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Aaron's (AAN) Reports Q2 Loss, Lower Revenues at Both Segments
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The Aaron's Company, Inc. (AAN - Free Report) reported a loss per share with revenues missing the Zacks Consensus Estimate in the second quarter of 2024. Also, both metrics declined year over year.
Aaron's adjusted loss of 7 cents per share missed the Zacks Consensus Estimate of earnings of 3 cents. The company’s bottom line compared unfavorably with adjusted earnings of 39 cents per share in the year-ago quarter.
Consolidated revenues dipped 5.1% to $503.1 million, due to soft lease revenues and fees at Aaron's business, and a dip in retail sales. The figure lagged the Zacks Consensus Estimate of $510 million.
We note that shares of this Zacks Rank #3 (Hold) company have gained 44.9% in the past three months compared with the industry’s 1.5% rise.
More Details
Breaking up the components of consolidated revenues, lease revenues and fees dropped 5.1% year over year to $335.7 million, and retail sales fell 5.7% to $139.5 million. Non-retail sales, which mainly include merchandise sales to franchisees, slipped 3.1% year over year to $22.1 million, while franchise royalties and other revenues inched up 1.7% to $5.9 million from the year-ago quarter. E-commerce recurring revenues written grew 79.4% due to gains from the new omnichannel lease decisions and customer acquisition program.
In the Aaron’s business segment, revenues declined 5% year over year to $369.4 million due to a 2% dip in the lease portfolio size at the end of the quarter and a reduction of 140 basis points (bps) in the lease renewal rate to 86.8%. Same-store lease portfolio size grew 1.6% year over year against a dip of 6.5% in the year-ago quarter. For the second quarter, our model had predicted Aaron’s business unit’s revenues to be $369.1 million, indicating a year-over-year drop of 5.1%.
The Aaron's Company, Inc. Price, Consensus and EPS Surprise
In the BrandsMart segment, revenues decreased 5.8% to $135.4 million, mainly due to a 7.3% dip in comparable sales. The decline in comparable sales was attributed to soft customer traffic. Our estimate for BrandsMart segment’s revenues was $142.2 million, reflecting a year-over-year decline of 1.1%.
Margins
Aaron’s gross profit dipped 3.6% year over year to $272 million while the gross margin expanded 90 bps to 54.1%. In the second quarter, the company reported an operating loss of $12.3 million against the year-ago quarter’s operating profit of $11.3 million. We had expected gross profit of $268.2 million, down 5% year over year.
Adjusted EBITDA declined 42.2% year over year to $24.5 million due to lower adjusted EBITDA at both segments. The adjusted EBITDA margin declined 310 bps to 4.9%. We had estimated adjusted EBITDA of $28 million with an adjusted EBITDA margin of 5.5%.
Financial Position
Aaron’s, which has agreed to be acquired by IQVentures for $10.10 per share in cash, or an enterprise value of around $504 million, ended the quarter with cash and cash equivalents of $34.2 million, net debt of $181.6 million and shareholders’ equity of $657.7 million. In first-half 2024, it used $6.9 million of cash from operating activities.
At the end of the second quarter, the company generated a negative adjusted free cash flow of $39.2 million. Capital expenditure was $40.3 million in the first six months ended Jun 30.
It paid out dividends of $3.8 million in the second quarter. Concurrently, the company’s board has declared a regular quarterly cash dividend of 12.5 cents per share, payable on Oct 3, 2024, to shareholders of record as of Sep 13, 2024.
Due to the pending IQVentures deal, which is likely to be concluded by the year’s end, Aaron’s has withdrawn its 2024 view.
Key Picks
We have highlighted three better-ranked stocks, namely, G-III Apparel Group (GIII - Free Report) , Gildan Activewear (GIL - Free Report) and Royal Caribbean (RCL - Free Report) .
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.2%, on average.
The consensus estimate for Gildan Activewear’s current financial-year earnings per share indicates growth of 14% from the year-ago corresponding figure.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and earnings per share indicates an increase of 17.8% and 67.8%, respectively, from the year-ago reported levels.
