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Five Below, Inc. (FIVE - Free Report) came up with second-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. While net sales grew year over year, earnings declined sharply from the year-ago period. This extreme-value retailer for tweens, teens and beyond continued with its sluggish comparable sales performance. The soaring inflation is impacting consumers’ purchasing behavior. Five Below revisited its full-year outlook to reflect the year-to-date performance.
Despite lower-than-expected results, shares of Five Below were up 5.1% during the after-market trading session on Aug 31. Management stated that the company remains focused on long-term growth opportunities and the Triple-Double vision. It is optimistic about opening 1,000 new stores in the coming years. The company also looks to expand the Five Beyond concept.
Let’s Introspect
Five Below delivered second-quarter earnings of 74 cents a share, lower than the Zacks Consensus Estimate of 77 cents. The bottom line fell significantly from the earnings of $1.15 reported in the year-ago period.
Net sales of $668.9 million increased 3.5% year over year but missed the Zacks Consensus Estimate of $679.8 million. Comparable sales for the quarter under discussion declined 5.8% against an increase of 39.2% registered in the year-ago period. While comp tickets decreased 4.3%, comp transactions fell 1.7% in the reported quarter.
The gross profit slid 0.8% year over year to $228.5 million, while the gross margin contracted roughly 150 basis points to 34.2% due to occupancy deleverage and higher freight expenses.
We note that SG&A expenses shot up 19.7% to $172.5 million, while as a percentage of net sales, the same deleveraged 350 basis points to 25.8%. The operating income was $56 million for the quarter under discussion, down from the $86.2 million reported in the year-ago period. Also, the operating margin shrunk approximately 500 basis points to 8.4% during the quarter due to a lower gross margin and SG&A expenses.
Five Below, Inc. Price, Consensus and EPS Surprise
Five Below ended the quarter with cash and cash equivalents of $155.1 million and short-term investment securities of $117.3 million. Total shareholders’ equity was $1,162.6 million as of Jul 30, 2022. Year to date, Five Below repurchased 247,132 shares for approximately $40 million in the quarter.
Five Below anticipates gross capital expenditures of approximately $235 million in fiscal 2022, excluding tenant allowances. This includes about 160 new store openings, more than 250 conversions to the Five Beyond format, the opening of a new distribution center in Indiana and investments in systems and infrastructure.
Store Updates
Five Below opened 27 new stores in the reported quarter. This took the total count to 1,252 stores in 40 states as of Jul 30, 2022, reflecting an increase of 11.7% from the year-ago count. The company plans to open about 45 new stores in the third quarter and 160 new stores in fiscal 2022. For the next fiscal year, it plans to open more than 200 stores.
Guidance
Five Below envisions third-quarter fiscal 2022 net sales in the range of $600 million-$619 million compared with the $607.6 million reported in the year-ago period. We note that the company’s sales projection was shy of the Zacks Consensus Estimate of $631.8 million.
The company expects a 7% to 9% decline in comparable sales in the third quarter against an increase of 14.8% registered in the year-ago period. Management anticipates third-quarter earnings between 8 cents and 19 cents per share. This suggests a decline from the earnings of 43 cents reported in the prior-year period. The Zacks Consensus Estimate for third-quarter earnings per share currently stands at 28 cents.
Five Below foresees a contraction of about 540 basis points in the third-quarter operating margin due to the deleverage of fixed expenses on the negative comp, higher store expenses and increased marketing expenses, partly offset by disciplined expense management.
For the fourth quarter, management estimates a low-single-digit decline in comparable sales. However, it expects operating margin expansion in the final quarter versus last year.
Management projected fiscal 2022 net sales in the band of $2.97 billion-$3.02 billion, lower than the consensus estimate of $3.06 billion. The current view is also lower than the prior forecast of $3.04 billion to $3.12 billion. The company reported net sales of $2.85 billion last fiscal.
Five Below anticipates comparable sales to be down 3-5% against an increase of 30.3% recorded in the prior year. The company had earlier projected comparable sales to be flat to down 2%.
Management guided earnings between $4.26 and $4.56 per share, falling short of the consensus mark of $4.81. The current view is also lower than the prior forecast of $4.85 to $5.24 per share. The company reported earnings of $4.95 in fiscal 2021.
The company expects its operating margin to be approximately 11%, lower than the 13.3% reported last year, stemming from deleverage on fixed costs and higher SG&A expenses from more normalized marketing spend, partially offset by cost-containment efforts.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have fallen 22.8% compared with the industry’s decline of 12.6%.
Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of nearly 6% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.
Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 11.9% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.
Costco, which operates membership warehouses, currently carries a Zacks Rank #2 (Buy). COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financial-year revenues suggests growth of 15.4% from the year-ago reported figure. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
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Five Below (FIVE) Q2 Earnings & Sales Miss, Comps Decline Y/Y
Five Below, Inc. (FIVE - Free Report) came up with second-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. While net sales grew year over year, earnings declined sharply from the year-ago period. This extreme-value retailer for tweens, teens and beyond continued with its sluggish comparable sales performance. The soaring inflation is impacting consumers’ purchasing behavior. Five Below revisited its full-year outlook to reflect the year-to-date performance.
