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Aaron's (AAN) Expands GenNext Strategy, Opens 100th Store

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As part of the GenNext real estate strategy, The Aaron's Company, Inc. (AAN - Free Report) launched its 100th store in Largo, FL. These GenNext concept stores come with larger, brighter, and easier-to-navigate main showrooms offering new furniture, appliances as well as electronics. The stores also feature expanded assortment and payment methods, an enhanced shopping experience, and a new technology related to decisioning. The company has already been receiving positive feedback for other GenNext locations, with collective sales growth of 20%, outpacing sales in traditional stores.

AAN initially tested and opened 47 such stores by the end of 2020. Last year, it rapidly expanded the rollout of these stores to more than double. GenNext stores are expected to transform the rent-to-own industry. Reaching the 100th store milestone further strengthens its mission.

What Else Should You Know?

Apart from the sturdy performance of GenNext stores, Aaron’s has been gaining from solid e-commerce business and strength in the direct-to-consumer lease-to-own market. This led to impressive third-quarter 2021 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Consolidated revenues rose 2.5% year over year driven by improved quality and size of its lease portfolio, which somewhat offset reduced customer payment activities and the impact of net closure of 79 franchised stores in 15 months ended Sep 30, 2021. Same-store revenues rose 4.6% for the third quarter, driven by a robust lease portfolio, which partly offset reduced payment activities. This marked the sixth successive quarter of same-store sales growth.

The company has also been witnessing strength in the e-commerce platform after the reopening of stores. For third-quarter 2021, e-commerce lease revenues were up 13.3%, accounting for 14.3% of total revenues. The uptick can be attributable to increased investments in digital marketing, an improved shopping experience, same-day and next-day delivery facilities, personalization of products, and a broader assortment, including the latest product categories. Its express delivery program also bodes well.

Driven by these factors, management raised its 2021 view. For 2021, the company anticipates revenues of $1.82-$1.83 billion, up from the earlier mentioned $1.775-$1.8 billion. Same-store revenues are forecast to grow 7.5-8.5% compared with 6-8% growth stated previously.

Shares of this Zacks Rank #3 (Hold) company have gained 15.3% in a year’s time against the industry’s 18.1% decline.

Zacks Investment ResearchImage Source: Zacks Investment Research

Yet, Aaron’s is reeling under continued sluggishness in franchisee revenues due to reduced franchised locations. Lower customer payment activity due to reduced government stimulus also remains a concern. Management expects customer payment activity to decline further in the near term as well. Although fourth-quarter 2021 customer lease payment activity is likely to remain above the pre-pandemic level, it is anticipated to decline year over year.

Stocks to Consider

Some better-ranked stocks from the Consumer Discretionary sector include Delta Apparel (DLA - Free Report) , Guess (GES - Free Report) and Hanesbrands (HBI - Free Report) .

Delta Apparel currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 95.5% on average. The stock has rallied 45.3% in a year’s time. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Delta Apparel's sales and earnings per share for the current financial year suggests growth of 11.6% and 9.4%, respectively, from the year-ago reported numbers.

Guess currently has a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 97% on average. Shares of GES have gained 2.3% in the past year.

The Zacks Consensus Estimate for Guess’ sales for the current financial year suggests year-over-year growth of 38.6%. The consensus mark for GES’ earnings per share is pegged at $2.97, indicating a substantial improvement from a loss of 7 cents reported in the year-ago period.

Hanesbrands currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 28.6%, on average. Shares of HBI have gained 13.1% in the past year.

The Zacks Consensus Estimate for Hanesbrands’ sales and earnings for the current financial year suggests growth of 2% and 25.5%, respectively, from the year-ago reported numbers.

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