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The Aaron's Company, Inc. (AAN - Free Report) released second-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same. In the quarter, both the top and bottom lines declined on a year-over-year basis.
Aaron's delivered adjusted earnings of 39 cents per share, outpacing the Zacks Consensus Estimate of 18 cents. However, the bottom line declined 50.6% year over year from 79 cents per share reported in the prior-year quarter. On a GAAP basis, AAN reported earnings of 21 cents per share versus a loss of 17 cents in the year-ago quarter.
Quarter in Detail
Consolidated revenues declined 13.1% to $530.4 million, owing to weak lease revenues & fees and drab retail sales at both Aaron's and BrandsMart businesses. The figure came below the Zacks Consensus Estimate of $541 million.
Breaking up the components of consolidated revenues, we note that lease revenues and fees dropped 8.5% year over year to $353.8 million and retail sales decreased to $148 million from $190.8 million. Non-retail sales, which mainly include merchandise sales to franchisees, declined 15.6% year over year to $22.8 million, while franchise royalties and other revenues in the quarter decreased 3.3% to $5.8 million from the year-ago quarter.
In Aaron’s business segment, revenues declined 9.6% year over year to $388.9 million due to lower lease portfolio size and lease renewal rate coupled with fewer exercises of early purchase options and weak retail sales. In the quarter, we had expected sales of $376.2 million from Aaron’s business segment. E-commerce revenues rose 5.5% year over year and represented 17.9% of lease revenues.
For the BrandsMart segment, revenues were $143.8 million in the second quarter of 2023. Our estimate for sales from the BrandsMart segment was $157.5 million in the quarter. Its e-commerce product sales were 8.1% of total product sales.
The Aaron's Company, Inc. Price, Consensus and EPS Surprise
Aaron’s gross profit declined 3.7% to $282.3 million and the gross margin expanded 520 basis points (bps) to 53.2%. The operating profit came in at $11.3 million compared with the prior-year quarter’s operating loss of $9.5 million.
Adjusted EBITDA declined 17% year over year to $42.4 million, due to lower lease revenues & fees at the Aaron's business and weak retail sales at BrandsMart, partly offset by reduced personnel costs and lower write-offs at Aaron's business. The adjusted EBITDA margin also contracted 40 bps to 8% compared with our estimate of 6.8%.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $38.4 million, debt of $186.1 million and shareholders’ equity of $710.6 million. In the quarter, the company provided $53.4 million in cash from operating activities.
At the end of the second quarter, the company generated an adjusted free cash flow of $36 million. Capital expenditure was $21.4 million in the reported quarter. For 2023, capital expenditures are expected in the band of $85-$100 compared with $90-$105 million guided earlier. For 2023, AAN expects adjusted free cash flow in the range of $85-$95 million, higher than its earlier projection of $75-$85 million.
The company declared dividends worth $3.9 million in the quarter under review.
Outlook
For full-year 2023, the company anticipates revenues in the band of $2.12-$2.22 billion versus $2.15-$2.25 billion predicted earlier. Adjusted EBITDA (excluding stock-based compensation) is still projected in the range of $140-$160 million. It continues to envision adjusted earnings per share (EPS) of $1.00-$1.40 for the full year. Earnings per share are expected in the range of 55-80 cents compared with the earlier forecast of 70-95 cents.
For the Aaron’s business, revenues are still expected in the range of $1.50-$1.57 billion. Adjusted EBITDA is likely to be in the band of $170-$185 million.
For BrandsMart, revenues are now anticipated in the range of $615-$645 million, lower than $645-$675 million expected previously. Adjusted EBITDA is forecast in the range of $12.5-$17.5 million.
Shares of this Zacks Rank #4 (Sell) company have gained 29.2% in the past three months against the industry’s 0.1% decline.
Ralph Lauren, a footwear and accessories dealer, has a trailing four-quarter earnings surprise of 17.4%, on average. The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.
Skechers designs, develops, markets and distributes footwear for men, women and children. It has a trailing four-quarter earnings surprise of 39.1%, on average. The Zacks Consensus Estimate for SKX’s current financial-year sales and EPS suggests growth of 8.8% and 34.9%, respectively, from the year-ago reported numbers.
Deckers Outdoor, a footwear dealer, has a trailing four-quarter earnings surprise of 13.6%, on average. The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and EPS suggests growth of 9.1% and 14.2%, respectively, from the year-ago corresponding figures.
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Aaron's (AAN) Q2 Earnings Beat Estimates, Revenue View Lowered
The Aaron's Company, Inc. (AAN - Free Report) released second-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same. In the quarter, both the top and bottom lines declined on a year-over-year basis.
