Aaron's Shares Plunge After Q2 Results, FY22 Guidance Cut

  • Aaron's Company Inc AAN reported second-quarter revenue growth of 30.6% year-over-year to $610.4 million, beating the consensus of $607.87 million.
  • Adjusted EPS was $0.79, beating the consensus of $0.62.
  • Same-store revenues decreased 6.7% Y/Y, driven by a lower lease renewal rate, the lower exercise of early purchase options, and reduced retail sales.
  • Gross profit margin fell by 1,500 bps to 48%.
  • The company recorded an operating loss of $(9.46 million), compared to a profit of $44.05 million in 2Q21.
  • Aaron's cash provided by operating activities year-to-date was $57.08 million, compared to $60.16 million a year ago.
  • Adjusted EBITDA declined to $48.1 million (-26.4% Y/Y), and margin declined by 610 bps to 7.9%.
  • The company repurchased 254,216 shares for ~$5.3 million during the quarter. The remaining authorized share repurchase amount was $135.8 million as of June 30, 2022.
  • "In the Aaron's Business, customer demand and payment activity progressively worsened through the quarter as high inflation impacted the lower-income consumer. In response to these challenging market conditions, we are leveraging our centralized lease decisioning and digital servicing platforms to maintain relationships with our customers and strengthen actions to control costs," said Douglas Lindsay, Chief Executive Officer.
  • FY22 Outlook: Aaron expects Total Revenues of $2.19 billion to $2.27 billion (prior $2.32 billion to $2.39 billion), Adjusted EBITDA of $ $150.0 million to $170.0 million (prior $200 million to $215 million).
  • It expects Adjusted EPS of $1.75 to $2.15, (prior $2.65 to $2.90); and Free cash flow of $50 million to $60 million (prior $45 million to $55 million).
  • Price Action: AAN shares are trading lower by 29.03% at $11 during the post-market session on Monday.
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