Street Is Bullish On Five Below After Q3 Sales Beat

Five Below Inc FIVE shares are sharply higher after reporting a third-quarter sales beat on Wednesday.

Five Below reported quarterly earnings of 17 cents per share, which met the analyst consensus estimate. The company reported quarterly sales of $377.4 million, which beat the analyst consensus estimate of $373.52 million. This is a 20.6% increase over sales of $312.823 million the same period last year.

A Rare Retail Growth Story

Bank of America analyst David Buckley said Five Below’s strong value offering and constant product improvement is driving a rare retail growth story.

Buckley said despite concerns about price increases in an effort to mitigate tariffs that were implemented in October, the company still reported third quarter comps of +2.9%.

“Both basket and transaction drove comps, and management continues to highlight strong performance in multiple worlds (Style, Tech, Candy and Room),” the analyst wrote in a note.

Bank of America reiterated a Buy rating on the company with a $150 price target.

Five Below 'Poised To Take Market Share'

Buckingham Research analyst Bob Summers said results show ongoing operating momentum and the appeal of the business model over both the short and long term.

“In our view, merchandising initiatives, sustained innovation and pricing actions will sustain momentum over the immediate future,” said Summers.

The analyst believes the company utilizes a unique and differentiated concept in an attractive value segment of retail and “remains poised to take market share”.

“We expect the stock to quickly recapture recent losses and establish positive momentum but anticipate volatility as the stock will likely trade in unison with tariff related noise.”

Buckingham maintains a Buy rating on the company with a $145 price target.

KeyBanc Cautious On Tariff Concerns

KeyBanc analyst Bradley Thomas took a slightly more cautious stance on the company due to valuation, difficult comparisons and tariff concerns.

Despite these headwinds, the analyst views Five Below as one of the most compelling growth stories in his coverage.

“While the potential of a List 4B tariff still looms over 2020, management is executing admirably in its merchandising, marketing, store remodels, and new store productivity,” he said.

KeyBanc maintains a Sector Weight rating on the stock.

Five Below Price Action

Five Below shares traded up 3% to $121.47 at time of publication.

Related Links:

The Street's Reaction To Five Below's Earnings, Tariff Commentary

BofA: Five Below Has Upside To $150

Posted In: Bank of AmericaBob SummersBradley ThomasBuckingham ResearchDavid BuckleyKeyBancAnalyst ColorEarningsLong IdeasNewsPrice TargetReiterationRetail SalesAnalyst RatingsTrading Ideas