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Bear of the Day: Five Below (FIVE)

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Not all retail stocks are created equal. While some have come out of the gate swinging for the fences and crushing earnings this quarter, others are teetering on the brink. The downside risk is palpable for a number of names. One way to shelter yourself from this downside risk is to avoid stocks that have seen their earnings locked in downtrends. Avoiding these can be the key to making it through the next market downturn which is inevitable.

Today’s Bear of the Day is a stock that is not in the good graces of our Zacks Rank and is therefore also in a bad, negative earnings trend. It’s Zacks Rank #5 (Strong Sell) Five Below (FIVE - Free Report) ). Five Below has built its brand on offering trendy and affordable products to a younger demographic. However, the company's reliance on discretionary spending places it at a disadvantage in the current economic climate, where inflationary pressures and reduced consumer confidence are curtailing non-essential purchases. With consumers tightening their belts, Five Below's sales are likely to suffer, particularly in its core market segments of teens and young adults.

The company is also grappling with supply chain issues, which have led to increased costs and delays in inventory restocking. These operational challenges are exacerbating the company’s financial woes, as higher costs eat into margins and disrupt the timely availability of popular products. In addition, the rapid expansion of Five Below’s store footprint is stretching its resources thin, further complicating efforts to maintain efficient operations across its growing network of locations???

The reason for the unfavorable Zacks Rank is that five analysts have cut their earnings expectations for the current year and next year over the last week. These negative revisions have dropped our Zacks Consensus Estimate for the current year from $6.48 to $5.68 while next year’s number is off from $7.70 to $6.81. That’s still strong earnings growth for next year but the numbers are moving in the right direction.

Five Below is in the Retail – Miscellaneous industry which ranks in the Bottom 42% of our Zacks Industry Rank. There are a few stocks in this industry which are in the good graces of our Zacks Rank. These include Zacks Rank #1 (Strong Buy) Bark (BARK - Free Report)  and Dick’s Sporting Goods (DKS - Free Report) ).


See More Zacks Research for These Tickers

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DICK'S Sporting Goods, Inc. (DKS) - free report >>

Five Below, Inc. (FIVE) - free report >>

BARK Inc. (BARK) - free report >>

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