Five Below, Inc. ( FIVE Quick Quote FIVE - Free Report) posted strong fourth-quarter fiscal 2022 results. The results were backed by better-than-expected holiday period sales and overall quarter sales. Management cited that continued improvement in transaction metrics and delivery of high-value products contributed to the company’s performance amid a strong inflationary environment. Shares of this Zacks Rank #3 (Hold) company have increased 40.9% in the past six months compared with the industry’s rise of 16%. Let’s Delve Deeper
Five Below posted earnings per share of $3.07 for the fourth quarter of fiscal 2022, which beat the Zacks Consensus Estimate of $3.06. The company’s earnings per share increased 23.3% from $2.49 reported in the year-ago period.
Net sales of $1,122.8 million increased 12.7% year over year and came ahead of the Zacks Consensus Estimate of $1,105 million. Net sales for the holiday period, from Oct 30, 2022 to Jan 7, 2023, increased 11.2% to $1,003.7 million compared with $902.3 million reported in the year-ago holiday period. Comparable sales for the quarter under discussion increased 1.9% compared with an increase of 3.4% registered in the year-ago period. The comp increase was driven by an increase in comp transaction of 2.8% which was partially offset by a decline in comp average ticket of 0.9% in the reported quarter. During the holiday period, comparable sales increased 0.9%.
Gross profit grew 14% year over year to $452.4 million and gross margin expanded approximately 50 basis points (bps) to 40.3%. This increase was primarily driven by cost management strategies in distribution and freight expenses, which were partially offset by higher-than-expected shrink.
We note that selling general and administrative (SG&A) as a percentage of net sales declined by approximately 80 bps to 20.2% due to lower incentive compensation and cost management strategies. Operating income increased 20.4% to $225.8 million for the quarter under discussion. Also, the operating margin increased approximately 130 bps to 20.1% during the quarter.
Five Below ended the fiscal year with cash and cash equivalents of $332.3 million and short-term investment securities of $66.8 million. Total shareholders’ equity was $1,361.9 million as of Jan 28, 2023. In fiscal 2022, Five Below repurchased 247,132 shares for approximately $40 million.
Five Below anticipates gross capital expenditures of approximately $325 million in fiscal 2023, excluding tenant allowances. Store Update
Five Below opened 48 new stores in the reported quarter. This took the total count to 1,340 stores in 42 states as of Jan 28, 2023, reflecting an increase of 12.6% from the year-ago count. The company plans to open about 200 new stores in fiscal 2023 and convert 400 stores to the new Five Beyond format in the same period.
Five Below envisions first-quarter fiscal 2023 net sales in the range of $723 million to $735 million, up from $639.6 million reported in the first quarter of fiscal 2022.
The company expects comparable sales to increase in the range of 2.5-4% in the first quarter. Management also expects operating margin in the range of 5.7% to 6.2% in the same period. Management anticipates first-quarter earnings between 59 cents and 65 cents per share compared with 59 cents reported in the year-ago period. Management projects fiscal 2023 net sales in the band of $3.49 billion to $3.59 billion, up from $3.1 billion reported in fiscal 2022. Five Below anticipates comparable sales to be up 1-4% in fiscal 2023. Management guided earnings between $5.25 and $5.76 per share for fiscal 2023, an increase from $4.69 reported in the year-ago period. 3 Key Picks
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