Five Below (FIVE) Q3 Earnings & Sales Beat, Raises View

Five Below, Inc. (FIVE – Free Report) delivered better-than-expected top and bottom line for the fifth straight quarter, when it posted third-quarter fiscal 2017 results. The impressive results prompted management to provide an encouraging outlook. Consequently, shares of this Zacks Rank #2 (Buy) company increased 2.3% in after-hour trading session yesterday. In fact, the stock has surged 28.7% in the past three months, outperforming the industry’s growth of 2.6%.

Earnings of 18 cents per share surpassed the Zacks Consensus Estimate of 13 cents and also surged 80% year over year. Additionally, the bottom line exceeded the company’s guided range of 11-13 cents per share. The uptick can be attributable to higher sales and margin expansion.

Net sales grew 28.9% to $257.2 million from the year-ago quarter and also came ahead of the Zacks Consensus Estimate of $244.9 million. Also, the top line surpassed the company’s guided range of $241-$246 million. The improvement was due to solid comps growth and new store openings.

Comps increased 8.5% in the reported quarter and also exceeded the guided range of 3-5%. This was primarily driven by 7.1% growth in comp transaction, along with sturdy performance in its WOW product and incredible price points.

Margins

Gross profit improved 30.7% year over year to $83.6 million, while gross margin expanded roughly 45 basis points (bps) to 32.5%. The increase was mainly backed by favorable store occupancy costs.

Meanwhile, improved gross profit led operating income to jump 71.6% to $14.8 million during the third quarter. Further, operating margin increased 150 bps from the year-ago quarter to 5.8%.

Financials

Five Below had cash and cash equivalents of $54.9 million and short-term investment securities of $56.7 million as of Oct 28. Notably, the company had no debt and total shareholders’ equity was $381.3 million at the end of the reported quarter.

During the first nine months of fiscal 2017, the company generated net cash from operating activities of $17 million and incurred capital expenditures of $49.5 million.