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Will Five Below Impress Investors with First-Quarter Results?

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Expectations from the first quarter

Five Below (FIVE) plans to announce its results for the first quarter of fiscal 2019 after the financial markets close on June 5. Fiscal 2019’s first quarter ended on May 4. Five Below exceeded analysts’ sales expectations in all the quarters of fiscal 2018. Five Below is a value retailer that offers trendy merchandise for tweens and teens with price points of $5 and below.

The company’s guidance issued in March indicates net sales growth in the range of 21.8% to 23.5% to $361 million to $366 million in the first quarter. Five Below expects its first-quarter same-store sales growth in the range of 3% to 4%. Analysts expect Five Below’s first-quarter sales to rise 22.8% to $363.98 million.

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Five Below expects its first-quarter EPS between $0.32 to $0.35 compared to $0.39. Despite strong sales growth, the company’s first-quarter earnings are expected to decline on a reported basis due to growth investments, costs associated with establishing a new distribution center, and the impact of a new lease accounting standard.  Excluding the impact of one-time items, analysts expect the company’s first quarter adjusted EPS to be flat at $0.35.

Recap of past performance

Five Below’s net sales increased 19.4% to $602.7 million in fiscal 2018’s fourth quarter and exceeded analysts’ estimate of $601.5 million. The retailer’s top-line growth was driven by sales from new stores and same-store sales growth of 4.4%. The Tech, Sports, Create, and Candy categories performed well in the fourth quarter.

Five Below’s fourth-quarter EPS grew 31.4% to $1.59 and beat analysts’ expectations of $1.58. The company’s EPS growth was driven by higher sales, increased interest income, and lower taxes.

Five Below’s fiscal 2018 sales grew 22.0% to $1.56 billion, while EPS increased 44.6% to $2.66. The company’s performance in fiscal 2019 is expected to be adversely hit by rising costs (including wages), supply chain investments, and the impact of tariffs.

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