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Five Below (FIVE) Q4 Earnings Beat, Sales Increase 16% Y/Y

Five Below, Inc. FIVE posted mixed fourth-quarter fiscal 2021 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line surpassed the same. Both metrics grew year over year. An impressive comparable sales run also continued in the quarter.

Over the past three months, shares of Five Below have dropped 9.1% compared with the industry’s decline of 15.4%.

Let’s Introspect

Five Below delivered fourth-quarter fiscal 2021 earnings of $2.49 a share that topped the Zacks Consensus Estimate by a penny. The bottom line also improved 13.2% from earnings of $2.20 reported in fourth-quarter fiscal 2020.

Net sales of $996.3 million came below the Zacks Consensus Estimate of $1,012 million. The metric rose 16.1% from revenues of $858.5 million reported in fourth-quarter fiscal 2020, thanks to higher comparable sales. We note that comparable sales for the quarter under review rose 3.4% compared with an increase of 13.8% registered in the year-ago period. Growth was driven by higher transactions and tickets.

Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. Price, Consensus and EPS Surprise

Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote

Gross profit climbed 16.4% year over year to $396.9 million, while gross margin expanded 10 basis points to 33.3%, backed by efficiencies and leverage. This was partly offset by elevated inbound freight costs and the shift in store freight.

We note that SG&A expenses climbed 22.2% to $209.3 million during the quarter. Operating income amounted to $187.6 million during the quarter under discussion, up 10.6% from $169.6 million reported in the third quarter of fiscal 2020. However, operating margin contracted 90 basis points to 18.8% during the quarter.

Financials

This presently Zacks Rank #3 (Hold) player ended the quarter with cash and cash equivalents of $65 million and short-term investment securities of $277.1 million. Total shareholders’ equity was $1,120.3 million as of Jan 29, 2022.

Five Below repurchased 368,699 shares for approximately $60 million in the fiscal fourth quarter.

Management incurred capital expenditures of $288.2 million during the 52-week period ended Jan 29, 2022. Five Below anticipates capital expenditures of approximately $220 million in fiscal 2022, excluding the impact of tenant allowances.

Store Updates

Five Below opened 17 stores in the reported quarter. During fiscal 2021, FIVE opened 171 stores and remodeled 45 outlets. This took the total count to 1,190 stores as of Jan 29, 2022, reflecting an increase of 16.7% from the year-ago count.

For fiscal 2022, Five Below predicts opening approximately 160 stores, about 100-110 openings in the second half with nearly 20 in January. FIVE anticipates completing roughly 45 remodels and 200 conversions to the new Five Beyond prototype. In the first quarter of fiscal 2022, FIVE will open around 35 stores.

Also, management intends to open 15 stores in the urban markets in the said fiscal year, 11 of which will be in the New York City. FIVE plans to triple its U.S. store base to 3,500 by 2030 from about 1,200 stores currently.

Long-Term Developments

Management updated the "Triple-Double" growth vision and other long-term goals. It anticipates accomplishing double sales and more than double earnings per share by fiscal 2025 end. FIVE expects to increase the operating margin to nearly 14%.

Management aims to open about 1,000 stores, of which around 375-400 new stores in the next two fiscal years, and 550-600 new stores in fiscal 2024 and 2025.

Guidance

Management issued guidance for first-quarter and fiscal 2022. This outlook indicates pandemic-led delays in construction and permitting a shift of stores into the second half of the current fiscal year and the first half of fiscal 2023 besides the inflationary impacts.

Five Below envisions first-quarter fiscal 2022 net sales in the range of $644=$658 million compared with $597.8 million reported in the last fiscal year. FIVE expects a flat to 2% decrease in comparable sales. Management forecasts earnings for the fiscal first quarter between 54 cents and 62 cents per share compared with 88 cents in the prior fiscal year.

Management projected fiscal 2022 net sales in the band of $3.16-$3.26 billion compared with $2.85 billion reported in the prior fiscal year. Five Below anticipates a flat to 3% rise in comparable sales. Management forecasts earnings between $5.19 and $5.70 per share compared with $4.95 in fiscal 2021.

The Zacks Consensus Estimate for earnings per share is currently pegged at 92 cents for the first quarter and $5.82 for fiscal 2022. These estimates are likely to witness downward revisions in the coming days.

Key Picks in Retail

Some better-ranked stocks are Capri Holdings CPRI, Boot Barn Holdings BOOT and Tapestry TPR.

Capri Holdings, which offers accessories and footwear, carries a Zacks Rank #2 (Buy) at present. CPRI has an expected earnings per share (EPS) growth rate of 53.9% for three-five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year EPS suggests growth of 215.8% from the year-ago figure. CPRI has a trailing four-quarter earnings surprise of 1,018.2%, on average.

Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, presently has a Zacks Rank of 2. BOOT has an expected EPS growth rate of 20% for three-five years.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago corresponding figures. BOOT has a trailing four-quarter earnings surprise of 47.1%, on average.

Tapestry, a renowned designer of fine accessories, is presently Zacks #2 Ranked. TPR has a trailing four-quarter earnings surprise of 28.2%, on average.

The Zacks Consensus Estimate for Tapestry’s current-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the corresponding year-ago levels. TPR has an expected EPS growth rate of 10% for three-five years.


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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.

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