use, automated lease processing, eliminating the need for specialist in-store personnel, Aaron’s maintained. Progressive serves 5,500 retails with approximately 15,000 locations, including 40 of the top 100 and eight of the top 20 United States-based furniture and bedding retailers. Select merchant partners include Mattress Firm, Big Lots, Art Van Furniture and Sleepy’s, Aaron’s pointed out.

In addition to the deal, Aaron’s announced a new strategic plan to renew focus on comparable store revenue growth for Aaron’s core store portfolio, refine and grow the company’s online platform, drive cost efficiency to recapture margin, moderate growth in new company-operated stores and strengthen and grow the franchise store base.

In connection with its initiatives, Aaron’s held a conference call and meetings with its franchisees where it outlined what the company described as benefits the Progressive acquisition would have for them. In the call, Dave Edwards president and COO, SEI/Aaron’s, Inc., the retailer’s top franchisee with 106 locations, and a member of the Aaron’s Franchisee Board, noted, “The Progressive acquisition moves Aaron’s quantum leaps forward. Progressive has already proven they can attract a customer electronically, and Progressive’s ability to approve a customer online is a more quantifiable way to qualify a customer. This gives us the opportunity down the road to be more things to more people.”

Aaron’s operates more than 2,130 company-operated and franchised stores in 48 states and Canada, the company noted.

Also on April 15, Aaron’s announced that it was reducing the its first quarter revenue and earnings guidance.

“Like many retail companies, we continue to be adversely affected by the current macroeconomic environment, and many of our stores were negatively impacted by abnormal weather conditions during the quarter,” Ronald Allen, Aaron’s CEO said in announcing the change. “As a result, our revenues and earnings will not meet expectations for the quarter. Both same store revenue and customer growth in company-operated stores declined by approximately 2% in the quarter, and franchised stores as a collective group also experienced negative same store revenues and customer growth. More than 80% of company-operated stores are in states that experienced severe weather events during January, February and early March. Approximately 70% of company-operated stores have been identified as having operations that were adversely impacted by the weather, including a significant number of store closings as well as elevated utility and maintenance expenses. We estimate the effect of the severe winter weather will negatively impact diluted earnings per share for the quarter in the range of five cents to six cents.”