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Here's Why Aaron's (AAN) Stock is Up 36.8% in Past 3 Months

The Aaron's Company, Inc. AAN looks good on the back of its business strategic initiatives. The company has been seeing strength in its e-commerce platform, buoyed by flexible payment options, low prices and a wider variety of products. It remains on track with its market optimization strategy, including the GenNext stores and hub. The GenNext stores contributed more than 33% of  lease revenues and retail sales at the end of the last reported quarter.

We note that shares of this major omnichannel provider of lease-to-own and purchase solutions have gained 36.8% in the past three months compared with the industry’s 5.5% growth. A VGM Score of B further demonstrates strength for this Zacks Rank #3 (Hold) company.

On Jun 17, 2024, Aaron’s signed a deal with IQVentures Holdings, LLC, a well-known fintech organization, to be acquired by the latter. The companies expect to close the transaction by the end of 2024, after receiving unanimous consent from Aaron’s board and satisfying other closing conditions. Per the deal, AAN will sell its shares to IQVentures for $10.10 per share in cash, summing up to a total enterprise value of $504 million. After the completion of the sale transaction, AAN will continue to operate under its current brand name and retain its headquarters in Atlanta, GA. Post the sale, Aaron’s will be a privately-held company and cease to trade on the NYSE. (Read More: Aaron's Agrees to be Acquired by IQVentures, Shares Rise)

Let's Delve Deeper

Within Aaron’s business, the company continues to expand its e-commerce business, driven by its omnichannel lease decisioning and customer acquisition program that was launched in fourth-quarter 2023. This permits customers to shop across its channels by submitting a lease application, thus providing leasing power to all Aaron's customers.

This program has been driving significantly higher conversion rates of lease applications, benefiting from growth in major product categories of appliances, furniture and consumer electronics, which resulted in improved lease portfolio size in the first quarter.

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Zacks Investment Research

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Regarding e-commerce efforts, notable efforts include increased investments in digital marketing, improved shopping experience, same-day and next-day delivery facilities, personalization of products and a broader assortment, including the latest product categories. The express delivery program also bodes well.

Driven by these efforts, revenues generated from leases initiated on improved 20.8% year over year in the first quarter and represented 24% of lease revenues for the Aaron’s business. Recurring revenues written into the portfolio from e-commerce improved 94.1% year over year, gaining from new omnichannel lease decisioning and customer acquisition program. This represented 34% of the total recurring revenues written in the quarter.

Within the BrandsMart business, the company continues to invest in its e-commerce shopping experience and digital marketing strategies to attract new customers. Aaron’s market optimization strategy has been delivering significant financial performance by improving in-store customer experience and enhancing the operating model. The company has been experiencing a sturdy performance in GenNext stores for a while now. It introduced 11 GenNext stores, including three in new markets, in the first quarter. This resulted in the opening of 265 company-operated GenNext stores since the launch of the program.

However, Aaron’s has been witnessing sluggish demand for its discretionary products across the industry. In addition, elevated operating costs, related to increased investments in advertising and higher provision for lease merchandise write-offs, have been weighing on its profitability. Nonetheless, the company has been making efforts to boost overall growth.

Key Picks

Some better-ranked companies are G-III Apparel Group GIII, Royal Caribbean RCL and lululemon athletica LULU.

G-III Apparel Group sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 sales indicates an increase of 3.3% from the year-ago period’s reported level.

Royal Caribbean sports a Zacks Rank of 1, at present. RCL has a trailing four-quarter earnings surprise of 18.3%, on average.

The consensus estimate for RCL’s 2024 sales and earnings per share (EPS) indicates increases of 16.8% and 63.8%, respectively, from the year-ago period’s reported levels.

lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank # 2 (Buy), at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS indicates growth of 11.5% and 11.8%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 7.4%, on average.

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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report

The Aaron's Company, Inc. (AAN) : Free Stock Analysis Report

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G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report

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