Shares of rent-to-own appliance and furniture giant Aaron’s nosedived after the company posted much lower than expected revenues and earnings.
As of mid-afternoon Tuesday, shares of Aaron’s Company stock (NYSE: AAN) were down 18% to less than $9 per share. That followed the release of the company’s fourth quarter earnings late Monday. Even news of a $0.125 per share quarterly dividend failed to appease investors.
Analysts had expected Aaron’s Company to post earnings of $0.03 per share on revenues of $542 million. Instead, the company announced an adjusted loss of 26 cents per share and earnings of $529.5 million.
Aaron’s, based in Atlanta, is the largest rent-to-own chain in the country with roughly 1,300 locations in 47 states and Canada. Its BrandsMart subsidiary is one of the leading appliance retailers in the country.
This was the second consecutive quarter the company has fallen short of investor expectations. In Q3 2023, it reported earnings per share of $0.01, when analysts were looking for $0.07. The stock fell by 21% following that miss.
The disappointing results come just three weeks after analysts at Truist raised the financial institution’s price target on the company from $8 to $12, which turned the heads of some retail investors. The company’s stock is down more than 21% year to date. Over the past year, shares have lost 37% of their value.
For the full year of 2023, Aaron’s also fell far short of expectations. It reported revenue of $2.14 billion, a nearly 5% decrease from the prior year.
The company is now forecasting revenue between $2.055 billion and $2.155 billion for fiscal 2024, another drop that underscores weakness in the rent-to-own market.
Additionally, Aaron’s said it had cut the direct compensation of its top executives. CEO Douglas A. Lindsay will see a 17% pay cut and president Stephen Olsen and CFO C. Kelly Wall will both have their salaries reduced by 8%. Aaron’s plans to shift to performance-based incentives for its executives.
Rent-to-own appliance stores are often favored by people with low incomes who either can’t afford to buy an appliance or piece of furniture outright or don’t have a sufficient credit score to be approved for a payment plan or loan. Installment-plan payments are generally low, but the ultimate cost for whatever the customer is renting-to-own typically is significantly higher than the retail cost.
The appeal, beyond the low payments, is many companies in this industry do not require a credit check, most offer free delivery and set-up, and some offer free repairs for a period of time. Payments are generally made weekly or every other week, depending on the contract. But customers who miss those payments typically see the appliance or furniture taken back—with no compensation for the money they’ve paid to date.
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