It has been about a month since the last earnings report for Five Below (FIVE). Shares have added about 1.1% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Five Below due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
Five Below Q2 Earnings & Sales Beat Estimates, FY25 View Raised
Five Below reported impressive second-quarter fiscal 2025 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Also, net sales and earnings increased year over year. The company raised its fiscal 2025 outlook.
FIVE posted adjusted earnings per share of 81 cents in the fiscal second quarter, which beat the Zacks Consensus Estimate of 61 cents. Also, the figure increased 50% from 54 cents in the year-ago quarter.
Net sales of $1.03 billion increased 23.7% year over year. Also, this metric surpassed the Zacks Consensus Estimate of $997 million.
Leisure sales were $470.5 million, representing a 25% increase from year ago period. Fashion and home sales totaled $309.3 million, up 24% year over year. Snack and seasonal sales were $247.1 million, a 20% increase from last year period.
Comparable sales (comps) increased 12.4% year over year, driven by an 8.7% increase in comparable transactions and a 3.4% increase in average ticket.
Insight Into Margins & Costs of FIVE
Adjusted gross profit grew 26.2% year over year to $343.3 million. We note that the adjusted gross margin increased approximately 60 basis points (bps) year over year to 33.4%. This is primarily reflecting fixed cost leverage from strong comparable sales, partially offset by the net impact of tariffs.
Selling, general and administrative (SG&A) costs rose 28.3% to $242.3 million. SG&A costs, as a percentage of net sales, increased approximately 90 bps to 23.6%.
Adjusted operating income was $55.1 million compared with $37 million in the second quarter of fiscal 2024. The adjusted operating margin increased approximately 90 bps to 5.4%.
Five Below’s Financial Snapshot: Cash & Equity Overview
The company ended the fiscal second quarter with cash and cash equivalents of $562.7 million, and short-term investment securities of $107.4 million. Total shareholders’ equity was $1.91 billion as of Aug. 2, 2025.
FIVE Provides Q2 Store Update
The company opened 32 net new stores and ended the quarter with 1,858 stores across 44 states. This represents an 11.5% increase in the number of stores from the end of the second quarter of fiscal 2024. The company plans to open 150 stores by the end of fiscal 2025, taking the total count to 1,921 stores.
What Lies Forward in Q3 for Five Below?
FIVE provided its financial expectations for the third quarter and fiscal 2025, incorporating the anticipated effects of currently imposed tariffs. For the third quarter of fiscal 2025, the company anticipates net sales between $950 million and $970 million, whereas it reported $843.7 million in the third quarter of fiscal 2024. This projection is based on the planned opening of 50 net new stores and indicates a 5-7% increase in comparable sales.
At the midpoint, adjusted operating margin is projected to be 1% compared with 3.3% in the third quarter of last year. This decline reflects pressures in both gross margin and SG&A. Within gross margin, the company anticipates roughly 160 basis points of unmitigated tariff-related costs, partially offset by fixed cost leverage. SG&A expenses are expected to be about 100 basis points higher than last year, mainly due to higher incentive compensation and increased investments in store labor, including support for additional physical inventory counts.
Net income is expected to fall between $5 million and $12 million, while adjusted net income is projected to be between $7 million and $13 million. Net income and adjusted net income were $1.7 million and $23.3 million, respectively, in the year-ago period. Earnings per share are expected to be 9-21 cents, whereas it reported 3 cents in the year-ago period. Adjusted earnings per share are projected to be 12-24 cents, whereas it reported 42 cents in the year-ago period. These projections do not take into account any potential share repurchases.
Five Below’s FY25 Outlook
The company updated its financial outlook for fiscal 2025, reflecting improved expectations in several key areas. Net sales are projected to be $4.44-$4.52 billion, an upward revision from the earlier stated $4.33-$4.42 billion. In fiscal 2024, the company reported net sales of $3.88 billion. This increase suggests stronger anticipated performance, supported by plans to open stores and an improved outlook for comparable sales growth of 5-7% compared with the prior-mentioned growth of 3-5%.
The midpoint of the company’s operating margin guidance has increased by about 60 basis points to 7.9%, driven by fixed cost leverage on higher sales. On a year-over-year basis, however, operating margin is expected to decline by approximately 130 basis points, reflecting tariff and incentive compensation headwinds that are partially offset by fixed cost leverage.
Net income is forecast between $253 million and $275 million, which marks an upward adjustment from the previously stated $223-$249 million. Adjusted net income is projected between $264 million and $286 million, significantly raised from the earlier guidance of $235-$261 million. Net income and adjusted net income were $253.6 million and $277.8 million, respectively, in fiscal 2024.
Earnings per share are expected to be $4.56-$4.96, up from the prior mentioned $4.04-$4.51 and suggesting a rise from the $4.60 reported in fiscal 2024. Adjusted earnings per share are likely to be $4.76-$5.16 compared with the previously mentioned $4.25-$4.72, whereas it registered $5.04 in fiscal 2024. FIVE anticipates the gross capital expenditure of $210 million. These investments will support store openings and ongoing upgrades to systems and infrastructure.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted 3512.5% due to these changes.
VGM Scores
Currently, Five Below has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Five Below has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Five Below, Inc. (FIVE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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