Is Five Below Back on Track for Growth?

Retail

Published: March 26, 2015 8:55 am

Last Updated: March 26, 2015 8:57 am

Five Below Inc. (NASDAQ: FIVE) reported its fiscal fourth-quarter earnings Wednesday after the markets closed. The retailer, with prices generally under $5, reported earnings of $0.61 per share and $263.8 million in revenue, versus the Thomson Reuters consensus estimates of $0.60 per share and $262.3 million. In the same quarter of the previous year, it posted $0.47 per share earnings and $212.0 million in revenue.

The company gave its outlook for the first quarter as revenues in a range of $150 million to $152 million. It also plans to open 18 new stores. There is a consensus estimate $154.24 million in revenue.

In the beginning of January, the company announced softer than previously guided sales, but at the same time sales were growing. The company said that net sales in this period increased by 24.5% from the same period in the previous year, from $185.3 million to $230.7 million.

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In the fourth quarter, Five Below opened only one new store but ended the quarter with a total of 366 stores in 21 states. Its number of stores was up 20% from same period in the previous year.

Looking at the balance sheet, at the end of January Five Below had cash and cash equivalents totaling $63.2 million and total liquidity of $83.2 million.

Joel Anderson, CEO of Five Below, commented on the 2015 plan:

We look forward to an exciting year in 2015 for Five Below. We plan to open 70 new stores and generate a same store sales increase of approximately 3% while simultaneously making long-term investments in people, systems and infrastructure to support our future growth. Looking ahead to 2016, as we leverage these investments, we expect to deliver net income growth of 25%+.

Sterne Agee maintained a Buy rating for Five Below and lowered its price target to $40 from $42. At the same time, the firm lowered its 2015 and 2016 fiscal year estimates to $1.04 from $1.32 and to $1.10 from $1.40 respectively.

Shares of Five Below closed Wednesday down 1.4% at $32.22. Following the release of the earnings report, shares were up about 5.5% at $5.52 in premarket trading on Thursday. The consensus analyst price target is $40.93, and the 52-week trading range is $28.51 to $47.89.

Investors are likely wondering if the company’s growth getting back on track.

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