Five Below (FIVE) stock is down sharply in Thursday's session after the discount retailer disclosed lower-than-anticipated fiscal first-quarter results and slashed its full-year outlook.
In the 13 weeks ended May 4, Five Below's net sales increased 11.8% year-over-year to $811.9 million, driven by the opening of 61 new stores. However, same-store sales decreased 2.3%. FIVE also said its earnings per share (EPS) fell 10.4% to 60 cents from the year-ago period.
"While our first-quarter sales were disappointing, disciplined cost management enabled us to deliver adjusted EPS within our earnings outlook," Five Below CEO Joel Anderson said in a statement. However, the executive notes that "needs-based items" helped drive a revenue gain.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"[W]e achieved positive comparisons in our higher-income cohorts, suggesting some trade-down of these customers seeking value at our stores," Anderson said in the company's earnings call. "However, we saw underperformance in the lower-income demographic that more than offset these results."
The executive added that the quarter "solidified that consumers are feeling the impact of multiple years of inflation across many key categories such as food, fuel, and rent and are, therefore, far more deliberate with their discretionary dollars."
The results came up short of analysts' expectations. According to Barron's, Wall Street was anticipating net sales of $834.3 million and earnings of 63 cents per share.
For its fiscal second quarter, Five Below expects net sales in the range of $830 million to $850 million and earnings in the range of 57 cents to 69 cents per share.
According to Yahoo Finance, analysts are forecasting revenue of $882.8 million and earnings of 99 cents for the company's second quarter.
Given the lackluster start to the year and its outlook on the second quarter, Five Below lowered its full-year outlook. Here’s what the company now expects versus its previous expectations:
| Metric | New Outlook | Previous Outlook |
|---|---|---|
| Revenue | $3.79 billion to $3.87 billion | $3.97 billion to $4.07 billion |
| Same-store sales | (3%) to (5%) | Flat to 3% |
| EPS | $5 to $5.40 | $5.71 to $6.22 |
For the full year, analysts are anticipating revenue of $4 billion and earnings of $6 per share.
"Five Below remains an extreme value, high growth retailer," Anderson said. "We are excited to open approximately 230 new stores by the end of this year and bring Five Below to more neighborhoods, offering trend-right, WOW items at amazing value."
Is Five Below stock a buy, sell or hold?
Most analysts remain upbeat toward the consumer discretionary stock, even though it's down more than 45% for the year to date. According to S&P Global Market Intelligence, analysts' consensus target price for FIVE is $167.39, representing implied upside of more than 40% to current levels. Meanwhile, the consensus recommendation is a Buy.
However, Oppenheimer analyst Brian Nagel has a Neutral (Hold) rating on FIVE. While Nagel is "upbeat" on the company's longer-term strategic positioning, "we are hard-pressed to envision a meaningful rebound in FIVE shares until much clearer signals of sustained sales expansion emerge," he says.
As such, Nagel believes "are best served remaining on the sidelines with FIVE shares, at least for now."
Related Content
-
Are You a Retirement Millionaire Too Scared To Spend?If you are too scared to spend money in retirement, you may be saddled with regret. Here are three ways to safely enjoy your sizable retirement nest egg.
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social SecurityTreasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
-
Seven Questions to Ask When Evaluating Personal Loan OptionsTaking out a personal loan too hastily could lock you into unfavorable terms with an untrustworthy lender. Ask these questions before signing anything.
-
How Much Does Being Rich Matter in Retirement?After a certain point, having more money in retirement won't make you any happier, new research shows. Instead, physical health, a sense of purpose, and a minimal amount of non-mortgage debt are more relevant.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
Estate Planning When You Have International AssetsEstate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
-
Microsoft Stock: Innovation Spurs Its 100,000% ReturnMicrosoft's ability to recognize the "next big thing" has allowed sales – and its share price – to grow exponentially over the years.
-
Three Essential Estate Planning Steps to Protect Your Nest EggAfter dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
