May 13, 2009 - Aaron's Inc. (AAN - NYSE) operates as a specialty retailer of consumer electronics, computers, residential and office furniture, household appliances, and accessories in the United States and Canada. It engages in the lease ownership, rental, and retail sale of widescreen, LCD televisions, and computers; upholstered living-room furniture, including sofas, sofa beds, and chairs and modular sofas; bedroom furniture, such as bedding, mattresses, and box springs; dining room furniture; washers, dryers, refrigerators, and lawn tractors; and office furniture, which include desks, credenzas, conference tables, bookcases, and chairs.

When the economy gets this bad, not all people stop spending. Some of them go to Aaron's and rent the things they want or need. The cash flow is easier to handle, even if the price is much higher in the long run. Aaron's does better when times are tough.

For the first quarter, revenues were up 15% when compared to the same quarter last year ($473.9 million vs. $412.7 million) with same store sales climbing by 12%. In 2006, total sales were $1.3266 billion. In 2007, they were $1.4949 billion. Last year, they reached $1.5926 billion. This year analysts expect $1.8 billion and next year $1.97 billion.

Earnings in the first period jumped by 55% to 65 cents a share, up from 42 cents in last year's first three months. For the full year, 8 analysts have a consensus estimate of $2.01, ranging from $1.95 to $2.03. Last year, earning per share (eps) were $1.61. Next year, the consensus is for $2.25 from 7 analysts with a range of $2.01 to $2.38.

For the first quarter, every region where Aaron's offers products showed an increase in sales, including Florida where the housing market has collapsed. New customers keep coming. In the first thee months, Aaron's added almost 52,000 of them, increasing its customer base by 20% over last year's first period. Since Aaron's doesn't do credit checks on customers, more people qualify to rent. Also, in the current economic malaise, renting furniture and appliances doesn't carry as much negative implication.

The balance sheet is strong with current assets at $815 million and current liabilities at $300 million. Total debt is $78.85 million. The forward P/E is 13.35. Price to Book is 2.09. Operating margin is 9.4% with Profit margin for the last 12 months at 6.13%. Book value per share is $14.84.
The 52- week range has been $15.11 to $35.21. Total share outstanding are 54.17 million. Insiders own 73% of the stock.

Look for Aaron's to continue growing while other companies shrink. In fact, analysts see revenues increasing by 5.5% a year over the next 5 years while earnings improve by 20% a year in the same time period. It's hard to find that kind of growth in this economy.

Company Web site: www.aaronrents.com

- Ted Allrich