Five Below (FIVE 2.25%), a retail chain known for selling products priced at $5 or less, released its results for its fiscal 2024 fourth quarter on March 19. Adjusted EPS of $3.48 outpaced analysts' expectations of $3.38, while revenue of $1.39 billion marginally exceeded estimates of $1.38 billion.
| Metric | Fiscal Q4 2024 | Fiscal Q4 2024 Analysts' Estimate | Fiscal Q4 2023 | % Change |
|---|---|---|---|---|
| Adjusted EPS | $3.48 | $3.38 | $3.65 | (4.7%) |
| Revenue | $1.39 billion | $1.38 billion | $1.34 billion | 4.0% |
| Net income | $187.5 million | N/A | $202.2 million | (7.3%) |
| Operating income | $246.8 million | N/A | $268.4 million | (8.1%) |
Source: Analysts' estimates provided by FactSet.
Understanding Five Below's Business
Five Below, a retailer focusing on low-cost products, heavily targets the tween and teen demographic. It grew its store count in fiscal 2024, focusing on rigorous site selection for new locations. Its ability to quickly adapt to market trends with high item velocity, ensuring relevance in merchandise, has been a key factor in its success. Its focus remains on expanding its physical footprint and enhancing the in-store experience.
NASDAQ: FIVE
Key Data Points
Quarter Highlights and Insights
During fiscal Q4 2024, which ended on Feb. 1, Five Below opened 22 net new stores, contributing to its total of 227 new locations in fiscal 2024, and ended the year with 1,771 total. Sales reached $1.39 billion, above management's guidance range of $1.35 billion to $1.38 billion, and net income also exceeded projections at $187.5 million.
Notably, fiscal 2024's fourth quarter had 13 weeks. Fiscal 2023's had 14 weeks. The 7% fewer shopping days in this year's quarter contributed to declines on numerous metrics. Operating income fell by 8.1% to $246.8 million. Comparable sales decreased by 3.0%. Meanwhile, materials costs and SG&A (selling, general, and administrative) expenses rose, affecting profitability.
In the quarter, management also engaged in strategic efforts in operational efficiency, with a continued focus on inventory optimization and targeting shrinkage to safeguard margins.
Looking Ahead
For its fiscal 2025, Five Below projects net sales between $4.21 billion and $4.33 billion, and is guiding for comparable sales to be in the range of flat to up 3%. Diluted EPS is expected to be between $3.90 and $4.52, with adjusted EPS forecast to be in the $4.10 to $4.72 range. It plans to open about 150 new stores. The outlook suggests cautious optimism amid competitive pressures both in-store and online.
Investors are advised to keep an eye on management’s efforts to enhance operational efficiencies and optimize inventory levels. Given the current economic challenges, close attention to cost management will be critical. Furthermore, global supply chain disruptions pose risks to the chain's cost structure. Trending focus areas will include scaling the "Five Beyond" concept, targeting a new pricing tier, and continued brand reinforcement to bolster customer loyalty.
