What happened
Aaron's (NYSE: AAN) reported third-quarter results that came in well above expectations and boosted its full-year guidance, boosted by a big acquisition. Investors are excited about the retailer's future, sending shares up as much as 25% on Tuesday morning.
So what
Aaron's historically has been mostly focused on rent-to-own solutions, and investors came into earnings season worried that with the financial health of the subprime customer under pressure it could be a rough report for the retailer. But Aaron's delivered a present surprise, reporting earnings of $0.31 per share on revenue of $593.4 million. Analysts had expected earnings of $0.12 per share on revenue of $560 million.
The company's results were boosted by the acquisition of electronics retailer BrandsMart USA, which contributed EBITDA of $6.6 million and revenue of $183.3 million in the quarter.
"This quarter we delivered solid financial results in what remains a challenging economic environment," CEO Douglas Lindsay said in a statement. "Our ongoing strategic investments in centralized lease decisioning, e-commerce, the GenNext store program, and BrandsMart all contributed to these positive results as we continue to transform our customers' in-store and digital experience."
Now what
After the earnings report, Aaron's narrowed its full-year earnings guidance to between $1.90 and $2.05 per share, down from $1.75 to $2.15. The low point of that guidance is above the pre-earnings analyst consensus estimate of $1.83 per share in earnings. Similarly, Aaron's now expects revenue to come in at between $2.23 billion to $2.27 billion for the year. Analysts had expected $2.23 billion in sales.
It is still a difficult operating environment, as Lindsay notes, and things could turn south from here. But for now, Aaron's appears to be navigating the headwinds well. Investors are breathing a sigh of relief on Tuesday, sending shares higher.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
