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Five Below (FIVE) Q3 Earnings Beat, Comparable Sales Up 14.8%

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·5 min read
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  • BOOT
  • PLCE
  • TPR
  • FIVE

In spite of a challenging supply chain environment, Five Below, Inc. FIVE posted stellar third-quarter results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Impressive comparable sales run also continued in the quarter. Better-than-expected performance prompted management to provide an upbeat view for fiscal 2021. As a result, shares of this extreme-value retailer for tweens, teens and beyond rose 9.4% during the after-market trading session on Dec 1.

Five Below stated that the holiday season is off to a robust start. The company’s focus on providing trend-right products, strengthening digital capabilities and delivering better WOW products, including the Five Beyond offering, bode well. It is adding assisted checkout capabilities and committed toward providing same-day delivery service to make shopping convenient.

Shares of this Zacks Rank #2 (Buy) company have gained 6.3% in the past six months against the industry’s decline of 9.2%.

Let’s Introspect

Five Below delivered third-quarter fiscal 2021 earnings of 43 cents a share that topped the Zacks Consensus Estimate of 29 cents. Remarkably, the bottom line improved from earnings of 36 cents reported in third-quarter fiscal 2020.

Net sales of $607.6 million came ahead of the Zacks Consensus Estimate of $562.7 million. The metric rose 27.5% from revenues of $476.6 million in third-quarter fiscal 2020, thanks to solid product trends that drove traffic and new customers to outlets.

We note that comparable sales for the quarter under review climbed 14.8% compared with an increase of 12.8% registered in the year-ago period. The growth was driven by an improvement in comp transactions of 14.3% and a comp ticket increase of 0.5%.

Gross profit surged 33.9% year over year to $202.4 million, while gross margin expanded 160 basis points to 33.3%. We note that SG&A expenses climbed 26.1% to $159.9 million during the quarter. Operating income amounted to $42.4 million during the quarter under discussion, up 75.1% from $24.2 million in the third quarter of fiscal 2020. Operating margin expanded 190 basis points to 7% during the quarter.

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

Financials

Five Below ended the quarter with cash and cash equivalents of $86.8 million and short-term investment securities of $224.6 million. Total shareholders’ equity was $1,033.2 million as of Oct 30, 2021.

Management incurred capital expenditures of approximately $213.2 million during the 39-week period ended Oct 30, 2021. Five Below anticipates capital expenditures of approximately $310 million in fiscal 2021, excluding the impact of tenant allowances.

Store Updates

During the quarter, Five Below opened 52 new stores across 24 states, including entering the 40th state, New Mexico. This took the total count to 1,173 stores, as of Oct 30, 2021, reflecting an increase of 15.2% from the year-ago count. The company also informed that with the additional 17 new stores opened in the final quarter, it has completed 171 new openings for the fiscal year.

Guidance

Five Below envisions fourth-quarter fiscal 2021 net sales in the range of $985 million to $1,005 million compared with $858.5 million reported in the year-ago period. The company guided 2-4% increase in comparable sales compared with the record comparable sales growth of 13.8% last year. Management forecast fourth-quarter earnings between $2.36 and $2.48 per share compared with $2.20 in the prior-year period.

Management projected fiscal 2021 net sales in the band of $2,837 million to $2,857 million compared with $1,962.1 million reported in the year-ago period. The company anticipates a 30% jump in comparable sales. Management forecast earnings between $4.82 and $4.94 per share compared with $2.20 in the prior year, including benefit from share-based
accounting of approximately 8 cents.

Here are 3 More Key Stocks for You

Some better-ranked stocks include, Boot Barn Holdings BOOT, Tapestry TPR and The Children's Place PLCE.

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). Shares of the company have soared 181.8% in the past one year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.5% and 188%, respectively, from the year-ago period. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.

Tapestry, which provides luxury accessories and branded lifestyle products, flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 29%, on average. Shares of the company have jumped 33.6% in the past one year.

The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 14.8% and 17.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.

The Children's Place, a pure-play children’s specialty apparel retailer, carries a Zacks Rank #1. The company registered an earnings surprise of 19.6% in the last reported quarter. Shares of the company have rallied 83.8% in the past one year.

The Zacks Consensus Estimate for The Children's Place’s current financial year sales and EPS suggests growth of 27.4% and 464.9%, respectively, from the year-ago period. PLCE has an expected EPS growth rate of 8% for three-five years.


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