A month has gone by since the last earnings report for Five Below (FIVE Quick QuoteFIVE - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Five Below due for a pullback? 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 (FIVE Quick QuoteFIVE - Free Report) Q4 Earnings Top Estimates, Sales Rise Y/Y

Five Below, Inc. posted strong fourth-quarter fiscal 2022 results. The results were backed by better-than-expected holiday period sales and overall quarter sales. Management cited that continued improvement in transaction metrics and delivery of high-value products contributed to the company’s performance amid a strong inflationary environment.

Let’s Delve Deeper

Five Below posted earnings per share of $3.07 for the fourth quarter of fiscal 2022, which beat the Zacks Consensus Estimate of $3.06. The company’s earnings per share increased 23.3% from $2.49 reported in the year-ago period.

Net sales of $1,122.8 million increased 12.7% year over year and came ahead of the Zacks Consensus Estimate of $1,105 million. Net sales for the holiday period, from Oct 30, 2022 to Jan 7, 2023, increased 11.2% to $1,003.7 million compared with $902.3 million reported in the year-ago holiday period.

Comparable sales for the quarter under discussion increased 1.9% compared with an increase of 3.4% registered in the year-ago period. The comp increase was driven by an increase in comp transaction of 2.8% which was partially offset by a decline in comp average ticket of 0.9% in the reported quarter. During the holiday period, comparable sales increased 0.9%.

Gross profit grew 14% year over year to $452.4 million and gross margin expanded approximately 50 basis points (bps) to 40.3%. This increase was primarily driven by cost management strategies in distribution and freight expenses, which were partially offset by higher-than-expected shrink.

We note that selling general and administrative (SG&A) as a percentage of net sales declined by approximately 80 bps to 20.2% due to lower incentive compensation and cost management strategies. Operating income increased 20.4% to $225.8 million for the quarter under discussion. Also, the operating margin increased approximately 130 bps to 20.1% during the quarter.

Financials

Five Below ended the fiscal year with cash and cash equivalents of $332.3 million and short-term investment securities of $66.8 million. Total shareholders’ equity was $1,361.9 million as of Jan 28, 2023. In fiscal 2022, Five Below repurchased 247,132 shares for approximately $40 million.

Five Below anticipates gross capital expenditures of approximately $325 million in fiscal 2023, excluding tenant allowances.

Store Update

Five Below opened 48 new stores in the reported quarter. This took the total count to 1,340 stores in 42 states as of Jan 28, 2023, reflecting an increase of 12.6% from the year-ago count. The company plans to open about 200 new stores in fiscal 2023 and convert 400 stores to the new Five Beyond format in the same period.

Guidance

Five Below envisions first-quarter fiscal 2023 net sales in the range of $723 million to $735 million, up from $639.6 million reported in the first quarter of fiscal 2022.

The company expects comparable sales to increase in the range of 2.5-4% in the first quarter. Management also expects operating margin in the range of 5.7% to 6.2% in the same period.

Management anticipates first-quarter earnings between 59 cents and 65 cents per share compared with 59 cents reported in the year-ago period.

Management projects fiscal 2023 net sales in the band of $3.49 billion to $3.59 billion, up from $3.1 billion reported in fiscal 2022. Five Below anticipates comparable sales to be up 1-4% in fiscal 2023.

Management guided earnings between $5.25 and $5.76 per share for fiscal 2023, an increase from $4.69 reported in the year-ago period.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -10.67% due to these changes.

VGM Scores

Currently, Five Below has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Five Below belongs to the Zacks Retail - Miscellaneous industry. Another stock from the same industry, Ulta Beauty (ULTA Quick QuoteULTA - Free Report) , has gained 2.8% over the past month. More than a month has passed since the company reported results for the quarter ended January 2023.

Ulta reported revenues of $3.23 billion in the last reported quarter, representing a year-over-year change of +18.2%. EPS of $6.68 for the same period compares with $5.41 a year ago.

For the current quarter, Ulta is expected to post earnings of $6.76 per share, indicating a change of +7.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Ulta. Also, the stock has a VGM Score of A.