Why Aaron's Shares Jumped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of big-box retailer Aaron's (NYS: AAN) were flying off the shelves today, gaining as much as 14%, after an impressive third-quarter earnings report.

So what: Revenue was up 9%, and adjusted EPS grew 28%, to $.46 a share for the consumer electronics, furniture, and appliance seller. Analysts were expecting $0.43 cents in profit per share. Management said that performance was particularly strong in its HomeShare stores, which, like Aaron's, offers customers a rent-to-own or pay-by-installments option. Same-store sales growth was strong at 6.5%, as management raised guidance in all areas, and is now calling for adjusted EPS of $2.05-$2.29 in 2012, and $2.25 to $2.41 next year.

Now what: Aaron's targets consumers with no credit or bad credit, who may have difficulty buying from other stores. The business model seems especially well-suited to a poor economy and high unemployment like we've had for last few years, so it's not a huge surprise to see shares reach an all-time high today. Aaron's could be threatened by Wal-Mart's (NYS: WMT) reintroduction of its layaway plan but, otherwise, it seems on track, expanding at a steady pace through new stores and solid same-store sales growth. Shares should keep moving higher until unemployment comes down and the economy improves.

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The article Why Aaron's Shares Jumped originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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