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Five Below (FIVE) Q3 Earnings & Sales Beat, View Raised

Five Below, Inc. FIVE came up with third-quarter fiscal 2023 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Net sales grew, while earnings declined on a year-over-year basis. Management cited that an improved transaction trend and sales growth contributed to the company’s performance amid macroeconomic headwinds.

Let’s Delve Deeper

Five Below posted earnings per share of 26 cents in the third quarter of fiscal 2023, beating the Zacks Consensus Estimate of 23 cents. However, the company’s earnings per share decreased 10.3% from 29 cents reported in the year-ago quarter.

Net sales of $736.4 million increased 14.2% year over year and surpassed the Zacks Consensus Estimate of $727 million. Comparable sales for the quarter under discussion increased 2.5% against a decrease of 2.7% registered in the year-ago period. The increase was driven by 3.1% growth in comparable transactions. Our estimate for comparable sales growth was pegged at 1% for the quarter.

The gross profit grew 7.2% year over year to $222.8 million. Meanwhile, the gross margin contracted 190 basis points (bps) to 30.3%. The metric fell short of our estimate of 30.6%.

We note that selling, general and administrative (“SG&A”) expenses shot up 10.6% to $206.7 million. SG&A as a percentage of net sales decreased by approximately 90 bps to 28.1%, driven by the timing of marketing expenditures and leverage on certain store-related expenses. Our estimate for SG&A expenses, as a rate of net sales, was 28.8% for the quarter under review.

Operating income was down 23% to $16.1 million for the quarter under discussion. The operating margin decreased approximately 100 bps to 2.2% during the quarter compared with our estimate of 1.8%.

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 fiscal third quarter with cash and cash equivalents of $162.9 million and no short-term investment securities. Total shareholders’ equity was $1,377.9 million as of Oct 28, 2023. The company repurchased shares worth $80 million during the quarter.

The company’s board of directors recently announced the authorization to buy back up to $100 million of its common shares through Nov 27, 2026. This program will substitute its current share repurchase program, which recently retired.

Store Update

Five Below opened 74 new stores in the reported quarter. This took the total count to 1,481 stores in 43 states as of Oct 28, 2023, reflecting an increase of 14.6% from the year-ago count. The company plans to open more than 200 new stores in fiscal 2023. FIVE has converted more than 400 stores to the new Five Beyond format. It ended the fiscal third quarter with about half of its comparable store base in the new format.

Guidance

Five Below envisions fourth-quarter fiscal 2023 net sales in the range of $1.32-$1.35 billion, up from $1.12 billion reported in the fourth quarter of fiscal 2022. The company expects 2-3% growth in comparable sales for the fourth quarter. Management expects net income in the range of $201-$211 million.

Management anticipates fourth-quarter earnings per share between $3.64 and $3.80 compared with $3.07 reported in the year-ago period.

Five Below currently projects fiscal 2023 net sales in the band of $3.54-$3.57 billion compared with $3.1 billion reported in fiscal 2022. For fiscal 2023, Five Below anticipates comparable sales growth of 2.5%. Previously, the company projected net sales in the band of $3.50-$3.57 billion and comparable sales growth of 1-3%.

Management now anticipates earnings per share between $5.40 and $5.56 for fiscal 2023 compared with $5.27-$5.55 predicted earlier. This indicates an increase from $4.69 reported in the year-ago period. For the fiscal year, it expects to generate a net income of $300-$310 million. The 53rd week is expected to add about $40 million in sales and boost earnings by 8 cents per share.

FIVE anticipates gross capital expenditures of approximately $335 million in fiscal 2023.

Shares of this Zacks Rank #3 (Hold) company have increased by 2.8% in the past three months compared with the industry’s decline of 5%.

3 Red-Hot Stocks

Some better-ranked stocks from the same space are MINISO Group Holding Limited MNSO, Deckers Outdoor Corporation DECK and MarineMax HZO. While MINISO Group sports a Zacks Rank #1 (Strong Buy), Deckers Outdoor and MarineMax, each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MINISO Group operates as a retailer and wholesaler of lifestyle products. The Zacks Consensus Estimate for MNSO’s current financial-year earnings per share and sales suggests growth of 43.6% and 29.9%, respectively, from the corresponding year-ago reported figures.

Deckers Outdoor is a leading producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.

MarineMax is a recreational boat and yacht retailer and a superyacht services company. MarineMax has a trailing four-quarter negative earnings surprise of 10.1%, on average. The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.

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