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Five Below shares fall 10% on guidance

By Robert Davis

21:50, 1 September 2021

Five Below building

Shares of American retailer Five Below fell by 10% during after-hours trading on Wednesday, after the company reported its revenue had doubled but its sales were slowing.

The youth-focused retailer reported EPS of $1.15 per share on total sales of $647m in its fiscal Q2 2021, representing a net year-over-year increase of 55%. Analysts had previously projected the company to earn $1.11 per share on top of revenues north of $658m.

Shares of Five Below finished trading 1.52% higher during Wednesday’s regular trading session, finishing at $216.05 per share.

During after-hours trading, shares were trending near $195.79 per share.  

Earnings details

New store openings are one of the key areas of growth for Five Below in Q2. The company opened 34 stores, marking a 14% increase from Q2 2020. Five Below now operates more than 1,100 stores in 39 US states.

Year-to-date, Five Below has opened more than 100 stores across the country compared to the 82 stores it opened during fiscal year 2020.

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However, this strategy also increased the cost of doing business for the retailer. For example, the company’s cost of goods sold to nearly double in Q2 while its operating lease assets also increased to more than $1bn.

At the same time, the company posted a net income of $114m in Q2 2021 compared to a loss of $21m at the same time last year.

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Company outlook

Five Below is a Philadelphia-based retailer that specializes in selling clothes and accessories to teens and tweens, according to its website. Most items in the stores range in price from $1 to $5 and are offered across multiple categories, including clothes, bedroom décor, tech, and party supplies.

Looking ahead, the company expects to bring in between $550m and $565m in revenue during Q3 2021. This estimate is contingent on the company opening up to 45 new stores, however.

At the same time, Five Below expects its net income to drop by approximately 90% during the next quarter. Five Below estimates it will bring in between $12m and $16m in Q3 2021 compared to the $114m the company earned in Q2 2021.  

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