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Why Is Five Below (FIVE) Up 21.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Five Below (FIVE - Free Report) . Shares have added about 21.4% 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 the most recent earnings report in order to get a better handle on the important drivers.
Five Below Meets Q2 Earnings Estimates, Lowers Fiscal 2024 View
Five Below reported second-quarter fiscal 2024 results, wherein the top line beat the Zacks Consensus Estimate and the bottom line met the same. However, net sales increased while earnings declined year over year, impacted by macroeconomic pressures and an evolving consumer environment. This led the company to lower its fiscal 2024 outlook.
More on Five Below’s Q2 Results & Insight Into Margins
Five Below posted earnings per share of 54 cents in the second quarter. The figure decreased 35.7% from 84 cents in the year-ago quarter.
Net sales of $830.1 million increased 9.4% year over year. Also, this metric surpassed the Zacks Consensus Estimate of $822 million. Comparable sales decreased 5.7% year over year.
The gross profit grew 2.7% year over year to $271.8 million. Also, the gross margin decreased approximately 220 basis points (bps) year over year to 32.7%.
We note that SG&A expenses rose 7.8% to $188.8 million. SG&A, as a percentage of net sales, decreased approximately 40 bps to 22.7%.
Adjusted operating income was $37 million compared with $42.4 million in the second quarter of fiscal 2023. The adjusted operating margin decreased approximately 530 bps and to 6.6%.
FIVE’s Financial Snapshot: Cash & Equity Overview
Five Below ended the fiscal second quarter with cash and cash equivalents of $209 million and short-term investment securities of $118.7 million. Total shareholders’ equity was $1.61 billion as of Aug. 3. The company repurchased approximately 85,000 shares in the second quarter for about $10 million.
Five Below Provides Q2 Store Update
The company opened 62 new stores and ended the quarter with a total of 1,667 stores across 43 states. This represents an 18.5% increase in the number of stores from the end of the second quarter of fiscal 2023. It plans to open approximately 85 new stores in the third quarter compared with 74 stores in the year-ago quarter.
The company plans to open approximately 230 stores by the end of fiscal 2024, thereby taking the total count to 1,774 stores, which represents unit growth of approximately 14.9%.
What Lies Forward for FIVE?
Net sales for the fiscal third quarter are expected to range between $780 million and $800 million. This projection indicates a mid-single-digit decline in comparable sales, reflecting some challenges in the broader retail environment or specific operational factors.
For profitability, the company anticipates net loss to be between $2 million and $13 million. However, on an adjusted basis, which likely excludes certain one-time costs or non-operational items, net income is expected to be between $5 million and $12 million, with adjusted earnings per share in the range of 10-20 cents.
The updated outlook for fiscal 2024 indicates net sales to be between $3.73 billion and $3.80 billion, slightly lower than the previous forecasted range of $3.79-$3.87 billion. This adjustment reflects a more conservative estimate, with comparable sales anticipated to decrease in the range of 4-5.5% compared with the earlier expectation of a 3-5% decline.
Net income is now expected to be in the range of $220-$244 million compared with the previous estimate of $277-$299 million. Similarly, adjusted net income is expected to be in the range of $241-$261 million. Adjusted earnings per share are now expected to be between $4.35 and $4.71, down from the prior expectation of $5.00-$5.40. Gross capital expenditures are expected to be approximately $335-$345 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
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 C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending downward for the stock, and the magnitude of these revisions has been net zero. 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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Why Is Five Below (FIVE) Up 21.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Five Below (FIVE - Free Report) . Shares have added about 21.4% 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 the most recent earnings report in order to get a better handle on the important drivers.
Five Below Meets Q2 Earnings Estimates, Lowers Fiscal 2024 View
Five Below reported second-quarter fiscal 2024 results, wherein the top line beat the Zacks Consensus Estimate and the bottom line met the same. However, net sales increased while earnings declined year over year, impacted by macroeconomic pressures and an evolving consumer environment. This led the company to lower its fiscal 2024 outlook.
More on Five Below’s Q2 Results & Insight Into Margins
Five Below posted earnings per share of 54 cents in the second quarter. The figure decreased 35.7% from 84 cents in the year-ago quarter.
Net sales of $830.1 million increased 9.4% year over year. Also, this metric surpassed the Zacks Consensus Estimate of $822 million. Comparable sales decreased 5.7% year over year.
The gross profit grew 2.7% year over year to $271.8 million. Also, the gross margin decreased approximately 220 basis points (bps) year over year to 32.7%.
We note that SG&A expenses rose 7.8% to $188.8 million. SG&A, as a percentage of net sales, decreased approximately 40 bps to 22.7%.
Adjusted operating income was $37 million compared with $42.4 million in the second quarter of fiscal 2023. The adjusted operating margin decreased approximately 530 bps and to 6.6%.
FIVE’s Financial Snapshot: Cash & Equity Overview
Five Below ended the fiscal second quarter with cash and cash equivalents of $209 million and short-term investment securities of $118.7 million. Total shareholders’ equity was $1.61 billion as of Aug. 3. The company repurchased approximately 85,000 shares in the second quarter for about $10 million.
Five Below Provides Q2 Store Update
The company opened 62 new stores and ended the quarter with a total of 1,667 stores across 43 states. This represents an 18.5% increase in the number of stores from the end of the second quarter of fiscal 2023. It plans to open approximately 85 new stores in the third quarter compared with 74 stores in the year-ago quarter.
The company plans to open approximately 230 stores by the end of fiscal 2024, thereby taking the total count to 1,774 stores, which represents unit growth of approximately 14.9%.
What Lies Forward for FIVE?
Net sales for the fiscal third quarter are expected to range between $780 million and $800 million. This projection indicates a mid-single-digit decline in comparable sales, reflecting some challenges in the broader retail environment or specific operational factors.
For profitability, the company anticipates net loss to be between $2 million and $13 million. However, on an adjusted basis, which likely excludes certain one-time costs or non-operational items, net income is expected to be between $5 million and $12 million, with adjusted earnings per share in the range of 10-20 cents.
The updated outlook for fiscal 2024 indicates net sales to be between $3.73 billion and $3.80 billion, slightly lower than the previous forecasted range of $3.79-$3.87 billion. This adjustment reflects a more conservative estimate, with comparable sales anticipated to decrease in the range of 4-5.5% compared with the earlier expectation of a 3-5% decline.
Net income is now expected to be in the range of $220-$244 million compared with the previous estimate of $277-$299 million. Similarly, adjusted net income is expected to be in the range of $241-$261 million. Adjusted earnings per share are now expected to be between $4.35 and $4.71, down from the prior expectation of $5.00-$5.40. Gross capital expenditures are expected to be approximately $335-$345 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
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 C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending downward for the stock, and the magnitude of these revisions has been net zero. 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.