We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Aaron's (AAN) Tops Q3 Earnings, Lags Revenues; Stock Up
Read MoreHide Full Article
Aaron’s Inc. (AAN - Free Report) posted third-quarter 2016 results, wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same. Shares of this Atlanta-based company have gained 9.2% since the earnings release. Both earnings and revenues witnessed a year-over-year improvement.
This rent-to-own company’s adjusted earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 47 cents and surged 28.2% from the prior-year quarter. Including one-time items, the company reported earnings of 40 cents per share, reflecting a 21.2% year-over-year increase.
Aaron’s top line improved 0.2% to $769 million, mainly backed by revenue growth at the company’s Progressive division. However, its total revenue fell short of the Zacks Consensus Estimate of $784 million.
Comparable store sales (comps) at company-operated stores dropped 4.6%, while the customer count, on a same-store basis, slipped 1.6%. Comps at the company’s franchise stores inched up 0.4% but same-store customer count registered a rise of 0.3%. At quarter end, the company’s self-operated stores had 981,000 customers, reflecting a 1.9% year-over-year decline. The franchisees had a customer base of 542,000, representing a 4.1% year-over-year fall.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter increased 23.2% year over year to $76.4 million. Further, the adjusted EBITDA margin improved 180 basis points (bps) to 9.9% in the quarter.
Segment Details
Core Business
Aaron’s core business’ sales fell 9.5% to $454.1 million in the reported quarter. Adjusted EBITDA for the core business segment was $40.4 million, down 7.6% year over year, while EBITDA margin expanded 20 bps to 8.9%.
On May 13, 2016, the company sold the assets of its HomeSmart unit. Its results for the third quarter included HomeSmart revenues of $25.4 million through May 13, which were up 68.2% year over year.
Progressive
Progressive contributed $308.4 million to revenues in the third quarter of 2016, marking a 15.9% year-over-year surge. This was driven by a 28% rise in the number of active doors in the quarter, though invoice volume per active door fell 13%. The segment’s EBITDA was $37.2 million for the third quarter, compared with $18.3 million in the year-ago quarter. Also, EBITDA margin expanded 520 bps to 12.1%. Progressive had 540,000 customers as of Sep 30, 2016, representing 12% year-over-year growth. We note that Progressive acquired DAMI in Oct 2015, which contributed revenues of $6.5 million in the third quarter.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $319.5 million, debt of $496.2 million, and total shareholders’ equity of $1,457.1 million.
During the first nine months of 2016, it generated cash from operations of $460.5 million.
In the third quarter of 2016, Aaron’s repurchased 1,372,700 shares of common stock worth nearly $34.5 million. As of Sep 30, 2016, the company had an authorization to buy back 9,123,721 more shares.
Store Update
Aaron’s consolidated or shuttered five Company-operated Aaron's Sales & Lease Ownership stores, four franchised Aaron's Sales & Lease Ownership stores, and one franchised HomeSmart store. It sold three company-operated stores to franchisees which were consolidated with existing outlets, and purchased 15 franchised stores.
As of Sep 30, 2016, Aaron’s had a total of 1,228 company-operated stores and 703 franchised Sales & Lease Ownership stores. Consequently, the company operated over 1,930 stores in total as of quarter end.
While Progressive performed exceedingly well in the reported quarter, the company’s core division continues to remain challenging. Nonetheless, the company remains on track with its cost-management and inventory control activities, alongside undertaking efforts to rightsize its store base. In this regard, the company closed about 56 stores by the end of October, and anticipates closing more stores in 2017. Management expects these activities to support the performance of its core business and place it well for long-term profitability.
Following the quarter, management updated its outlook for 2016, based on ongoing business trends, store closure strategies and restructuring costs.
Segment-wise, the company expects comps for the core segment in the range of negative 5% to negative 3% for the remainder of 2016. Earlier comps were projected to come in the range of negative 3% to flat for 2016.
The company’s adjusted EBITDA is projected in the range of $330−$350 million in 2016 compared with the previous forecast of $325−$355 million. On a segmental basis, core business adjusted EBITDA is expected in the range of $195−$205 million compared with $195−$215 million projected previously. Adjusted EBITDA guidance for the Progressive division is $140−$150 million compared with $135−$145 million projected earlier.
Lastly, the company trimmed its GAAP earnings forecast for 2016 to $1.79−$1.93 per share from $1.92−$2.12 expected previously. It expects adjusted earnings in the band of $2.16−$2.30 per share, compared with $2.13−$2.33 anticipated earlier.
Zacks Rank
Aaron’s currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail space include Tilly's, Inc. (TLYS - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Boot Barn Holdings, Inc. (BOOT - Free Report) .
Tilly's, with a long-term earnings growth rate of 15.5%, has jumped nearly 63% in the past three months. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Eagle Outfitters, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.8%. The stock gained roughly 16.6% in the past six months.
