Deutsche Bank Reduces Estimates On Five Below, Still Sees Growth Ahead

Deutsche Bank cut its price target on Five Below Inc FIVE from $43 to $42 Thursday as a result of lowered FY 2016 estimates. The firm maintained a Buy rating.

Analyst Paul Trussell modestly revised the “2015 and 2016 SSS and EPS estimates down,” but still believed “that 4 percent comps and 25 percent EPS growth will be the average over the next few years.”

“While the new distribution facility shows commitment to long-term store growth, we have adjusted 2015 door openings to 71 from 74, in-line with management commentary at ICR calling for ~70 this year, which still represents 19.4 percent sq. ft. growth,” according to the analyst note.

Trussell saw the holiday season “as FIVE's Achilles' heel that can be improved over time with an altered merchandising approach to make the store more of a destination. Meanwhile, new store productivity remains very strong, driving cash returns in less than a year, naturally impacting year 2 comps.”
 
“We still believe a 1.2x PEG ratio can be maintained in this environment to this very unique retail growth story, translating to a 30x multiple on our revised FY16 EPS estimate of $1.39 (from $1.42) for our $42 PT (from $43),” according to Trussell.

Five Below Inc recently traded at $33.35, down 3.47 percent.