Five Below (FIVE) Q2 Earnings: Will the Momentum Sustain?

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Five Below, Inc.FIVE is slated to report second-quarter fiscal 2018 results on Sep 6. In the trailing four quarters, this specialty value retailer has outperformed the Zacks Consensus Estimate by an average of 16%. In the last reported quarter, the company delivered a positive earnings surprise of 9.4%.

The Zacks Consensus Estimate for the quarter under review is pegged at 38 cents compared with 30 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. The Zacks Consensus Estimate for revenues is pegged at $335.1 million, up approximately 18% from the year-ago quarter.

Let's delve deeper and take a look at the factors that are likely to influence the results of the to-be-reported quarter.

Factors Holding Key

Five Below's commitment toward enhancement of digital and e-commerce channels, improvement in customers' shopping experience, store openings as well as marketing efforts bode well for the stock. The company focuses on expanding store base as well as enhancing the in-store experience to draw traffic.

The company's primary focus on teens and pre-teens help enhance customer base by attracting shoppers. Further, Five Below is known for its impressive range of merchandise, as it remains committed toward making innovations and refreshing its products per the evolving consumer trends. These factors combined with the company's pricing strategy of selling products for $5 or below enable it to cater to demographic shoppers, alongside resonating with value-seeking customers.

Five Below has been witnessing positive comparable store sales growth for six straight quarters now. The company had earlier projected fiscal 2018 comparable sales to increase in the band of 1-2%. However, a flat comparable sales projection for the second quarter raises concern but the cloud clears on introspection as one realizes that it is due to tough year over year comparison when spinners drove the traffic in the year-ago period.

Nonetheless, SG&A expenses have been increasing for quite some time now. This is likely to hurt the company's income, unless fully offset by substantial increase in net sales. Management expects second-quarter operating margin to contract 100 basis points. This may be due to deleverage in fixed expenses on account of lower comparable sales and the timing of the $7.5 million in Tax Reform related investments.

Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. Price, Consensus and EPS Surprise | Five Below, Inc. Quote

What the Zacks Model Unveils?

Our proven model does not conclusively show that Five Below is likely to beat earnings estimates this quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Five Below has a Zacks Rank #2 but an Earnings ESP of 0.00%. This makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Costco Wholesale Corporation COST has an Earnings ESP of +0.49% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Dave & Buster's Entertainment, Inc. PLAY has an Earnings ESP of +1.49% and a Zacks Rank #3.

NIKE, Inc. NKE has an Earnings ESP of +3.56% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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