Boot Barn Holdings, a Zacks Rank #2 stock, has a long-term earnings growth rate of 14.5%. The stock surged nearly 52.7% in the past six months.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Aaron's (AAN) Tops Q3 Earnings, Lags Revenues; Stock Up
Aaron’s Inc. (AAN - Free Report) posted third-quarter 2016 results, wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same. Shares of this Atlanta-based company have gained 9.2% since the earnings release. Both earnings and revenues witnessed a year-over-year improvement.
This rent-to-own company’s adjusted earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 47 cents and surged 28.2% from the prior-year quarter. Including one-time items, the company reported earnings of 40 cents per share, reflecting a 21.2% year-over-year increase.
Aaron’s top line improved 0.2% to $769 million, mainly backed by revenue growth at the company’s Progressive division. However, its total revenue fell short of the Zacks Consensus Estimate of $784 million.
Comparable store sales (comps) at company-operated stores dropped 4.6%, while the customer count, on a same-store basis, slipped 1.6%. Comps at the company’s franchise stores inched up 0.4% but same-store customer count registered a rise of 0.3%. At quarter end, the company’s self-operated stores had 981,000 customers, reflecting a 1.9% year-over-year decline. The franchisees had a customer base of 542,000, representing a 4.1% year-over-year fall.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter increased 23.2% year over year to $76.4 million. Further, the adjusted EBITDA margin improved 180 basis points (bps) to 9.9% in the quarter.
Segment Details
Core Business
Aaron’s core business’ sales fell 9.5% to $454.1 million in the reported quarter. Adjusted EBITDA for the core business segment was $40.4 million, down 7.6% year over year, while EBITDA margin expanded 20 bps to 8.9%.
On May 13, 2016, the company sold the assets of its HomeSmart unit. Its results for the third quarter included HomeSmart revenues of $25.4 million through May 13, which were up 68.2% year over year.
Progressive
Progressive contributed $308.4 million to revenues in the third quarter of 2016, marking a 15.9% year-over-year surge. This was driven by a 28% rise in the number of active doors in the quarter, though invoice volume per active door fell 13%. The segment’s EBITDA was $37.2 million for the third quarter, compared with $18.3 million in the year-ago quarter. Also, EBITDA margin expanded 520 bps to 12.1%. Progressive had 540,000 customers as of Sep 30, 2016, representing 12% year-over-year growth. We note that Progressive acquired DAMI in Oct 2015, which contributed revenues of $6.5 million in the third quarter.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $319.5 million, debt of $496.2 million, and total shareholders’ equity of $1,457.1 million.
During the first nine months of 2016, it generated cash from operations of $460.5 million.
In the third quarter of 2016, Aaron’s repurchased 1,372,700 shares of common stock worth nearly $34.5 million. As of Sep 30, 2016, the company had an authorization to buy back 9,123,721 more shares.
Store Update
Aaron’s consolidated or shuttered five Company-operated Aaron's Sales & Lease Ownership stores, four franchised Aaron's Sales & Lease Ownership stores, and one franchised HomeSmart store. It sold three company-operated stores to franchisees which were consolidated with existing outlets, and purchased 15 franchised stores.
As of Sep 30, 2016, Aaron’s had a total of 1,228 company-operated stores and 703 franchised Sales & Lease Ownership stores. Consequently, the company operated over 1,930 stores in total as of quarter end.
AARONS INC Price, Consensus and EPS Surprise
AARONS INC Price, Consensus and EPS Surprise | AARONS INC Quote
Guidance
While Progressive performed exceedingly well in the reported quarter, the company’s core division continues to remain challenging. Nonetheless, the company remains on track with its cost-management and inventory control activities, alongside undertaking efforts to rightsize its store base. In this regard, the company closed about 56 stores by the end of October, and anticipates closing more stores in 2017. Management expects these activities to support the performance of its core business and place it well for long-term profitability.
Following the quarter, management updated its outlook for 2016, based on ongoing business trends, store closure strategies and restructuring costs.
Segment-wise, the company expects comps for the core segment in the range of negative 5% to negative 3% for the remainder of 2016. Earlier comps were projected to come in the range of negative 3% to flat for 2016.
The company’s adjusted EBITDA is projected in the range of $330−$350 million in 2016 compared with the previous forecast of $325−$355 million. On a segmental basis, core business adjusted EBITDA is expected in the range of $195−$205 million compared with $195−$215 million projected previously. Adjusted EBITDA guidance for the Progressive division is $140−$150 million compared with $135−$145 million projected earlier.
Lastly, the company trimmed its GAAP earnings forecast for 2016 to $1.79−$1.93 per share from $1.92−$2.12 expected previously. It expects adjusted earnings in the band of $2.16−$2.30 per share, compared with $2.13−$2.33 anticipated earlier.
Zacks Rank
Aaron’s currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail space include Tilly's, Inc. (TLYS - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Boot Barn Holdings, Inc. (BOOT - Free Report) .
Tilly's, with a long-term earnings growth rate of 15.5%, has jumped nearly 63% in the past three months. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Eagle Outfitters, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.8%. The stock gained roughly 16.6% in the past six months.
Boot Barn Holdings, a Zacks Rank #2 stock, has a long-term earnings growth rate of 14.5%. The stock surged nearly 52.7% in the past six months.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>