The new point of sale system ultimately diverted operational focus from key areas of deliveries and cash collection, which we can measure and attribute to having a negative effect on easyhome's income.
David Ingram, President and Chief Executive Officer, easyhome

Photo RTO Online

(L-R) Don Johnson, Chairman of the Board, easyhome; John Natale, Vice President, easyhome U.S. Holdings Inc; David Ingram, President and CEO, easyhome; at the 2007 grand opening of the company's first U.S. store in South Glens Falls, New York (see story).

easyhome Ltd. (TSX:EH), Canada's largest rent-to-own company, reported results for the quarter ended June 30, 2008.

easyhome's revenue increased to $39.8 million, up 13.6% from $35.0 million in the second quarter of 2007. Same store revenue growth was 8.7% continuing a trend of 27 consecutive quarters of comparable revenue growth. Operating income was $3.9 million, a decrease of 17.3% to the same period a year ago. Diluted earnings per share fell to $0.21 versus $0.26 last year.

According to easyhome, there were two primary factors impacting the company's Q2 performance. The first was reduced price-point marketing to generate new leases coupled with the liquidation of older distressed merchandise from the inventories. The second, and perhaps more impactful factor was the implementation of a new information technology system, which touches all aspects of the customer transaction from taking payments through writing new leases and additionally extends to all management reporting.

Commenting on the results, David Ingram, President and Chief Executive Officer of easyhome said, "While our net income for the second quarter was a disappointment, I am confident that the issues have been isolated and that our management team has initiated the appropriate actions to correct them. We implemented initiatives in March to improve the new agreement margins through both selective price increases and vendor cost reductions which we believe will bring the amortization expense to historic levels by the end of the third quarter."

Ingram continued, "While we anticipated many of the potential issues with the new system rollout, it was still a significant undertaking for our associates. The new point of sale system ultimately diverted operational focus from key areas of deliveries and cash collection, which we can measure and attribute to having a negative effect on easyhome's income. All stores are now converted and we expect to have worked through most of the operational transition issues in this quarter."

Mr. Ingram concluded, "Despite reporting our first earnings decline since the second quarter of 2006, I am encouraged by a number of positive developments in the quarter. Our strategy to diversify our business units is building a foundation for long-term growth. easyfinancial, with 9 kiosks, is now contributing to earnings and will be well placed for expansion in 2009. easydecor, our rent-to-rent product for the staging community, is also making a modest profit. With the announcement of easygates in May of successfully signing 2 franchise development agreements for 16 stores, we are confident in our plans for expansion into the United States. We are excited by the Insta-Rent opportunity and in particular, welcome customers and associates to our organization. With the combination of focused execution and diversified growth platforms, we are well positioned to continue our 8 years of sequential growth."

easyhome announced the acquisition of Insta-Rent Inc. today (see story).

easyhome operates 221 stores, including 209 Canadian corporate stores, 8 U.S. corporate stores, 3 Canadian franchised stores and 1 licensed Canadian store.