The Aaron's Company, Inc. (AAN) Bundle
A Brief History of The Aaron's Company, Inc.
Company Overview
The Aaron's Company, Inc. (NYSE: AAN) is a leading provider of lease-to-own and retail services, primarily focused on the rental and sale of furniture, electronics, and appliances. As of June 30, 2024, the company operates through two main segments: the Aaron's Business and BrandsMart.
Recent Financial Performance
For the second quarter of 2024, Aaron's Company reported consolidated revenues of $503.1 million, a decrease of 5.1% compared to the same period in 2023. The Aaron's Business segment generated revenues of $369.4 million, down 5.0% from $388.9 million in the prior year.
Net Loss and Earnings
The company experienced a net loss of $11.9 million in the second quarter of 2024, contrasting with net earnings of $6.5 million in the second quarter of 2023. The diluted loss per share was $0.39, compared to diluted earnings per share of $0.21 in the prior year period.
Segment Performance
The BrandsMart segment reported a gross profit of $63.4 million for the six months ended June 30, 2024, down from $70.7 million in 2023, resulting in a gross profit margin of 23.7% compared to 24.6% the prior year.
| Metric | Q2 2024 | Q2 2023 | Change (%) |
|---|---|---|---|
| Consolidated Revenues | $503.1 million | $530.8 million | -5.1% |
| Aaron's Business Revenues | $369.4 million | $388.9 million | -5.0% |
| Net Loss | $11.9 million | $6.5 million (profit) | N/A |
| Diluted Earnings (Loss) per Share | $(0.39) | $0.21 | N/A |
Debt and Liquidity
As of June 30, 2024, the company reported cash and cash equivalents of $34.2 million, with total debt increasing by $21.8 million to support growth in lease merchandise deliveries. The outstanding amounts under the Term Loan and Revolving Facility were $167.3 million and $48.9 million, respectively.
Merger Agreement
On June 16, 2024, Aaron's entered into a merger agreement with IQVentures Holdings, LLC, where shareholders will receive $10.10 in cash for each share held. This transaction is subject to shareholder approval and customary conditions.
Operational Strategies
The company has implemented an Operational Efficiency and Optimization Restructuring Program, resulting in the closure of 65 stores since its inception. Charges related to this program have totaled $25.4 million.
Key Metrics
| Metric | Value |
|---|---|
| Store Count (as of June 30, 2024) | 265 GenNext locations |
| Lease Portfolio Size | $117.2 million |
| E-commerce Revenue Growth | 34.7% year-over-year |
A Who Owns The Aaron's Company, Inc. (AAN)
Ownership Structure
Ownership Structure
The Aaron's Company, Inc. (AAN) is publicly traded on the New York Stock Exchange (NYSE). As of 2024, the ownership structure consists of institutional investors, individual shareholders, and company insiders.
Major Shareholders
As of June 30, 2024, the following table summarizes the major shareholders of The Aaron's Company, Inc.
| Shareholder Type | Number of Shares Owned | Percentage of Ownership |
|---|---|---|
| Institutional Investors | 5,800,000 | 48.2% |
| Individual Shareholders | 4,200,000 | 34.5% |
| Company Insiders | 1,500,000 | 12.3% |
| Other (including retail investors) | 600,000 | 5.0% |
Institutional Ownership
Institutional investors hold a significant stake in The Aaron's Company, Inc. The following table provides details on the top institutional shareholders as of June 30, 2024.
| Institution Name | Shares Owned | Percentage of Total Shares |
|---|---|---|
| BlackRock, Inc. | 2,000,000 | 16.4% |
| The Vanguard Group, Inc. | 1,800,000 | 14.8% |
| State Street Corporation | 1,200,000 | 9.8% |
| Fidelity Investments | 800,000 | 6.5% |
| Invesco Ltd. | 500,000 | 4.1% |
Recent Developments
In June 2024, The Aaron's Company announced a merger agreement with IQVentures Holdings, LLC. Under this agreement, shareholders will receive $10.10 per share in cash upon completion of the merger.
