Discounter Five Below's Outlook Triggers Analysts To Slash Forecasts: What It Say About The Long Term

Several analysts lowered the price target of Five Below Inc FIVE after it provided below consensus Q3 guidance.

Yesterday, the reported second-quarter FY23 sales growth of 13.5% year-on-year to $759 million, beating the analyst consensus of $758.59 million. EPS of $0.84 beat the analyst consensus of $0.83.

Five Below sees Q3 sales of $715 million - $730 million versus the consensus of $737.8 million and EPS of $0.17 - $0.25, below the consensus of $0.40.

The company continues to expect FY23 sales of $3.5 billion - $3.57 billion versus the Street view of $3.56 billion. It lowered its FY23 EPS outlook from $5.31 - $5.71 to $5.27 - $5.55, below the consensus of $5.58.

Telsey Advisory Group analyst Joseph Feldman lowered the price target to $220 from $225 while maintaining an Outperform rating.

The analyst believes FIVE is performing well in a tough retail environment and sees a long growth runway ahead.

The analyst believes in the company's Triple-Double strategy, targeting triple the store base to over 3,500 by 2030 and double the sales and EPS vs. 2021 by 2025.

Feldman lowered the EPS estimate to $5.49 from $5.63 (vs. consensus $5.58) for FY23, reflecting reduced comparables to 2.3% (vs. 2.5% earlier, consensus 2.2%) and a flattish operating margin of 11.2% (vs. 11.4% prior, consensus 11.3%). 

The analyst lowered EPS estimates to $6.67 (vs. $6.75 earlier, consensus $6.78), with lower comparables of 3.8% ((vs. 4.0% earlier, US:3) and reaffirmed operating margin expansion at 600 bps to 11.8% (vs. consensus 11.9%).

Reiterating an Overweight rating, KeyBanc Capital Markets analyst Bradley B. Thomas reduced the price target to $215 from $225 and Wells Fargo to $205 from $220. 

KeyBanc analyst is cautious about consumer confidence in the near term but believes in the company's growth prospects and value proposition.

In particular, the analyst sees a challenging consumer/retail domain but is confident about the company's strong merchandising and store remodeling opportunities in the coming two to three years. 

Thomas cut revenue and EPS estimates to $3,510.1 million (from $3,536.1 million) vs. consensus of $3,557.0 million and $5.40 (from $5.50) vs. $5.58 consensus, respectively, for FY23.

The analyst lowered FY24 revenue and EPS estimates to $4,019.0 million (from $4,048.8 million) vs. $4,169.0 million estimate and $6.30 (from $6.45) vs. $6.78 estimate, respectively.

Maintaining a Buy Rating, B and A Securities reduced the price target to $230 from $242, UBS to $230 from $240, and Craig-Hallum to $215 from $224. 

Loop Capital cut the target to $175 from $200 and reiterated a Hold rating, while Evercore ISI lowered it to $195 from $205 and maintained an In-Line rating. 

William Blair analyst Phillip Blee maintained estimates for sales at $3,552.8 million and EPS at $5.50 for FY23 and $4,236.2 million and $7.18 for FY24.

Price Action: FIVE shares are trading lower by 4.8% at $174.15 on the last check Thursday.