Five Below (NASDAQ:FIVE) delivered lower-than-expected results for the first quarter of Fiscal 2024. The company’s management cut its full-year sales outlook, indicating that the macroeconomic challenges may continue to hurt the spending power of its customers. Owing to the Q1 miss and weak guidance, FIVE stock tanked 15.5% in Wednesday’s after-hours trading.
FIVE is a specialty discount store chain based in the United States. It should be noted that FIVE has a decent earnings beat history, as it has missed expectations only twice since September 2020.
With this background, let’s take a look at Five Below’s Q1 performance.
FIVE: Q1 Highlights
Five Below’s adjusted earnings per share (EPS) was down 1.6% year-over-year to $0.60 and came below the Street’s estimate of $0.63. Meanwhile, Q1 net sales increased 11.8% to $811.9 million but missed analysts’ expectations of $834.3 million. During the quarter, the company said that strong demand for essentials, such as food and beauty products, supported the top line.
Further, comparable sales declined 2.8% from the year-ago quarter due to weakness in the lower-income customer base.
In terms of store openings, Five Below opened 61 new stores, ending the quarter with 1,605 stores across 43 states. This reflects a 17% growth from the same period last year. Interestingly, the management disclosed plans to open about 230 new stores by the end of this year.
Q2 and FY24 Guidance
For Q2 FY24, the management anticipates that revenue will range from $830 million to $850 million, reflecting a 9.4% to 12% increase year-over-year. This growth is expected to be driven by the opening of 60 new stores. Meanwhile, comparable sales are expected to decrease in the mid-single-digit range in Q2.
Additionally, EPS for the second quarter is expected to be between $0.57 and $0.69.
For the full year, Five Below expects revenue between $3.79 billion and $3.87 billion, down from the previous guidance range of $3.97 billion and $4.07 billion. Also, comparable sales are expected to decline between 3% and 5%.
In terms of earnings, FIVE expects adjusted EPS to come between $5.00 to $5.40, below the analysts’ average estimate of $6 per share.
Is FIVE a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on FIVE stock based on 12 Buys and three Holds. After a 34.1% decrease in its share price over the past six months, the analysts’ average price target on Five Below stock of $202 per share implies a 52.1% upside potential.
