Shares of Five Below (NASDAQ:FIVE) are down more than 4% in premarket trading Wednesday after the retailer released a weaker-than-expected EPS forecast for the first quarter.
Five Below reported Q4 EPS of $2.49, up from $2.20 in the year-ago period and just above the consensus estimates of $2.48. Net sales came in at $996.3 million in the quarter, up 16% YoY and short of the analyst consensus of $1.01 billion.
The company reported a total location count of 1,190, up 1.4% QoQ and in line with the consensus projection. The number of store openings was 17 for the period, also in line with expectations.
Going forward, Five Below expects Q1 EPS in the range of 54c to 62c, well below the consensus estimates of 88c per share. The company expects comparable sales growth from 0% to 2%, compared with the analyst estimates of 1.13% growth. Net sales in the first quarter are expected in the range of $658 million, missing the consensus projection of $681.6 million.
Five Below expects EPS for the full year in the range of $5.19 to $5.70, short of the analyst expectations of $5.86 per share. FY net sales are expected in the range of $3.16 billion to $3.26 billion, compared with the analyst expectations of $3.35 billion.
The company expects to double sales and more than double EPS by the end of FY2025. It plans to open 1,000 new stores by the end of FY2025, including 375-400 new stores in the following two fiscal years, plus 550-600 new stores over FY 2024 and FY 2025.
The discount store company expects to triple the number of stores to more than 3,500 by the end of FY2030. FIVE's operating margin target is roughly 14%.
We delivered sales growth in line with our expectations against the difficult comparison to last year's stimulus-fueled comparable sales increase of 13.8%, and despite the impact of weather in January," FIVE said in a statement.
Goldman Sachs analyst Kate McShane believes the updated store target is below investor expectations, based on our conversations.
Our key questions include the cadence of SSS in the quarter; QTD trends; view on the supply chain and transportation costs; outlook for new and existing markets given the updated long-term store target; details on new store performance; the uplift from Five Beyond; drivers to the long-term margin expansion, and the consideration of price increases given the inflationary environment, McShane wrote in a client note.
Telsey Advisory Group analyst Joseph Feldman is more positive as he argues that the soft outlook isn't hurting the long-term story.
We continue to believe the long-term story is intact, including store growth, gains from merchandising newness, such as Five Beyond, and leverage of technology and infrastructure investments, Feldman said in a client note.
By Senad Karaahmetovic