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Aaron's (AAN) Banks On Brand Strength & Solid Online Show
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The Aaron’s Company (AAN - Free Report) looks well-placed for long-term growth, driven by its robust lease-to-own portfolio, strength in its core businesses, the solid e-commerce business and sturdy performance in GenNext stores. Further, it witnessed accretive gains from the acquisition of BrandsMart. These upsides are likely to continue working well for AAN, helping it counter escalated inflation and supply-chain hurdles.
Although the AAN stock fell 2% in the past three months, it outperformed the industry’s decline of 10.4%.
Factors in Aaron’s Favor
The Zacks Rank #1 (Strong Buy) company has been witnessing strength in its e-commerce platform, even after stores reopened. In first-quarter 2022, e-commerce lease revenues were up 3.9%, accounting for 15.4% of the total revenues. The uptick can be attributable to increased investments in digital marketing, improved shopping experience, same-day and next-day delivery services, product personalization, and a broader assortment, including the latest product categories. Its express delivery program also bodes well.
Image Source: Zacks Investment Research
The company also remains focused on its GenNext strategy. The GenNext concept stores come with easier-to-navigate main showrooms, offering new furniture, appliances and electronics. The stores have been performing well. The company opened 19 GenNext locations in first-quarter 2022. This, along with the 116 existing stores at the beginning of the quarter, accounted for 13.2% of lease and retail revenues in the first quarter.
As part of its GenNext strategy, AAN expects to open more than 80 additional GenNext stores in 2022. Earlier, it anticipated 100 new GenNext locations for 2022. But due to the global supply-chain challenges, the remaining 20 stores will be completed in 2023.
Recently, Aaron’s completed the acquisition of appliance and electronics retailer, BrandsMart. With the buyout, Aaron’s will be able to offer high-quality furniture, appliances, electronics, and other home goods on affordable lease and retail purchase options to its customers. The move is expected to strengthen AAN’s market position and help expand the customer base. The deal is expected to generate significant cost synergies and aid Aaron’s top line in the near term. Management anticipates more than $3 billion in total annual revenues and more than $300 million in adjusted EBITDA from this transaction by 2026.
Hurdles on The Way
Despite the upsides, Aaron’s is reeling under ongoing inflationary pressures, uncertainty related to geopolitical conflict and supply-chain challenges. This hurt its first-quarter 2022 results, wherein the top line lagged the Zacks Consensus Estimate and declined year over year.
Consolidated revenues fell 5.2% due to reduced lease revenues from the expected normalization in the lease renewal rate and a decline in early purchase options. Same-store revenues fell 4.3% year over year in the first quarter due to the same factors. Also, adjusted earnings of 87 cents per share declined 29.8% year over year.
Looking Ahead
Management raised the 2022 view, driven by potential gains from its BrandsMart buyout. The company expects revenues of $2.32-$2.39 billion, up from the earlier mentioned $1.775-$1.825 billion. Adjusted EBITDA is likely to be $200-$215 million, which compares favorably with the prior stated $180-$190 million. It also issued the bottom-line view, wherein adjusted earnings are envisioned to be $2.65-$2.90.
Earnings estimates for the current financial year have increased 10% to $2.74 over the past 30 days. This, along with a VGM Score A, reflects its inherent strength.
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories, presently sports a Zacks Rank #1. GIL has a trailing four-quarter earnings surprise of 160.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 8.7% and 5.2% from the year-ago period’s reported numbers, respectively.
Oxford Industries, which is involved in designing, sourcing, marketing and distributing products bearing the trademarks of its owned and licensed brands, currently flaunts a Zacks Rank #1. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the year-ago period's reported numbers.
Delta Apparel, a manufacturer of knitwear products, currently has a Zacks Rank #2 (Buy). DLA has a trailing four-quarter earnings surprise of 95.5%, on average.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.
