Five Below, Inc. (FIVE - Free Report) came up with better-than-expected second-quarter fiscal 2013 results. The quarterly earnings of 11 cents per share surpassed the Zacks Consensus Estimate by a couple of cents and increased almost threefold year over year.
Including one-time charges, quarterly earnings came in at 7 cents as against a loss of $3.41 per share in the prior-year period.
Robust top-line growth and increased margins drove the better-than-expected results. However, rising expenses were a headwind.
Net sales increased 34.9% year over year to $117.1 million and handily surpassed the Zacks Consensus Estimate of $113.0 million.
Comparable same store sales increased 6.6% as against an 8.6% rise in the prior-year period, primarily driven by strong performances across all categories. This quarter marks the 29th consecutive quarter in which the company posted positive comps.
Gross profit increased 37.1% year over year to $39.4 million. Gross profit margin expanded 60 basis points (bps) to 33.7%, mainly due to occupancy expense leverage, partly offset by the deleverage of distribution expenses from the new Olive Branch distribution center.
Adjusted operating income jumped 55.2% to $9.7 million on a year-over-year basis whereas operating margin expanded 110 bps to 8.3%.
During the quarter, the company opened 18 new outlets. At the end of the quarter, the company had 276 stores in 19 states, a 22% rise from the prior-year period.
Other Financial Aspects
This Zacks Rank #2 (Buy) company ended the quarter with cash and cash equivalents of $21.1 million, notes payable of $19.5 million and shareholders’ equity of $82.0 million.
During the first-half of fiscal 2013, net cash used in operating activities was $5.7 million and incurred capital expenditures of $15.1 million.
Outlook for Third-Quarter 2013
For the third quarter, net sales are expected to be $107-$109 million based on the 24 new store openings and assumption of a mid single-digit rise in comparable store sales.
Adjusted net income is expected to be around $1.5-$2.1 million resulting in earnings per share (EPS) of 3-4 cents. On GAAP basis, net income is expected to be in the band of $0.6-$1.2 million, coming to EPS of 1-2 cents.
For fiscal 2013, net sales are expected to be $531-$536 million based on the 60 new store openings in the whole year and assumption of a 5% rise in comparable store sales.
Adjusted net income is expected to be between $37.1 million and $38.8 million, resulting in EPS of 68-71 cents. On GAAP basis, net income is expected to be around $32.3-$34.0 million, with EPS in the range of 60-63 cents.
The Zacks Consensus Estimate for the third quarter and fiscal 2013 stands at 4 cents and 71 cents, respectively.
Other Stocks to Consider
Other stocks worth considering in the retail sector include Citi Trends, Inc. , Kirkland's Inc. (KIRK - Free Report) and PCM, Inc. (PCMI - Free Report) . All of these carry a Zacks Rank #1 (Strong Buy).