Based on lower-than-expected revenue and customer growth as well as expectations of an additional regulatory proceedings charge, Aaron’s Inc. (AAN) lowered its revenue and earnings guidance for the third quarter of fiscal 2013.
The leading rent-to-own operator reduced its revenue expectation to $540 million from $550 million projected earlier. The revision was primarily due to the prevalent sluggish economic environment, which limited consumers’ spending. The company’s comparable sales and customer growth remained flat year over year. Moreover, shipments of franchised products declined from the year-ago comparable quarter.
In order to reinstate itself on the growth trajectory, Aaron’s has already launched the promotion of various new products and hopes to enhance it further in the coming quarters. Moreover, the company expects the HomeSmart business to contribute significantly to revenues in fiscal 2014 and in the future, given its store expansion programs for the segment.
Furthermore, Aaron’s projects an additional charge of about $13 million in the third quarter relating to a pending regulatory investigation by the California Attorney General.
Considering the above-mentioned factors, along with an accrued regulatory charge, Aaron’s lowered its earnings guidance range for the third quarter to 25–29 cents per share from 48–52 cents forecasted earlier.
Excluding the effect of regulatory charge, Aaron’s anticipates earnings per share to be 37–41 cents, up from the prior range of 48–52 cents. Currently, the Zacks Consensus Estimate is 49 cents per share, which could witness a revision in the future following the company’s guidance.
Concurrently, Aaron’s announced that its board of directors has authorized an additional share repurchase program of $11 million, bringing the company’s total authorization to $15 million. The company has not repurchased shares since the beginning of 2013, but now intends to do so at the earliest. Aaron’s ended Sep 2013 with $300 million of cash in hand and $100 million in investments.
Currently, Aaron’s carries a Zacks Rank #4 (Sell). Other well-performing stocks among consumer electronics retailers include Best Buy Co., Inc. (BBY), Conns Inc. (CONN) and hhgregg Inc. (HGG). All of these carry Zacks Rank #2 (Buy).