If cash is king, then Cash America International is king of pawns. Ruling over a kingdom of more than 900 stores operating as Cash America Pawn, SuperPawn, and Pawn X-Change in the US and Prenda Fácil in Mexico, it's one of the largest providers of secured, non-recourse loans (also known as pawn loans). Cash America also provides cash advances in six states under the Cashland and Cash America Payday Advance banners. Check cashing, money orders, and money transfers are offered through about 120 owned and franchised Mr. Payroll stores in more than 15 states.
Cash America's pawn business generally consists of retail customers collateralizing short-term loans with jewelry, electronics, and other items. About one-third of Cash America's loans are not redeemed and the collateral is sold, which accounts for the largest percentage of the company's revenue. However, the firm isn't built on selling pawned merchandise alone. The interest rates and finance and service fees that it charges can translate to an annual interest rate of up to 300% on the loans it makes.
Cash America's cash advance business entails small short-term loans that are due in full on the borrower's next payday. Terms usually range from one to six weeks. The company also offers installment loans with average terms of four months, and markets and processes stored-value debit cards issued by a third-party financial institution, MetaBank.
Cash America has been expanding its business by acquiring existing pawnshops or by opening new storefronts. It established a presence in Mexico in 2008, when it bought a majority interest in the Prenda Fácil chain of more than 110 pawnshops for some $91 million. Since then, the company has opened more than 70 new locations in Mexico. Gold jewelry is the main form of collateral there, and the annual interest rates that the company charges typically equate to around 150%.
In 2012 Cash America is extending its reach into strategic markets in Tennessee, North Carolina, Kentucky, and Arizona -- states where the company already operates more than 80 pawn lending locations. Through a pair of independent transactions valued at up to $72 million, Cash America plans to purchase 34 pawn lending locations by the end of 2012.
Cash America bought nearly all the assets of Maxit Financial in 2010 for $70 million. The deal added nearly 40 pawn shop locations operating under the Pawn X-Change and Maxit banners in Washington and Arizona, respectively. The company plans to continue to add locations in the US and Mexico, either through acquisitions or by opening new stores.
With the US market nearly saturated and hampered by legal constraints, international growth remains an area of focus for Cash America. After selling its European retail operations in 2004, the company returned to the UK in 2007 with its QuickQuid online cash advances. Similar operations were set up in Canada and Australia in 2009 under the DollarsDirect platform. Cash America initially began offering short-term cash advances via the Internet in the US with the 2006 acquisition of CashNetUSA. The company has since grown its Internet lending presence to more than 30 states.
In 2011 it spun off the online lending business as Enova International, which encompasses CashNetUSA, DollarsDirect, and QuickQuid and Pounds to Pocket in the UK. Cash America will retain ownership of 80% of Enova following that company's planned IPO.
Cash America and other pawn shop operations were one of the few sectors to see an increase in revenues during the economic downturn that began in earnest in 2007. Recession-battered consumers used pawn loans and cash advances to keep the mortgage paid and put gas in their tanks. Cash America's revenues topped the $1 billion mark for the first time in company history in 2008; revenues and profits have increased each year since then; both were up nearly 20% in 2011.
Nonetheless, the company's pawn and cash advance businesses carry a stigma, whether justified or not, of preying on the poor or uneducated. (For its part, the company claims it attracts consumers who cannot or do not want to deal with traditional banks.) Several states have enacted legislation in recent years that put limits on loan amounts or the interest rates that pawn and payday lenders can charge. In these markets, Cash America has either curtailed its operations or is concentrating on credit services, such as arranging consumer loans through third-party lenders. The company has also increased it focus on gold-buying services and added stored-value cards. – less