Earnings preview: What to expect from Five Below Q4 results

Five Below (FIVE) is scheduled to report its fourth-quarter earnings results on Wednesday after the market closes. The results will be benefited by comparable store sales growth and new store openings. The discount store chain will be beneficial by the positive customer response to a compelling assortment of trend-right products.

The specialty value retailer will be beneficial from the new store growth and the performance of its new stores are likely to remain strong. This follows the company’s third quarter numbers of 53 stores opening in diverse markets across 20 states and the quarter ended with 745 stores. The new stores will be benefited from the universal appeal, expanding the scale and brand awareness.

In addition, the company expects its customers who had discovered Five Below through the spinner craze, return to its stores and continue to shop at the company. The results will experience broad-based performance, specifically from Tech, Room, Sports, Create and Candy Worlds.

Analysts expect Five Below to post earnings of $1.58 per share on revenue of $602 million for the fourth quarter. In comparison, during the previous year quarter, the company reported a profit of $1.18 per share on revenue of $504.83 million. Analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $132.12 per share in the next 52 weeks.

The company remained excited about the toys opportunity due to the space left by Toys R Us closures and the need for a new destination. During the third quarter, the company had begun advertising toys, games, and crafts across its digital marketing channels and set the stores with its Mega Toy Island.

Five Below had shifted its focus from marketing spend to digital efforts including TV, YouTube, and other social media. This changes the company’s spotlight to improving brand awareness and driving traffic, engagement and repeat visits. The company has depended on the strong holiday season to drive its results for the fourth quarter.

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For the holiday period from November 4, 2018, through January 5, 2019, the company reported a 24.6% increase in net sales to $526.1 million from $422.3 million in the previous year period. Comparable sales for the Holiday Period increased by 4.9%. The results were broad-based and it successfully capitalized on the toy opportunity through an expanded selection of amazing value toys and games.

For the third quarter, the company reported a 37% jump in earnings helped by a marked uptick in comparable store sales and new store openings. Sales increased by 22% as its new stores generated another strong performance. Comparable sales increased by 4.8% driven by a 2.8% rise in comp average ticket and a 2% rise in comp transactions.

For the fourth quarter, the company had expected sales to exceed its forecast range of $593 million to $600 million with around five new stores opening. Comparable store sales were forecast to grow in the 3% to 4% range, while earnings were predicted to be at the high end of $1.53 to $1.57 per share range.

Shares of Five Below opened higher on Monday and is trading in the green territory. The stock has risen over 72% in the past year and over 33% in the past three months.

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