Five Below (FIVE) Q3 Earnings & Sales Beat Estimates, Stock Up
Five Below, Inc. FIVE posted better-than-expected third-quarter fiscal 2022 results despite a tough operational environment. Management cited that a continued improvement in the ticket and transaction metrics, disciplined cost management and a sustained focus on the long-term Triple Double vision contributed to the company’s performance. Five Below raised its full-year view.
Shares of this extreme-value retailer for tweens, teens and beyond rose 9.1% during the after-market trading session on Nov 30. Over the past six months, shares of this Zacks Rank #3 (Hold) company have rallied 22.4% compared with the industry’s rise of 11.8%.
Let’s Introspect
Five Below delivered third-quarter earnings of 29 cents a share, which beat the Zacks Consensus Estimate of 14 cents. However, the bottom line fell from the earnings of 43 cents reported in the year-ago period.
Net sales of $645 million increased 6.2% year over year and came ahead of the Zacks Consensus Estimate of $611 million. Comparable sales for the quarter under discussion declined 2.7% against an increase of 14.8% registered in the year-ago period. While comp tickets decreased 1.8%, comp transactions fell 0.9% in the reported quarter.
Five Below, Inc. Price, Consensus and EPS Surprise
Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote
The gross profit grew 2.7% year over year to $207.8 million. Meanwhile, the gross margin contracted roughly 110 basis points to 32.2% due to occupancy deleverage.
We note that SG&A expenses shot up 16.9% to $186.9 million, while as a percentage of net sales, the same deleveraged 270 basis points to 29%. The operating income was $20.9 million for the quarter under discussion, down from the $42.4 million reported in the year-ago period. Also, the operating margin shrunk approximately 375 basis points to 3.2% during the quarter.
Financials
Five Below ended the quarter with cash and cash equivalents of $44.2 million and short-term investment securities of $72.7 million. Total shareholders’ equity was $1,184.5 million as of Oct 29, 2022. Year to date, Five Below repurchased 247,132 shares for approximately $40 million.
Five Below anticipates gross capital expenditures of approximately $235 million in fiscal 2022, excluding tenant allowances.
Store Update
Five Below opened 40 new stores in the reported quarter. This took the total count to 1,292 stores in 42 states as of Oct 29, 2022, reflecting an increase of 10.1% from the year-ago count. The company plans to open about 48 new stores in the fourth quarter and 150 new stores in fiscal 2022.
The company also concluded the 2022 Five Beyond growth initiative with approximately 250 stores converted to the new store format.
Guidance
Five Below envisions fourth-quarter fiscal 2022 net sales in the range of $1,085 million-$1,110 million compared with the $996.3 million reported in the year-ago period.
The company expects a 1% decline to a 1% increase in comparable sales in the fourth quarter against an increase of 3.4% registered in the year-ago period. Management anticipates fourth-quarter earnings between $2.93 and $3.09 per share. This suggests an increase from the earnings of $2.49 reported in the prior-year period.
Five Below foresees an improvement of about 150 basis points in the fourth-quarter operating margin due to leverage in both the gross margin and SG&A expenses.
Management projected fiscal 2022 net sales in the band of $3,038 million-$3,063 million. The current view is up from the prior forecast of $2.97 billion to $3.02 billion. The company reported net sales of $2.85 billion last fiscal.
Five Below anticipates comparable sales to be down 2-3% against an increase of 30.3% recorded in the prior year. The company had earlier projected comparable sales to decline 3% to 5%.
Management guided earnings between $4.55 and $4.71 per share. The current view is also up from the prior forecast of $4.26 to $4.56 per share. The company reported earnings of $4.95 in fiscal 2021.
3 Key Picks
Here we have highlighted three better-ranked stocks, namely Crocs CROX, Chipotle Mexican Grill CMG and Arhaus ARHS.
Crocs, a leader in innovative casual footwear for women, men and children, carries a Zacks Rank #2 (Buy). CROX has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS suggests growth of 51.5% and 23.7%, respectively, from the year-ago period. CROX has a trailing four-quarter earnings surprise of 18.2%, on average.
Arhaus, a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 14.3%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 49.1% and 21.7%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.1% and 31%, respectively, from the year-ago reported figure. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.
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Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
Five Below, Inc. (FIVE) : Free Stock Analysis Report
Arhaus, Inc. (ARHS) : Free Stock Analysis Report
