Five Below Soars 15% on Q3 Beat and Raised Guidance - But Analysts Remain Cautious?

Well, Wall Street just got a taste of the same dose of excitement that my three year old gets when she sees Five Below. In short, the discount retailer lit a fire on Wall Street, as the stock blasted over 15% this morning after two massive new moves: Winnie Park, the ex-CEO of Forever 21, is taking the helm, and the company jacked up its full-year outlook. Now, considering the company has lost over half of its value in the year of our Lord 2024—this could either be the beginning of a major rebound or just another retail sugar high before the crash.

(Source: Giphy) 

But first, let’s talk about the headline grabber: Winnie Park’s taking over as CEO starting December 16. After Joel Anderson bailed in July, leaving the company to fumble through an interim period under COO Kenneth Bull, this hire feels like a power move. Park has a history of shaking up struggling brands, and for a company that’s been looking as wobbly as a dollar-store shelf, her arrival couldn’t come fast enough. Investors clearly took the bait, hoping she’s the miracle worker Five Below desperately needs.

(Source: Seeking Alpha) 

On the other hand, we have the number porn. Simply put, Five Below didn’t just beat expectations—it obliterated them. Third-quarter sales hit $843.7 million, crushing the $797.4 million analysts had penciled in. Adjusted EPS? A cool 42 cents—a full 25 cents above estimates. In addition, those Black Friday sales proved to be more than solid—however, Bull still couldn’t resist throwing in a cautious note about “fewer shopping days between Thanksgiving and Christmas.” Translation: We may have just gotten lucky. 

(Source: Nasdaq) 

With that said though, the real hype machine and the main fuel to the seismic 15% rally comes down to the company's raised guidance. Full-year net sales are now expected to hit $3.84 billion to $3.87 billion, up from the previous $3.73 billion to $3.80 billion forecast. Meanwhile, adjusted EPS has been raised to  $4.78 to $4.96, up from the earlier range of $4.35 to $4.71. Meaning this is no doubt the kind of news that makes bulls foam at the mouth, while Five Below’s stock, which has been beaten down by more than half this year, finally got some breathing room.

(Source: Giphy) 

But, but, but… naturally, there still seems to be some skepticism with this stock boom. JPMorgan analysts noted that foot traffic, while improving, is just now crawling out of the gutter after a brutal second quarter. Sure, there’s a “180-degree turn” in store visits, but let’s not pretend this is some overnight retail renaissance. Shares are still gutted for the year and while today’s rally is cute, it’s going to take more than one decent quarter and a new CEO to dig out of this hole.

(Source: Investopedia) 

What’s more is that when it comes to holiday projections, Five Below is forecasting a 3% to 5% decline in comparable sales for the quarter—better than the 5.44% drop analysts feared, but still not exactly the kind of confidence-inspiring number that screams “comeback.” For the full year, comps are expected to dip 3%, which, while slightly less bad than earlier predictions, isn’t exactly a vote of confidence. 

In the end, the reality is that Five Below is still walking a tightrope.  Sure, the raised outlook and Park’s arrival are giving the stock a much-needed jolt, but retail is still a bloodbath, and discount stores are facing a consumer base that’s as bargain-hungry as ever. Any slip-up in the coming holiday weeks, and this mini-rally could implode in a lot of investors' faces. 

(Source: Giphy) 

For now though, Five Below has bought itself some time. But with expectations climbing and the margin for error shrinking, the next few months will be the ultimate test. In the meantime, place your bets accordingly, friends—and as always, stay safe and stay frosty! Until next time…

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Stocks.News does not hold positions in companies mentioned in the article.