Leading rent-to-own operator,
) reported impressive financial results for the fourth quarter of
2012. Driven by robust top-line performance, the company's
quarterly earnings surged 12% to 48 cents per share from the
adjusted earnings of 43 cents posted in the comparable year-ago
quarter. However, quarterly earnings fell short of the Zacks
Consensus Estimate by a couple of cents.
On the back strong comparable-store sales (comps) growth,
Aaron's top line grew 9% to $568.5 million from $522.7 million in
the year-ago quarter. However, total revenue fell short of the
Zacks Consensus Estimate of $573.0 million.
Comps at the company's owned stores increased 4.6% in the
quarter, while stores open for over 2 years witnessed a rise of
3.1%. The improved comps performance came on the back of 7.8%
growth in customer traffic at the company's operated stores.
Moreover, comps at the company's franchise stores registered a
6.5% hike on the back of a 9.6% rise in customer traffic.
During the quarter, the company adopted a unique promotional
strategy to boost its Black Friday sales. The customers were
given an option to buy products immediately and pay after Jan
2013. This strategy resulted in better-than-expected deferral
revenue for 2013. However, the company did not record these
deferral revenues, but recognized all the expenses related to
this promotional activity in fourth quarter.
Aaron's Sales & Lease Ownership division's revenues was
recorded at $539.8 million, up 8% from the fourth quarter of
2011. The company's HomeSmart division reported revenues of $14.8
million, increasing $5.9 million from the year-ago quarter.
The company's self-operated stores ended the 2012 with
1,134,000 customers, while its franchisee customer count came in
at 604,000. Customer count increased 11.0% compared with the same
period last year.
Brief Discussion on 2012
For 2012, Aaron's adjusted earnings reached $2.04 per share,
which was 16.6% higher from the adjusted earnings of $1.75
reported in 2011. However, it missed the Zacks Consensus Estimate
of $2.07 per share. Including one-time items, the company
reported an increase of 57.3% with earnings per share reaching
$2.25 compared with $1.43 reported in 2011.
Total revenue increased 10% to $2,222.6 million from $2,022.3
million in 2011. However, it came below the Zacks Consensus
Estimate of $2,229.0 million.
Cash and investments at Aaron's as of Dec 31, 2012 were $215.4
million and total shareholders' equity was $1,136.1 million.
During 2012, the company generated nearly $60.0 million of cash
flow from operating activities.
During 2012, Aaron's repurchased 1,236,689 shares of common
stock and still has 4,044,655 shares remaining under its current
In the fourth quarter, Aaron's opened 37 new company-operated
Sales & Lease Ownership stores as well as 26 new franchised
stores and 2 RIMCO stores. The company also acquired 2 stores
from its franchisees and 5 stores from third-party operators.
Moreover, during the quarter, the company sold one
company-operated store to franchise and closed 1 company-operated
Sales & Lease Ownership store. Further, Aaron's opened and
closed 1 each self-operated HomeSmart store.
As of Dec 31, 2012, Aaron's has a total of 1,227
company-operated Sales & Lease Ownership stores, 742
franchised Sales & Lease Ownership stores, 78 HomeSmart
stores, 1 franchised HomeSmart store, 19 company-operated RIMCO
stores, and 6 franchised RIMCO stores. At the end of the year,
the number of stores opened stood at 2,073.
Aaron's expects to report total revenue of about $630.0
million in the first quarter of 2013, representing an increase of
approximately 7.3% from the prior-year quarter. Earnings per
share are anticipated to be between 70 cents and 74 cents, up
9%-16% year-over-year. Currently, the Zacks Consensus Estimate
stands at 71 cents per share, which could witness a revision in
coming days following the company's guidance.
For full year 2013, the company expects total revenue of
approximately $2.4 billion and earnings per share in the range of
$2.25-$2.41. Currently, the Zacks Consensus Estimate stands at
$2.33 per share, which could witness a revision in coming days
following the company's guidance.
In 2013, management targets new store growth of about 4%-6%
over 2012, with equal numbers of company-operated and franchised
stores and a small rise in number of HomeSmart stores. Going
forward, the company will also remain focused on its strategy of
acquiring franchised stores or selling underperforming
Currently, Aaron's holds a Zacks Rank #2 (Buy). Aaron's
leverages an extensive network of stores to effectively penetrate
into its target markets, which in turn, facilitates the company
to generate healthy sales and gain a competitive advantage over
) and Advance America.
Other stocks in the retail consumer electronic universe worth
GOME Electrical Appliances Holding Limited
), both carrying a Zacks Rank #2 (Buy).
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