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Aaron's (AAN) Reports Q2 Loss, Lower Revenues at Both Segments
The Aaron's Company, Inc. (AAN - Free Report) reported a loss per share with revenues missing the Zacks Consensus Estimate in the second quarter of 2024. Also, both metrics declined year over year.
Aaron's adjusted loss of 7 cents per share missed the Zacks Consensus Estimate of earnings of 3 cents. The company’s bottom line compared unfavorably with adjusted earnings of 39 cents per share in the year-ago quarter.
Consolidated revenues dipped 5.1% to $503.1 million, due to soft lease revenues and fees at Aaron's business, and a dip in retail sales. The figure lagged the Zacks Consensus Estimate of $510 million.
We note that shares of this Zacks Rank #3 (Hold) company have gained 44.9% in the past three months compared with the industry’s 1.5% rise.
More Details
Breaking up the components of consolidated revenues, lease revenues and fees dropped 5.1% year over year to $335.7 million, and retail sales fell 5.7% to $139.5 million. Non-retail sales, which mainly include merchandise sales to franchisees, slipped 3.1% year over year to $22.1 million, while franchise royalties and other revenues inched up 1.7% to $5.9 million from the year-ago quarter. E-commerce recurring revenues written grew 79.4% due to gains from the new omnichannel lease decisions and customer acquisition program.
In the Aaron’s business segment, revenues declined 5% year over year to $369.4 million due to a 2% dip in the lease portfolio size at the end of the quarter and a reduction of 140 basis points (bps) in the lease renewal rate to 86.8%. Same-store lease portfolio size grew 1.6% year over year against a dip of 6.5% in the year-ago quarter. For the second quarter, our model had predicted Aaron’s business unit’s revenues to be $369.1 million, indicating a year-over-year drop of 5.1%.
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
In the BrandsMart segment, revenues decreased 5.8% to $135.4 million, mainly due to a 7.3% dip in comparable sales. The decline in comparable sales was attributed to soft customer traffic. Our estimate for BrandsMart segment’s revenues was $142.2 million, reflecting a year-over-year decline of 1.1%.
Margins
Aaron’s gross profit dipped 3.6% year over year to $272 million while the gross margin expanded 90 bps to 54.1%. In the second quarter, the company reported an operating loss of $12.3 million against the year-ago quarter’s operating profit of $11.3 million. We had expected gross profit of $268.2 million, down 5% year over year.
Adjusted EBITDA declined 42.2% year over year to $24.5 million due to lower adjusted EBITDA at both segments. The adjusted EBITDA margin declined 310 bps to 4.9%. We had estimated adjusted EBITDA of $28 million with an adjusted EBITDA margin of 5.5%.
Financial Position
Aaron’s, which has agreed to be acquired by IQVentures for $10.10 per share in cash, or an enterprise value of around $504 million, ended the quarter with cash and cash equivalents of $34.2 million, net debt of $181.6 million and shareholders’ equity of $657.7 million. In first-half 2024, it used $6.9 million of cash from operating activities.
At the end of the second quarter, the company generated a negative adjusted free cash flow of $39.2 million. Capital expenditure was $40.3 million in the first six months ended Jun 30.
It paid out dividends of $3.8 million in the second quarter. Concurrently, the company’s board has declared a regular quarterly cash dividend of 12.5 cents per share, payable on Oct 3, 2024, to shareholders of record as of Sep 13, 2024.
Due to the pending IQVentures deal, which is likely to be concluded by the year’s end, Aaron’s has withdrawn its 2024 view.
Key Picks
We have highlighted three better-ranked stocks, namely, G-III Apparel Group (GIII - Free Report) , Gildan Activewear (GIL - Free Report) and Royal Caribbean (RCL - Free Report) .
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.2%, on average.
The consensus estimate for Gildan Activewear’s current financial-year earnings per share indicates growth of 14% from the year-ago corresponding figure.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and earnings per share indicates an increase of 17.8% and 67.8%, respectively, from the year-ago reported levels.