Five Below Lowers Earnings and Sales Outlook

Scott Peters
08 Jun, 2022
New York City

Five Below struck a cautious note after facing weak consumer spending and rising costs headwinds and lowered its annual sales and earnings outlook. 

The company is still planning to keep its store size and chain expansion plans intact despite the weakening economic conditions. 

Net sales in the first quarter 2022 ending on April 30 decreased 7% $639.6 million on 3.6% fall in comparable sales. 

Operating income margin plunged to about 6.6% from 10% a year ago after selling, general and administrative expenses surged from $137.2 million to $167.7 million. 

Net income in the quarter declined to $32.7 million from $49.6 million a year ago and diluted earnings per share fell to 59 cents from 88 cents. 

Net income margin in the quarter declined to 5.1% from 8.2% a year ago. 

At the time of the previous quarter results, the retailer had guided first quarter sales between $644 million and $658 million, net income between $30 million and $35 million, and earnings per share between 54 cents and 62 cents. 

The company opened 35 new stores and ended the quarter with 1,225 stores in 40 states, an increase of 12.7%. 

The company repurchased 247,132 shares in the first quarter of fiscal 2022 at a cost of approximately $40.0 million.

Inventories in the quarter increased to $504.2 million from $326.7 million a year ago largely on higher store counts and rising import and supply costs. 

About 30% stores in the chain are now in a new format and larger  9,000 square foot size.

Guidance and Outlook 

Second Quarter 

Net sales are expected to be in the range of $675 million to $695 million based on opening approximately 30 new stores and assuming an approximate 2% to 5% decrease in comparable sales. 

Net income in the quarter is expected to be in the range of $41 million to $48 million and diluted earnings per share between 74 cents to 86 cents on approximately 55.8 million diluted weighted average shares outstanding. 

Full-year Fiscal 2022

The retailer guided net sales in the full-year between $3.04 billion and $3.12 billion on comparable sales to range between a decline of 2% to flat.

The retailer plans to open additional 160 net new stores. 

Net income is expected to be between $271 million and $293 million and diluted earnings per share between $4.85 and $5.24 on approximately 55.8 million diluted weighted average shares outstanding. 

In the full-year, gross capital expenditures are expected to be approximately $225 million. 

At the time of the previous quarter's results, the company had guided full-year sales between $3.16 and $3.26 billion, net income between $292 million and $320 million, and diluted earnings per share between $5.19 and $5.70. 

Company and Stock 

Five Below, Inc is headquartered in Philadelphia, Pennsylvania and operates 1,225 stores across the nation. 

The company's "triple-double" vision is to double its store count to 2,000 by the end of 2025 and double sales and earnings per share.  

Five Below declined 7.4% to $125.30 in the aftermarket trading and in the year has fallen 34.83%.