From Home Furnishing Business
Aaron’s Profits Jump 21% on Flat Q3 Revenues
Rent-to-own major Aaron’s Inc. (AAN) said third-quarter revenue rose less than 1%, but net income jumped more than 21% as its Progressive Finance subsidiary continued to perform well.
Progressive, which provides rent-to-own transactions in traditional retail stores, saw its revenue jump 16%, and recorded a 28% increase in active doors during the quarter, the company said.
Revenues from its core Aaron’s Sales and Lease Ownership stores fell 9.5%.
Total revenue for the quarter ended Sept. 30 was $769 million, up from $767.7 million in last year’s third quarter. Net income totaled $29.5 million or 40 cents per share. That was up from $24.2 million or 33 cents per share in the same quarter last year.
"Our third quarter results benefited from strong lease portfolio performance at Progressive and disciplined execution in our core business," said John Robinson, Chief Executive Officer. "Progressive is achieving solid revenue growth with consistent profitability. The strong increase in new doors demonstrates our compelling value proposition for customers and retailers."
However, Robinson said the core business “remains challenging.”
“Ongoing efforts to manage costs and control inventory levels helped offset a decline in same store revenues, and we're taking additional steps to rightsize our store base,” he said. “We believe these actions will better position the core business for long-term profitability."
He said the company plans to close 56 Aaron’s stores by the end of October, and an undetermined number of additional stores will be shuttered in 2017. The restructuring expense and store closure initiatives resulted in a pre-tax charge of approximately $4.7 million in the third quarter. The company said it expects to incur an additional pre-tax charge of approximately $13 million in the fourth quarter of 2016 to complete the closure of the 56 stores.
As of Sept. 30, the company had 1,228 company-operated stores and 703 franchised Aaron's Sales & Lease Ownership stores.
Aaron’s also cut its earnings estimates for 2016 to a range of $1.79 to $1.93 per share. That was below a July forecast of $1.92 to $2.12 per share.
The company said it expects same-store revenues at its core Aaron’s stores to decline 3% to 5% for the remainder of the year.
For the nine months ended Sept. 30, revenues increased 2.3% to $2.413 billion. Nine-month net income was $117.7 million or $1.61 per share. That compares with $114 million or $1.56 per share in the first nine months of 2015.