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Aaron's Makes Comeback, Franchisees Support

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Rent-to-own retailer Aaron’s Inc. (AAN - Free Report) made a comeback armed with profound support from franchisees for its Progressive Finance Holdings LLC acquisition as well as the newly formulated strategic plans.  The shares of Aaron’s climbed 2% on the index during yesterday’s trade, to close at $29.84 per share.

The run up of shares during yesterday’s trade represents a nearly 50% recovery from the 4% it lost during the previous day’s trade as the company’s announcement of scaling back its earnings and sales forecast overshadowed the news of Progressive’s acquisition and the new growth plan.

Yesterday, the company discussed the significant benefits from the acquisition of the merchandise lease-to-own company Progressive Finance with its franchisees. Aaron’s believes that this acquisition will prove transformational for the company, furnishing it an opportunity to expand into the large and growing virtual rent-to-own market.

Progressive, which provides web-based lease-to-own financing programs for retailers, is expected to provide solid investor returns for Aaron’s shareholders, given its exceptional growth metrics that represent 77% annual revenue growth from $228 million in 2012 to $403 million in 2013.

Further, the company expects the acquisition to be accretive in the double-digits to cash earnings per share in 2014 and significantly accretive in 2015. Further, Aaron’s will benefit from Progressive’s tie-ups with the largest U.S. retailers, including Mattress Firm, Big Lots Inc. (BIG - Free Report) , Art Van Furniture and Sleepy's, which adds about 15,000 new sources of revenue for Aaron’s.

Further, the company highlighted that it is shifting focus on reviving its core business operations through disciplined growth, better execution, portfolio optimization, cost cutting and return of capital. In the process, the company expects to concentrate on returning to same store sales growth trajectory, build a strong online platform, optimize cost savings, limit company-operated store growth to 2%–3% per year and encourage the expansion of its franchise store base. Additionally, the company targets debt-to-capitalization ratio of 20% and expects to use excess cash to reward shareholders.

During the meeting, the company’s franchisees applauded Aaron’s by providing complete support for its recently completed acquisition. The franchisees remarked that the acquisition will take Aaron’s to new heights as it reaps the benefits of Progressive’s proven knowledge and experience in the online lease-to-own business. The franchisees believe the acquisition will facilitate strong expansion of Aaron’s customer base through its foray into the online arena.

Aaron’s currently holds a Zacks Rank #3 (Hold). Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include American Apparel Inc. (APP) and Foot Locker Inc. (FL - Free Report) , both of which sport a Zacks Rank #2 (Buy).

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