Rent-To-Purchase Chains See Mixed Q3

By Jeff Malester On Dec 18 2000 - 8:00am

New record financial results were set by two of three major players in the rental-purchase business during the third quarter, with both Aaron Rents and Rent-A-Center announcing record revenue and earnings, while Rainbow Rentals came in with mixed results.

Atlanta-based Aaron Rents, which said its third quarter ended Sept. 30 was its 35th consecutive quarter of record sales and earnings, reported a 14 percent increase in sales to $124.9 million in the three months, compared with $109.4 million in the year-ago period. Net earnings were not as vigorous, moving up less than 10 percent to $6.7 million in the third quarter, compared with $6.1 million in the year-ago three months.

Aaron's Rental Purchase division boosted its revenue 22 percent to a record $79.8 million in the third quarter, compared with $65.4 million in the same three months in 1999. Systemwide revenue, which includes revenue of franchised stores, gained 19 percent to $163.7 million for the third quarter, compared with $137 million last year.

Comp-store revenue from company-operated rental-purchase stores grew 10.3 percent during the third quarter, compared with the year-ago three months. Comp-store revenue from the company's rent-to-rent locations climbed 9.1 percent during the three months, compared with the same three months in 1999.

For the nine months, Aaron Rents' revenue rose 16 percent to $372.1 million, compared with $321 million in the same nine months last year. Net earnings were up about 7 percent for the period to $20.9 million, from $19.4 million last year.

Rental-purchase revenue grew 25 percent in the first nine months, hitting $236.7 million, compared with $188.8 million for the year-ago nine months. Systemwide revenue increased 21 percent to $484.3 million, compared with $400.4 million last year.

Third-quarter net earnings and revenue growth at Plano, Texas-based Rent-A-Center was primarily driven by strong growth in same-store revenue, said the company. Same-store revenue climbed 14 percent in the period, compared with the year-ago third quarter.

Net earnings for the quarter jumped 53 percent to $23.9 million, up from $15.6 million in the year-ago third quarter. Total revenue for the third quarter ended Sept. 30 was $405 million, compared with $350.4 million in the same three months last year, a 15.6 percent gain.

Excluding a one-time gain of $22.4 million taken in second-quarter 2000, nine-month net earnings rose 63 percent to $67.7 million, compared with $41.5 million in the same period last year. Total revenue for the nine months increased 13.7 percent to $1.19 billion, up from $1.05 billion in the year-ago period. Comp-store revenue for the nine months was up 13.6 percent.

Rainbow Rentals, citing disappointing overall third-quarter results, said it was pleased with an improved performance in September "that enabled us to exceed our revised expectations for the full quarter," according to chairman/CEO Wayland J. Russell.

Total revenue in the third quarter ended Sept. 30 was $23.5 million, up 15.8 percent from the $20.3 million registered in the same three months last year. Rainbow said the increase was primarily the result of new store openings, revenue increases at comp stores and store acquisitions. Comp-store sales were up 4.9 percent in the third quarter, compared with the year-ago three months.

Net income in the third quarter at Rainbow dropped to $579,000, down from $1.2 million in the same quarter in 1999. These results, according to the company, were affected by a greater-than-anticipated seasonal reduction in units on rent during the summer months, higher delinquencies and higher-than-anticipated expenses in stores opened during 1999.

For the nine months, net income was $3.28 million, down marginally from the $3.59 million reported in the year-ago nine months. Revenue for the nine months was $68.4 million, up 16 percent from the $58.9 million recorded in the first nine months of 1999. Nine-month revenue at comp stores climbed 4.4 percent. n