Five Below, Inc. (FIVE) came up with better-than-expected second-quarter fiscal 2013 results. The quarterly earnings of 11 cents per share surpassed the Zacks Consensus Estimate by a couple of cents and increased almost threefold year over year.
Including one-time charges, quarterly earnings came in at 7 cents as against a loss of $3.41 per share in the prior-year period.
Robust top-line growth and increased margins drove the better-than-expected results. However, rising expenses were a headwind.
Net sales increased 34.9% year over year to $117.1 million and handily surpassed the Zacks Consensus Estimate of $113.0 million.
Comparable same store sales increased 6.6% as against an 8.6% rise in the prior-year period, primarily driven by strong performances across all categories. This quarter marks the 29th consecutive quarter in which the company posted positive comps.
Gross profit increased 37.1% year over year to $39.4 million. Gross profit margin expanded 60 basis points (bps) to 33.7%, mainly due to occupancy expense leverage, partly offset by the deleverage of distribution expenses from the new Olive Branch distribution center.
Adjusted operating income jumped 55.2% to $9.7 million on a year-over-year basis whereas operating margin expanded 110 bps to 8.3%.
During the quarter, the company opened 18 new outlets. At the end of the quarter, the company had 276 stores in 19 states, a 22% rise from the prior-year period.
Other Financial Aspects
This Zacks Rank #2 (Buy) company ended the quarter with cash and cash equivalents of $21.1 million, notes payable of $19.5 million and shareholders’ equity of $82.0 million.
During the first-half of fiscal 2013, net cash used in operating activities was $5.7 million and incurred capital expenditures of $15.1 million.
Outlook for Third-Quarter 2013
For the third quarter, net sales are expected to be $107-$109 million based on the 24 new store openings and assumption of a mid single-digit rise in comparable store sales.
Adjusted net income is expected to be around $1.5-$2.1 million resulting in earnings per share (EPS) of 3-4 cents. On GAAP basis, net income is expected to be in the band of $0.6-$1.2 million, coming to EPS of 1-2 cents.
For fiscal 2013, net sales are expected to be $531-$536 million based on the 60 new store openings in the whole year and assumption of a 5% rise in comparable store sales.
Adjusted net income is expected to be between $37.1 million and $38.8 million, resulting in EPS of 68-71 cents. On GAAP basis, net income is expected to be around $32.3-$34.0 million, with EPS in the range of 60-63 cents.
The Zacks Consensus Estimate for the third quarter and fiscal 2013 stands at 4 cents and 71 cents, respectively.
Other Stocks to Consider
Other stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN), Kirkland's Inc. (KIRK) and PCM, Inc. (PCMI). All of these carry a Zacks Rank #1 (Strong Buy).
- Personal Investing Ideas & Strategies