Five Below (FIVE) Q2 Earnings Beat Estimates, Sales Rise Y/Y
Five Below, Inc. FIVE came up with second-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line beat the same. Net sales and earnings grew year over year. Management cited that an improved transaction trend and sales growth contributed to the company’s performance amid macro headwinds.
Let’s Delve Deeper
Five Below posted earnings per share of 84 cents in the second quarter of fiscal 2023, beating the Zacks Consensus Estimate of 83 cents. The company’s earnings per share increased 13.5% from 74 cents reported in the year-ago period.
Net sales of $759 million increased 13.5% year over year but lagged the Zacks Consensus Estimate of $760 million. Comparable sales for the quarter under discussion increased 2.7% against a decrease of 5.8% registered in the year-ago period. The comparable sales increase was driven by growth of 4.5% in comp transactions. Our estimate for comparable sales growth was pegged at 2.3% for the quarter.
The gross profit grew 15.8% year over year to $264.6 million. Meanwhile, the gross margin expanded 70 basis points (bps) to 34.9%, which was driven by lower inbound freight costs. The metric fared better than our estimate of 34.1%.
We note that selling, general and administrative (SG&A) expenses shot up 19.4% to $206 million. SG&A as a percentage of net sales increased by approximately 140 bps to 27.1% due to higher marketing costs and an increase in certain store-related expenses. Our estimate for SG&A expenses, as a rate of net sales, was 26.4% for the quarter under review.
Operating income was up 4.6% to $58.6 million for the quarter under discussion. The operating margin decreased approximately 70 bps to 7.7% during the quarter, in line with our estimate.
Five Below, Inc. Price, Consensus and EPS Surprise
Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote
Financials
Five Below ended the fiscal second quarter with cash and cash equivalents of $334.5 million and short-term investment securities of $101.8 million. Total shareholders’ equity was $1,440.1 million as of Jul 29, 2023. The company did not make any repurchases during the quarter.
FIVE anticipates gross capital expenditures of approximately $335 million in fiscal 2023, excluding tenant allowances.
Store Update
Five Below opened 40 new stores in the reported quarter. This took the total count to 1,407 stores in 43 states as of Jul 29, 2023, reflecting an increase of 12.4% from the year-ago count. The company plans to open more than 200 new stores in fiscal 2023 and convert more than 400 stores to the new Five Beyond format in the same period.
Guidance
Five Below envisions third-quarter fiscal 2023 net sales in the range of $715-$730 million, up from $645 million reported in the third quarter of fiscal 2022.
The company expects flat to 2% growth in comparable sales for the third quarter. Management expects an operating margin in the range of 1.4%-2.1% in the same period.
Management anticipates third-quarter earnings per share between 17 cents and 25 cents compared with 29 cents reported in the year-ago period.
Management continues to project fiscal 2023 net sales in the band of $3.50-$3.57 billion compared with $3.1 billion reported in fiscal 2022. For fiscal 2023, Five Below continues to anticipate comparable sales growth in the range of 1-3%.
Management now anticipates earnings per share between $5.27 and $5.55 for fiscal 2023 compared with $5.31-$5.71 predicted earlier. This indicates an increase from $4.69 reported in the year-ago period.
Shares of this Zacks Rank #3 (Hold) company have increased by 6.1% in the past three months compared with the industry’s increase of 2.3%.
Stocks to Consider
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Boot Barn BOOT and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 10.1% and 1,372%, respectively, from the year-ago reported figures. ANF delivered an earnings surprise of 724.8% in the last four quarters, on average.
Boot Barn, a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 13.5%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 5.1% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an average earnings surprise of 9.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 8.3% from the year-ago reported figure.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
Five Below, Inc. (FIVE) : Free Stock Analysis Report
