Aaron's stock tumbles postmarket on guidance cut due to high inflation

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Aaron’s (NYSE:AAN) stock tumbled ~24% postmarket on Monday after the rent-to-own retailer cut its 2022 outlook citing high inflation, which is expected to weaken demand, lease portfolio size, lease renewal rates, and provision for lease merchandise write-offs.

AAN expects 2022 adj. EPS of $1.75-$2.15, well below consensus estimate of $2.71. Its prior outlook was $2.65-$2.90.

2022 revenue is projected to be $2.19B-$2.27B, missing consensus estimate of $2.33B. Its prior guidance was $2.32B-$2.39B.

2022 adj. EBITDA is estimated to be $150M-$170M vs. prior outlook of $200M-$215M.

Meanwhile, AAN reported Q2 adj. EPS of $0.79 vs. consensus estimate of $0.62.

Q2 revenue grew 30.6% to $610.38M. Revenue from the Aaron’s Business was $430.2M, down 8% vs. Q2 2021, due to lower lease revenues and retail sales.

Aaron’s Business same store revenues decreased 6.7% Y/Y, hurt by lower lease renewal rate, lower exercise of early purchase options, and a drop in retail sales.

“In the Aaron’s Business, customer demand and payment activity progressively worsened through the quarter as high inflation impacted the lower-income consumer. In response to these challenging conditions, we are leveraging centralized lease decisioning and digital servicing platforms to maintain relationships with customers and strengthening actions to control costs,” said CEO Douglas Lindsay.

Shares of AAN have declined 38.4% YTD.