Consensus “buy” rating
Five Below (FIVE) stock was rated a “buy” by 75%, or 15 out of 20 analysts, as of June 3, while the other five rated the value retailer a “hold.” None of the analysts gave it a “sell” recommendation. As of June 3, Five Below stock was up 21.7% on a year-to-date basis. Analysts’ 12-month price target of $140.41 reflects an upside potential of about 13%.
Five Below has delivered positive same-store sales growth for 13 straight years. Five Below’s sales grew 22.0% to $1.56 billion, and same-store sales growth was 3.9% in fiscal 2018, which ended on February 2. However, both net sales growth and same-store sales growth slowed down compared to fiscal 2017. Based on the guidance issued in March, Five Below expects the slowdown in its sales growth rate to continue in fiscal 2019. Five Below anticipates its fiscal 2019 sales to grow by about 19.6% to 20.9% to $1.865 billion to $1.885 billion and same-store sales growth of about 3%.
Five Below expects its fiscal 2019 EPS to come in between $3.00 to $3.07 compared to $2.66 in fiscal 2018. Five Below’s bottom line is expected to be adversely impacted by higher wages and investments associated with its new Southeast distribution center, which is expected to open in the spring this year, and the impact of a new lease accounting standard. However, it should be noted that Five Below is likely to revise its guidance to account for the increase in tariffs.
Five Below expects to drive its sales growth with the help of an expanded store base, attractive merchandise, and a strong supply chain network. The company opened 125 net new stores in fiscal 2018 and ended the year with 750 stores. Five Below plans to open about 145 to 150 new stores in fiscal 2019. Over the long term, the company’s goal is to operate over 2,500 stores.
The company is also rolling out a formal store remodel program to enhance the consumer shopping experience. Five Below also tested merchandise with higher price points (great than $5 and up to $10) in selected stores in fiscal 2018 and plans to continue to test this concept in 2019.
Five Below is scheduled to announce its results for the first quarter of fiscal 2019 after the markets close on June 5. Analysts expect Five Below’s first-quarter sales to rise 22.8% to $363.98 million and adjusted EPS to remain flat on a year-over-year basis at $0.35.