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What's happening?
Shares of Five Below (FIVE -1.12%) have lost 14% of their value today after the discount retailer released underwhelming fourth-quarter guidance and announced a major shift in its executive ranks after Thursday's closing bell.
Why it's happening
Five Below's third-quarter results were more or less in line with Wall Street's expectations, as the company produced $138 million in revenue and $0.06 in earnings per share against the analyst consensus of $137.2 million and $0.06 in EPS. However, Five Below's fourth-quarter projections, which call for revenue in the $262 million to $266 million range and EPS in a range of $0.59 to $0.62, both fall beneath Wall Street's expectations for $268.8 million in revenue and $0.64 in EPS even on the high end.
The market was also troubled by the sudden announcement that Five Below COO Joel Anderson will become its CEO at the start of next February, with co-founder and current CEO David Schlessinger stepping down. Both men will now serve on the company's board of directors. Wells Fargo analysts noted after the news that this was probably planned since Anderson's hiring last year, as his salary is unchanged despite the promotion. However, the analysts are concerned by waves of insider sales, coupled with a rapid exit by private-equity stakeholders.
Three firms, Buckingham, Sterne Agee, and Deutsche Bank, lowered their price targets after the news, with Buckingham dropping its target to $40 per share, Sterne Agee reducing its target to $45, and Deutsche Bank lowering its target to $46. These targets still imply an upside of anywhere from 8% to 24% based on Five Below's current price.
