News

The Aaron's Company, Inc. AAN reported wider loss per share during fourth-quarter 2023. Also, the top line missed the Zacks Consensus Estimate and declined on a year-over-year basis.

Aaron's delivered adjusted loss of 26 cents per share against the consensus estimate of earnings of 3 cents per share. However, the company reported earnings of 9 cents per share in the year-ago quarter.

Quarter in Detail

Consolidated revenues declined 10.2% to $529.5 million, owing to weak lease revenues and fees at the Aaron's Business, and drab retail sales and BrandsMart businesses. The figure lagged the Zacks Consensus Estimate of $543 million.

Breaking up the components of consolidated revenues, we note that lease revenues and fees dropped 8.3% year over year to $331.2 million and retail sales decreased 14% to $166.4 million from $193.4 million. Non-retail sales, which mainly include merchandise sales to franchisees, declined 9.3% year over year to $26.4 million, while franchise royalties and other revenues in the quarter decreased 6.8% to $5.5 million from the year-ago quarter.

The Aaron's Company, Inc. Price and Consensus

In the Aaron’s business segment, revenues declined 8.7% year over year to $369.2 million due to weak lease portfolio size, coupled with a lower lease renewal rate and lower lease renewal rate. In the quarter, we had expected sales of $358.8 million from Aaron’s business segment. E-commerce revenues rose 10.4% year over year and represented 20.6% of lease revenues.

For the BrandsMart segment, revenues decreased 12.6% to $164 million in the fourth quarter of 2023. Our estimate for sales from the BrandsMart segment was $185.2 million in the quarter. Its e-commerce product sales were 9.8% of the total product sales.

Margins

Aaron’s gross profit declined 5.8% to $269.4 million while the gross margin expanded 130 basis points (bps) to 62.8%. The operating profit was $14.8 million compared with the year-ago quarter’s operating profit of $17 million.

Adjusted EBITDA declined 6.6% year over year to $33.8 million due to lower lease revenues and fees at the Aaron's business, and weak retail sales at BrandsMart, partly offset by reduced personnel costs and lower write-offs at the Aaron's business. The adjusted EBITDA margin increased 20 bps to 9.1% compared with our estimate of 5.9%.

Financial Position

Aaron’s ended the quarter with cash and cash equivalents of $59 million, a debt of $194 million and shareholders’ equity of $686.1 million. In 2023, the company provided $180.4 million in cash from operating activities.

At the end of 2023, the company generated an adjusted free cash flow of $102.3 million. Capital expenditure was $94.4 million during 2023.

For 2024, capital expenditure is expected to be $85-$95 million. For 2023, AAN expects an adjusted free cash flow of $15-$30 million.

The company declared dividends worth $3.8 million in the quarter under review.

Outlook

For 2024, the company anticipates revenues of $2.06-$2.16 billion while adjusted EBITDA is projected to be $105-$125 million. It envisions the bottom line in the range of a loss per share of 10 cents to an earnings per share (EPS) of 25 cents for the full year. Loss on a reported basis is expected to be 5-30 cents a share.

For the Aaron’s business, revenues are expected to be $1.46-$1.52 billion while adjusted EBITDA is likely to be $137.5-$152.5 million for the year.

For BrandsMart, revenues are anticipated to be $610-$650 million, while adjusted EBITDA is forecast at $7-$12 million for 2024.

We note that shares of this Zacks Rank #4 (Sell) company have declined 10.9% in the past three months against the industry’s 16.7% growth.

Eye These Solid Picks

Some top-ranked companies are GIII Apparel GIII, lululemon athletica LULU and Royal Caribbean RCL.

GIII Apparel, an accessories dealer, sports a Zacks Rank #1 (Strong Buy), at present. GIII has a trailing four-quarter earnings surprise of 541.8%, 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 EPS suggests growth of 39.3%, respectively, from the year-ago corresponding figure.

lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank #2 (Buy), at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 18.4% and 23.7%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.

Royal Caribbean caries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 28.3%, on average.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates increases of 13.7% and 38.1%, respectively, from the year-ago period’s reported levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.