Here's How Five Below (FIVE) Looks Just Ahead of Q2 Earnings

Five Below, Inc. FIVE is likely to register a decrease in the top line when it reports second-quarter fiscal 2020 numbers on Sep 2, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $409.7 million, suggesting a decline of about 1.8% from the prior-year reported figure. Nonetheless, we note that the rate of sales decline is likely to decelerate sharply on a sequential basis. The company had witnessed a decline of 44.9% in the last-reported quarter, when stores were closed in the wake of coronavirus.

The Zacks Consensus Estimate for earnings for the quarter under review has increased by a penny to 14 cents over the past 30 days. The current Zacks Consensus Estimate indicates that the company is likely to swing back to profit following a loss in the last-reported quarter. However, the consensus estimate still suggests a sharp decline from earnings of 50 cents reported in the year-ago period.

Notably, this specialty value retailer has a trailing four-quarter negative earnings surprise of 38.3%, on average. In the last reported quarter, the company missed the Zacks Consensus Estimate by a wide margin.

Factors to Note

Markedly, Five Below started reopening stores in late April itself and had about 90% of its stores reopened as of Jun 9, exhibiting decent initial sales trends. On its last earnings call management informed that comparable sales for reopened stores, including e-commerce business, were tracking up about 8% for the second quarter through Jun 9. With respect to merchandise, the company has been focusing on essential goods, consumables and everyday items, such as healthcare and personal care that customers are looking for nowadays.

We note that the company’s second-quarter results are likely to have benefited from the pent-up demand and government stimulus program to an extent. However, the loss of operating days on account of store closures at some point of time during the quarter due to the coronavirus crisis cannot be overlooked.

To address challenges tied to the pandemic, Five Below has been focusing on cutting operating expenses, lowering capital expenditures and managing inventory. However, operating margin deleverage owing to fixed cost components in SG&A is a concern.

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

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Five Below this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Although Five Below carries a Zacks Rank #3, it has an Earnings ESP of -15.86%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

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

Big Lots BIG presently has an Earnings ESP of +10.57% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollies Bargain Outlet OLLI currently has an Earnings ESP of +10.98% and a Zacks Rank #1.

Dollar General DG has an Earnings ESP of +2.16% and a Zacks Rank #2 at present.

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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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