Five Below (FIVE) Reports Strong Results and Guidance to Send Shares 6% Higher and Prompt Analysts to Hike PTs
Shares of Five Below (NASDAQ: FIVE) are up 6% in pre-open Friday after the company reported better-than-expected results and guidance.
FIVE registered earnings of $49.6 million in Q1 after recording a loss of $50.6 million in the same period last year. Earnings per share came in at $0.88 per share on sales of $598 million vs $-0.91 per share on sales of $201 million a year ago. Analysts were calling for $0.65 per share.
“Our first quarter results kicked off a great start to fiscal 2021, surpassing our expectations. Our teams did an outstanding job executing in an environment of elevated consumer demand. We saw broad-based strength across our worlds, as we offered customers the extreme value, trend-right products in an amazing shopping experience they expect from Five Below. We continued to invest in our growth, opening a record 68 new stores across various states, including Utah, our 39th state. Six of these new stores finished in the top 25 of all Spring grand openings,” Joel Anderson, President and CEO of Five Below, stated.
For Q2, the company is projecting EPS between $1.01 per share between $1.13 per share on sales ranging between $640 million and $660 million.
Jefferies analyst Randal Konik hiked the price target to $300.00 per share from $260.00 per share on the Buy-rated stock.
“1Q sales beat by ~10%, while EPS beat by >30%. Also impressive, many new stores finished in the top 25 of all Spring grand openings. This means that FIVE brand awareness continues to grow and that LT mature sales levels will continue to rise. This should result in higher LT comps, cost leverage, margin expansion, and strong FCF. Finally, Five Beyond could become the next leg of incremental productivity,” the analyst said in a note.
For Konik, FIVE remains a top idea in this coverage.
“We like FIVE's value-oriented offering, nimble and scaling business model, ample real estate growth opportunity ahead, and upside potential offered by Five Beyond. We believe there is a visible path to FIVE's long-term store count target of 2,500 units, which we believe may be conservative, and we believe that the inclusion of higher price-point products into the company's assortment should enhance FIVE's value offering and yield a multitude of benefits that are likely underappreciated in consensus estimates.”
Telsey Advisory Group analyst Joseph Feldman took note of a “strong quarter and guidance” to push him towards hiking the price target by $10 to $240.00 per share. He rates the stock as “Overweight.”
“We remain encouraged by the strong business momentum at Five Below and its ability to execute at a high level. The company should continue to benefit from: 1) its value-oriented assortment and treasure hunt experience; 2) its strong high-teens unit growth rate, with potential upside to the long-term target of 2,500+ stores; 3) the rollout of Five Beyond—above $5 to $15 items—which provides the flexibility to widen the assortment while still offering value at higher prices; 4) leverage of investments to operate more efficiently, including expansion of self-checkout (~60% of stores in 2021) and delivery (partnership with Instacart); and 5) expansion into new areas, like digital and gaming,” Feldman wrote in a memo.