Pawn loans surge 33% as K-shaped economy splits consumer lending

Luxury pawn stores attract wealthy shoppers seeking bargains

LAS VEGAS — At a Max Pawn Luxury shop near the Las Vegas Strip, roughly 20 preowned Hermès Birkin bags sit locked in a glass showcase. Nearby displays stock secondhand Chanel handbags, Rolex watches, and luxury footwear from Louis Vuitton and Gucci, with some used Birkins priced above $30,000.

The store, part of a chain Ezcorp acquired in 2022, attracts shoppers who travel from other states to buy luxury goods, according to store manager Chris Jewell. Many rarely request layaway and seldom need loans, Jewell said. While some customers save up for a single splurge, “a lot of customers own three, four, five Birkins or multiple Rolexes,” he told The Wall Street Journal.

Across town at an Ezpawn store near the Las Vegas airport, the scene is different. The shop is packed with musical instruments, bicycles, preowned Louis Vuitton bags, and Nike sneakers. Customers filter in and out, many regulars who know the staff by name. Some need a $200 pawn loan to pay bills.

“There definitely looks to be a greater need for cash now than a year ago,” said Ezcorp finance chief Tim Jugmans. “You have people going, ‘Well, I’m not qualifying for certain consumer loan products, maybe I’m better off just getting a pawn, and that allows me to deal with my finances.’”

Ezcorp’s overall pawn loans surged 33% to $349 million for the three months ended March 31 compared with a year earlier, a record high for the company. U.S. loans rose 16%, with the average loan size climbing 16% to $240. The quarterly revenue rose 46% to $447 million.

The loan growth was particularly notable because pawn loan demand is typically depressed early in the year when people receive tax refunds, said Kyle Joseph, an analyst at financial services firm Stephens. “Everything is expensive. That’s driving good loan demand,” Joseph said. “But you also have more bargain-hungry consumers looking for deals, and pawnshops have relatively good pricing.”

Pawnshops offer short-term cash loans against personal collateral such as jewelry, electronics, and musical instruments. Borrowers need only a valid identification to get cash; there are no credit checks and nonpayment does not damage credit scores. If a customer does not repay, the shop sells the merchandise to recover the loan balance.

Borrowers forfeit collateral in 35% to 45% of Ezcorp’s transactions, according to the company. Those who do repay face costs that vary by location: Some states cap interest rates at 5% a month or below before extra fees, while others permit up to 30%. In Nevada, pawnshops can charge monthly interest of up to 13%, plus a $5 initial fee and storage costs for certain items.

“Our customers really use us as an alternative… to be smarter in what they’re doing based on the economic conditions out there,” said Jerry Jory, a division vice president at Ezcorp. He said recent budget pressures mean more people rely on pawn loans to bridge the gap between paychecks. “When times are tougher, people have to find a way to get an additional source of income,” Jory said. “For some customers, if we weren’t there, what would the option be, not drive?”

Ezcorp boosted its high-end market presence in 2022 by acquiring Max Pawn Luxury. The luxury segment remains a small but expanding slice of the business, with three stores in Las Vegas and a fourth that opened in Miami last year. The company does not disclose stand-alone financials for the luxury storefronts and has not set a target for the number of stores, according to Jugmans.

“Our main aim right now is to get them all humming,” the CFO said. “We’re really just seeing how we can ensure that it’s replicable in other cities.”

The initial push into luxury came from growing consumer appetite for secondhand luxury, prompting a companywide rollout where all standard stores now carry a curated, typically lower-priced selection of high-end items. As affluent consumers continue spending with confidence while lower-income consumers pull back, the all-luxury concepts capture the more resilient side of a divided economy, according to Stephens analyst Joseph.

“Everyone thinks of pawn as the lowest end of the credit spectrum, but I think they are sort of capitalizing on the K-shaped economy,” Joseph said.