Five Below's Consumables Strength: A Silver Lining In Tight Consumer Spending Scenario

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  • Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Five Below Inc FIVE and lowered the price target from $230 to $225.
  • Five Below will report earnings after the markets close on Thursday, June 1.
  • The analyst maintained 1Q23 EPS estimate of $0.65 versus the FactSet consensus (FS) of $0.63 and a total sales growth of 14.5% to $732 million, with a comparable sale of 3.5%.
  • Based on comments from multiple retailers, including Target Corp TGT and Walmart Inc WMT, the analyst believes that May trends were slower across retail, and the consumer spending environment is likely to remain tight in 2H23.
  • In 2023, Five Below should continue to benefit from the opening of about 200 new stores, converting 400 stores to the new Five Beyond prototype, said the analyst.
  • It will also gain from increasing the number of Five Beyond SKUs, expanding closeout items across all categories, and enhancing digital and supply chain capabilities, added the analyst.
  • The analyst continues to believe that the company has a long runway of growth ahead as it progresses on its Triple-Double strategy and the promotion of CFO Ken Bull to the newly created role of COO should help with the execution of the strategy.
  • Overall, the analyst thinks Five Below should benefit from the strength in consumables, select value-focused discretionary products, and trend categories.
  • Price Action: FIVE shares are trading lower by 2.53% at $172.78 on the last check Tuesday.
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