A month has gone by since the last earnings report for Five Below (FIVE Quick QuoteFIVE - Free Report) . Shares have lost about 5.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Five Below due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Five Below Q3 Earnings & Sales Beat Estimates

Five Below, Inc. posted better-than-expected third-quarter fiscal 2022 results despite a tough operational environment. Management cited that a continued improvement in the ticket and transaction metrics, disciplined cost management and a sustained focus on the long-term Triple Double vision contributed to the company’s performance. Five Below raised its full-year view.

Let’s Introspect

Five Below delivered third-quarter earnings of 29 cents a share, which beat the Zacks Consensus Estimate of 14 cents. However, the bottom line fell from the earnings of 43 cents reported in the year-ago period.

Net sales of $645 million increased 6.2% year over year and came ahead of the Zacks Consensus Estimate of $611 million. Comparable sales for the quarter under discussion declined 2.7% against an increase of 14.8% registered in the year-ago period. While comp tickets decreased 1.8%, comp transactions fell 0.9% in the reported quarter.

The gross profit grew 2.7% year over year to $207.8 million. Meanwhile, the gross margin contracted roughly 110 basis points to 32.2% due to occupancy deleverage.

We note that SG&A expenses shot up 16.9% to $186.9 million, while as a percentage of net sales, the same deleveraged 270 basis points to 29%. The operating income was $20.9 million for the quarter under discussion, down from the $42.4 million reported in the year-ago period. Also, the operating margin shrunk approximately 375 basis points to 3.2% during the quarter.

Financials

Five Below ended the quarter with cash and cash equivalents of $44.2 million and short-term investment securities of $72.7 million. Total shareholders’ equity was $1,184.5 million as of Oct 29, 2022. Year to date, Five Below repurchased 247,132 shares for approximately $40 million.

Five Below anticipates gross capital expenditures of approximately $235 million in fiscal 2022, excluding tenant allowances.

Store Update

Five Below opened 40 new stores in the reported quarter. This took the total count to 1,292 stores in 42 states as of Oct 29, 2022, reflecting an increase of 10.1% from the year-ago count. The company plans to open about 48 new stores in the fourth quarter and 150 new stores in fiscal 2022. The company concluded the 2022 Five Beyond growth initiative with approximately 250 stores converted to the new store format and expects to convert 80% of the chain in the new format by fiscal 2025.

Guidance

Five Below envisions fourth-quarter fiscal 2022 net sales in the range of $1,085 million-$1,110 million compared with the $996.3 million reported in the year-ago period.

The company expects a 1% decline to a 1% increase in comparable sales in the fourth quarter against an increase of 3.4% registered in the year-ago period. Management anticipates fourth-quarter earnings between $2.93 and $3.09 per share. This suggests an increase from the earnings of $2.49 reported in the prior-year period.

Five Below foresees an improvement of about 150 basis points in the fourth-quarter operating margin due to leverage in both the gross margin and SG&A expenses.

Management projected fiscal 2022 net sales in the band of $3,038 million-$3,063 million. The current view is up from the prior forecast of $2.97 billion to $3.02 billion. The company reported net sales of $2.85 billion last fiscal.

Five Below anticipates comparable sales to be down 2-3% against an increase of 30.3% recorded in the prior year. The company had earlier projected comparable sales to decline 3% to 5%.

Management guided earnings between $4.55 and $4.71 per share. The current view is also up from the prior forecast of $4.26 to $4.56 per share. The company reported earnings of $4.95 in fiscal 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Five Below has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Five Below belongs to the Zacks Retail - Miscellaneous industry. Another stock from the same industry, Dick's Sporting Goods (DKS Quick QuoteDKS - Free Report) , has gained 0.8% over the past month. More than a month has passed since the company reported results for the quarter ended October 2022.

Dick's reported revenues of $2.96 billion in the last reported quarter, representing a year-over-year change of +7.7%. EPS of $2.60 for the same period compares with $3.19 a year ago.

Dick's is expected to post earnings of $2.86 per share for the current quarter, representing a year-over-year change of -21.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.7%.

Dick's has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.