) made a comeback armed with profound support from franchisees
for its Progressive Finance Holdings LLC acquisition as well as
the newly formulated strategic plans. The shares of Aaron's
climbed 2% on the index during yesterday's trade, to close at
$29.84 per share.
The run up of shares during yesterday's trade represents a nearly
50% recovery from the 4% it lost during the previous day's trade
as the company's announcement of scaling back its earnings and
sales forecast overshadowed the news of Progressive's acquisition
and the new growth plan.
Yesterday, the company discussed the significant benefits from
the acquisition of the merchandise lease-to-own company
Progressive Finance with its franchisees. Aaron's believes that
this acquisition will prove transformational for the company,
furnishing it an opportunity to expand into the large and growing
virtual rent-to-own market.
Progressive, which provides web-based lease-to-own financing
programs for retailers, is expected to provide solid investor
returns for Aaron's shareholders, given its exceptional growth
metrics that represent 77% annual revenue growth from $228
million in 2012 to $403 million in 2013.
Further, the company expects the acquisition to be accretive in
the double-digits to cash earnings per share in 2014 and
significantly accretive in 2015. Further, Aaron's will benefit
from Progressive's tie-ups with the largest U.S. retailers,
including Mattress Firm,
Big Lots Inc.
), Art Van Furniture and Sleepy's, which adds about 15,000 new
sources of revenue for Aaron's.
Further, the company highlighted that it is shifting focus on
reviving its core business operations through disciplined growth,
better execution, portfolio optimization, cost cutting and return
of capital. In the process, the company expects to concentrate on
returning to same store sales growth trajectory, build a strong
online platform, optimize cost savings, limit company-operated
store growth to 2%-3% per year and encourage 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.
During the meeting, the company's franchisees applauded Aaron's
by providing complete support for its recently completed
acquisition. The franchisees remarked that the acquisition will
take Aaron's to new heights as it reaps the benefits of
Progressive's proven knowledge and experience in the online
lease-to-own business. The franchisees believe the acquisition
will facilitate strong expansion of Aaron's customer base through
its foray into the online arena.
Aaron's currently holds a Zacks Rank #3 (Hold). Other
better-ranked retail stocks that look promising and are expected
to continue with their upbeat performance include
American Apparel Inc.
Foot Locker Inc.
), both of which sport a Zacks Rank #2 (Buy).
AARONS INC (AAN): Free Stock Analysis Report
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FOOT LOCKER INC (FL): Free Stock Analysis
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