Charlie Loudermilk's first customer as a business owner was an auction company that needed 300 chairs for a public sale. With $500 in capital, he bought Army surplus folding chairs and rented them for 10 cents each per day.

Fifty years later, R. Charles Loudermilk Sr. is chairman and chief executive officer of one of the nation's largest and fastest growing lease-sale companies, Aaron Rents Inc., with more than 1,030 stores in 45 states, Puerto Rico and Canada and record 2004 sales just shy of a billion dollars.

KIMBERLY SMITH/Staff (ENLARGE)
Aaron Rents CEO R. Charles Loudermilk Sr.
EMAIL THIS PRINT THIS MOST POPULAR
WANT REPRINTS? Our authorized provider, ValeoIP, can reformat articles, with accompanying photos and graphics. Get more information on custom reprints -- and custom plaques.

And the mix of products that can be leased, rented and/or bought now includes home and office furniture, accessories, computers, electronics and appliances.

As a result, Aaron Rents last year joined Georgia's elite list of companies with more than $1 billion in market value — share price times shares outstanding.

And with a 44 percent profit gain in 2004 on a more than 23 percent jump in sales, it's not surprising that Aaron Rents was one of the 10 best-performing Georgia companies on this year's Georgia 100 list.

"We are doing most things right," says Loudermilk in an interview. "We can do better, of course. But we are shooting for $2 billion in sales in three more years — at the end of 2008. We think our profitability will follow that trend."

The company reported a profit of $52.6 million, or $1.04 per share, on revenue of $946.5 million in the year that ended Dec. 31.

The company reported a first-quarter 2005 profit of $18.4 milion, or 36 cents per share, on revenue of $279.3 million. Those were year-over-year gains of 44 percent for profit and 15 percent for revenue in the period ended March 31.

That prompted the company to double its dividend payout and approve its second 3-for-2 stock split in two years.

Stock rose 88%

Investors have been attracted by the company's expansion, pushing its share price on the New York Stock Exchange to a high of $25 in 2004, an 88 percent rise during the year. The eight Wall Street analysts who follow Aaron Rents have "buy" ratings on the company's stock.

While the company's profit growth slowed in 2001 — the year of a mild recession and the Sept. 11 attacks — sales have risen steadily over the past five years, seemingly oblivious to the economy.

"I don't see the economy affecting us one way or another, good or bad, for the simple reason we are renting and selling the necessities of life: refrigerators, stoves, furniture, electronics, TVs," says Loudermilk. "People have to have those things even if the economy is down. They might not drive as much, or go to the movies as much, but they can't cut out necessities."

The profile of Aaron Rents' principal market is a "credit challenged" consumer: one who doesn't have good enough credit to finance a sofa or refrigerator from a conventional retailer, but does have a job and enough income to make monthly payments.

"They don't run credit checks," explains Morgan Keegan & Co. analyst Laura Champine, who has an "outperform" rating on company shares.

"They want the customer to have a pay stub and five references — people who say you're a pretty good guy.

"That might seem like a high-risk way of doing business, but I can tell you that, consistently, their write-off losses are 3 percent or less."

Champine says the Aaron Rents approach is built for a customer base that has "constantly changing lifestyles."

As Loudermilk explains it, Aaron Rents targets lower- to middle-income customers, which makes the company's rent-to-own strategy especially attractive.

To get an idea of Aaron's target market, Loudermillk says he would like to put a store next to or near every Wal-Mart Supercenter, "because a lot of those shoppers cannot afford to buy big-ticket items, and we handle big-ticket items."

"The customer could buy everything else at the Wal-Mart except a stove or big-screen television, and we would provide that," he says

Mass direct mailings

Aaron Rents uses mass direct mailings as its main marketing strategy, with twice-monthly mailings of up to 15 million fliers to every postal address in its carefully chosen ZIP code markets.

More than half the company's store rental revenue last year — 52 percent — was for electronics such as TVs and appliances, 35 percent for furniture and 12 percent for computers.

One reason, analyst Champine explains, is a price level that is below the competition by "30 to 40 percent, which is where they have decided to put their margins."

She said the upside of this approach is that Aaron Rents customers "are more likely to take ownership of the product. And if they do, that means Aaron Rents has less old product in the stores and more new product, which makes the stores look better."

Loudermilk is especially pleased with a fairly new strategy worked out with Dell Computer, which does check its customers' credit histories.

"We are taking Dell Computer turn-downs. If a customer is turned down at Dell — and there are hundreds and thousands turned down if they don't have good credit scores — Dell gives us their turn-downs. We call those customers and tell them we would like to have their business," says Loudermilk.

Aaron Rents' growth strategy includes franchising, which was launched in 1991. At the end of 2004, there were 357 franchisees, and contracts for new outlets were awarded for 160 additional outlets last year.

Aaron Rents manufactures its own furniture through its MacTavish Furniture Industries, which operates 10 plants. MacTavish produced $70 million in furniture last year.

Looking ahead, Loudermilk says the company expects to increase store openings by 15 percent to 20 percent annually over the next several years.

By the way, there has never been an "Aaron."

Loudermilk and his mother, Addie, founded the company in 1955 and chose the name "Aaron Rents" so it would be at the front of the phone book.