Five Below Beats Analyst Q1 Profit Predictions By One Penny

Andrew Klips  |

Five Below, Inc. (FIVE) reported first-quarter earnings and sales that nipped past analyst predictions after Wednesday’s closing bell as the company opened more stores and withstood a lull in sales early in the quarter.

For the quarter ended May 4, the Philadelphia, Pennsylvania-based teen retailer posted a 33.1 percent climb in revenue to $95.6 million, compared to $71.8 million in the year prior quarter. Net income totaled $1.6 million, or 3 cents per share, versus a net loss of $1.2 million, or 32 cents per share, in the first quarter of 2012. Adjusted net income, which excludes the impact of the founder’s transaction in both quarters, was $2.5 million, or 5 cents per share, essentially the same as the year prior period.

Wall Street was expecting earnings per share of 4 cents on sales of $94.23 million.

Five Below, which was founded by David Schlessinger and Thomas Vellios (who also founded the bankrupt Zany Brainy toy company), opened 14 new stores during the first quarter to run their total to 258 stores in 18 states. So far, it looks like the founding duo are fairing better with teen clothes and accessories than toys as their incredible growth rate still has the attention of investors as shown by a share price that is nearly 50 times estimated earnings for the next year. The company has increased their number of stores by about 80 percent in two years. For this year, Five Below said it plans on opening a total of 60 new stores.

Five Below went public last July at $26 per share.

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"The first quarter played out largely as we had expected and we are pleased to have delivered results that came in ahead of our original guidance,” said Vellios, president and chief executive at Five Below. “As we said a few weeks ago, once the headwinds facing consumers abated mid-quarter, we saw a strengthening in our traffic and sales patterns as our trend-right merchandise at extremely compelling prices resonated with our customers,” he added.

The quarter ended with the company having $36.7 million in cash and cash equivalents and $34.5 million in total debt.

Looking ahead, Five Below sees net sales for the current quarter in the range of $112 million to $114 million, based upon opening 14 new stores and 4 percent to 5 percent growth in same-store-sales. Adjusted income is forecast between 8 cents and 9 cents per share. Analysts were on average expected EPS of 8 cents on revenue of $109.9 million.

For the full year 2013, the company boosted its outlook to sales between $524 million and $529 million, up from a prior call of $516 million to $521 million. Earnings per share are forecast in the range of 65 cents and 68 cents, up from prior guidance of a range of 62 cents to 65 cents. Analysts were expecting EPS of 67 cents on sales of $530.7 million.

Shares closed down by 2.5 percent during regular trading hours Wednesday at $35.40. The earnings beat and improved outlook helped the stock erase those losses to trade modestly ahead in extended trading with shares climbing to about $36.50.

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