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Why Aaron's (AAN) Stock is a Great Investment at the Moment
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The Aaron’s Company, Inc. (AAN - Free Report) has been in investors’ good books, driven by its cost-reduction initiatives, solid online show and strength in the GenNext program. The company’s acquisition of the appliance and electronics retailer, BrandsMart, also bodes well.
Backed by these strengths, the company posted a third straight quarter of top and bottom-line beat in first-quarter 2023. Results benefited from the BrandsMart buyout, with fewer customers opting for early purchase options and reduced write-offs.
Shares of this Zacks Rank #1 (Strong Buy) company have rallied 16% in the year-to-date period against the industry’s decline of 8.1%. The stock also compared favorably with the sector’s growth of 8.3% and the S&P 500’s 13.7% rise. A VGM Score of A also raises optimism on the stock.
Image Source: Zacks Investment Research
What’s Working Well for AAN?
Aaron’s has continued to witness strength in its e-commerce platform. In the first quarter of 2023, e-commerce lease revenues were up 12.3%, accounting for 17.9% of the total revenues. The uptick can be attributable to increased website traffic and a higher conversion rate.
Some other notable efforts include increased investments in digital marketing, improved shopping experience, same-day and next-day delivery services, the personalization of products, and a broader assortment, including the latest product categories. Its express delivery program also bodes well.
The BrandsMart acquisition is expected to strengthen AAN’s market position and help expand its customer base. The deal is also likely to generate significant cost synergies and aid Aaron’s top line. Notably, revenues were $144.2 million in the first quarter of 2023, driven by strength in small appliances and housewares, and e-commerce strength. The company has been optimistic about its performance in the near future. It announced the opening of its first BrandsMart store in 2023.
A sturdy performance in GenNext stores bodes well. Notably, the company had 222 GenNext locations at the end of the first quarter. This accounted for more than 27% of lease and retail revenues, up from 15% in the first quarter of 2022.
Aaron’s envisions 2023 adjusted earnings per share (EPS) of $1-$1.40 compared with the previously mentioned 70 cents to $1.10. Earnings per share are expected to be 70-95 cents compared with the earlier stated 55-80 cents. This includes the benefit of the deferred tax revaluation, and lower expected depreciation and interest expenses for the remainder of 2023.
Hurdles to Overcome
The company continues to witness sluggishness in its Aaron’s Business segment and dismal margins. Lower average lease portfolio size and lease renewal rate, coupled with fewer exercises of early purchase options and weak retail sales have been hurting the Aaron’s segment. Soft customer traffic has been resulting in delayed deliveries and lower lease revenues.
Moreover, AAN has been witnessing high inflation and other challenging economic conditions that continue to impact its customers. In 2023, management expects to continue being affected by high inflation and other macroeconomic factors. Both segments are expected to continue experiencing softness in customer demand in its core product categories, including appliances, furniture and electronics in the first half of the year.
Bottom Line
Although lower lease revenues, drab Aaron’s Business segment and inflation remain headwinds, solid online show, gains from the BrandsMart buyout and strength in the GenNext program are likely to aid Aaron’s performance in the near term.
SP Plus provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry. The company currently carries a Zacks Rank #2 (Buy). SP has a trailing four-quarter earnings surprise of 1.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SP’s current financial-year sales and earnings suggests growth of 11.2% and 1.4% from the year-ago period’s actuals, respectively.
BrightView, a provider of commercial landscaping services, primarily in the United States, currently carries a Zacks Rank #2. BV has a trailing four-quarter earnings surprise of 31.4%, on average.
The Zacks Consensus Estimate for BrightView’s current financial-year sales suggests growth of 2.7%, while earnings indicate a decline of 35%, from the year-ago period’s reported levels.
lululemon is a yoga-inspired athletic apparel company that creates lifestyle components. LULU currently carries a Zacks Rank #2. It has a long-term earnings growth rate of 20%.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and EPS suggests growth of 17% and 18.4%, respectively, from the year-ago reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
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Why Aaron's (AAN) Stock is a Great Investment at the Moment
The Aaron’s Company, Inc. (AAN - Free Report) has been in investors’ good books, driven by its cost-reduction initiatives, solid online show and strength in the GenNext program. The company’s acquisition of the appliance and electronics retailer, BrandsMart, also bodes well.
