Aaron's Inc. (AAN) registered an earnings per share growth of 12.5% in the third quarter of fiscal 2011 to 36 cents from 32 cents a year ago, on the back of healthy top-line growth. Earnings in the relevant quarter, however, failed to meet the Zacks Consensus Estimate of 38 cents per share.
Quarterly Details
Aaron’s top line jumped 7.0% to $485.2 million from $452.2 million in the year-ago quarter. The company posted positive comparable-store sales of 5.3% in the quarter under review. Total revenue however marginally missed the Zacks Consensus Estimate of $486.0 million.
Aaron's Sales & Lease Ownership division’s revenue increased to $370.4 million, thereby contributing 8.7% to its top-line growth. Aaron's Office Furniture stores reported revenue of $6.8 million. The company is left with just one Office Furniture store to liquidate.
Consolidated lease revenues and fees jumped 9.0% and franchise royalties and fees surged 9.0% for the third quarter of fiscal 2011. Non-retail sales, which are primarily sales of lease merchandise to Aaron's Sales & Lease Ownership franchisees, increased 2.0% to $86.1 million for the quarter from $84.3 million in the comparable period of 2010.
Financial Position
Cash and cash equivalents, in the reported quarter, came in at $218.9 million and total shareholder equity was $938.4 million.
Store Update
In the quarter under review, Aaron's Sales & Lease Ownership division opened 8 new company-operated stores, 16 new franchised stores, 4 HomeSmart stores, and 1 RIMCO store, thereby bringing the total to 1,135 company-operated stores, 693 franchised stores, 56 HomeSmart stores, 13 company-operated RIMCO stores, and 6 franchised RIMCO stores.
Management Guidance
The company expects to report total revenue of $520.0 million and earnings per share of 41 cents to 45 cents in the fourth quarter of fiscal 2011. For fiscal 2011, the company witnessed total revenue of $2.02 billion and expects to earn in the range of $1.73 to $1.77 per share. Further, the company anticipates earnings in the range of $1.88 to $2.04 per share in fiscal 2012.
Management targets new store growth for both the company-operated and franchised stores to be 6% to 8% for 2011 and 5.0% to 9.0% for fiscal 2012.
Aaron is a rent-to-own operator in the United States and has a low price provider strategy. The company is involved in the rental and specialty retailing of consumer electronics, residential and office furniture, household appliances, and accessories.
The company is in direct competition with Rent-A-Center Inc. (RCII)
Aaron’s shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Our long-term recommendation on the stock remains ‘Neutral’.
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