Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares of Five Below (NASDAQ:FIVE) rose as much as 10.2% in Thursday's early trading, then settled to trade up around 8.5% as of noon after the discount retailer announced strong first-quarter results.
Quarterly sales jumped 22% year over year to $153.7 million, helped by a combination of comparable-store sales growth of 1.7%, and a 19% increase in the number of total locations over the past year to 385. Based on generally accepted accounting principles, that translated to earnings of $0.08 per diluted share, compared to $0.07 per share in the year-ago period. Analysts, on average, were anticipating earnings of $0.07 per share on revenue of $151.4 million.
Why it's happening: Five Below CEO Joel Anderson explained, "Continued strength in new store performance drove the sales and earnings upside versus our guidance, reinforcing our excitement and confidence in the store growth potential for this brand." In addition, Anderson noted Five Below benefited from both optimized marketing efforts, and actions to "invigorate our assortments with even more newness."
For the current quarter, Five Below anticipates 25 new locations and a 4% to 5% increase in comps. As a result, second-quarter revenue should be $182 million to $185 million, with GAAP diluted net income per share of $0.12 to $0.13. Wall Street was expecting earnings and revenue near the low end of those ranges.
For the full year, Five Below expects revenue of $820 million to $828 million, based on 70 new store openings and a roughly 3% increase in comps. GAAP diluted net income per share should be $1.03 to $1.06. Analysts were modeling fiscal 2015 earnings and revenue of $1.04 per share and $822.3 million, respectively. Five Below is also targeting 85 openings in 2016.
All things considered, it's hard to find anything to criticize in these solid results. Even with shares trading after this pop at a relatively lofty 43 times trailing-12-month earnings and 29 times next year's estimates, I wouldn't be the least bit surprised if Five Below stock continues to reward patient investors going forward.