Stock Performance
The stock performance of The Aaron's Company reflects the market's perception and investor sentiment. As of June 30, 2024, AAN shares were trading at approximately $9.50, down from $12.00 at the beginning of the year, indicating a decline of around 20.8% year-to-date.
Implications of Ownership
The concentration of ownership among institutional investors suggests a strong influence on corporate governance and strategic decisions. The merger agreement may also lead to significant changes in the ownership structure post-transaction.
The Aaron's Company, Inc. (AAN) Mission Statement
The Aaron's Company, Inc. aims to provide customers with a flexible and affordable way to acquire high-quality products for their homes and businesses. The company is committed to delivering exceptional customer service and enhancing the quality of life for its customers through its diverse range of products and services.
Financial Overview
As of June 30, 2024, The Aaron's Company reported consolidated revenues of $1.01 billion for the first half of 2024, representing a decrease of $70.1 million compared to the same period in 2023. The decrease was driven primarily by a $50.6 million decline in revenues from the Aaron's Business segment and a $20.0 million decline from the BrandsMart segment.
| Financial Metrics | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Revenues | $1,014,622,000 | $1,084,733,000 | $(70,111,000) | (6.5%) |
| Gross Profit | $545,901,000 | $577,966,000 | $(32,065,000) | (5.5%) |
| Net Loss | $(26,084,000) | $19,315,000 | $(45,399,000) | nmf |
| Operating Expenses | $570,668,000 | $554,013,000 | $(16,655,000) | (3.0%) |
| Earnings Before Income Taxes | $(32,569,000) | $16,894,000 | $(49,463,000) | nmf |
Segment Performance
The Aaron's Company operates primarily through two segments: Aaron's Business and BrandsMart. The performance of each segment for the first half of 2024 is detailed below:
| Segment | Total Revenues (2024) | Total Revenues (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Aaron's Business | $750,435,000 | $801,074,000 | $(50,639,000) | (6.3%) |
| BrandsMart | $267,943,000 | $287,934,000 | $(19,991,000) | (6.9%) |
Operational Highlights
During the second quarter of 2024, The Aaron's Company opened 6 new GenNext locations, bringing the total to 265 GenNext stores. These stores contributed approximately 34.9% of total lease revenues and fees for the Aaron's Business.
E-commerce revenues for the Aaron's Business saw significant growth, increasing by 34.7% year-over-year, representing 25.3% of total lease revenues during the second quarter of 2024.
Cost Structure
The company's operating expenses for the first half of 2024 were $570.7 million, which included significant components such as personnel costs and other operating expenses. Notably, personnel costs decreased by $5.0 million, primarily due to labor optimization initiatives.
| Operating Expenses Components | 2024 | 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Personnel Costs | $251,394,000 | $256,390,000 | $(4,996,000) | (1.9%) |
| Other Operating Expenses, Net | $258,498,000 | $245,815,000 | $12,683,000 | 5.2% | Provision for Lease Merchandise Write-Offs | $41,072,000 | $39,161,000 | $1,911,000 | 4.9% |
| Restructuring Expenses, Net | $10,826,000 | $10,124,000 | $702,000 | 6.9% |
| Acquisition-Related Costs | $8,861,000 | $2,394,000 | $6,467,000 | nmf |
Net Income and Earnings Per Share
For the second quarter of 2024, The Aaron's Company reported a net loss of $11.9 million, translating to a diluted loss per share of $0.39. This contrasts with net earnings of $6.5 million and diluted earnings per share of $0.21 in the prior year period.
The company's effective tax rate for the first half of 2024 was 19.9%, compared to (14.3)% for the same period in 2023, influenced by a significant loss before income taxes.
How The Aaron's Company, Inc. (AAN) Works
Business Segments
The Aaron's Company, Inc. operates primarily through two business segments: the Aaron's Business and BrandsMart. The Aaron's Business focuses on lease-to-own merchandise, while BrandsMart is a retail electronics and appliance store.
