Expansion Plan on Track at Aaron Rents?

Implications: Last year, management at Aaron Rents committed to open 350 new stores by the end of 2007.  In its Q4 earnings call, RNT addressed questions about the purposes and logistics of the new opening timetable and announced that the expansion is on track, with plans to open 250 stores in 2007. 

Analysis: Revenue and earnings keep growing at Aaron Rents and management hopes to continue the trend by opening 250 new stores in 2007.  Since committing in the middle of 2006 to add 350 stores in 18 months, RNT has opened roughly 100 new stores.  However, they only added a net of 146 stores in all of 2006, which begs the question of whether they can substantially exceed that effort this year.  And, most important, why the rush?

While Aaron's has aggressively increased its store count over the past 10 years (with only 350 stores open in 1997), management seems to think that Rent-A-Center's acquisition of RentWay late last year has created the opportunity to open stores at an even brisker pace.  Some have speculated that RNT wanted the RentWay deal and felt pressure to respond when it lost a bidding war to RAC.

In another interesting twist, management said that it hopes franchisees will open about 50% of the remaining 250 stores.  Previously, RNT has said that 2/3 of the new stores would be company-owned, with the remaining 1/3 being franchise stores.  Chairman and CEO Charlie Lowdermilk noted that RNT headquarters has been full of prospective new franchisees recently, likely a result of added franchise sales personnel and a strengthening track record of successful franchisees.