Back to top

Analyst Blog

Leading rent-to-own operator, Aaron's Inc. announced that it has opened 32 new company-operated and franchised stores in 17 different states of the U.S. and 2 Canadian provinces in the last 3 months. These store openings are in sync with the company’s aggressive growth trend.

The company’s new stores are located as follows - Prescott, Maricopa and Buckeye, Ariz.; Tulare and El Cajon, Calif.; Craig, Colo.; Putnam, Conn.; Greenacres, Jacksonville and Yulee, Fla.; Pratt, Kan.; Baton Rouge, La.; Aberdeen, Baltimore and Reisterstown, Md.; New Albany, Miss.; Elizabeth City, N.C.; Concord, N.H.; Taos, N.M.; Hamburg, Rochester, Bronx and Brooklyn, N.Y.;  Westerville, Barberton and Hillsboro, Ohio; Seminole, Okla.; Yankton, S.D.; Rockdale and Plano, Texas; Grande Prairie, Alberta; and Port Alberni, British Columbia.

Earlier, in Sep 2012, Aaron’s opened its 2,000th store in Bronx, New York, marking a strong fiscal 2012 for the company. During fiscal 2012, the company expanded its store count by 6.6%, besides reporting strongest ever financial results.

Aaron’s adjusted earnings reached $2.04 per share in fiscal 2012, which was 16.6% higher from the adjusted earnings of $1.75 reported in 2011. However, it missed the Zacks Consensus Estimate of $2.07 per share. Total revenue increased 10% to $2,222.6 million from fiscal 2011.

Looking ahead, management remains encouraged by its store expansion outlook for 2013 and resulting job opportunities. In 2013, management targets new store growth of about 4%–6% over 2012, with equal numbers of company-operated and franchised stores and a small rise in number of HomeSmart stores. Going forward, the company will remain focused on its strategy of acquiring franchised stores or selling underperforming company-operated stores.

Aaron’s is a rent-to-own operator in the United States, and has a low price provider strategy. The company is involved in rental and specialty retailing of consumer electronics, residential and office furniture, household appliances, and accessories.

Currently, Aaron's has a customer base of over 1.7 million throughout the U.S. and Canada. The company offers its customers low monthly payments on a lease-to-own option and no credit checks on everyday brand name necessities such as refrigerators, computers, beds and televisions.

Moreover, Aaron’s leverages an extensive network of stores to effectively penetrate into its target markets, which in turn facilitates the company to generate healthy sales and gain a competitive advantage over its rivals. The company currently operates over 2,075 company-operated and franchised stores across Canada and 48 states of the U.S.

The company’s peer, Rent-A-Center Inc. also follows the strategy of expanding its store network to boost its top line. For 2013, Rent-A-Center’s management plans to open approximately 60 rent-to-own locations in Mexico. Furthermore, the company aims at about 425 domestic RAC Acceptance kiosk additions.

Despite these encouraging expansion prospects, currently, shares of Aaron’s hold a Zacks Rank #3 (Hold).

However, until any further upward revision in Aaron’s rating, other stocks in the finance-leasing universe worth considering are CorEnergy Infrastructure Trust and Electro Rent Corporation , which hold a Zacks Rank #2 (Buy) and a Zacks Rank #3 (Hold), respectively.

Please login to Zacks.com or register to post a comment.