) plunged 9.51% during yesterday's trade, to close at $30.34 per
share after the company lowered its earnings and sales forecast for
the second quarter of fiscal 2014 due to dismal performance of its
The rent-to-own specialty retailer came up with its preliminary
results for the second quarter that reflects strong revenue
performance at the recently acquired Progressive business offset by
disappointing results at its core operations. That being said, the
company forecasts revenue to be nearly $672 million in the second
quarter as against $675 million projected earlier.
Consequently, Aaron's slashed its adjusted earnings per share,
which is now expected to be in the range of 34-37 cents, while its
earlier anticipated adjusted earnings ranged between 43-48 cents
per share. Adjusted earnings results for the quarter excludes the
amortization expenses and transaction costs related to
Progressive's purchase as well as other one-time costs and
expenses. On a GAAP basis, the company projects earnings in the
range of 9-12 cents per share.
While Aaron's core business remains troubled, the company is
encouraged by the better-than-expected second quarter earnings and
revenue results of the recently acquired Progressive business. The
company is working relentlessly to integrate Progressive's business
to realize the attractive e-commerce, customer relationship and
other operational synergies between the two businesses.
Looking forward, the company remains confident of Progressive's
future growth and is on track to revive its core business' results
through the strategic initiatives announced in April.
The company's strategic plans focus on reviving its core business
and bringing the company back to profitability include
concentrating on stimulating same store sales growth, building a
strong online platform, optimizing cost savings to expand margins,
limiting company-operated store growth to 2%-3% per year and
encouraging the expansion of its franchise store base.
Additionally, the company targets debt-to-capitalization ratio of
20% and expects to use excess cash to reward shareholders.
Further, the company's cost reduction initiatives remain focused on
rigorously evaluating its store base, specific cost reductions
across the organization, long-term SG&A cost saving initiatives
and better inventory management and analytics to optimize store
operation. As a part of its store evaluation process, the company
intends to close down 44 underperforming stores in the third
quarter of fiscal 2014 and plans to focus on store rationalization
for the next few years.
Aaron's currently holds a Zacks Rank #3 (Hold). A better-ranked
retail stock in the related industry is
) with a Zacks Rank #2 (Buy). Meanwhile, other stocks performing
well in the retail industry include
Citi Trends Inc.
Christopher & Banks Corp.
), both of which sport a Zacks Rank #1 (Strong Buy).
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