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Five Below (FIVE) Q1 Earnings Top Estimates, Comps Up Y/Y

·5 min read

In spite of a challenging backdrop, Five Below, Inc. FIVE commenced fiscal 2021 on a strong note. The company reported solid first-quarter results, wherein both the top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Impressively, both the metrics even surpassed pre-pandemic level. Well, the quarter marked the fourth straight sales and earnings beat. Notably, comparable sales increased significantly during the quarter under review.

Stronger-than-expected performance prompted management to provide an upbeat view for the second quarter. Markedly, shares of Five Below rose 5.9% during the after-market trading session on Jun 3. Meanwhile, shares of this Zacks Rank #3 (Hold) company have gained 8.8% in the past six months compared with the industry’s rally of 7.6%.

Undeniably, the company’s focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. Moreover, it is expanding self-checkout capabilities to make shopping convenient. Again, the two-pronged approach of massive coronavirus stimulus package and mass vaccination has acted as tailwind.

Let’s Introspect

Five Below delivered first-quarter fiscal 2021 earnings of 88 cents a share that comfortably surpassed the Zacks Consensus Estimate of 66 cents. Impressively, the bottom line improved sharply from a loss of 91 cents reported in the first quarter of fiscal 2020 and earnings of 46 cents posted in the first quarter of fiscal 2019.

Net sales of $597.8 million topped the Zacks Consensus Estimate of $556.9 million. The metric surged 197.6% from $200.9 million in the first quarter of fiscal 2020 and 63.9% from $364.8 million in the first quarter of fiscal 2019. The increase in sales was driven by double-digit ticket growth, partly offset by lower transactions due to reduced store hours. The company witnessed strength in the Sports, Tech, Style, Candy and Room worlds.

Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. Price, Consensus and EPS Surprise
Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote

We note that comparable sales for the quarter under review soared 162% against a decline of 51.8% in the year-ago quarter. For the comparable subset of stores that were open in both the first quarter of fiscal 2019 and the first quarter of fiscal 2021, sales jumped 23%. Management informed that e-commerce business registered double-digit growth year over year.

Gross profit surged to $200.9 million in the first quarter of fiscal 2021 from $20.5 million in the first quarter of fiscal 2020, while gross margin expanded to 33.6% from 10.2% in the year-ago period.

We note that SG&A expenses climbed 48.1% to $137.2 million during quarter under review. Operating income amounted to $63.7 million during quarter under discussion against an operating loss of $72.2 million in the first quarter of fiscal 2020. Markedly, operating income increased over 2.5 times from $24.5 million in the first quarter of fiscal 2019.

Financials

Five Below ended the quarter with cash and cash equivalents of $84.2 million and short-term investment securities of $299.3 million. Total shareholders’ equity was $930.6 million as of May 1, 2021.

Management incurred capital expenditures of approximately $76.4 million during the quarter. Five Below anticipates capital expenditures of approximately $315 million in fiscal 2021, excluding the impact of tenant allowances. This includes opening a new ship center in Arizona and commencing construction on a new ship center outside Indianapolis, inaugurating new stores and executing remodels, and investing in systems and infrastructure.

Store Updates

During the quarter, Five Below opened 67 net new stores. This took the total count to 1,087 stores as of May 1, 2021, in 39 states, reflecting an increase of 18.2% from the year-ago count. The company during the quarter remodeled about a dozen stores into five beyond prototype and now expects to conclude fiscal 2021 with approximately 30% of stores in the five beyond format. It plans to open about 30 new stores in the second quarter. Management plans to open 170-180 new stores in fiscal 2021. The company expects to complete about 30 remodels during the fiscal year.

Guidance

Five Below envisions second-quarter fiscal 2021 net sales in the range of $640 million to $660 million. Management forecast second-quarter earnings between $1.01 and $1.13 per share. The Zacks Consensus Estimate for revenues is pegged at $588.1 million, while the same for earnings per share currently stands at 70 cents.

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