Five Below Clocks 41st Straight Quarter of Positive Comps

Retailer’s net sales jumped 20.8% to $220.1 million during Q2 FY16

f1Specialty value retailer Five Below Inc. (NASDAQ: FIVE) announced its Q2 FY16 and H1 FY16 financial results on August 31st, 2016.

The Philadelphia, Pennsylvania-based Company offers accessories, clothing, sunglasses, jewelry, beauty products and branded cosmetics; and everyday home décor items. Further, the company provides party goods, decorations, and greeting cards, as well as special occasion merchandise products and season-specific items. It primarily targets teen and pre-teen customers with an edited assortment of trend-right products, all priced at $5 and below, including select brands and licensed merchandise across categories such as Style, Room, Sports, Tech, Crafts, Party, Candy, and Now.

As of June 20th, 2016, it operated about 450 stores in 30 U.S. states. Read more about Five Below’s financial results below.

Q2 FY16 financial highlights

f2During Q2 FY16, Five Below reported strong performance, beating both sales and EPS estimates. Net sales jumped 20.8% to $220.1 million from $182.2 million in the year-ago period. Comparable store sales grew 3.1%, driven by continued strength in new store performance, marking the 41st consecutive quarter of positive comp growth. The Company’s gross profit soared to $73.3 million in Q2 FY16 from $59.8 million in the year-ago period. Operating income jumped 36% to $15.7 million from $11.6 million in the second quarter of FY15. As a result of operating margin expansion, net income grew to $9.8 million compared to $7.1 million in the year-ago period. Diluted EPS soared 38% to $0.18 compared to diluted EPS of $0.13 per share in the year-ago period.

Five Below made progress with its strategic initiatives, including the initial launch of its e-commerce platform and the hiring of key team members to further strengthen its merchandising capabilities. These initiatives were highlighted in Five Below’s impressive EBIT growth, an industry-leading unit economics and 85% growth stemming from new stores.

H1 FY16 financial highlights

For H1 FY16, Five Below’s net sales jumped 22.9% to $412.8 million from $335.9 million in the year-ago comparable period, while comparable store sales grew 3.9%. Operating income increased to $26.5 million from $18.6 million in the year-ago period. Net income grew to $16.6 million compared to $11.3 million in the comparable period last year. Diluted EPS rose to $0.30 compared to $0.21 per share in the comparable period of FY15. As of July 30th, 2016, the Company had cash and cash equivalents of $67.1 million.

f3Other highlights

Store update: Five Below opened 33 new stores and ended Q2 FY16 with 491 stores in 30 states. This represents an increase in stores of 17.7% from the year-ago period. During H1 FY16, Five Below opened 54 new stores compared to 51 new stores opened in the comparable period in FY15.

Guidance for Q3 FY16 and full year FY16

For Q3 FY16, Five Below’s net sales are expected to be in the range of $199 million to $202 million based on 25 new store openings and assuming a 1% to 2% rise in comp sales. Net income is expected to be in the range of $4.7 million to $5.3 million, with diluted EPS in the range of $0.09 per share to $0.10 per share.

For full-year FY16, net sales are expected to be in the range of $1,000 million to $1,009 million based on 85 new store openings and assuming a 3% rise in comp sales. Net income is expected to be in the range of $70.4 million to $72.7 million, with diluted EPS in the range of $1.28 per share to $1.32 per share.

Stock Performance

f4Five Below’s stock ended the day at $42.60, slipping 4.40%, at the close on Thursday, September 8th, 2016, having vacillated between an intraday high of $44.37 and a low of $42.53 during the session. The stock’s trading volume was at 1,706,810 for the day. The Company’s market cap was at $2.37 billion as of Thursday’s close.

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