What Happened?
Shares of discount retailer Five Below (NASDAQ: FIVE) jumped 3.8% in the morning session after the company reported third-quarter results that far exceeded its own forecasts and Wall Street's expectations.
Revenues for the quarter reached $1.038 billion, a significant 23.1% increase compared to the same period in the previous year. This growth was mainly fueled by a remarkable 14.3% surge in same-store sales, which was well above the company's guided range of 5% to 7%. The strong sales performance came from both an increase in customer transactions and a higher average ticket size. Furthermore, adjusted earnings per share came in at $0.68. This figure was nearly three times the upper end of the company's own guidance of $0.12 to $0.24 and beat analysts' consensus estimate by $0.42.
After the initial pop the shares cooled down to $176.66, up 4.9% from previous close.
Is now the time to buy Five Below? Access our full analysis report here.
What Is The Market Telling Us
Five Below’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 4.6% on the news that Mizuho raised its price target on the stock to $160 from $150, signaling optimism before the company's earnings release. The firm maintained its Neutral rating on the discount retailer but cited continued business momentum and expectations for a strong holiday season. This outlook was based on recent store checks and discussions which indicated Five Below's product assortment was well-positioned to drive sales. The positive analyst action occurred as the company was scheduled to report its quarterly earnings on December 3, with investors watching closely.
Five Below is up 78.3% since the beginning of the year, and at $176.66 per share, has set a new 52-week high. Investors who bought $1,000 worth of Five Below’s shares 5 years ago would now be looking at an investment worth $1,081.
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