Five Below (FIVE) Plunges After Missing Q2 Revenue Views, Company Still Well-Positioned Says Goldman
Shares of Five Below (NASDAQ: FIVE) are down 9% in pre-open Thursday after the company delivered weaker-than-expected Q2 sales.
Five Below reported Q2 EPS of $1.15 to top the analyst estimate of $1.11. Revenue for the quarter came in at $646.6 million versus the consensus estimate of $648.28 million.
“We had another strong quarter, with the team executing well in a dynamic operating environment. Sales increased 55% and earnings per share increased 125% versus the second quarter of 2019. Once again, the strength was broad-based throughout our worlds. New store growth continued with the opening of 34 new stores across 19 states, bringing our new store count for the first half to a record 102 new stores,” Joel Anderson, President and CEO of Five Below.
For the current quarter, FIVE is projecting sales between $550 million to $565 million and net income in the range of $12.8 million to $16.7 million.
Goldman Sachs analyst Kate McShane reiterated a Buy rating and a $236.00 per share price target on FIVE as he remains positive overall on the company’s outlook.
“2Q results were essentially in line with Street expectations, although mixed vs the company’s guidance as sales were on the low end and EPS beat. FIVE also provided 3Q guidance (still not providing full year given the uncertain backdrop) which came in as expected with SSS slightly better. However, given FIVE’s history of exceeding expectations, we do not think it is enough to excite investors as risks, such as increasing freight costs and potentially slowing consumer demand, weigh on the sector. However, we continue to like FIVE given its differentiated treasure hunt offering that is resonating well with customers, supporting strong unit growth potential, while the company also seems to be better positioned with respect to freight exposure vs retail peers,” McShane said in a client note.
KeyBanc analyst Bradley Thomas maintained a Sector Weight rating on FIVE.
“FIVE’s 2Q was strong, though sales were slightly below expectations. QTD trends are solid, and 3Q guidance spans consensus. Encouragingly, given the continued success of the Five Beyond initiative, it will be expanded to 50% of stores in 2022, which should help to offset cost inflation and enhance margins. We believe the LT outlook for FIVE remains compelling, and view FIVE as one of the more intriguing growth stories in our coverage, though we remain SW due to valuation, particularly given what have been lofty investor expectations of late,” Thomas wrote in a note sent to clients.