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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 (NYSE: 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 (NYSE: 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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