Pleasing Performance, Encouraging Execution From Five Below In Q2

Five Below Inc (NASDAQ: FIVE)'s second-quarter earnings report Wednesday resulted in the stock losing around 3 percent by Thursday morning, but some Wall Street analysts continue to appreciate the bullish long-term outlook.

Loop Capital: 'Very Pleased'

Investors should be "very pleased" with Five Below's earnings report, Loop Capital Markets' Anthony Chukumba commented in a research report. Among the several stand-out data points from the quarter includes an encouraging guidance despite a slowdown in fidget spinner sales, evidence of continued improvement in the company's merchandising, and signs that management is "beginning to crack the code" on TV advertising.

Overall, Five Below's 28.7-percent net sales growth in the quarter and 9.3-percent comp growth was mostly due to increased transactions, Chukumba continued. The company's best performing categories were room, technology, and candy while fidget spinners, slime, and emoji-themed products were the best performing products.

Looking forward, the retailer continues to better position itself to expand into a national retailer, Chukumba also noted. In the meantime, the company remains Loop Capital's favorite stock pick in the deep discounting retail sector.

Chukumba maintains a Buy rating on Five Below's stock with an unchanged $60 price target.

Buckingham: 'More Confident Than Ever'

Five Below's second-quarter earnings report should make investors "more confident than ever" in its ability to sustain a 20 percent earnings per share growth rate over the next five years, Buckingham Research Group's Kelly Halsor commented in a research report.

In fact, Five Below's prospects as being the "strongest and most consistent" growth stories in the entire retail space was also reinforced after the earnings report, Halsor continued. Specifically, the company made it clear it holds a competitive advantage over its peers in terms of its ability to capitalize on trends at a fast rate.

Five Below's third-quarter guidance may also be conservative and the analyst's checks suggest it is off to a solid start in the quarter. As such, the company could report upside to its 3–5-percent comp guidance for the third quarter as well as upside to the company's 2-percent comp growth estimate in the fourth quarter.

Finally, Five Below continues to grow its cash position, which may suggest that a share repurchase program and/or dividend payment is now a medium-term focus as an immediate-term priority is to continue investing in the brand.

Halsor maintains a Buy rating on Five Below's stock with an unchanged $62 price target.

At time of publication, shares of Five Below were trading down 6.06 percent at $46.38.

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