Shares of Aaron’s Company (NYSE: AAN) witnessed a sharp decline of 18%, plummeting to below $9 per share in mid-afternoon trading on Tuesday. The disappointing results were revealed in the company’s fourth-quarter earnings released on Monday, which failed to meet analyst expectations. Even the announcement of a $0.125 per share quarterly dividend failed to offset the concerns of investors.
Analysts had anticipated earnings of $0.03 per share on revenues totaling $542 million. Contrary to expectations, Aaron’s Company reported an adjusted loss of 26 cents per share and earnings of $529.5 million, signaling a significant miss.
Headquartered in Atlanta, Aaron’s is the largest rent-to-own chain in the U.S., boasting approximately 1,300 locations across 47 states and Canada. The company’s BrandsMart subsidiary is a prominent player in the appliance retail sector.
This marks the second consecutive quarter where Aaron’s has fallen short of investor expectations. In Q3 2023, the company reported earnings per share of $0.01, significantly below the anticipated $0.07, resulting in a 21% stock decline.
The lackluster performance follows Truist analysts raising the price target on Aaron’s just three weeks ago, from $8 to $12, capturing the attention of retail investors. Year-to-date, the company’s stock has plummeted over 21%, with shares losing 37% of their value over the past year.
For the full year of 2023, Aaron’s reported revenues of $2.14 billion, reflecting a nearly 5% decline from the previous year. The company’s fiscal outlook for 2024 forecasts revenue in the range of $2.055 billion to $2.155 billion, indicating continued challenges in the rent-to-own market.
In response to the financial challenges, Aaron’s disclosed a reduction in the direct compensation of its top executives. CEO Douglas A. Lindsay will experience a 17% pay cut, while President Stephen Olsen and CFO C. Kelly Wall will see an 8% salary reduction. The company is set to transition to performance-based incentives for its executive team.
Rent-to-own appliance stores cater primarily to individuals with low incomes who may face challenges in outright purchases or credit approvals. While the installment payments are often manageable, the total cost typically far exceeds the retail price, posing a financial burden on customers. The industry’s appeal lies in its no-credit-check policy, free delivery, setup services, and, in some cases, complimentary repairs for a specified period. However, missed payments can result in the repossession of rented items without compensation for prior payments.