Shares of Five Below (FIVE +0.31%) were falling today after the discount retailer posted disappointing results in its first-quarter earnings report.
As a result, the stock was down 12.8% as of 12:07 p.m. ET.
Image source: Getty Images.
The consumer slowdown hits Five Below
Five Below, which specializes in selling cheap merchandise like games, toys, fashion accessories, and candy, said that revenue rose 11.9% to $811.9 million, but that was well below the consensus at $833.9 million.
What was also troubling was that all of that growth came from new stores, as comparable sales in the period were down 2.3%. Five Below opened 61 new stores in the quarter.
On the bottom line, Five Below's results also disappointed, as operating income fell from $42.4 million to $36.2 million, and earnings per share dipped from $0.67 to $0.60 after adjustments, which compared to estimates at $0.63.
CEO Joel Anderson noted weakness in discretionary categories, but said, "Needs-based items such as those in our candy, food, and beauty departments outperformed expectations and drove positive sales results."
NASDAQ: FIVE
Key Data Points
What's next for Five Below?
Looking ahead, the company expects revenue of $830 million-$850 million in the quarter, which assumes the opening of 60 new stores and a mid-single-digit comparable sales decline. That's also well below revenue estimates at $882.8 million
On the bottom line, it sees earnings per share of $0.57-$0.69, which was also below the consensus at $0.99.
It's unclear if Five Below's challenges are a direct result of the macro environment or more specific to the business, but management may have to rethink its expansion strategy if comparable sales and profits keep falling.
Therefore, it's not surprising to see the stock down double digits on the news.
