Why Five Below Is Rallying

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When Five Below Inc. (NASDAQ: FIVE) reported its fiscal fourth-quarter financial results after the markets closed on Wednesday, the company posted $0.90 in earnings per share (EPS) and $388.1 million in revenue. Consensus estimates from Thomson Reuters had called for $0.90 in EPS and revenue of $393.89 million. The same period of last year reportedly had EPS of $0.77 and $326.35 million in revenue.

During the fiscal fourth quarter, comparable sales increased by 1.0%, while for the full fiscal year comps only increased by 2.0%.

In terms of guidance for the first quarter, the company expects to see EPS in the range of $0.12 to $0.14 and revenues between $228 million and $232 million. The consensus estimates are $0.14 in EPS and $230.82 million in revenue for the current quarter.

The outlook for this fiscal year was slightly better than this near-time guidance. Five Below expects to have EPS in the range of $1.55 to $1.61 and revenues of $1.21 billion to $1.23 billion. The consensus forecasting for the full year has EPS at $1.58 and $1.21 billion in revenue.

On the books, Five Below cash, cash equivalents and short-term investments totaled $153.88 million at the end of the quarter, up from $99.42 million in the same period of last year.

CEO Joel Anderson commented:

Our performance in 2016 once again illustrates the strength, consistency and broad appeal of the Five Below model with a compelling merchandise assortment designed to ‘wow’ our customers at incredible values. We achieved another strong year of 20% sales growth, reaching the $1 billion milestone in sales as we opened 85 net new stores and delivered our 11th consecutive year of positive comparable sales growth. This top line performance was accompanied by operating leverage, while we continued to invest in the business, resulting in a 24% increase in EPS for 2016.

Shares of Five Below closed Wednesday down 1.9% at $38.13, with a consensus analyst price target of $48.53 and a 52-week trading range of $35.03 to $52.70. Following the release of the earnings report, the stock was up 7% at $40.80 in early trading indications Thursday.