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I would say, first of all, we're seeing really strong signs and this new customer acquisition program that we rolled out, and it's specifically benefiting ecomm, but is also benefiting our stores |
Steve and his team have done a really good job on managing costs and improving margin in that business |
We've seen our -- the Aaron's customer be very resilient as a needs-based customer |
Our market optimization strategy, which includes our GenNext stores and hub and showroom program continues to deliver meaningful financial performance through the transformation of our in-store customer experience and operating vault.In the quarter, we opened 9 GenNext stores, bringing the year-to-date total to 43 stores and 254 company-operated GenNext door since launching the program |
So we have great confidence there, and I'm really happy with what we've done there and continue to do.In terms of the consumer, Kelly said it right |
We have recently enhanced our lease decisioning technology and customer acquisition programs, which are leading to an improved customer experience |
And again, we've talked about this in the past, our Aaron's business has the benefit of being a portfolio business |
In the first 8 weeks of 2024, we're seeing total lease merchandise deliveries up high single digits, and our ecommerce channel is up over 100% as compared to the prior year period |
And we believe when demand does improve in the second half of the year, we'll see great flow-through |
We have also continued to streamline our cost structure and delivered over $40 million of cost reductions in 2023, exceeding the high end of our target range |
Today, we'll also provide our 2024 outlook and why given the fundamental strength of our business, we believe we are well positioned to deliver enhanced long-term value to shareholders |
We really believe in the growth opportunity -- market growth opportunity at BrandsMart and the compelling brand positioning that we have in South Florida and Georgia, in particular |
We also delivered strong adjusted free cash flow in 2023 that exceeded the high end of our revised outlook by approximately 28% |
Our 2024 earnings outlook for the Aaron's business reflects the benefits of our enhanced customer acquisition program, which is partially offsetting the impact of a lower lease portfolio size to start the year |
And so that's really encouraging |
We're seeing more and more customers getting approved online and shopping in stores with their remaining leasing power, which is encouraging.Ecomm was up 60% in the quarter in recurring revenue written and we said it's going to be tracking in the first 8 weeks to over 100% in the first quarter |
In addition, we ended the fourth quarter with a total of 114 showrooms in the chain and are pleased with the cost savings this program is delivering |
We are pleased with enhancements to our lease decisioning technology, which we believe will continue to contribute to improvements in our write-offs |
But once we get beyond there, we really start to see the margin flow-through benefits in the portfolio, which will carry over for -- our average lease is a little over 20 months written and so we get that benefit over a multiyear period |
We have a resilient business model and a healthy financial profile, and I believe we're well positioned to take advantage of the significant opportunities in front of us |
Although demand is challenging, we remain confident in BrandsMart's compelling value proposition, strength of the brand and potential to expand its market |
While 2023 was a challenging year, we've taken decisive actions to improve performance, and I'm excited about what we're seeing so far in 2024 |
This new program not only drove a higher conversion rate, but also improved customer shopping experience |
At BrandsMart, our outlook assumes that demand improves in the back half of the year with sequential improvement in comparable sales in each quarter of the year |
We are optimistic that our investments will equip BrandsMart to improve sales performance as customer demand rebounds later this year |
As Douglas mentioned earlier, we are excited about the trends we are seeing in the Aaron's business so far this year |
With the investments we've made to innovate our business and the strength of our balance sheet, we are better positioned than ever to drive long-term profitable growth at Aaron's and BrandsMart |
We believe our compelling lease rate and payment options will continue to attract new customers and help us gain market share over time |
While leasing power had previously been available in our stores, expanding it to ecommerce has improved the overall customer shopping experience and led to higher approval and conversion rates during the fourth quarter |
The latter part of the year is expected to benefit from the demand improvements at both businesses, partially offset by a lower lease renewal rate and higher write-offs with Q2 and Q3 generating the majority of earnings in 2024 |
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Consolidated company earnings for the fourth quarter were below our expectations, primarily due to softer-than-expected demand at BrandsMart |
The consolidated adjusted earnings were approximately $4 million below the low end of our outlook range |
During the fourth quarter, BrandsMart continued to experience weaker customer traffic and trade down to lower-priced products in our key product categories of major appliances to consumer electronics |
BrandsMart continued to experience softness in customer demand during the fourth quarter due to lower customer traffic and continued trade down to lower-priced products across our major product categories |
As a result, BrandsMart's comparable sales were down 14% year-over-year |
However, we ended the fourth quarter with our lease portfolio size down 7% year-over-year due to the ongoing challenging demand trends |
Consolidated revenues were $2.14 billion, down 4.9% due to lower lease revenues and fees and retail and nonretail sales at the Aaron's business as well as lower retail sales at BrandsMart |
As a result, BrandsMart ended the year with revenues and adjusted earnings below our revised outlook |
Consistent with overall sales performance, we experienced pressure in our ecommerce channel |
In addition, we continue to experience pressure on demand at BrandsMart that we expect to persist through the first half of the year |
Adjusted EBITDA was $136 million, down from $177.1 million due primarily to the same factors that impacted the fourth quarter year-over-year performance that I discussed earlier |
As we think about the financial performance over the course of 2024, the lower lease portfolio size at the Aaron's business to begin the year, combined with incremental marketing investments will put pressure on the P&L, and earnings increases will lag the expected lease portfolio size growth |
The marketplace for appliances and electronics has been challenging, and we're forecasting demand to improve over the course of the year |
During the quarter, we continued to see pressure on average ticket as customers selected lower-price items across all major product categories |
But BrandsMart continues to be challenging going into Q1 |
So as we're seeing growth in ecomm here in the near term, it is putting pressure on margin |
One is these being durable goods that we really drive at BrandsMart appliances, consumer electronics and furniture, but the breakdown of that is really between transactions and ticket is what's driving the decline in comparable sales |
As Douglas mentioned, we continue to operate in a challenging macroeconomic environment where customer demand for our product categories has not rebounded from the demand pull forward that occurred during the pandemic |
Kelly Wall And comps comp sales at BrandsMart to be negative in Q1 as well |
But as the portfolio -- so that is in the near term, again, putting pressure on margin.Also, our increased investment on the marketing side, really in the first half of the year and continuing into the back half of the year is also impacting margin this year |
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