Yahoo Finance Why Is Five Below (FIVE) Down 14% Since Last Earnings Report?
A month has gone by since the last earnings report for Five Below (FIVE). Shares have lost about 14% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Five Below due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Five Below Earnings and Sales Miss Estimates in Q4
Five Below reported mixed fourth-quarter fiscal 2023 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. However, net sales and earnings increased 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.
Five Below posted earnings per share of $3.65 in the fourth quarter of fiscal 2023, lagging the Zacks Consensus Estimate of $3.78 per share. However, the company’s earnings per share increased 18.9% from $3.07 in the year-ago quarter.
Net sales of $1,337.7 million increased 19.1% year over year but missed the Zacks Consensus Estimate of $1,350 million. Comparable sales for the quarter under discussion rose 3.1% against a decrease of 1.9% registered in the year-ago period. The increase was driven by 3.9% growth in comparable transactions.
The gross profit grew 21.9% year over year to $551.6 million. Meanwhile, the gross margin contracted 90 basis points (bps) to 41.2%, primarily driven by lower inbound freight and leverage on fixed costs due to the extra week.
We note that selling, general and administrative (“SG&A”) expenses shot up 24.5% to $246.1 million. SG&A, as a percentage of net sales, decreased approximately 80 bps to 18.4%, attributed to the comparison with the previous year's cost-control strategies and a rise in incentive compensation from the prior year.
Operating income was up 18.9% to $268.4 million for the quarter under discussion. The operating margin was 20.1% in the quarter compared with our estimate of 20.7%.
Financials
Five Below ended the fiscal fourth quarter with cash and cash equivalents of $179.7 million, and short-term investment securities of $280.3 million. Total shareholders’ equity was $1,585 million as of Feb 3, 2024. The company repurchased shares worth $80 million during the quarter.
Store Update
Five Below opened 63 stores in the reported quarter. This took the total count to 1,544 stores in 43 states as of Feb 3, 2024, reflecting an increase of 15.2% from the year-ago count. The company plans to open 225-235 stores in fiscal 2024. FIVE has converted more than 450 stores to the new Five Beyond format. In fiscal 2023, the company opened 205 stores and ended the year with more than half of its comparable stores in the Five Beyond format.
Guidance
For the first quarter of fiscal 2024, net sales are expected to be $826-$846 million, which indicates a year-over-year increase of 13.7-16.5%. Comparable sales growth is projected between flat and 2%. It expects to generate a net income of $32-$38 million. The company plans to open 55-60 stores. Management anticipates fiscal first-quarter earnings per share between 58 cents and 69 cents, whereas it reported 67 cents in the year-ago period.
Five Below projects fiscal 2024 net sales of $3.97-$4.07 billion, whereas it posted $3.56 billion in fiscal 2023. For fiscal 2023, the company anticipates comparable sales to see between flat and 3% growth. Management anticipates earnings per share between $5.71 and $6.22 for fiscal 2024. This indicates an increase from the $5.41 reported in the year-ago period. For the fiscal year, it expects to generate a net income of $318-$346 million.
Approximately $365 million in gross capital expenditure (CapEx), excluding tenant allowances, is expected in fiscal 2024. This budget includes the opening of stores, approximately 200 conversions, the completion of distribution center expansions in Georgia and Arizona, the start of expansion at the Indiana distribution center, and investments in systems and infrastructure.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -14.47% due to these changes.
VGM Scores
Currently, Five Below has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Five Below has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Five Below, Inc. (FIVE) : Free Stock Analysis Report
