On Tuesday, Deutsche Bank (ETR:DBKGn) analyst Krisztina Katai increased the price target on Five Below (NASDAQ:FIVE) stock to $106 from the previous $100 while maintaining a Hold rating. The adjustment comes as Five Below is expected to affirm its fourth-quarter guidance ahead of its January 13 presentation at the ICR Conference.
The analyst noted that among the big box and dollar store segment, Five Below stands out as the company likely to provide an update before its ICR presentation. Despite a shorter holiday season and mixed signals from various consumer spending reports, such as MasterCard SpendPulse and U.S. Retail Sales, consumers continue to seek value. Katai's observations from store checks suggest that Five Below had a strong sell-through during the holiday period.
The analyst has decided to maintain the fourth-quarter same-store sales (SSS) estimate at a decline of 3.5%, which aligns closely with the Street’s expectation of a 3.6% decrease and is within the company's guidance range of a 5% to 3% decline. The analyst also mentioned that the buy-side's assumption is approximately a 4.0% decline.
Five Below shares have seen a decrease of 13% from their December peak, influenced by concerns about slowing traffic, tariff risks, and what some consider aggressive fourth-quarter SSS guidance. Katai pointed out that the fourth quarter of 2019, which had five fewer selling days, experienced a significant SSS slowdown from the third to the fourth quarter.
This historical context is important as it relates to the current year's guidance, which anticipates a 360 basis points deceleration at the high end for the fourth quarter of 2024. This projection could potentially leave room for a miss or lack of update to the high-end of the range, particularly as the third quarter may have benefited from favorable weather conditions.
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