Five Below (FIVE) Q1 Earnings Miss Estimates, Sales Rise Y/Y

Zacks Equity Research
·5-min read

Five Below, Inc. FIVE reported first-quarter fiscal 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. However, net sales increased and earnings decreased on a year-over-year basis.

The company remains focused on driving sales through pricing tests, marketing initiatives and cost optimization efforts while maintaining its commitment to strategic pillars such as store expansion and product strategy.

Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote

Let’s Delve Deeper

Five Below posted earnings per share of 60 cents in the first quarter, which lagged the Zacks Consensus Estimate of 62 cents. Also, the company’s earnings per share decreased 10.4% from 67 cents in the year-ago quarter.

Net sales of $811.9 million increased 11.8% year over year but missed the Zacks Consensus Estimate of $832 million. Comparable sales decreased 2.3%, driven by a 2.8% decline in transaction volume, which was partially mitigated by a 0.5% increase in the average transaction value. The rise in average transaction value was due to higher average unit prices, although this was largely counterbalanced by a reduction in the number of units per transaction.

The gross profit grew 12.2% year over year to $263.5 million. Also, the gross margin increased approximately 20 basis points (bps) year over year to 32.5%, primarily driven by lower-than-expected inbound freight costs. The metric surpassed our estimate of 32.3%.

We note that selling, general and administrative (SG&A) expenses rose 16.5% to $190.2 million. SG&A, as a percentage of net sales, increased approximately 100 bps to 23.4%. This increase was mainly due to fixed cost deleverage, a one-time legal expense, higher pre-opening expenses due to more store openings compared with last year, and a planned marketing shift into the first quarter. The one-time legal expense contributed roughly 20 bps to SG&A as a percentage of sales. Our estimate for SG&A expenses, as a rate of net sales, was pegged at 27.3%.

Adjusted operating income was $38.2 million compared to $42.4 million in the first quarter of fiscal 2023. The adjusted operating margin decreased approximately 110 bps and fell to 4.7%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Financials

Five Below ended the fiscal first quarter with cash and cash equivalents of $96.3 million, and short-term investment securities of $273.3 million. Total shareholders’ equity was $1.58 billion as of May 4. The company repurchased approximately 182,000 shares in the first quarter at a cost of about $30.0 million.

Store Update

The company opened 61 new stores and ended the quarter with a total of 1,605 stores across 43 states. This represents a 17.4% increase in the number of stores compared with the end of the first quarter of fiscal 2023. It plans to open approximately 60 new stores in the second quarter compared with 40 stores opened in the year-ago quarter.

The company plans to open approximately 230 stores by the end of fiscal 2024, thereby taking the total count to 1,774 stores, which represents a unit growth of approximately 15%.

Guidance

For the second quarter, Five Below expects net sales to be between $830 million and $850 million, representing an increase in the range of 9.4-12% compared with the same period last year. The company anticipates a mid-single-digit decrease in comparable sales. The operating margin is projected to be 5.2% at the midpoint, with a deleverage of approximately 250 bps. Net income is expected to be between $32 million and $38 million, with earnings per share ranging from 57 cents to 69 cents.

For full fiscal 2024, Five Below forecasts net sales to be in the range of $3.79-$3.87 billion, reflecting a 7.9- 10.2% increase from fiscal 2023. Comparable sales are expected to decrease in the band of 3-5%. Adjusted operating margin is anticipated to be 9.8% at the midpoint, with a deleverage of 90 bps. Net income is estimated to be between $277 million and $299 million, with adjusted earnings per share between $5 and $5.40. Gross capital expenditures are expected to be in the range of $345-$355 million.

Shares of this Zacks Rank #4 (Sell) company have plunged 45.4% in the past three months compared with the industry’s 5.2% decline.

Key Picks

A few better-ranked stocks are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Canada Goose GOOS.

Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 17.5% and 0.1%, respectively, from fiscal 2023’s reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company sports a Zacks Rank of 1, at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.

