Five Below crushes earnings; shows strong momentum heading into holiday

Teen and tween fave Five Below blew past Street estimates in its third quarter, delivering better-than-expected top and bottom line for the fifth straight quarter and opening a record number of stores.

Net income increased 81.4% to $9.9 million, or $0.18 per share, in the quarter ended Oct. 28, compared to $5.4 million in the year-ago period. Analysts had estimated $0.13 per share.

Five Below's net sales increased 28.9% to $257.2, from $199.5 million last year. Analysts had expected $244.93 million. Same-store sales rose 8.5%, also more than expected. Traffic rose 8.5%.

“We are extremely pleased with our third quarter results that exceeded the high end of our sales, comp and earnings outlook," said Joel Anderson, CEO, Five Below. "This quarterly performance reflects a strong customer response to our WOW product, incredible price points, differentiated in-store experience and increasingly targeted marketing efforts. With the strength of our year-to-date performance, as well as our quarter-to-date momentum, we are raising our guidance for the year.”

Five Below opened 41 new stores in the third quarter, a record for the-fast-growing chain, giving it a total of 625 locations in 32 states. On the company's quarterly call, Anderson said Five Below remains confident in its "2,000-plus store potential" and ability to achieve 20% top-line growth with 20% plus bottom-line growth through 2020.

Anderson also praised the chain's real estate and construction teams, which he called "best-in-class." He said opening 41 stores in one quarter was a "great test," and that it did not produce any stress on the company.

Five Below raised its guidance for the fourth quarter and full year. For the full year, net sales are expected to be in the range of $1.264 billion to $1.276 billion, compared with earlier guided range of $1.236 to $1.248 billion. Same-store sales are projected to rise 5.7% to 6.5%, compared with earlier guidance of 3.5% to 4.5%.

Net income is expected to be in the range of $95.9 million to $99.7 million, with a diluted income per common share of $1.72 to $1.79, compared with the previous range of $1.62 to $1.66.