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Why Aaron’s stock is getting hammered today

Yahoo Finance Live’s Brian Sozzi provides his take on why Aaron’s stock is plummeting.

Video Transcript

BRAD SMITH: The Aaron's company topped estimates in its latest quarter. However, not without seeing some disappointing numbers, such as a 6.7% decrease in same store revenues. And guidance for the full year not looking rosy either. That's where we find Sozzi's Take today without those rose-colored glasses. Sozzi.

BRIAN SOZZI: Yeah, this quarter stunk. There's no other way to put it by Aaron's. I mean, I'm not going to bury the lead here. It's just not good. But most importantly, they saw that sales fell 8%. Operating profits were down, I believe, close to 40% in that Aaron's business. The CEO, Doug Lindsay, warning demand and payment activity has progressively gotten worse throughout the quarter, blaming inflation, blaming-- putting that-- noting the pressured consumer spending environment.

There's a couple of factors here at play, I think, that bears this quarter out. One, we're seeing a slowing housing environment. We've seen a slowdown in housing starts, new home creation. Of course, you're renting a lot of these products probably as you went out and perhaps bought a new house. Inflation continues to be a problem, as the CEO mentioned.

Also, inflation amongst the vendors that sell them the inventory. That's a big problem, too. Look, you go to the website, it costs 60, $70, $80 now to rent a big screen TV. That's pretty pricey. And then, last but not least, again, the vendors, the costs they're trying to push through, I don't think Aaron's is able to raise prices enough in this environment.

And my take is very simple here, as it always is. It's gonna be a challenging few quarters for Aaron's, as it gets-- tries to work through some of these challenges it's seeing in this business. And I think consumers are saying right now, as I am saying on that bright yellow couch, there's nothing wrong with your current TV. Use it and use it well. But again, you're seeing Aaron's shares really get hammered here.

JULIE HYMAN: Yeah, you're lying on-- I've seen that couch before, actually.

BRIAN SOZZI: With no shoes, bare feet. So I'm on a couch with bare feet in jeans and a tie.

JULIE HYMAN: But you're inside. That's why your shoes are off.

BRIAN SOZZI: OK.

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