The consensus estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 47.5% and 10.5%, respectively, from fiscal 2023 reported figures. ANF has a trailing four-quarter average earnings surprise of 210.3%.

Canada Goose is a global outerwear brand. It sports a Zacks Rank of 1, at present.

The Zacks Consensus Estimate for Canada Goose’s current fiscal-year earnings indicates growth of 13.7% from the year-ago period’s reported figures. GOOS has a trailing four-quarter average earnings surprise of 70.9%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

The Gap, Inc. (GPS) : Free Stock Analysis Report

Five Below, Inc. (FIVE) : Free Stock Analysis Report

Canada Goose Holdings Inc. (GOOS) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

  • Up next
  • Up next
  • Up next
  • Up next

Latest stories

  • Russia's war-driven economy is so hot that the World Bank upgraded it to a 'high-income country'

    Russia's trade rebounded by nearly 7% last year, while activities in the financial sector and construction grew by 6.6% and 3.6% respectively.

  • 6 family office funds tied to Singapore launder case got tax breaks

    Six single family office funds linked to a S$3 billion money laundering case in Singapore have received tax incentives from the Monetary Authority of Singapore.

  • A-G’s report: Mara Inc’s inefficient operations lead to RM286m loss

    KUALA LUMPUR, July 4 — Government-linked Mara Inc has incurred RM286.30 million in losses due to inefficient business op...

  • Fed officials touted 'modest further progress' on inflation at last meeting: Minutes

    Fed officials offered encouragement about the path of inflation while meeting in June, but they made it clear they didn’t expect to lower rates until they saw more evidence of a downward trend.

  • Shell (SHEL) Hits Pause on Major Biofuels Plant in Europe

    Shell (SHEL) remains committed to achieving its net-zero emissions target by 2050 despite abandoning several renewable projects to focus on its more profitable ventures, primarily in oil and gas.

  • Mondelez (MDLZ) Navigates Hurdles Through Portfolio Strength

    Mondelez's (MDLZ) focus on core categories and portfolio strength place it well in a challenging and dynamic operating environment.

  • BP CEO Halts Offshore Wind Projects, Enacts Hiring Freeze

    BP's new CEO Murray Auchincloss has implemented a hiring freeze and paused new offshore wind projects, shifting the company's focus to oil and gas to address investor concerns over its energy transition strategy.

  • SLB and TotalEnergies Ink 10-Year Digital Solutions Partnership

    SLB and TotalEnergies enter into a 10-year collaboration to co-develop scalable digital solutions, focusing on enhancing energy resource access and efficiency through advanced AI technologies.

  • Bitcoin Sinks Under $61K as One Trader Sticks to $150K Prediction This Year

    U.S.-listed ETFs ended a five-day inflow streak with $13 million in net outflows on Tuesday.

  • Fed won't hit 2% target until 2026: Economist

    With somewhat cooling inflation and stagnant labor market growth, conversations about whether the Federal Reserve's interest rate cut timing persist. Interactive Brokers senior economist José Torres joins Market Domination to give insight into the labor market, the broader stock market, and the Fed's future policy decisions. "I think we're going to hit the Fed's 2% target somewhere in 2026. Fed Chair Powell was asked about it; he didn't think that we would hit it this year or next year. In fact, when we consider the disinflation that occurred last year in the second half, now those base effects become unfavorable into the second half of this year. So we're going to actually see core PCE start to tick higher. And if you look at the dots of summary of economic projections from the Fed, they're expecting core PCE to finish the year around 2.8," Torres tells Yahoo Finance. For more expert insight and the latest market action, click here to watch this full episode of Market Domination. This post was written by Nicholas Jacobino

  • London stocks, pound climb as Britons vote

    London's stock market and the pound advanced versus the dollar Thursday as Britons voted in a general election expected to be won by the centre-left and main opposition Labour party."Today's UK election looks unlikely to cause too many shockwaves given just how resounding the Labour party victory is expected to be, with markets feeling optimistic over the potential change at Downing Street," said Scope Markets analyst Joshua Mahony.

