Aaron's Inc. (NYSE:AAN - News) registered an earnings per share growth of 36.7% in the second quarter of 2011, climbing to 41 cents a share from the year-ago earnings of 30 cents. Earnings in the relevant quarter however came in line with the Zacks Consensus Estimate.
Aaron’s top line jumped 9.0% to $484.4 million from $446.3 million in the year-ago quarter. The company posted positive comparable-store sales of 5.0% in the quarter under review. Total revenue was also at par with the Zacks Consensus Estimate.
Aaron's Sales & Lease Ownership division’s revenue increased to $479.9 million thereby contributing 9.0% to total top-line growth. Aaron's Office Furniture stores reported revenue of $0.8 million. The company is left with just one Office Furniture store to liquidate.
Consolidated lease revenues and fees jumped 8.0% and franchise royalties and fees increased 7.0% for the second quarter of fiscal 2011. Non-retail sales, which are primarily sales of lease merchandise to Aaron's Sales & Lease Ownership franchisees, surged 15.0% to $84.6 million for the quarter from $73.6 million in the comparable period in 2010.
Cash and cash equivalents, in the reported quarter, came in at $176.4 million and total shareholder equity was $1,001.1 million.
In the quarter under review, Aaron's Sales & Lease Ownership division opened 17 new company-operated stores, 12 new franchised stores, 10 HomeSmart stores, and 1 RIMCO store, thereby bringing the total to 1,143 company-operated stores, 681 franchised stores, 15 HomeSmart stores, 12 company-operated RIMCO stores, and six franchised RIMCO stores.
The company expects to report total revenue of $480 million and earnings per share of 35 cents to 39 cents in the third quarter of fiscal 2011. For fiscal 2011, the company sees total revenue of $2.0 billion and expects to earn in the range of $1.73 to $1.81 per share.
Management targets new store growth for both the company-operated and franchised stores to be 5% to 9% for 2011.
Aaron is a rent-to-own operator in the United States and has a low price provider strategy. The company is involved in the rental and specialty retailing of consumer electronics, residential and office furniture, household appliances, and accessories.
Aaron’s shares maintain a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. Our long-term recommendation on the stock remains ‘Neutral’.
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