On Jan 16, 2014, Zacks Investment Research downgraded
), the consumer electronics and household appliances retailer, to
a Zacks Rank #5 (Strong Sell).
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Why the Downgrade?
Estimates for Aaron's have shown a downtrend since the company
lowered its fourth-quarter and full-year 2013 guidance. The
leading rent-to-own operator revealed that the revised guidance
is based on lower-than-expected revenue and customer growth in
the fourth quarter.
The company trimmed its fourth-quarter revenue expectation to
$555 million from $575 million projected earlier. For 2013,
Aaron's now anticipates revenues of $2.24 billion, down from its
earlier guidance of $2.26 billion.
The downward revision was primarily due to the prevalent sluggish
economic environment. The company's comparable sales and customer
growth fell 1% year over year during the fourth quarter.
Moreover, shipments of franchised products declined from the
year-ago comparable quarter.
The company believes that the current business environment will
not dramatically change in the near term. Looking at the current
business scenario, Aaron's now intends to slow down the pace of
opening namesake and HomeSmart stores and expects net new store
growth to remain under 4% in 2013.
Considering the above-mentioned factors, Aaron's lowered its
earnings guidance range for the fourth quarter and 2013. The
company now projects earnings between 27 cents and 31 cents per
share, down from its previous guidance range of 38-42 cents.
The trimmed guidance triggered a downtrend in the Zacks Consensus
Estimates, as analysts became less constructive on the stock's
future performance. This is evident from the movement witnessed
in the Zacks Consensus Estimate that fell 5.6% to $1.86 for 2013
and 12.8% to $1.91 per share for 2014 in the past 7 days. The
current Zacks Consensus Estimate for the quarter is pegged at 29
cents per share that dropped 27.5% in the same time frame.
Other Stocks that Warrant a Look
Other better-ranked retail stocks that look promising and are
expected to continue with their upbeat performance include
Tiffany & Co.
), all of which hold a Zacks Rank #1 (Strong Buy).