Discount retailer Five Below crushed analysts’ expectations by delivering 100% earnings growth in the third quarter of fiscal 2020 (which ended Oct. 31). Shares rose 1.9% in pre-market trading.
Five Below’s (FIVE) 3Q EPS doubled to $0.36, while analysts expected EPS of $0.20. The bottom line improved on robust sales and improved margins. Net sales grew 26.3% year-over-year to $476.6 million, driven by comparable sales growth of 12.8% and contribution from new stores. Analysts expected sales of $445.2 million.
The company stated that it delivered its highest comparable sales growth since 2010. It opened 36 new stores across 20 states in the quarter, bringing the total store count to 1,018.
Five Below did not provide any explicit guidance for 4Q but indicated that it is “very pleased with a strong start to the fourth quarter and the Black Friday weekend.” (See FIVE stock analysis on TipRanks)
Berenberg Bank analyst Brian McNamara reiterated a Hold rating on Five Below with a $127 price target following the earnings release. Commenting on 3Q sales performance, McNamara stated, “Impressive comps, but we believe a good portion was driven by pandemic-driven excess disposable income which should mean revert, in our view.”
“Strong start to Q4, but there is reasonable uncertainty as to how the quarter plays out. Management gave what we believe to be an honest and credible assessment regarding how the holiday season will play out for the teen and tween retailer. While it is very pleased with the start of Q4 up to and including Thanksgiving, there is uncertainty regarding how much of that spending has been pulled forward,” added McNamara.
The Street has a cautiously optimistic outlook on Five Below, with a Moderate Buy analyst consensus based on 7 Buys and 3 Holds. With shares advancing 22% year-to-date, the average price target of $151.60 indicates a downside of about 3% from current levels.
Related News:
Costco’s November Sales Lag Expectations; Oppenheimer Stays Bullish
Kohl’s To Host Sephora Beauty Shops; Shares Pop 13%
Amazon To Pay $500M In Holiday Bonuses; Street Is Bullish