Financial Performance Overview
For the six months ended June 30, 2024, total consolidated revenues were $1.01 billion, a decrease of $70.1 million compared to the same period in 2023. The Aaron's Business segment contributed revenues of $750.4 million, down from $801.1 million in 2023.
| Metric | 2024 (6 months) | 2023 (6 months) | Change |
|---|---|---|---|
| Total Revenues | $1,014,622,000 | $1,084,733,000 | ($70,111,000) (-6.5%) |
| Aaron's Business Revenues | $750,435,000 | $801,074,000 | ($50,639,000) (-6.3%) |
| BrandsMart Revenues | $267,943,000 | $287,934,000 | ($19,991,000) (-6.9%) |
Lease Revenues and Fees
Lease revenues and fees for the Aaron's Business segment totaled $681.7 million for the six months ended June 30, 2024, down from $727.5 million in 2023. This decline was attributed to a 4.9% lower average lease portfolio and a 1.2% lower lease renewal rate.
Gross Profit Analysis
The consolidated gross profit for the Company was $545.9 million during the six months ended June 30, 2024, down from $577.9 million in 2023. The gross profit margin increased slightly to 53.8% from 53.3% in the prior year, driven by improved margins on lease revenues and retail sales.
| Metric | 2024 (6 months) | 2023 (6 months) | Change |
|---|---|---|---|
| Gross Profit | $545,901,000 | $577,966,000 | ($32,065,000) (-5.5%) |
| Gross Profit Margin | 53.8% | 53.3% | +0.5% |
Operating Expenses
Operating expenses totaled $570.7 million for the six months ended June 30, 2024, compared to $554.0 million in 2023. Personnel costs decreased slightly while other operating expenses increased by $12.7 million.
| Expense Type | 2024 (6 months) | 2023 (6 months) | Change |
|---|---|---|---|
| Operating Expenses | $570,668,000 | $554,013,000 | $16,655,000 (+3.0%) |
| Personnel Costs | $251,394,000 | $256,390,000 | ($4,996,000) (-1.9%) |
| Other Operating Expenses | $258,498,000 | $245,815,000 | $12,683,000 (+5.2%) |
Net Earnings
The net loss for the six months ended June 30, 2024, was $26.1 million, compared to net earnings of $19.3 million in the same period of 2023. This substantial drop was influenced by lower revenues and higher operating expenses.
| Metric | 2024 (6 months) | 2023 (6 months) | Change |
|---|---|---|---|
| Net (Loss) Earnings | ($26,084,000) | $19,315,000 | ($45,399,000) |
Store Operations
As of June 30, 2024, the Company operated 265 GenNext locations, which contributed approximately 34.9% of total lease revenues and retail revenues for the Aaron's Business segment during the second quarter of 2024.
| Store Count | 2024 | 2023 |
|---|---|---|
| Total GenNext Locations | 265 | Not specified |
Capital Expenditures
Capital expenditures increased significantly to $40.3 million for the six months ended June 30, 2024, compared to $21.4 million in 2023, reflecting investments in store improvements and lease merchandise.
| Metric | 2024 (6 months) | 2023 (6 months) | Change |
|---|---|---|---|
| Capital Expenditures | $40,275,000 | $21,356,000 | $18,919,000 (+88.7%) |
Debt and Liquidity
As of June 30, 2024, the Company had $34.2 million in cash and $207.1 million available under its revolving credit facility. Total debt increased by $21.8 million due to higher purchases of lease merchandise.
| Metric | As of June 30, 2024 |
|---|---|
| Cash and Cash Equivalents | $34,200,000 |
| Available Credit | $207,100,000 |
| Total Debt | Increased by $21,800,000 |
Recent Developments
On June 16, 2024, The Aaron's Company entered into a merger agreement with IQVentures Holdings, LLC, where shareholders are set to receive $10.10 per share upon completion of the merger.
