After severe criticism from shareholders regarding the board's
action over the last few months, the board of directors of
) has unanimously voted for making amendments in the company's
regulations to declassify the board. The board will ask for
approval from its shareholders at the company's Annual Meeting on
Under the declassified format, shareholders get an opportunity
to change all board members on an annual basis. Therefore, board
members work efficiently toward making shareholder friendly
On the other hand, board members are categorized under several
classes in the classified board structure, and only one class
participates in the proxy voting every year. Therefore, it is
difficult to make significant changes in management under the
classified board format.
Aaron's has been witnessing soft top-line and bottom-line
performances for the last several quarters. Various shareholders
including the second largest shareholder of the rent-to-own
retailer, Vintage Capital Management LLC and Starboard Value LP
have blamed the ill-advised strategies of current management for
the downfall of Aaron's.
On Mar 7, 2014, Vintage Capital sent notice to Aaron's
intimating it of the nomination of five candidates, while Starboard
sent a notice regarding nomination of four candidates to the
company's board at the Annual General Meeting. However, last week
Starboard withdrew the names of its nominated candidates and has
opted to support Vintage Capital's nominations. Further, Vintage
Capital in a letter delivered on Apr 29 to Aaron's Chairman, Ray
Robinson, proposed to go for a shareholder approval regarding the
declassification of board in the 2014 Annual General Meeting.
We believe that the boards' recent move may lead to changes in
leadership which may reinstate Aaron's former stature.
The board's recent move is well appreciated by the investors as
was reflected in the company's share price that touched a new
52-week high of $33.85 during yesterday's trading session. The
stock closed trade at $33.30, up 3.5% from the previous day's
closing price. Further, this inspired Zacks Investment Research to
promote Aaron's to a Zacks Rank #1 (Strong Buy) on May 13.
The company has been witnessing rising earnings estimates since
it released its first-quarter 2014 earnings results on Apr 25,
2014, wherein its earnings of 53 cents per share came within its
own guidance range. Moreover, an upbeat guidance for 2014 further
boosts analyst confidence. The quarterly earnings came in line with
the Zacks Consensus Estimate.
Other Stocks Worth Considering
Some better-performing stocks in the wholesale retail sector
Best Buy Co., Inc.
American Apparel, Inc.
Foot Locker, Inc.
). All of these stocks carry a Zacks Rank #2 (Buy).
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