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Aaron's (AAN) Banks On Brand Strength & Solid Online Show
The Aaron’s Company (AAN - Free Report) looks well-placed for long-term growth, driven by its robust lease-to-own portfolio, strength in its core businesses, the solid e-commerce business and sturdy performance in GenNext stores. Further, it witnessed accretive gains from the acquisition of BrandsMart. These upsides are likely to continue working well for AAN, helping it counter escalated inflation and supply-chain hurdles.
Although the AAN stock fell 2% in the past three months, it outperformed the industry’s decline of 10.4%.
Factors in Aaron’s Favor
The Zacks Rank #1 (Strong Buy) company has been witnessing strength in its e-commerce platform, even after stores reopened. In first-quarter 2022, e-commerce lease revenues were up 3.9%, accounting for 15.4% of the total revenues. The uptick can be attributable to increased investments in digital marketing, improved shopping experience, same-day and next-day delivery services, product personalization, and a broader assortment, including the latest product categories. Its express delivery program also bodes well.
Image Source: Zacks Investment Research
The company also remains focused on its GenNext strategy. The GenNext concept stores come with easier-to-navigate main showrooms, offering new furniture, appliances and electronics. The stores have been performing well. The company opened 19 GenNext locations in first-quarter 2022. This, along with the 116 existing stores at the beginning of the quarter, accounted for 13.2% of lease and retail revenues in the first quarter.
As part of its GenNext strategy, AAN expects to open more than 80 additional GenNext stores in 2022. Earlier, it anticipated 100 new GenNext locations for 2022. But due to the global supply-chain challenges, the remaining 20 stores will be completed in 2023.
Recently, Aaron’s completed the acquisition of appliance and electronics retailer, BrandsMart. With the buyout, Aaron’s will be able to offer high-quality furniture, appliances, electronics, and other home goods on affordable lease and retail purchase options to its customers. The move is expected to strengthen AAN’s market position and help expand the customer base. The deal is expected to generate significant cost synergies and aid Aaron’s top line in the near term. Management anticipates more than $3 billion in total annual revenues and more than $300 million in adjusted EBITDA from this transaction by 2026.
Hurdles on The Way
Despite the upsides, Aaron’s is reeling under ongoing inflationary pressures, uncertainty related to geopolitical conflict and supply-chain challenges. This hurt its first-quarter 2022 results, wherein the top line lagged the Zacks Consensus Estimate and declined year over year.
Consolidated revenues fell 5.2% due to reduced lease revenues from the expected normalization in the lease renewal rate and a decline in early purchase options. Same-store revenues fell 4.3% year over year in the first quarter due to the same factors. Also, adjusted earnings of 87 cents per share declined 29.8% year over year.
Looking Ahead
Management raised the 2022 view, driven by potential gains from its BrandsMart buyout. The company expects revenues of $2.32-$2.39 billion, up from the earlier mentioned $1.775-$1.825 billion. Adjusted EBITDA is likely to be $200-$215 million, which compares favorably with the prior stated $180-$190 million. It also issued the bottom-line view, wherein adjusted earnings are envisioned to be $2.65-$2.90.
Earnings estimates for the current financial year have increased 10% to $2.74 over the past 30 days. This, along with a VGM Score A, reflects its inherent strength.
Other Stocks to Consider
Some other top-ranked stocks from the Consumer Discretinary sector are Delta Apparel (DLA - Free Report) , Oxford Industries (OXM - Free Report) and GIII Apparel Group (GIII - Free Report) .
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories, presently sports a Zacks Rank #1. GIL has a trailing four-quarter earnings surprise of 160.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 8.7% and 5.2% from the year-ago period’s reported numbers, respectively.
Oxford Industries, which is involved in designing, sourcing, marketing and distributing products bearing the trademarks of its owned and licensed brands, currently flaunts a Zacks Rank #1. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the year-ago period's reported numbers.
Delta Apparel, a manufacturer of knitwear products, currently has a Zacks Rank #2 (Buy). DLA has a trailing four-quarter earnings surprise of 95.5%, on average.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.