Based on lower-than-expected revenue and customer growth as
well as expectations of an additional regulatory proceedings
) 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
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
Best Buy Co., Inc.
). All of these carry Zacks Rank #2 (Buy).
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