NEW YORK (AP) -- Shares of Five Below are falling sharply in early premarket trading Friday as its fourth-quarter outlook missed Wall Street's view. An analyst says he still believes in the discount retailer's long-term growth story, however.
On Thursday Five Below Inc. said that it anticipates fourth-quarter revenue between $208 million and $210 million. Analysts surveyed by FactSet predict revenue of $216 million.
The company said that the outlook is based on its quarter-to-date results, which include a 25.4 percent increase in revenue to $185.3 million and a 0.5 percent dip in sales at stores open at least a year.
Sales at stores open at least a year is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.
Co-founder and CEO Thomas Vellios said in a statement that Five Below's holiday sales didn't meet its expectations because bad winter weather hurt customer traffic. The situation was also hampered by the shortened holiday season, which had six fewer days than the prior-year period.
Jefferies' Daniel Binder said in a client note that Five Below's business will likely rebound once the tough winter weather subsides.
The analyst is also not concerned about inventory levels, saying that most of what Five Below sells isn't perishable and can be sold at various times of the year. For season-specific items, Binder said that Five Below usually stores the items if they can be used again in the future.
Five Below foresees quarterly adjusted earnings in a range of 44 cents to 46 cents per share.
Wall Street is looking for earnings of 50 cents per share.
Shares of Five Below dropped $5.59, or 12.8 percent, to $38 in premarket trading about three hours before the market opening. The stock is up 32 percent over the last year.
Binder said if Five Below's shares decline when the market opens Friday, investors should take advantage of the opportunity.
"We think investors should buy on the dip as we believe Five Below's growth story remains attractive in the years to come," he wrote.
Binder maintained a "Buy" rating and reduced the company's price target to $48 from $51.
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