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Five Below (FIVE) to Post Q3 Earnings: What's in the Cards?

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Five Below, Inc. FIVE is scheduled to report third-quarter fiscal 2019 results on Dec 4, after the closing bell. We note that in the trailing four quarters, the company’s bottom line outperformed the Zacks Consensus Estimate by 4.1%, on average.

The Zacks Consensus Estimate for third-quarter earnings has remained unchanged over the past 30 days to at 17 cents. This suggests a decline of 22.7% from the year-ago quarter’s reported figure. Management had estimated third-quarter earnings between 14 cents and 17 cents, which calls for a year-over-year decline from 22 cents reported in the prior year.

For revenues, the consensus mark is pegged at $374 million, indicating an increase of 19.6% from the figure reported in the year-ago quarter.

Five Below, Inc. Price, Consensus and EPS Surprise


Key Things to Note

Five Below’s focus on merchandise assortment, enhancement of digital and e-commerce channels, and pricing strategy has been driving the top line. Also, the company’s store expansion strategy, supply chain improvement and better WOW products have been contributing to the overall performance. Cumulatively, these factors have been favoring comparable sales.

In the last earnings call, the company projected net sales between $369 million and $374 million for the third quarter, which suggests an increase of 18-19.6% from the year-ago quarter’s figure.  Management guided comparable sales growth of 2-3%.

However, the company has been grappling with higher SG&A expenses for quite some time now. This has been hurting margins to an extent. Five Below projected operating margin contraction of 175 basis points for the third quarter due to deleverage in SG&A expenses owing to depreciation costs associated with the opening of new Southeast distribution center and adoption of the new lease accounting standard as well as shift in merchandise costs from the second quarter to the third.

What the Zacks Model Predicts

Our proven model doesn’t conclusively predict an earnings beat for Five Below this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Five Below carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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Here are a few companies you may want to consider, as our model shows that these have the right combination to post an earnings beat:

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Dollar General DG has an Earnings ESP of +0.47% and a Zacks Rank #2.

Big Lots, Inc. BIG has an Earnings ESP of +3.85% and a Zacks Rank #3.

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