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Five Below (FIVE) Q2 Earnings Beat Estimates, Comps Rise Y/Y

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In spite of a challenging backdrop, Five Below, Inc. FIVE delivered a decent performance in second-quarter fiscal 2021, wherein both the top and the bottom lines not only improved year over year but also surpassed the pre-pandemic level. While earnings per share beat the Zacks Consensus Estimate for the fifth straight quarter, net sales fell short of the same, which hurt investor sentiment. As a result, shares of this specialty value retailer fell 9.3% during the after-market trading session on Sep 1.

Nonetheless, Five Below stated that the third quarter is off to a robust start from a sales perspective. The company’s focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. It is expanding self-checkout capabilities and committed toward providing same-day delivery service to make shopping convenient. Comparable sales increased significantly during the quarter under review.

Shares of this Zacks Rank #3 (Hold) company have gained 21.5% in the past three months against the industry’s decline of 9%.

Let’s Introspect

Five Below delivered second-quarter fiscal 2021 earnings of $1.15 per share that topped the Zacks Consensus Estimate of $1.11. Impressively, the bottom line improved sharply from earnings of 53 cents in second-quarter fiscal 2020 and 51 cents in second-quarter fiscal 2019.

Net sales of $646.6 million missed the Zacks Consensus Estimate of $658.2 million. However, the metric surged 51.7% from $426.1 million in the second quarter of fiscal 2020 and rose 54.9% from $417.4 million in the second quarter of fiscal 2019. 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 climbed 39.2% against a decline of 12.2% in the year-ago quarter. For the comparable subset of stores that were open in both the second quarter of fiscal 2019 and the second quarter of fiscal 2021, sales jumped 21%.

Gross profit surged 64.7% year over year to $230.3 million, while gross margin expanded 280 basis points to 35.6%. We note that SG&A expenses climbed 35.1% to $144.2 million during the quarter. Operating income amounted to $86.2 million during the quarter under discussion, up 160% from $33.1 million in the second quarter of fiscal 2020 and 139.2% from $36 million in the second quarter of fiscal 2019.

Financials

Five Below ended the quarter with cash and cash equivalents of $126.2 million and short-term investment securities of $286.9 million. Total shareholders’ equity was $1,002.5 million as of Jul 31, 2021.

Management incurred capital expenditures of approximately $134.6 million during the 26-week period ended Jul 31, 2021. Five Below continues to anticipate capital expenditures of approximately $315 million in fiscal 2021, excluding the impact of tenant allowances.

Store Updates

During the quarter, Five Below opened 34 new stores. This took the total count to 1,121 stores in 39 states, as of Jul 31, 2021, reflecting an increase of 14.2% from the year-ago count. The company plans to open about 40-45 new stores in the third quarter. Management plans to open 170-175 new stores in fiscal 2021. The company expects to complete about 30 remodels during the fiscal year.

Guidance

Five Below envisions third-quarter fiscal 2021 net sales in the range of $550 million to $565 million compared with $476.6 million reported in the year-ago period. The company guided mid-single digit growth in comparable sales. Management forecast third-quarter earnings between 23 cents and 30 cents a share compared with 36 cents in the prior-year period. The Zacks Consensus Estimate for revenues is pegged at $547.5 million, while the same for earnings per share currently stands at 24 cents.

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Abercrombie & Fitch Co. ANF has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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