This article originally appeared as part of ongoing coverage in our premium Motley Fool Rule Breakers service... we hope you enjoy this complimentary peek!
Shares of low-cost retailer Five Below (NASDAQ:FIVE) have fallen as much as 18% on Friday after the company announced underwhelming sales for the nine-week holiday period and offered disappointing fourth-quarter forecasts.
Why it's happening
Five Below's overall sales grew by 24.5% in the nine weeks ended January 3 to reach $230.7 million, with comparable-store sales up 3.2%. The company now expects overall fourth-quarter net sales to range from $262 million to $263 million, with earnings of $0.59 to $0.60 per share. High-end estimates on both top and bottom lines were reduced from earlier forecasts -- Five Below's prior guidance had called for sales of $262 million to $266 million, with EPS in the range of $0.59 to $0.62. This high-end reduction fell below Wall Street's expectations, which had sought $265.8 million in revenue and $0.61 in EPS for the fourth quarter.
CEO Thomas Vellios noted that there was "softness in the business post-Black Friday that continued into early December," but also highlighted an uptick in sales as shoppers approached and eventually moved past the actual Christmas holiday. At least five analysts cut their outlook for Five Below as a result of this disappointing performance -- Buckingham Research lowered its price target to $37 per share, which happens to be close to where shares are actually trading right now after the day's drastic pullback.
Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool is short Five Below. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.