Aaron's Q2 Net Drops 67.1 Percent; COO Buck to Retire
ATLANTA-Huge gains in expenses and in depreciation of lease merchandise offset a strong revenue gain to send Aaron's second-quarter net income plummeting 67.1 percent, to $8.5 million.
Along with releasing its earnings, the lease-to-own retailer issued a separate statement saying that Dave Buck, its chief operating officer, will retire from the company. Buck served for 25 years with Aaron's.
The lease-to-own retailer's operating expenses jumped 24.8 percent in dollars and 99 basis points as a percentage of sales, to 46.4 percent. Depreciation of lease merchandise was up 56.9 percent in the quarter, which ended on June 30.
Total revenues, meanwhile, posted a 22.2 percent gain, finishing at $672.5 million. However, gross margin for Aaron's retail business fell 556 basis points to 34.9 percent.
Ronald Allen, Aaron's CEO, characterized the second quarter as "a transformative period" for the company. "Our acquisition of Progressive Finance (the provider of virtual lease-to-own programs, in a deal which closed in April) opens new and fast-growing channels to our customers that we previously could not access," Allen said. He added, however, that Aaron's is "not pleased by the performance of our core business."
In April, Aaron's set out on a plan to stabilize and improve its core business. The company's second-quarter financial statement said it has already identified more than $50 million in potential annual cost savings and efficiencies.
Commenting on other initiatives, Allen added, "We have been aggressively developing our online strategy and are extremely pleased with an e-commerce pilot program we developed and deployed over the last two months. We will continue to build on these key learnings as we work towards the rollout of our e-commerce platform in early 2015. This demonstrates our strategic initiative to reach out to customers in an ever-evolving marketplace."
Buck began with Aaron's in 1989 and progressed up the company's corporate ladder through its management development program. He was named chief operating officer last year.
Assuming Buck's responsibilities will be Tristan Montanero and Michael Ryan, both of whom have the title of senior vice president of operations. Montanero and Ryan will assume charge over Aaron's six divisions and report to Steve Michaels, Aaron's president. Ryan has been promoted to his post after serving as vice president of franchising.