Aaron's (AAN) Up 11.4% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Aaron's Company, Inc. reported a wider-than-expected loss in Q1 2024, with revenues declining year over year, leading to concerns about future performance and estimates revisions [2][9]. Financial Performance - The company reported an adjusted loss of 15 cents per share, worse than the expected loss of 8 cents, and a significant decline from adjusted earnings of 66 cents per share in the same quarter last year [2][3]. - Consolidated revenues fell by 7.7% to $511.5 million, missing the Zacks Consensus Estimate of $517 million, primarily due to weak lease revenues and retail sales [2][3]. - Lease revenues and fees decreased by 7.4% year over year to $346 million, while retail sales dropped by 9% to $136.9 million [3][4]. Segment Analysis - In the Aaron's business segment, revenues declined 7.5% year over year to $381.1 million, attributed to a 4.8% decrease in lease portfolio size and a drop in lease renewal rates [3][4]. - The BrandsMart segment saw revenues decrease by 8.1% to $132.5 million, driven by a 9.4% decline in comparable sales due to weak customer traffic [4][5]. Margins and Operating Performance - Gross profit declined by 7.48% year over year to $273.9 million, with a slight expansion in gross margin to 53.5% [6]. - Adjusted EBITDA fell by 50.4% year over year to $22.7 million, with the adjusted EBITDA margin declining by 390 basis points to 4.4% [6]. Financial Position - At the end of Q1 2024, the company had cash and cash equivalents of $41 million, total debt of $212.9 million, and shareholders' equity of $670.5 million [7]. - The company reported a negative adjusted free cash flow of $33.2 million for the quarter, with capital expenditures of $20.9 million [7]. Outlook - For 2024, Aaron's expects revenues between $2.055 billion and $2.155 billion, with adjusted EBITDA projected at $105 million to $125 million [8]. - The company anticipates adjusted earnings between break-even and 25 cents per share, while GAAP losses are expected to be between 25 and 40 cents per share [8]. Estimate Revisions - There has been a downward trend in estimates, with the consensus estimate shifting down by 68.97% in the past month [9][11]. - The stock currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [11]. Investment Scores - Aaron's has an average Growth Score of C and a momentum score of C, but a strong value score of A, placing it in the top 20% for this investment strategy [10].