Aaron’s Q1 Earnings Slip But Still Beat Wall Street

In the first quarter, Aaron’s felt the effects of the COVID-19 pandemic but still managed to beat a Wall Street earnings estimate.

The company posted a net loss of $280 million, or $4.19 per diluted share, for the quarter, versus earnings of $56.1 million, or 82 cents per diluted share, in the period a year earlier. Adjusted for one-time charges, net earnings were $57.9 million, or 85 cents per diluted share, versus $74.3 million, or $1.08 per diluted share, in the year-prior period.

Aaron’s adjusted diluted earnings per share topped a MarketBeat-published analyst consensus estimate of 77 cents.

Aaron’s total revenues for the quarter were $1.1 billion as compared to $1.01 billion in the year-previous quarter. Operating loss was $408.9 million versus operating profit of $73.9 million in the quarter a year before.

The posted net loss in the quarter included a $446.9 million goodwill impairment charge for the Aaron’s business, $22.3 million in restructuring charges, a $14.7 million charge related primarily to early termination fees for a sales and marketing agreement, and $28.8 million for COVID-related incremental increases in bad debt expense, lease merchandise and current expected credit loss-driven loan loss reserves, all recorded as pre-tax charges. A net tax benefit of $34.2 million partially offset the charges.

John Robinson, Aaron’s CEO, said, “The COVID-19 pandemic has caused unprecedented disruption, and our heart-felt sympathy goes out to all who have been affected by the virus. While continuing to provide essential products during this crisis is important, our primary focus has been on the well-being of our associates, customers and communities. I am extremely proud of our associates’ contributions to maintaining business continuity in the face of the severe operational disruption caused by the pandemic as well as their selfless support of our communities in a real time of need. I am pleased with our first quarter results as we were performing ahead of expectations leading into the pandemic. Our conservatively capitalized balance sheet and strong year-to-date operating cash flow positioned us to better absorb the shock of the crisis. In addition, since the onset of the pandemic, strong customer payment activity, aggressive cost management and weaker than expected lease originations have resulted in an improving liquidity position. While there remains tremendous uncertainty related to COVID-19 and its economic impacts, we are encouraged by the strength of customer payments in April and the improving trajectory of our lease origination activity over the last few weeks. The phased reopening of Aaron’s business showrooms beginning in late April, aided by the e-commerce channel, which increased more than 50% in the month, contributed to the rebound in lease originations.”