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Why Is Five Below (FIVE) Down 8.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Five Below (FIVE - Free Report) . Shares have lost about 8.5% in that time frame, underperforming 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 catalysts.
Five Below Q2 Earnings Beat Estimates, Sales Rise Y/Y
Five Below came up with second-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line beat the same. Net sales and earnings grew year over year. Management cited that an improved transaction trend and sales growth contributed to the company’s performance amid macro headwinds.
Let’s Delve Deeper
Five Below posted earnings per share of 84 cents in the second quarter of fiscal 2023, beating the Zacks Consensus Estimate of 83 cents. The company’s earnings per share increased 13.5% from 74 cents reported in the year-ago period.
Net sales of $759 million increased 13.5% year over year but lagged the Zacks Consensus Estimate of $760 million. Comparable sales for the quarter under discussion increased 2.7% against a decrease of 5.8% registered in the year-ago period. The comparable sales increase was driven by growth of 4.5% in comp transactions. Our estimate for comparable sales growth was pegged at 2.3% for the quarter.
The gross profit grew 15.8% year over year to $264.6 million. Meanwhile, the gross margin expanded 70 basis points (bps) to 34.9%, which was driven by lower inbound freight costs. The metric fared better than our estimate of 34.1%.
We note that selling, general and administrative (SG&A) expenses shot up 19.4% to $206 million. SG&A as a percentage of net sales increased by approximately 140 bps to 27.1% due to higher marketing costs and an increase in certain store-related expenses. Our estimate for SG&A expenses, as a rate of net sales, was 26.4% for the quarter under review.
Operating income was up 4.6% to $58.6 million for the quarter under discussion. The operating margin decreased approximately 70 bps to 7.7% during the quarter, in line with our estimate.
Financials
Five Below ended the fiscal second quarter with cash and cash equivalents of $334.5 million and short-term investment securities of $101.8 million. Total shareholders’ equity was $1,440.1 million as of Jul 29, 2023. The company did not make any repurchases during the quarter.
FIVE anticipates gross capital expenditures of approximately $335 million in fiscal 2023, excluding tenant allowances.
Store Update
Five Below opened 40 new stores in the reported quarter. This took the total count to 1,407 stores in 43 states as of Jul 29, 2023, reflecting an increase of 12.4% from the year-ago count. The company plans to open more than 200 new stores in fiscal 2023 and convert more than 400 stores to the new Five Beyond format in the same period.
Guidance
Five Below envisions third-quarter fiscal 2023 net sales in the range of $715-$730 million, up from $645 million reported in the third quarter of fiscal 2022.
The company expects flat to 2% growth in comparable sales for the third quarter. Management expects an operating margin in the range of 1.4%-2.1% in the same period.
Management anticipates third-quarter earnings per share between 17 cents and 25 cents compared with 29 cents reported in the year-ago period.
Management continues to project fiscal 2023 net sales in the band of $3.50-$3.57 billion compared with $3.1 billion reported in fiscal 2022. For fiscal 2023, Five Below continues to anticipate comparable sales growth in the range of 1-3%.
Management now anticipates earnings per share between $5.27 and $5.55 for fiscal 2023 compared with $5.31-$5.71 predicted earlier. This indicates an increase from $4.69 reported in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -44.51% due to these changes.
VGM Scores
At this time, Five Below has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Five Below (FIVE) Down 8.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Five Below (FIVE - Free Report) . Shares have lost about 8.5% in that time frame, underperforming 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 catalysts.
Five Below Q2 Earnings Beat Estimates, Sales Rise Y/Y
Five Below came up with second-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line beat the same. Net sales and earnings grew year over year. Management cited that an improved transaction trend and sales growth contributed to the company’s performance amid macro headwinds.
Let’s Delve Deeper
Five Below posted earnings per share of 84 cents in the second quarter of fiscal 2023, beating the Zacks Consensus Estimate of 83 cents. The company’s earnings per share increased 13.5% from 74 cents reported in the year-ago period.
Net sales of $759 million increased 13.5% year over year but lagged the Zacks Consensus Estimate of $760 million. Comparable sales for the quarter under discussion increased 2.7% against a decrease of 5.8% registered in the year-ago period. The comparable sales increase was driven by growth of 4.5% in comp transactions. Our estimate for comparable sales growth was pegged at 2.3% for the quarter.
The gross profit grew 15.8% year over year to $264.6 million. Meanwhile, the gross margin expanded 70 basis points (bps) to 34.9%, which was driven by lower inbound freight costs. The metric fared better than our estimate of 34.1%.
We note that selling, general and administrative (SG&A) expenses shot up 19.4% to $206 million. SG&A as a percentage of net sales increased by approximately 140 bps to 27.1% due to higher marketing costs and an increase in certain store-related expenses. Our estimate for SG&A expenses, as a rate of net sales, was 26.4% for the quarter under review.
Operating income was up 4.6% to $58.6 million for the quarter under discussion. The operating margin decreased approximately 70 bps to 7.7% during the quarter, in line with our estimate.
Financials
Five Below ended the fiscal second quarter with cash and cash equivalents of $334.5 million and short-term investment securities of $101.8 million. Total shareholders’ equity was $1,440.1 million as of Jul 29, 2023. The company did not make any repurchases during the quarter.
FIVE anticipates gross capital expenditures of approximately $335 million in fiscal 2023, excluding tenant allowances.
Store Update
Five Below opened 40 new stores in the reported quarter. This took the total count to 1,407 stores in 43 states as of Jul 29, 2023, reflecting an increase of 12.4% from the year-ago count. The company plans to open more than 200 new stores in fiscal 2023 and convert more than 400 stores to the new Five Beyond format in the same period.
Guidance
Five Below envisions third-quarter fiscal 2023 net sales in the range of $715-$730 million, up from $645 million reported in the third quarter of fiscal 2022.
The company expects flat to 2% growth in comparable sales for the third quarter. Management expects an operating margin in the range of 1.4%-2.1% in the same period.
Management anticipates third-quarter earnings per share between 17 cents and 25 cents compared with 29 cents reported in the year-ago period.
Management continues to project fiscal 2023 net sales in the band of $3.50-$3.57 billion compared with $3.1 billion reported in fiscal 2022. For fiscal 2023, Five Below continues to anticipate comparable sales growth in the range of 1-3%.
Management now anticipates earnings per share between $5.27 and $5.55 for fiscal 2023 compared with $5.31-$5.71 predicted earlier. This indicates an increase from $4.69 reported in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -44.51% due to these changes.
VGM Scores
At this time, Five Below has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.