Aaron's (AAN) Reports Q2 Loss, Lower Revenues at Both Segments

Core Viewpoint - The Aaron's Company, Inc. reported a loss per share and revenues that fell short of the Zacks Consensus Estimate for Q2 2024, with both metrics declining year over year [1] Revenue Performance - Consolidated revenues decreased by 5.1% year over year to $503.1 million, missing the Zacks Consensus Estimate of $510 million [1] - Lease revenues and fees dropped 5.1% to $335.7 million, while retail sales fell 5.7% to $139.5 million [2] - Non-retail sales declined by 3.1% to $22.1 million, but franchise royalties and other revenues increased by 1.7% to $5.9 million [2] - E-commerce recurring revenues grew significantly by 79.4% due to new omnichannel lease decisions and customer acquisition programs [2] Segment Analysis - In the Aaron's business segment, revenues fell by 5% year over year to $369.4 million, attributed to a 2% decrease in lease portfolio size and a 140 basis points drop in lease renewal rate to 86.8% [3] - The BrandsMart segment saw revenues decrease by 5.8% to $135.4 million, primarily due to a 7.3% decline in comparable sales linked to reduced customer traffic [3] Profitability Metrics - Gross profit declined by 3.6% year over year to $272 million, while gross margin improved by 90 basis points to 54.1% [4] - The company reported an operating loss of $12.3 million compared to an operating profit of $11.3 million in the previous year [4] - Adjusted EBITDA fell by 42.2% year over year to $24.5 million, with the adjusted EBITDA margin decreasing by 310 basis points to 4.9% [4] Financial Position - The company has agreed to be acquired by IQVentures for $10.10 per share, with an enterprise value of approximately $504 million [5] - At the end of Q2, cash and cash equivalents stood at $34.2 million, net debt at $181.6 million, and shareholders' equity at $657.7 million [5] - The company generated a negative adjusted free cash flow of $39.2 million and had capital expenditures of $40.3 million in the first half of 2024 [5] - A regular quarterly cash dividend of 12.5 cents per share has been declared, payable on October 3, 2024 [5] Future Outlook - Due to the pending acquisition by IQVentures, the company has withdrawn its 2024 guidance [6]