Backed by these strengths, the company posted a third straight quarter of top and bottom-line beat in first-quarter 2023. Results benefited from the BrandsMart buyout, with fewer customers opting for early purchase options and reduced write-offs.
Shares of this Zacks Rank #1 (Strong Buy) company have rallied 16% in the year-to-date period against the industry’s decline of 8.1%. The stock also compared favorably with the sector’s growth of 8.3% and the S&P 500’s 13.7% rise. A VGM Score of A also raises optimism on the stock.
Image Source: Zacks Investment Research
What’s Working Well for AAN?
Aaron’s has continued to witness strength in its e-commerce platform. In the first quarter of 2023, e-commerce lease revenues were up 12.3%, accounting for 17.9% of the total revenues. The uptick can be attributable to increased website traffic and a higher conversion rate.
Some other notable efforts include increased investments in digital marketing, improved shopping experience, same-day and next-day delivery services, the personalization of products, and a broader assortment, including the latest product categories. Its express delivery program also bodes well.
The BrandsMart acquisition is expected to strengthen AAN’s market position and help expand its customer base. The deal is also likely to generate significant cost synergies and aid Aaron’s top line. Notably, revenues were $144.2 million in the first quarter of 2023, driven by strength in small appliances and housewares, and e-commerce strength. The company has been optimistic about its performance in the near future. It announced the opening of its first BrandsMart store in 2023.
A sturdy performance in GenNext stores bodes well. Notably, the company had 222 GenNext locations at the end of the first quarter. This accounted for more than 27% of lease and retail revenues, up from 15% in the first quarter of 2022.
Aaron’s envisions 2023 adjusted earnings per share (EPS) of $1-$1.40 compared with the previously mentioned 70 cents to $1.10. Earnings per share are expected to be 70-95 cents compared with the earlier stated 55-80 cents. This includes the benefit of the deferred tax revaluation, and lower expected depreciation and interest expenses for the remainder of 2023.
Hurdles to Overcome
The company continues to witness sluggishness in its Aaron’s Business segment and dismal margins. Lower average lease portfolio size and lease renewal rate, coupled with fewer exercises of early purchase options and weak retail sales have been hurting the Aaron’s segment. Soft customer traffic has been resulting in delayed deliveries and lower lease revenues.
Moreover, AAN has been witnessing high inflation and other challenging economic conditions that continue to impact its customers. In 2023, management expects to continue being affected by high inflation and other macroeconomic factors. Both segments are expected to continue experiencing softness in customer demand in its core product categories, including appliances, furniture and electronics in the first half of the year.
Bottom Line
Although lower lease revenues, drab Aaron’s Business segment and inflation remain headwinds, solid online show, gains from the BrandsMart buyout and strength in the GenNext program are likely to aid Aaron’s performance in the near term.
Other Stocks to Consider
Some other top-ranked companies are SP Plus (SP - Free Report) , BrightView (BV - Free Report) and lululemon athletica (LULU - Free Report) .
SP Plus provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry. The company currently carries a Zacks Rank #2 (Buy). SP has a trailing four-quarter earnings surprise of 1.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SP’s current financial-year sales and earnings suggests growth of 11.2% and 1.4% from the year-ago period’s actuals, respectively.
BrightView, a provider of commercial landscaping services, primarily in the United States, currently carries a Zacks Rank #2. BV has a trailing four-quarter earnings surprise of 31.4%, on average.
The Zacks Consensus Estimate for BrightView’s current financial-year sales suggests growth of 2.7%, while earnings indicate a decline of 35%, from the year-ago period’s reported levels.
lululemon is a yoga-inspired athletic apparel company that creates lifestyle components. LULU currently carries a Zacks Rank #2. It has a long-term earnings growth rate of 20%.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and EPS suggests growth of 17% and 18.4%, respectively, from the year-ago reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.