With first-quarter earnings season winding down, some retail bellwethers, such as Target TGT and Walmart WMT, have proven to Wall Street that they are ready to stand stall against Amazon’s AMZN encroachment. Meanwhile, deep-discount retailers such as Dollar General DG, Dollar Tree DLTR, and Five Below FIVE have all outpaced the industry over the last 12 months.
Therefore, let’s take a look at what investors should expect from Five Below’s first quarter fiscal 2019 financial results to see if FIVE stock might be worth buying at the moment.
Quick Retail Overview
The likes of Target, Walmart, Kroger KR, and Costco COST have all revved up their e-commerce and delivery businesses in recent years. These moves have helped the retail giants prepare for a more diverse future, where consumers have the ability to shop for the best deals more than ever before, thanks, in part, to Amazon and the ability to shop for consumer staples online. Meanwhile, the likes of Macy’s M, Nordstrom JWN, JC Penney JCP, and other department stores have suffered.
Five Below claims to offer “trend-right, high-quality products loved by tweens, teens and beyond.” The Philadelphia, Pennsylvania-based firm sells a range of products, all for $5 or less, under categories such as sports, tech, candy, books, and many more. Five Below operates roughly 750 stores across 33 states and offers delivery options through its e-commerce platforms.
The firm’s fiscal 2018 revenue jumped 22% to $1.56 billion, with comps up 3.9%. Five Below also opened 125 net new stores last year, up from 103 in 2017. “We are excited to continue our high growth with a record number of new store openings and remain confident in our 20/20 through 2020 goals and our ability to reach our 2,500+ U.S. store potential,” CEO Joel Anderson said in prepared remarks last quarter.
Moving on, our current Zacks Consensus Estimate calls for FIVE’s first-quarter revenue to surge 23.4% to reach $365.70 million. Last quarter, Five Below’s revenue jumped 19.4% to $602.7 million and topped our estimate. Looking further ahead, the retailer’s fiscal 2019 revenues are projected to jump 21.4% to $1.89 billion, which would nearly match 2018’s top-line expansion. Plus, FIVE’s fiscal 2020 revenue is projected to surge 21.7% above our current year estimate to $2.30 billion. This would mark three-straight years of roughly 22% full-year revenue growth.
At the bottom end of the income statement, FIVE’s adjusted quarterly earnings are projected to come in flat from the year-ago period at $0.35 per share. The company’s adjusted fourth-quarter 2018 earnings jumped roughly 30% to $1.58 per share. Five Below’s fiscal 2019 EPS figure is then expected to climb 15% to $3.06 per share. This would come on top of 2018’s 44% bottom-line growth.
Investors should also note that Five Below has a strong history of quarterly earnings beats. And we can see that FIVE’s climb—shares are up 250% in the last 5 years—has been matched by upward earnings revision trends.
Five Below is a Zacks Rank #2 (Buy) right now that sports an “A” grade for Growth and a “B” for Momentum in our Style Scores system. FIVE’s price/sales ratio of 4.6 currently rest well above its industry’s 0.4 average. And FIVE stock is trading at 39.2X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to its industry’s 25.2X average and its own five-year median of 30.6X.
Five Below has clearly proven to investors that it is worth the high multiples at the moment with its stock up huge. Let’s also not forget that the firm plans to expand its footprint in a major way. Therefore, Five Below stock might be one to consider at the moment, but buying stocks before earnings isn’t for the faint of heart. It is also worth noting that the escalating U.S.-China trade war could impact retailers like Five Below.
Five Below is scheduled to release its Q1 fiscal 2019 financial results after the closing bell on Wednesday, June 5. Make sure to head back to Zacks for a complete breakdown of the company’s actual metrics.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
Dollar General Corporation (DG) : Free Stock Analysis Report
Target Corporation (TGT) : Free Stock Analysis Report
Five Below, Inc. (FIVE) : Free Stock Analysis Report
J. C. Penney Company, Inc. (JCP) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
The Kroger Co. (KR) : Free Stock Analysis Report
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