  • Japan's Nikkei 225 index hits a record high close of 40,913.65

    Japan’s Nikkei 225 stock index closed Thursday at a fresh record high of 40,913.65, pushing past its most recent record close set in March on heavy buying of automaker and technology shares. The index's all-time high during intraday trading is 41,087.75, set on March 22. The gains tracked an overnight rally on Wall Street, where the S&P 500 and tech-heavy Nasdaq also hit fresh records.

  • Nearly 20 million people who owe student loans not making payments as government tries to claw back $1.6tn

    Throughout his presidency, Biden has sought out a way to eliminate student debt

  • Stocks Often Pop in July: Time to Buy These 4 ETFs?

    July is historically an upbeat month for the S&P 500 - here are some of our top ETF picks to ride the heat wave.

  • Why Paramount is back at the negotiating table with Skydance

    Shares of Paramount Global (PARA, PARAA) are rallying on revived merger talks with Skydance. According to reports, Skydance has reached a preliminary agreement to buy Shari Redstone's National Amusements, the controlling shareholder of Paramount. If that deal goes through, Skydance would then begin the merger process with Paramount Global. Bloomberg Intelligence senior media analyst Geetha Ranganathan joins Morning Brief to discuss the news and what it means for the media giant's future. "With Skydance, what we've constantly seen is that they are proposing a deal which basically favors Shari Redstone, who is the controlling shareholder, favors her over everybody else. So it favors her over class A shareholders as well as class B shareholders. And that is something that has the potential for attracting a lot of lawsuits. And that is something that has made Shari Redstone extremely wary, and so it looks like this time around, there is much stronger indemnification language in the agreement that should or could potentially protect her from a lot of the upcoming litigation," Ranganathan explains. Paramount has faced a rocky 6 months in its attempts to merge with Skydance, and Ranganathan believes that this deal comes with unique pressure: "The one thing that we have to remember is that the longer and longer this whole process kind of drags out, the less and the less value that the assets will have. And I think Shari Redstone realizes that she's been publicly negotiating for six months. That's something that's highly unusual in the media landscape, in any M&A deal for that matter, so for her to come that far and then just drop everything again, it created huge overhang on the stock. And I think she's realized that, which is why she's back at the negotiating table." For more expert insight and the latest market action, click here to watch this full episode of Morning Brief. This post was written by Melanie Riehl

  • 16-year-old Chinese boy beat with iron rod on New Zealand bus

    On Friday morning, during the Maori New Year public holiday, a 16-year-old teen named Jason was brutally attacked on an Auckland bus by a woman wielding an iron rod. The assailant, described as a Maori woman “more than 200 kilograms," hit Jason multiple times and stabbed him in the face, knocking out five of his teeth, on board the bus after having allegedly shouted "ch*nk" at him at Johns Lane stop. Man intervenes: A 75-year-old Chinese man, Penglai Qiuyue, intervened and managed to grab the weapon, though he was also injured in the process.

  • The world must prepare for President Michelle Obama

    The 2024 US Presidential race intensifies. Speculation abounds over potential replacements for President Joe Biden amid increasing pressure from his party and the media to step aside after a jaw-dropping, catastrophic debate against Donald Trump last week. Among the names circulating, a game-changer is emerging: Michelle Obama. Could this be America’s worst nightmare?

  • As AG stays silent, Rosmah presses on with bid to strike out money laundering and tax evasion charges

    KUALA LUMPUR, July 4 — Datin Seri Rosmah Mansor's money laundering and tax evasion trial proceeded today despite the lac...

  • Michelle Obama the only Biden alternative who would beat Trump

    The only prospective candidate who could beat Donald Trump in the presidential election is Michelle Obama, according to a new poll.

  • Singapore’s new S$20,000 cash declaration rules: What Malaysians need to know

    Singapore has implemented new regulations since May requiring all travellers to declare cash exceeding S$20,000 (RM69...