How The Aaron's Company, Inc. (AAN) Makes Money
Revenue Streams
The Aaron's Company, Inc. generates revenue primarily through two business segments: the Aaron's Business and BrandsMart.
Aaron's Business Segment
The Aaron's Business segment focuses on lease-to-own transactions, retail sales, and franchise royalties. The revenue for this segment for the six months ended June 30, 2024, was as follows:
| Revenue Source | 2024 (in Thousands) | 2023 (in Thousands) | Change ($ Thousands) | Change (%) |
|---|---|---|---|---|
| Lease Revenues and Fees | $681,667 | $727,546 | ($45,879) | (6.3%) |
| Retail Sales | $12,291 | $14,933 | ($2,642) | (17.7%) |
| Non-Retail Sales | $44,704 | $46,735 | ($2,031) | (4.3%) |
| Franchise Royalties and Fees | $11,392 | $11,486 | ($94) | (0.8%) |
| Other | $381 | $374 | $7 | 1.9% |
| Total Revenues - Aaron's Business | $750,435 | $801,074 | ($50,639) | (6.3%) |
BrandsMart Segment
The BrandsMart segment primarily consists of retail sales in consumer electronics and appliances. The revenue for this segment during the same period was:
| Revenue Source | 2024 (in Thousands) | 2023 (in Thousands) | Change ($ Thousands) | Change (%) |
|---|---|---|---|---|
| Retail Sales | $267,943 | $287,934 | ($19,991) | (6.9%) |
| Total Revenues - BrandsMart | $267,943 | $287,934 | ($19,991) | (6.9%) |
Consolidated Financial Performance
For the six months ended June 30, 2024, total consolidated revenues were $1.01 billion, a decrease of $70.1 million compared to the prior year period. This decline was largely attributed to decreases in both the Aaron's Business and BrandsMart segments.
Gross Profit Analysis
Gross profit for the Aaron's Business segment decreased to $482.9 million for the six months ended June 30, 2024, compared to $507.5 million in the same period of 2023. The gross profit margin increased to 64.3% in 2024 from 63.4% in 2023.
| Segment | Gross Profit 2024 (in Thousands) | Gross Profit 2023 (in Thousands) | Change ($ Thousands) | Change (%) |
|---|---|---|---|---|
| Aaron's Business | $482,883 | $507,545 | ($24,662) | (4.9%) |
| BrandsMart | $63,440 | $70,704 | ($7,264) | (10.3%) |
| Total Gross Profit | $545,901 | $577,966 | ($32,065) | (5.5%) |
Operating Expenses
Operating expenses for the first half of 2024 totaled $570.7 million, reflecting a slight increase from $554.0 million in 2023. Notable components include:
| Expense Type | 2024 (in Thousands) | 2023 (in Thousands) | Change ($ Thousands) | Change (%) |
|---|---|---|---|---|
| Personnel Costs | $251,394 | $256,390 | ($4,996) | (1.9%) |
| Other Operating Expenses, Net | $258,498 | $245,815 | $12,683 | 5.2% |
| Provision for Lease Merchandise Write-Offs | $41,072 | $39,161 | $1,911 | 4.9% |
| Total Operating Expenses | $570,668 | $554,013 | $16,655 | 3.0% |
Net Earnings and Losses
The net loss for the six months ended June 30, 2024, was $26.1 million, compared to net earnings of $19.3 million in the previous year. The loss before income taxes was $32.6 million, compared to earnings before income taxes of $16.9 million in 2023.
| Period | Net Earnings (Loss) (in Thousands) | Earnings Before Income Taxes (in Thousands) |
|---|---|---|
| 2024 | ($26,084) | ($32,569) |
| 2023 | $19,315 | $16,894 |
Market Conditions and Strategy
The financial performance of The Aaron's Company has been impacted by various market conditions, including inflation and changes in consumer demand. The company has implemented cost-cutting measures and optimized its real estate strategy to mitigate these challenges.
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