Aaron’s Beats Q2 Profit Estimate But Core Comps Lag

For the second quarter ended June 30, Aaron’s, Inc., which leases and sells home furnishings and housewares, posted net earnings of $40.5 million compared with $8.5 million in the prior year period as diluted earnings per share reached 56 cents up from 12 cents. On a non-GAAP basis, net earnings increased to $44.7 million versus $27.2 million for the 2014 quarter, and earnings per share assuming dilution increased to 61 cents compared with 37 cents in the year-prior period.

A Zack’s Investment Research analyst average estimate called for adjusted diluted earnings per share of 46 cents.

Revenues increased 16.1% to $769 million, the company stated. EBITDA was $89.8 million compared with $43 million in the quarter a year ago, the company maintained.

Aaron’s Sales & Lease Ownership division operations decreased 3.9% in the second quarter to $496.7 million compared to the second quarter of 2014. HomeSmart division revenues were down 3.1% to $15.5 million versus the second quarter of 2014.  Comparable store revenues in those combined core operations decreased 4.4%.

Revenues at Aaron’s Progressive operation, acquired in April, 2014, were $255.9 million, and invoice volume per active door grew 28%.

“The second quarter demonstrated our organization’s ability to grow revenues and increase EBITDA at double-digit rates,” said John Robinson, Aaron’s CEO. “Our core business achieved an increase in profit margin due to improved expense and inventory control. We’re disappointed that core revenues were not stronger in the quarter but remain optimistic that recent initiatives will drive better year-over-year comps in the future.”

During the second quarter of 2015, Aaron’s opened four company-operated namesake stores and three franchised locations. It acquired seven Aaron’s stores from franchisees and sold four company-operated namesake stores to franchisees, one of which was merged with an existing franchised location. In the quarter, the company closed 25 of its namesake locations and three franchised Aaron’s Sales & Lease Ownership stores, while completing a six-store swap with a third party and merging the acquired units with existing locations.

The company currently has 1,211 company-operated Aaron’s Sales & Lease Ownership stores, 784 franchised Aaron’s Sales & Lease Ownership stores, 83 company-operated HomeSmart stores, and two franchised HomeSmart stores.