Rainbow Rentals today reported financial results for its first quarter ended March 31, 2003.

During the earnings conference call, CEO Wayland Russell was asked if he felt the company was underperforming compared to the industry...

Wayland J. Russell
Chairman and CEO
"I believe that we're underperforming. We have lost customer count and units on rent in the core stores that generate the profit that we need to have. Our core competencies wavered 2 years ago. We've improved those core competencies and feel very, very strong in where we are operating each and every one of these stores"

The company also announced the addition of long time industry veteran Robert Harris. Mr. Harris is the former chief operating officer of Remco.

Wayland J. Russell
Chairman and CEO
"Robert comes to us [with] over 20 years experience with the Remco Enterprise Corporation, one of the premier rent to own companies of its time"

Mr. Harris developed the Remco training program and will utilize that talent to enhance Rainbow's leadership training efforts.

Revenue for the first quarter was $25.7 million, up 3.1 percent from $25.0 million for the comparable period of 2002. Revenue at comparable stores (open a year or longer) was down 1.4 percent.

Net income for the quarter was $401,000, or $0.07 per share, compared to net income of $529,000, or $0.09 per share, for the first quarter of 2002. The decline was primarily the result of higher corporate expenses, higher costs associated with a greater number of new store openings and the costs of closing two under-performing stores. Corporate expenses rose primarily as a result of increased store supervision costs and training.

During the first quarter, the company operated 11 stores that were open less than one year, compared to 6 stores open less than one year during the first quarter of 2002. Store closing costs included lease buy-outs for two under-performing stores closed in January. The higher new store costs and store-closing costs negatively impacted first quarter 2003 earnings by approximately $0.02 per share. These items offset the effect of improved comparable store operating income, which was achieved through cost controls and lower merchandise costs.

Wayland J. Russell
Chairman and CEO
"Although our first-quarter results were negatively affected by investments in store supervision and training, as well as the greater number of new stores and the closure of under-performing stores, these initiatives have strengthened our outlook for the future. We were pleased to register growth in units on rent in the first quarter, as we typically lose substantial units during the first three months. We are also pleased with our new advertising campaign and our enhanced store-manager retention program.

"Our primary focus continues to be building revenue in our established stores. We expect to accomplish this through the investments we have made over the past year in a stronger regional supervisory team, our stepped-up manager training process and our enhanced marketing activities. We also continue to benefit from better pricing from suppliers."

To improve profitability, Rainbow closed an additional under-performing store in early April and consolidated the accounts into a nearby store.