Market News

Five Below Pops 5.7% After Posting A Blowout Quarter

Five Below stock was up about 5.7% in Wednesday’s extended trading session after the specialty discount store operator reported better-than-expected 4Q results. Moreover, its 1Q outlook also surpassed analysts’ expectations.

Five Below (FIVE) reported 4Q adjusted earnings of $2.20 per share, which grew 11.7% year-over-year and topped the Street’s estimates of $2.11 per share. Increased revenues and operating income led to earnings growth in 4Q.

Revenues jumped about 25% year-over-year to $858.5 million and came in ahead of the consensus estimates of $838.3 million. The top-line was driven by a 13.8% growth in comparable-store sales. The company opened 2 new stores and ended the quarter with 1020 stores.

As for 2021, the company’s CEO Joel Anderson said, “With plans to open 170 to 180 new stores in our Five Beyond prototype, we are excited to enter the two new states of Utah and New Mexico, bringing the states we operate in to 40. Concurrently, we are expanding our distribution center network with the addition of our Arizona facility this year.”

Meanwhile, for the first quarter of 2021, the company expects sales in the range of $540-$560 million, higher than analysts’ expectations of about $440.9 million. Furthermore, it expects earnings in the range of $0.56-$0.68 per share. Analysts were expecting 1Q earnings of $0.39 per share. (See Five Below stock analysis on TipRanks)

Following the results, Berenberg Bank analyst Brian McNamara maintained a Hold rating and a price target of $143 (about 27% downside potential) on the stock. In a note to investors, the analyst said, “As FIVE is currently operating from a position of strength, we were disappointed the company offered no full-year guidance, even if it was perhaps a wider range of outcomes than typical. Management candidly pointed to many unknowns this year, and we believe there is a reasonable expectation internally for some meaningful mean reversion in H2 as external tailwinds wane.” 

Overall, the Street has a Moderate Buy consensus rating on the stock based on 11 Buys and 4 Holds. The average analyst price target of $203.79 implies upside potential of about 4% to current levels. Shares have rallied 242.9% in one year.

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