Despite lower-than-expected results, shares of Five Below were up 5.1% during the after-market trading session on Aug 31. Management stated that the company remains focused on long-term growth opportunities and the Triple-Double vision. It is optimistic about opening 1,000 new stores in the coming years. The company also looks to expand the Five Beyond concept.
Let’s Introspect
Five Below delivered second-quarter earnings of 74 cents a share, lower than the Zacks Consensus Estimate of 77 cents. The bottom line fell significantly from the earnings of $1.15 reported in the year-ago period.
Net sales of $668.9 million increased 3.5% year over year but missed the Zacks Consensus Estimate of $679.8 million. Comparable sales for the quarter under discussion declined 5.8% against an increase of 39.2% registered in the year-ago period. While comp tickets decreased 4.3%, comp transactions fell 1.7% in the reported quarter.
The gross profit slid 0.8% year over year to $228.5 million, while the gross margin contracted roughly 150 basis points to 34.2% due to occupancy deleverage and higher freight expenses.
We note that SG&A expenses shot up 19.7% to $172.5 million, while as a percentage of net sales, the same deleveraged 350 basis points to 25.8%. The operating income was $56 million for the quarter under discussion, down from the $86.2 million reported in the year-ago period. Also, the operating margin shrunk approximately 500 basis points to 8.4% during the quarter due to a lower gross margin and SG&A expenses.
Five Below, Inc. Price, Consensus and EPS Surprise
Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote
Financials
Five Below ended the quarter with cash and cash equivalents of $155.1 million and short-term investment securities of $117.3 million. Total shareholders’ equity was $1,162.6 million as of Jul 30, 2022. Year to date, Five Below repurchased 247,132 shares for approximately $40 million in the quarter.
Five Below anticipates gross capital expenditures of approximately $235 million in fiscal 2022, excluding tenant allowances. This includes about 160 new store openings, more than 250 conversions to the Five Beyond format, the opening of a new distribution center in Indiana and investments in systems and infrastructure.
Store Updates
Five Below opened 27 new stores in the reported quarter. This took the total count to 1,252 stores in 40 states as of Jul 30, 2022, reflecting an increase of 11.7% from the year-ago count. The company plans to open about 45 new stores in the third quarter and 160 new stores in fiscal 2022. For the next fiscal year, it plans to open more than 200 stores.
Guidance
Five Below envisions third-quarter fiscal 2022 net sales in the range of $600 million-$619 million compared with the $607.6 million reported in the year-ago period. We note that the company’s sales projection was shy of the Zacks Consensus Estimate of $631.8 million.
The company expects a 7% to 9% decline in comparable sales in the third quarter against an increase of 14.8% registered in the year-ago period. Management anticipates third-quarter earnings between 8 cents and 19 cents per share. This suggests a decline from the earnings of 43 cents reported in the prior-year period. The Zacks Consensus Estimate for third-quarter earnings per share currently stands at 28 cents.
Five Below foresees a contraction of about 540 basis points in the third-quarter operating margin due to the deleverage of fixed expenses on the negative comp, higher store expenses and increased marketing expenses, partly offset by disciplined expense management.
For the fourth quarter, management estimates a low-single-digit decline in comparable sales. However, it expects operating margin expansion in the final quarter versus last year.
Management projected fiscal 2022 net sales in the band of $2.97 billion-$3.02 billion, lower than the consensus estimate of $3.06 billion. The current view is also lower than the prior forecast of $3.04 billion to $3.12 billion. The company reported net sales of $2.85 billion last fiscal.
Five Below anticipates comparable sales to be down 3-5% against an increase of 30.3% recorded in the prior year. The company had earlier projected comparable sales to be flat to down 2%.
Management guided earnings between $4.26 and $4.56 per share, falling short of the consensus mark of $4.81. The current view is also lower than the prior forecast of $4.85 to $5.24 per share. The company reported earnings of $4.95 in fiscal 2021.
The company expects its operating margin to be approximately 11%, lower than the 13.3% reported last year, stemming from deleverage on fixed costs and higher SG&A expenses from more normalized marketing spend, partially offset by cost-containment efforts.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have fallen 22.8% compared with the industry’s decline of 12.6%.
3 Key Picks
Here we have highlighted three better-ranked stocks, namely Dillard's (DDS - Free Report) , Ulta Beauty (ULTA - Free Report) and Costco (COST - Free Report) .
Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of nearly 6% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.
Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 11.9% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.
Costco, which operates membership warehouses, currently carries a Zacks Rank #2 (Buy). COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financial-year revenues suggests growth of 15.4% from the year-ago reported figure. COST has a trailing four-quarter earnings surprise of 9.7%, on average.