The Aaron's Company, Inc. (NASDAQ:AAN) is a leading, technology-enabled, omni-channel provider of lease-to-own and retail purchase solutions for furniture, electronics, appliances, and other home goods. The Aaron's Company operates through two primary segments: the Aaron's Business and BrandsMart.
Business Overview
Aaron's Business Segment
The Aaron's Business segment, which includes the Aaron's branded company-operated and franchise stores, aarons.com e-commerce platform, Woodhaven Furniture Industries, and BrandsMart Leasing, has been a staple in the lease-to-own industry for over 65 years. The segment provides consumers with flexible lease-to-own and retail purchase solutions, focusing on unparalleled customer service, high approval rates, and an attractive value proposition.
BrandsMart Segment
The BrandsMart segment includes the operations of BrandsMart U.S.A., one of the leading appliance and consumer electronics retailers in the southeastern United States. BrandsMart U.S.A. operates 11 stores in Florida and Georgia and has a growing e-commerce presence on brandsmartusa.com.
Financials
In fiscal year 2023, The Aaron's Company generated annual revenue of $2,139,890,000 and net income of $28,230,000. The company's annual operating cash flow was $180,414,000, and its annual free cash flow was $85,999,000.
During the first quarter of 2024, The Aaron's Company reported consolidated revenues of $511,497,000, a decrease of 7.7% compared to the prior year period. The decrease was primarily driven by lower lease revenues and fees at the Aaron's Business segment and lower retail sales at the BrandsMart segment. Net loss for the quarter was $14,181,000, compared to net earnings of $12,798,000 in the prior year period.
Aaron's Business Segment Performance
The Aaron's Business segment reported revenues of $381,055,000 in the first quarter of 2024, a decrease of 7.5% compared to the prior year period. The decrease was primarily due to a lower average lease portfolio size, lower lease renewal rate, fewer exercises of early purchase options, and lower retail sales. Gross profit for the segment was $244,631,000, representing a gross margin of 64.2%.
BrandsMart Segment Performance
The BrandsMart segment reported revenues of $132,523,000 in the first quarter of 2024, a decrease of 8.1% compared to the prior year period. The decrease was primarily due to a 9.4% decrease in comparable sales, driven by weaker customer traffic and customer trade-down to lower-priced products across major categories. Gross profit for the segment was $29,476,000, representing a gross margin of 22.2%.
E-commerce Performance
The Aaron's Company's e-commerce channels continue to be a bright spot, with e-commerce revenues (excluding BrandsMart Leasing) increasing 20.8% in the first quarter of 2024 compared to the prior year period. E-commerce revenues now represent 24.0% of total lease revenues for the Aaron's Business segment, up from 17.9% in the prior year quarter.
Recent Developments
The Aaron's Company's strategic initiatives, including the real estate repositioning and optimization program and the operational efficiency and optimization program, have resulted in the closure or consolidation of 317 company-operated Aaron's stores since inception. These initiatives are expected to continue to drive cost savings and operational efficiencies.
Outlook
Looking ahead, The Aaron's Company is reaffirming its full-year 2024 outlook for revenues and adjusted EBITDA, and has raised its outlook for non-GAAP diluted EPS due to a lower estimated effective tax rate of approximately 38%, 12 percentage points lower than the prior guidance.
Liquidity
The Aaron's Company's balance sheet remains strong, with $41,036,000 in cash and cash equivalents and $212,913,000 in total debt as of March 31, 2024. The company's net debt to adjusted EBITDA ratio was 1.2x at the end of the first quarter.
Conclusion
The Aaron's Company continues to execute on its multi-year strategic plan, focusing on driving efficiencies, innovating its business, and enhancing its distinct competitive advantages to increase market share at both the Aaron's Business and BrandsMart segments. The Aaron's Company's management team and board remain highly engaged and committed to delivering additional value for shareholders.
Overall, The Aaron's Company is navigating a challenging macroeconomic environment, but is making strategic investments and operational improvements to position the business for long-term growth and success. The Aaron's Company's strong brand recognition, technology-enabled platform, and focus on serving the underserved customer base provide a solid foundation for future performance.