Why Is Five Below (FIVE) Down 14.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Five Below (FIVE). Shares have lost about 14.6% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Five Below due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Five Below Q3 Earnings Surpass Estimates, Gross Margin Rises Y/YFive Below reported third-quarter fiscal 2024 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. Also, net sales and earnings increased year over year. Third-quarter results surpassed expectations, with notable improvements across a wider array of merchandise categories and stronger operational performance. Strategic initiatives focused on introducing fresh offerings and providing value in key areas delivered strong results.The dedication of merchant and operational teams to the key priorities of product, value and store experience was instrumental in driving these outcomes. Looking forward, the focus will be on maintaining this momentum and successfully addressing customer needs during the critical fourth quarter.More on Five Below’s Q3 Results & Insight Into MarginsFive Below posted adjusted earnings per share of 42 cents in the fiscal third quarter, which beat the Zacks Consensus Estimate of 16 cents. Also, the figure increased 61.5% from 26 cents reported in the year-ago quarter.Net sales of $843.7 million increased 14.6% year over year. Also, this metric surpassed the Zacks Consensus Estimate of $801 million. Comparable sales (comps) increased 0.6% year over year, driven by a 1.2% increase in comp ticket, partially offset by a 0.6% decline in transaction volume.Adjusted gross profit grew 25.7% year over year to $280.1 million. We note that the adjusted gross margin increased approximately 290 bps year over year to 33.2%. This increase was primarily due to lapping the roughly 180 bps shrink true-up from the year-ago quarter, along with the timing of certain product margin benefits, including freight improvements and efficiencies in distribution.We note that SG&A expenses rose 24.4% to $215.4 million. Also, SG&A expenses, as a percentage of net sales, increased approximately 200 bps to 25.5%. This was mainly caused by higher store payroll expenses, including increased investments in labor hours and wages, along with fixed-cost deleverage. These impacts were partially offset by cost management initiatives that provided some leverage. Adjusted operating income was $27.6 million compared with $16.1 million in the third quarter of fiscal 2023. The adjusted operating margin increased approximately 110 bps to 3.3%. This was primarily due to lower-than-anticipated fixed cost deleverage, driven by the sales fee.Financial Snapshot: Cash and Equity OverviewFive Below ended the fiscal third quarter with cash and cash equivalents of $169.7 million and short-term investment securities of $46.9 million. Total shareholders’ equity was $1.62 billion as of Nov. 2. The company repurchased approximately 267,000 shares in the past nine months for about $40 million.Five Below Provides Q3 Store UpdateThe company opened 82 new stores and ended the quarter with a total of 1,749 stores across 44 states. This represents an 18.1% increase in the number of stores from the end of the third quarter of fiscal 2023.The company plans to open approximately 227 stores by the end of fiscal 2024, thereby taking the total count to 1,771 stores.What Lies Forward in Q4?For the fourth quarter of fiscal 2024, the company expects net sales to be in the range of $1.35-$1.38 billion, indicating growth of 5-7%, driven by the opening of approximately 22 net new stores and an anticipated 3% to 5% decrease in comparable sales. Adjusted gross margin at the midpoint is projected to decline approximately 90 bps. While a 100-bps benefit is expected from lapping last year’s shrink true-up, this is expected to be more than offset by fixed cost deleverage from the negative comparable sales and the timing of certain product costs, including freight.Adjusted SG&A as a percentage of sales is forecasted to increase approximately 120 bps at the midpoint, caused by fixed cost deleverage and investments in store hours and wages, partially offset by lower incentive compensation. These factors are expected to result in an adjusted operating margin decline of approximately 210 bps at the midpoint compared with the prior year’s fiscal fourth quarter.Net income for the fourth quarter is expected to fall between $174 million and $184 million, while adjusted net income is projected to be in the band of $179-$189 million. Earnings per share are expected between $3.15 and $3.33, and adjusted earnings are expected to range from $3.23 to $3.41.Five Below’s Fiscal 2024 OutlookFor fiscal 2024, the company expects net sales to grow between 9% and 10% and be in the range of $3.84-$3.87 billion, indicating the opening of approximately 227 net new stores and an estimated 3% decrease in comparable sales.Adjusted gross margin at the midpoint is expected to decrease about 20 bps due to fixed cost deleverage on the negative comparable sales, partially offset by lower inbound freight costs during the first half of the year, lapping last year’s shrink reserve true-up and efficiencies in distribution centers.Net income for the full year is projected to be between $240 million and $250 million, with adjusted net income expected to fall between $265 million and $275 million. Earnings per share for the year are anticipated to range from $4.34 to $4.52 and adjusted earnings are expected to be in the band of $4.78-$4.96. Gross capital expenditures for fiscal 2024 are expected to be approximately $340 million.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision.VGM ScoresCurrently, Five Below has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerFive Below is part of the Zacks Retail - Miscellaneous industry. Over the past month, Dick's Sporting Goods (DKS), a stock from the same industry, has gained 8.7%. The company reported its results for the quarter ended October 2024 more than a month ago.Dick's reported revenues of $3.06 billion in the last reported quarter, representing a year-over-year change of +0.5%. EPS of $2.75 for the same period compares with $2.85 a year ago.Dick's is expected to post earnings of $3.45 per share for the current quarter, representing a year-over-year change of -10.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.Dick's has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Five Below, Inc. (FIVE): Free Stock Analysis Report DICK'S Sporting Goods, Inc. (DKS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks