Tuesday, Five Below (NASDAQ:FIVE) shares, trading at $99.90 and down nearly 5% year-to-date, maintained their Sector Weight rating by KeyBanc, as the company disclosed its updated fourth-quarter-to-date (QTD) sales trends and reiterated its guidance for the fourth quarter and the year 2024 at the ICR Conference.
According to InvestingPro data, the company maintains strong profitability with a 35% gross margin. According to Bradley Thomas from KeyBanc, Five Below's comparable store sales (comp sales) over the holiday period saw a 3.2% decline, which is in line with the previously anticipated deceleration from a 0.6% increase in the third quarter.
Management at Five Below now anticipates sales to be towards the higher end of the previously guided negative 3-5% comp sales range, while also reaffirming its earnings per share (EPS) outlook. Thomas noted that the holiday sales results were consistent with Key First Look Data, suggesting a softer December performance.
This was attributed to the unfavorable calendar effect in 2024, where there were five fewer shopping days before Christmas compared to 2023. InvestingPro analysis indicates the stock is currently undervalued, with revenue growing at 14.3% over the last twelve months.
Despite the holiday sales being seen as encouraging, Thomas expressed caution due to potential risks from increased competition and the impact of tariffs. With the recent appointment of Winnie Park as the new CEO in December, Five Below is expected to concentrate on enhancing its merchandising strategies. The benefits of these efforts are anticipated to become more evident in the second half of 2025.
The company's performance and outlook signal a stable path ahead, with a focus on strategic improvements under the new leadership, aiming for a turnaround in the upcoming periods.
In other recent news, Five Below reported an 8.7% increase in holiday sales, reaching $1.19 billion. However, comparable store sales declined by 3.2%. The company anticipates fourth-quarter sales to hit the upper half of the projected $1.35 billion to $1.38 billion range, which is slightly below Truist's estimate of approximately $1.39 billion. Five Below also reiterated its adjusted earnings per share forecast of $3.23 to $3.41.
Truist Securities maintained its Hold rating on Five Below, citing concerns about the company's performance and future prospects. Deutsche Bank (ETR:DBKGn) and Mizuho (NYSE:MFG) also maintained Hold ratings but increased their price targets to $106 and $105 respectively. Despite the stock's recent re-rating, Truist's stance remains cautious, maintaining a Hold rating based on the current risk/reward balance.
The company's recent appointment of Winnie Park as CEO is seen as a potential positive step, but analysts caution that significant changes to the company's trajectory are not expected until the second quarter of 2025.
Five Below emphasized its commitment to enhancing product offerings, value, and the store experience as part of its strategy to recover from a substantial sales slowdown experienced in the previous year. These are all recent developments following the company's third-quarter performance and the appointment of a new CEO.
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