AAN Aaron's, Inc.

Risks

• Federal and state regulatory authorities are increasingly focused on our industry, and in addition to being subject to various existing federal and state laws and regulations, we may be subject to new or additional federal and state laws and regulations (or changes in interpretations of existing laws and regulations) that could expose us to government investigations, significant additional costs or compliance-related burdens that could force us to change our business practices in a manner that may be materially adverse to our operations, prospects or financial condition.
• The effects on our business of our announcement of Progressive Leasing’s proposed settlement with the FTC are not certain; it may have a material adverse effect on our reputation, business, and financial results, as could our failure to comply with the settlement.
• Progressive Leasing's virtual lease-to-own business, as well as our e-commerce-based business, differs in some potentially significant respects from the risks of the traditional store-based Aaron's Business lease-to-own business. The risks could have a material negative effect on Progressive Leasing, which could result in a material adverse effect on our entire business.
• Progressive Leasing’s loss of operating revenues from key retail partners could materially and adversely affect our business.
• We continue to implement an aggressive strategic plan within the Aaron’s Business and there is no guarantee that it will be successful.
• Our Aaron’s Business faces many challenges which could materially and adversely affect our overall results of operations, including the commoditization of certain product categories; increasing competition from a growing variety of sources; a decentralized, high-fixed-cost operating model; adverse consequences to our supply chain function from decreased procurement volumes; increasing costs for labor and transportation; and lower lease volumes on important categories such as consumer electronics.
• The transactions offered to consumers by our businesses may be negatively characterized by consumer advocacy groups, the media and certain federal, state and local government officials, and if those negative characterizations become increasingly accepted by consumers and/or Progressive Leasing’s or Vive’s retail and merchant partners, demand for our goods and the transactions we offer could decrease and our business could be materially adversely affected.
• From time to time we are subject to regulatory and legal proceedings which seek material damages or seek to place significant restrictions on our business operations. These proceedings may be negatively perceived by the public and by Progressive Leasing’s existing and prospective retail partners, and materially and adversely affect our business.
• Certain judicial or regulatory decisions may restrict or eliminate the enforceability of certain types of contractual provisions designed to limit costly litigation, including class actions, as a dispute resolution method.
• Our competitors could impede our ability to attract new customers, or cause current customers to cease doing business with us.
• If we do not maintain the privacy and security of customer, retail partner, employee or other confidential information, due to cybersecurity-related “hacking” attacks, intrusions into our systems by unauthorized parties or otherwise, we could incur significant costs, litigation, regulatory enforcement actions and damage to our reputation, any one of which could have a material adverse impact on our business, operating results and financial condition.
• Our proprietary algorithms and customer lease decisioning tools used to approve customers could no longer be indicative of our customers’ ability to perform under their lease agreements with us.
• We could lose our access to data sources, which could cause us competitive harm and have a material adverse effect on our business, operating results, and financial condition.
• If our information technology systems are impaired, our business could be interrupted, our reputation could be harmed and we may experience lost revenues and increased costs and expenses.
• We may pursue acquisitions or investments of complementary companies or businesses, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate the acquired companies could have an adverse impact on our business.
• Our stock price is volatile, and you may not be able to recover your investment if our stock price declines.
• We may engage in litigation with our franchisees.
• We must successfully order and manage our Aaron’s Business inventory to reflect customer demand and anticipate changing consumer preferences and buying trends or our revenue and profitability will be adversely affected.
• We depend on hiring an adequate number of hourly employees to run our business and are subject to government regulations concerning these and our other employees, including wage and hour regulations.
• The geographic concentration of our Aaron’s stores, as well as those of Progressive Leasing’s retail partners, may magnify the impact of conditions in a particular region, including economic downturns and other occurrences.
• Vive’s “second-look” credit programs for below-prime consumers differ in significant respects from the risks of Aaron’s store-based lease-to-own business. The risks could have a material negative effect on Progressive Leasing, which could result in a material adverse effect on our entire business.
• The loss of the services of our key executives, or our inability to attract and retain key talent could have a material adverse impact on our operations.
• If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.
• Operational and other failures by our franchisees may adversely impact us.
• We are subject to laws that regulate franchisor-franchisee relationships. Our ability to enforce our rights against our franchisees may be adversely affected by these laws, which could impair our growth strategy and cause our franchise revenues to decline.
• Changes to current law with respect to the assignment of liabilities in the franchise business model could adversely impact our profitability.
• We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our various businesses. A failure to correctly calculate and pay such taxes could result in substantial tax liabilities and a material adverse effect on our results of operations.
• Employee misconduct or misconduct by third parties acting on our behalf, or third parties to whom our Aaron’s Business previously sold certain of its past due customer accounts for the third parties to attempt to collect, could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
• Product safety and quality control issues, including product recalls, could harm our reputation, divert resources, reduce sales and increase costs.
• We may be alleged to have infringed upon intellectual property rights owned by others, or may be unable to protect our intellectual property.
• Interest rates on certain of our outstanding indebtedness are tied to LIBOR and may be subject to change.