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Five Below Holiday Sales Lag Expectations, Stock Takes a Hit

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Shares of Five Below, Inc. (FIVE - Free Report) fell 11.4% during the trading session on Jan 13. The stock was hurt by management’s commentary that overall holiday sales results for the quarter-to-date period from Nov 3, 2019 through Jan 4, 2020 fell short of expectations. Further, six fewer shopping days between Thanksgiving and Christmas hurt comparable sales performance.

Let’s Take an Insight

Net sales for the holiday period grew 13.4% to $596.6 million from $526.1 million reported in the comparable nine-week period from Nov 4, 2018 to Jan 5, 2019. We note that comparable sales declined 2.6% during the holiday period. Based on the quarter-to-date results, this Philadelphia, PA-based company trimmed fourth quarter and fiscal 2019 view.

Five Below now envisions fiscal 2019 net sales in the range of $1.845-$1.848 billion with comparable sales expected to improve in the band of 0.5-0.7%. Management now projects earnings between $3.07 and $3.10 per share. The company had earlier forecast net sales in the band of $1.877-$1.892 billion and earnings between $3.11 and $3.19 per share. Management had projected comparable sales growth of 2.5%.

For the final quarter, management anticipates net sales between $685 million and $688 million and comparable sales decrease of 2-2.5%. Five Below now guided earnings between $1.93 and $1.96 per share. The company’s prior estimate showed net sales between $717 million and $732 million and earnings in the range of $1.97-$2.05 per share. The company had earlier forecast comparable sales increase of 2-3%.

Despite soft sales performance for the quarter-to-date period from Nov 3, 2019 through Jan 4, 2020, the company believes that it remains on track to meet gross margin expectations on the back of effective inventory management and cost containment efforts.

Five Below also announced that it plans to open 180 new stores in 2020. It also intends to incorporate a Ten Below zone in most of the new and remodeled stores. Moreover, in order to strengthen digital capabilities, the company acquired e-commerce platform, fulfillment operation and certain other assets of Hollar.com.

Wrapping Up

Five Below remains committed toward enhancing customer experience via refresh store format, remodel program and Ten Below test. This Zacks Rank #2 (Buy) company is focusing on improving supply chain, delivering better WOW products and reimagined front-end. The company also made an investment in a gaming company called Nerd Street Gamers. The updated fourth quarter and fiscal year view includes a combined 2 cents impact from the Nerd Street Gamers and Hollar.com investments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 More Retailers’ Holiday Sales Reports

Macy’s (M - Free Report) comparable sales on an owned plus licensed basis decreased 0.6% during November and December period combined, while on an owned basis, comparable sales fell 0.7%.

Urban Outfitters (URBN - Free Report) witnessed comparable Retail segment net sales increase of 3% for the two months ended Dec 31, 2019.

J. C. Penney (JCP - Free Report) reported comparable store sales decline of 7.5% for the combined nine-week period ending Jan 4, 2020.

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