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Aaron Rents Runs Over Shareholders

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You might buy a series of workout tapes if supermodel Cindy Crawford were hawking them. Similarly, a line of handtools endorsed by Extreme Makeover: Home Edition host Ty Pennington might lure a handyman to splurge. And Goodyear Tire (NYSE: GT  ) will probably always get good mileage out of its auto-racing sponsorship.

Yet sometimes, the rationale used to connect a company and its promoter can be far-fetched. J.C. Penney (NYSE: JCP  ) , for example, signed up Crawford to promote a line of bedding, rugs, and wall decor, while Abbott Labs (NYSE: ABT  ) has Pennington touting its Similac baby formula. (You're not the only one confused by that pairing.) More strangely, rent-to-own industry player Aaron Rents (NYSE: RNT  ) has perverted a decades-long sponsorship with NASCAR to pay for the racecar dreams of one of its executives' sons.

With the tab for the racing team now growing to $1.6 million a year -- and Aaron distancing itself from its own industry, dropping the word "Rents" from its name and changing its ticker symbol from RNT to AAN -- investors need to ask whether this is the best use of shareholder money.

For one thing, NASCAR fans and the rent-to-own industry are not exactly demographically aligned. According to industry statistics, the average rent-to-own customer is a white female between the ages of 35 and 44. She's graduated high school and earns between $24,000 and $50,000 a year. NASCAR does have a large female fan base, but it's dominated by male spectators ages 45-54 who hold white-collar jobs and earn more than $50,000 annually.

This isn't any slight against the rent-to-own industry -- just a critique of the grasping nature of Aaron Rents' justification for its related party transactions. As the demographics suggest, even the most loyal NASCAR fans won't necessarily use Aaron Rents' services. This marks the 10th year of Aaron's NASCAR sponsorship, and I'd be far less concerned if that deal didn't seem primarily designed to promote the efforts of an executive's family members.

The company simply shouldn't make shareholders pay for these sorts of flights (or drives) of fancy.

Fool contributor Rich Duprey owns shares of Goodyear but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (8)

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  • Report this Comment On April 15, 2009, at 3:15 PM, catoismymotor wrote:

    Some would say their business practices run over their customers.

  • Report this Comment On April 15, 2009, at 3:39 PM, pondee619 wrote:

    As if plastering a company's name (along with many others) on a fast moving auto causes anyone to buy anything. Aaron Rents' sponsorship makes as much sense as any other. Budweiser on a speeding car?

  • Report this Comment On April 17, 2009, at 1:36 AM, MarketingMasters wrote:

    It is prejudicial to NOT want to brand your company with the No. 1 most attended sport and No. 2 most watched television sport in the United States. Those that actively market their wares in these tough times will be on top when people start spending again. Number crunching prudes should get out of the house a little more on the weekends and see what America is actually doing.

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Related Tickers

4/17/2009 4:03 PM
RNT $30.02 Down +0.00 +0.00%
Aaron Rents CAPS Rating: **
ABT $40.50 Down -0.24 -0.59%
Abbott Laboratorie… CAPS Rating: *****
GT $31.60 Down -0.14 -0.44%
Goodyear Tire and… CAPS Rating: ***
JCP $8.84 Up +0.18 +2.08%
J.C. Penney CAPS Rating: *