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Here's How Aaron's (AAN) Plans to Navigate Soft Demand Trends
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The Aaron's Co., Inc. (AAN - Free Report) is advancing its business through the effective use of e-commerce platforms and the implementation of its GenNext strategy. Alongside these initiatives, the company is focusing on cost-reduction measures aimed at improving efficiency and strategic procurement.
However, AAN faces several challenges. The company is impacted by changing market dynamics, which are expected to continue in the near term. It deals with soft retail sales and stiff competition. Aaron's has been, particularly, witnessing sluggish demand for discretionary products that led to soft top-line performance in third-quarter 2023. Retail sales fell 18% year over year in the quarter.
To grow and expand its market reach, AAN is pursuing a strategy of opening new retail stores across the United States. In the third quarter of 2023, it opened 15 new GenNext stores, including three in entirely new markets. By the end of the quarter, AAN had a total of 245 GenNext stores. This expansion plays a vital role in AAN's strategy.
Trends to Watch
The company's third-quarter earnings outperformed internal forecasts, underpinned by several key factors. Primarily, the Business segment demonstrated remarkable progress, as evidenced by an expanded lease portfolio and a notable decrease in write-offs. Specifically, the rate of lease merchandise write-offs relative to lease revenues and fees fell to 6.1%, a substantial decrease from 7.5% in the previous year’s quarter.
Furthermore, the company is successfully advancing its cost-optimization goals. It is on track to achieve $35-$40 million in savings in the ongoing financial year, underscoring management's dedication to enhancing business efficiency.
Aaron’s has been witnessing strength in its e-commerce platform, driven by flexible payment options, low prices and a wider variety of products. Some other notable efforts include increased investments in digital marketing, 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.
These positive developments collectively reflect the company's strategic focus on enhancing its business model, optimizing costs and expanding its market presence despite the broader economic challenges it faces.
Image Source: Zacks Investment Research
Sluggish Financial Performance
In the third quarter of 2023, Aaron's faced a notable downturn in its financial performance. The company's consolidated revenues declined 11.4% year over year. This downtick was mainly caused by reduced lease revenues and fees, and a fall in retail sales impacting both the Business and BrandsMart segments. Sluggish demand for discretionary products due to the impact of lower income on customers mainly hurt retail sales trends.
AAN expects ongoing demand trends to persist in the fourth quarter of 2023 and in 2024 as well. Consequently, management anticipates 2023 revenues in the range of $2.12-$2.17 billion compared with $2.12-$2.22 billion projected earlier.
Shares of this Zacks Rank #3 (Hold) company have decreased 32.9% in the past six months against the industry’s growth of 10%. The Zacks Consensus Estimate for current fiscal-year sales and earnings indicates a decline of 4.3% and 47.3%, respectively, from the year-ago levels.
The Zacks Consensus Estimate for Pactiv Evergreen’s current fiscal-year earnings suggests growth of 4.2% from the year-ago reported number.
H&R Block (HRB - Free Report) , a leading provider of tax preparation services, holds a Zacks Rank #2 (Buy). H&R Block delivered an average earnings surprise of 4% in the trailing four quarters.
The Zacks Consensus Estimate for H&R Block’s current financial-year sales and earnings indicates growth of around 2.4% and 9.9%, respectively, from the year-ago reported numbers.
American Public Education (APEI - Free Report) is an online and campus-based postsecondary education provider. It currently flaunts a Zacks Rank #1. APEI has a trailing four-quarter earnings surprise of 23.2%, on average.
The Zacks Consensus Estimate for American Public Education’s current fiscal-year earnings implies growth of 43.4%, from the year-ago reported numbers.
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Here's How Aaron's (AAN) Plans to Navigate Soft Demand Trends
The Aaron's Co., Inc. (AAN - Free Report) is advancing its business through the effective use of e-commerce platforms and the implementation of its GenNext strategy. Alongside these initiatives, the company is focusing on cost-reduction measures aimed at improving efficiency and strategic procurement.
However, AAN faces several challenges. The company is impacted by changing market dynamics, which are expected to continue in the near term. It deals with soft retail sales and stiff competition. Aaron's has been, particularly, witnessing sluggish demand for discretionary products that led to soft top-line performance in third-quarter 2023. Retail sales fell 18% year over year in the quarter.
To grow and expand its market reach, AAN is pursuing a strategy of opening new retail stores across the United States. In the third quarter of 2023, it opened 15 new GenNext stores, including three in entirely new markets. By the end of the quarter, AAN had a total of 245 GenNext stores. This expansion plays a vital role in AAN's strategy.
Trends to Watch
The company's third-quarter earnings outperformed internal forecasts, underpinned by several key factors. Primarily, the Business segment demonstrated remarkable progress, as evidenced by an expanded lease portfolio and a notable decrease in write-offs. Specifically, the rate of lease merchandise write-offs relative to lease revenues and fees fell to 6.1%, a substantial decrease from 7.5% in the previous year’s quarter.
Furthermore, the company is successfully advancing its cost-optimization goals. It is on track to achieve $35-$40 million in savings in the ongoing financial year, underscoring management's dedication to enhancing business efficiency.
Aaron’s has been witnessing strength in its e-commerce platform, driven by flexible payment options, low prices and a wider variety of products. Some other notable efforts include increased investments in digital marketing, 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.
These positive developments collectively reflect the company's strategic focus on enhancing its business model, optimizing costs and expanding its market presence despite the broader economic challenges it faces.
Image Source: Zacks Investment Research
Sluggish Financial Performance
In the third quarter of 2023, Aaron's faced a notable downturn in its financial performance. The company's consolidated revenues declined 11.4% year over year. This downtick was mainly caused by reduced lease revenues and fees, and a fall in retail sales impacting both the Business and BrandsMart segments. Sluggish demand for discretionary products due to the impact of lower income on customers mainly hurt retail sales trends.
AAN expects ongoing demand trends to persist in the fourth quarter of 2023 and in 2024 as well. Consequently, management anticipates 2023 revenues in the range of $2.12-$2.17 billion compared with $2.12-$2.22 billion projected earlier.
Shares of this Zacks Rank #3 (Hold) company have decreased 32.9% in the past six months against the industry’s growth of 10%. The Zacks Consensus Estimate for current fiscal-year sales and earnings indicates a decline of 4.3% and 47.3%, respectively, from the year-ago levels.
Key Picks
Pactiv Evergreen (PTVE - Free Report) , a food packaging solutions company, currently sports a Zacks Rank #1 (Strong Buy). PTVE delivered an average earnings surprise of 127.1% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pactiv Evergreen’s current fiscal-year earnings suggests growth of 4.2% from the year-ago reported number.
H&R Block (HRB - Free Report) , a leading provider of tax preparation services, holds a Zacks Rank #2 (Buy). H&R Block delivered an average earnings surprise of 4% in the trailing four quarters.
The Zacks Consensus Estimate for H&R Block’s current financial-year sales and earnings indicates growth of around 2.4% and 9.9%, respectively, from the year-ago reported numbers.
American Public Education (APEI - Free Report) is an online and campus-based postsecondary education provider. It currently flaunts a Zacks Rank #1. APEI has a trailing four-quarter earnings surprise of 23.2%, on average.
The Zacks Consensus Estimate for American Public Education’s current fiscal-year earnings implies growth of 43.4%, from the year-ago reported numbers.