Five Below (FIVE) down 12% as both Q4 results and guidance come short
Five Below (NASDAQ: FIVE) saw its shares tumble more than 12% in premarket trading Thursday after the chain of specialty discount stores reported below-consensus fiscal Q4 results and guidance.
For FQ4 2023, Five Below reported earnings per share (EPS) of $3.65, short of the consensus estimates of $3.78. The company's revenue for the quarter was reported at $1.34 billion, slightly below the analyst projection of $1.35 billion.
Looking ahead, Five Below provided its financial outlook for both the first quarter and the full year of 2025.
For the first quarter, it anticipates an EPS in the range of $0.58 to $0.69, missing the analyst consensus of $0.76. Revenue expectations for the same period are set between $826 million and $846 million, also short of the $852 million expected by analysts.
For the full fiscal year of 2025, Five Below projects an EPS between $5.71 and $6.22, which again is lower than the consensus estimate of $6.47. Revenue is estimated to range between $3.97 billion and $4.07 billion, falling short of the expected $4.11 billion by market analysts.
"Holiday 2023 marked a strong end to the year for sales performance as our amazing assortment of Wow product drove yet another quarter of comp transaction growth, led by the Five Beyond format stores,” said Joel Anderson, President and CEO of Five Below.
“We have implemented additional shrink mitigation initiatives based on our 2023 learnings. However, we expect the resulting benefits to take some time to realize, and therefore, we have not included any associated improvement in our outlook this year,” he added.
Commenting on FIVE's Q4 print, Goldman Sachs analysts led by Kate McShane said:
"We note that sales thus far during 1Q were softer in February, which management attributed to the timing of tax refunds, but have since improved during March, while higher-than-expected shrink is expected to weigh on FY24 margins."
The quarter's key highlights suggest potential guidance improvement with successful shrink mitigation, increased transactions from Five Beyond with penetration expected to hit around 70% by FY24's end, and restored store growth "with an accelerated real estate review process," analysts wrote.
Meanwhile, Telsey Advisory Group analysts lowered its price target on FIVE from $230 to $220 but maintained an Outperform rating.
They said Five is taking “active steps to mitigate shrink,” which has been weighing on its top and bottom lines. Those include transitioning to traditional associate checkout and assisted self-checkout, along with introducing new methods like receipt verification and increasing staff and security presence.
"We expect these mitigation efforts to work as the year progresses and believe the shrink pressure will prove somewhat transitory," Telsey's team wrote.
By Vahid Karaahmetovic