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Five Below soars in Q2, opening 125 stores and expanding toy selection

BY Marianne Wilson

Teen and tween discount retailer Five Below is on a roll, from store expansion to appointing its first-ever CIO.

The company raised its full-year outlook amid second quarter results that easily topped the Street and reaffirmed its 2,500-plus store potential. Five Below, which recently opened its 700th store (and 25th store in California), is on track to open 125 stores this year.

“The biggest driver of our growth continues to be our new stores and the performance by our new stores remains strong,” CEO Joel Anderson said on the chain’s quarterly earnings call. “Our real estate team continues to execute at a very high level finding great locations in vibrant shopping centers with solid traffic while our construction, design and store opening teams do a terrific job preparing the stores to open.”

Five Below is joining the ranks of retailers looking to fill the void left by the exit of Toys “R” Us. The chain will be rolling out an expanded toy selection in its stores this month.

“While Toys “R” Us is no longer in the market, families are searching for new toy destinations and we are excited to serve that need,” Anderson said on the call.

In other news, Anderson announced that Rob Feuerman has joined Five Below in the newly created position of CEO. From 2018 to 2018, he served in various senior roles at Gap Inc., including VP IT. He also is the founder of Kid Chow, the San Francisco area’s first online school lunch company preparing and serving organic meals to 60 K-8 schools.

For the second quarter, Five Below earned $25.1 million, or 45 cents a share, in the quarter, compared with $16.8 million, or 30 cents a share, in the year-ago period. Analysts has expected earnings of 38 cents a share.

Revenue rose 23% to $347.7 million, topping the $335 million analysts expected. Same-store sales rose 2.7%, better than the expected 0.1%.

“We saw broad-based strength across our worlds as our high quality, trend right products at incredible values continued to resonate with customers,” stated Anderson.

For fiscal 2018, the company expects revenue between $1.528 billion and $1.540 billion, based on opening about 125 new stores and an expected 2.5% to 3% increase in comparable sales.

Per-share net income is expected to be between $2.51 and $2.57.

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Game Stop continues to explore alternatives—including possible sale

BY Marianne Wilson

GameStop reported mixed results for its second quarter and confirmed it is considering a potential sale of the company.

The videogame retailer beat the Street on revenue, but its earnings missed estimates. It also said it is engaging with third parties “regarding a possible transaction” as part of a review of strategic and financial alternatives that was initiated by the company’s board.

“As our teams prepare for a busy and exciting holiday period, our board of directors, with the support of our financial and legal advisors, continues to conduct a comprehensive review of strategic and financial alternatives, including, but not limited to, a potential sale of the company,” said Dan DeMatteo, executive chairman of GameStop’s board of directors.

GameStop reported a net loss of $24.9 million, or 24 cents, for the period ended Aug. 4, compared with net income of $22.2 million, or 22 cents, in the year-ago period. Adjusted earnings per share fell to 5 cents from 15 cents. Analysts tracked by FactSet expected 8 cents a share.

Revenue fell 2.4% to $1.65 billion, but was still ahead of the $1.62 billion analysts were projecting. Digital sales increased 15.3% to $255.9 million, excluding the second quarter 2017 revenues from Kongregate, which was sold in July 2017.

The company reiterated its full-year outlook, which calls for total a total sales decline of 2% to 6%. It also reiterated its previous annual earnings-per-share guidance of between $3.00 and $3.35. Analysts were expecting $3.11 per share.

GameStop operates over 7,100 stores across 14 countries.

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Barnes & Noble kicks off fiscal year with a loss

BY Deena M. Amato-McCoy

The nation’s largest bookseller started its fiscal year with a loss in its first quarter due to disappointing sales and turnaround initiatives that are struggling to take hold.

Barnes & Noble’s net loss for the quarter ended July 28, was $17.0 million, or 23 cents per share, compared to a loss of $10.8 million, or 15 cents per share, in the prior year. Analysts expected a loss of 9 cents per share.

Sales declined 6.9% to $795.0 million, which missed analysts’ expectations of $833.4 million. Same-store sales decreased 6.1%. On a monthly basis however, Barnes & Noble continued to narrow its same-store sales losses, as declines improved each month of the quarter, declining 7.8%, 6.1% and 4.5%, respectively. The sales trend continued to improve into the second quarter, declining 0.8% in August.

Barnes & Noble’s quarterly earnings come on the heels of the company’s recent firing of former chief executive Demos Parneros, who was terminated for “violations of the company’s policies.” Shortly after his termination, Parneros filed a lawsuit accusing Barnes & Noble founder and chairman Leonard Riggio of engineering his “firing without cause” and for “falsely and irrevocably’ damaging his reputation.

Parneros was tapped as CEO of the struggling bookstore chain in April 2017, the chain’s fourth CEO in four years. Prior to joining Barnes & Noble as COO in 2016, he was president of North American stores & online for Staples.

Looking ahead to the second quarter, the company is preparing for the upcoming holiday season, and is encouraged by the sequential improvement in its sales trend and the fall title line-up. The retailer is also focused on its merchandising initiatives to grow sales, while continuing to control expenses.

“We fully realize that cutting expenses does not alone provide a path to the long term viability of any retail business,” said Riggio. “Therefore, our short- and long-term focus is to grow our top line, and, by doing so, provide us the cash flow needed to grow our business.”

For fiscal 2019, the company continues to expect earnings to be in a range of $175 million to $200 million.

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