Aaron's delivered adjusted earnings of 39 cents per share, outpacing the Zacks Consensus Estimate of 18 cents. However, the bottom line declined 50.6% year over year from 79 cents per share reported in the prior-year quarter. On a GAAP basis, AAN reported earnings of 21 cents per share versus a loss of 17 cents in the year-ago quarter.
Quarter in Detail
Consolidated revenues declined 13.1% to $530.4 million, owing to weak lease revenues & fees and drab retail sales at both Aaron's and BrandsMart businesses. The figure came below the Zacks Consensus Estimate of $541 million.
Breaking up the components of consolidated revenues, we note that lease revenues and fees dropped 8.5% year over year to $353.8 million and retail sales decreased to $148 million from $190.8 million. Non-retail sales, which mainly include merchandise sales to franchisees, declined 15.6% year over year to $22.8 million, while franchise royalties and other revenues in the quarter decreased 3.3% to $5.8 million from the year-ago quarter.
In Aaron’s business segment, revenues declined 9.6% year over year to $388.9 million due to lower lease portfolio size and lease renewal rate coupled with fewer exercises of early purchase options and weak retail sales. In the quarter, we had expected sales of $376.2 million from Aaron’s business segment. E-commerce revenues rose 5.5% year over year and represented 17.9% of lease revenues.
For the BrandsMart segment, revenues were $143.8 million in the second quarter of 2023. Our estimate for sales from the BrandsMart segment was $157.5 million in the quarter. Its e-commerce product sales were 8.1% of total product sales.
The Aaron's Company, Inc. Price, Consensus and EPS Surprise
The Aaron's Company, Inc. price-consensus-eps-surprise-chart | The Aaron's Company, Inc. Quote
Margins
Aaron’s gross profit declined 3.7% to $282.3 million and the gross margin expanded 520 basis points (bps) to 53.2%. The operating profit came in at $11.3 million compared with the prior-year quarter’s operating loss of $9.5 million.
Adjusted EBITDA declined 17% year over year to $42.4 million, due to lower lease revenues & fees at the Aaron's business and weak retail sales at BrandsMart, partly offset by reduced personnel costs and lower write-offs at Aaron's business. The adjusted EBITDA margin also contracted 40 bps to 8% compared with our estimate of 6.8%.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $38.4 million, debt of $186.1 million and shareholders’ equity of $710.6 million. In the quarter, the company provided $53.4 million in cash from operating activities.
At the end of the second quarter, the company generated an adjusted free cash flow of $36 million. Capital expenditure was $21.4 million in the reported quarter. For 2023, capital expenditures are expected in the band of $85-$100 compared with $90-$105 million guided earlier. For 2023, AAN expects adjusted free cash flow in the range of $85-$95 million, higher than its earlier projection of $75-$85 million.
The company declared dividends worth $3.9 million in the quarter under review.
Outlook
For full-year 2023, the company anticipates revenues in the band of $2.12-$2.22 billion versus $2.15-$2.25 billion predicted earlier. Adjusted EBITDA (excluding stock-based compensation) is still projected in the range of $140-$160 million. It continues to envision adjusted earnings per share (EPS) of $1.00-$1.40 for the full year. Earnings per share are expected in the range of 55-80 cents compared with the earlier forecast of 70-95 cents.
For the Aaron’s business, revenues are still expected in the range of $1.50-$1.57 billion. Adjusted EBITDA is likely to be in the band of $170-$185 million.
For BrandsMart, revenues are now anticipated in the range of $615-$645 million, lower than $645-$675 million expected previously. Adjusted EBITDA is forecast in the range of $12.5-$17.5 million.
Shares of this Zacks Rank #4 (Sell) company have gained 29.2% in the past three months against the industry’s 0.1% decline.
Three Solid Picks
Here we have highlighted three top-ranked stocks, namely, Ralph Lauren Corporation (RL - Free Report) , Skechers U.S.A., Inc. (SKX - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ralph Lauren, a footwear and accessories dealer, has a trailing four-quarter earnings surprise of 17.4%, on average. The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.
Skechers designs, develops, markets and distributes footwear for men, women and children. It has a trailing four-quarter earnings surprise of 39.1%, on average. The Zacks Consensus Estimate for SKX’s current financial-year sales and EPS suggests growth of 8.8% and 34.9%, respectively, from the year-ago reported numbers.
Deckers Outdoor, a footwear dealer, has a trailing four-quarter earnings surprise of 13.6%, on average. The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and EPS suggests growth of 9.1% and 14.2%, respectively, from the year-ago corresponding figures.