Aaron’s, three executives named in securities class action lawsuit

 

The home goods leasing company Aaron’s Holdings and certain of its executives were recently named as defendants in a securities class action lawsuit alleging false or misleading statements about one of the firm’s subsidiaries. To learn more about this case, visit Battea’s Aaron’s case summary. 

Specifically the suit relates to the company’s attributions for what led to robust growth of revenue and sales for the subsidiary Progressive Finance Holdings. The company allegedly claimed that Progressive had a proprietary algorithm that was used to determine customer qualifications for leasing, but that software issues undermined its ability to function properly, and in fact may have led to the loss of vital information about those customers.

The suit was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division, and in addition to naming Aaron’s Holdings itself as a defendant, it also names Aaron’s president and chief executive officer John Robinson, Progressive Finance chief executive officer Ryan Woodley, and former Aaron’s executive vice president Gilbert Danielson. The suit has a class period from Feb. 6, 2015, to Oct. 29, 2015.

The home goods leasing company Aaron's was recently served with a securities class action lawsuit.The home goods leasing company Aaron’s was recently served with a securities class action lawsuit.

A look at the issues
The class period opens on the day Aaron’s released its full-year and fourth-quarter 2014 financial data, which touted that Progressive had “once again exceed[ed] expectations.” Specifically, Progressive was the reason the company saw huge growth in revenue, which came in at $220.8 million for the year.

The company continued to report generally strong financial results for the first and second quarters of 2015, but by the time the third quarter results arrived, things had changed dramatically. The company was forced to cut its earnings forecasts for the year due to the aforementioned software problems.

“Gross margin improved in the quarter, however, we experienced higher bad debt expense and merchandise write offs due to a temporary interruption of certain data attributes we use to approve leases, as well as software issues that delayed our ability to identify and begin collections on certain delinquent accounts. We believe these issues have been resolved and will not have a meaningful impact on future results,” Robinson said in announcing the third-quarter results.

The stock price’s changes
At the start of the class period in early February 2015, Aaron’s was trading at $32.20 per share. That number rose slowly over the course of 2015, with few notable declines, and eventually hit a high of $40.33 in early October. But just 20 days later, when the third-quarter results were released, the stock price came crashing down, falling to $24.67 per share by Oct. 30. The downward trend continued for much of the year’s remainder, and the stock price stayed in that lower range until late 2016. It hit a recent low of just $20.33 in early January 2016.

Today, stock in Aaron’s Holdings trades at $38.67.

For more information on this case or other class action litigations, please contact Sam Wankel, Senior Vice President, Research, Battea Global Litigation Research, Inc., at 203-987-4949 or info@battea.com.