Five Below (FIVE) Up 1.1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Five Below reported strong Q2 fiscal 2025 results, exceeding estimates for both earnings and sales, and raised its fiscal 2025 outlook, indicating positive growth momentum [2][12]. Financial Performance - Adjusted earnings per share for Q2 were 81 cents, surpassing the Zacks Consensus Estimate of 61 cents, and reflecting a 50% increase from 54 cents in the same quarter last year [2]. - Net sales reached $1.03 billion, a 23.7% year-over-year increase, exceeding the Zacks Consensus Estimate of $997 million [3]. - Comparable sales increased by 12.4% year over year, driven by an 8.7% rise in comparable transactions and a 3.4% increase in average ticket size [4]. Margins and Costs - Adjusted gross profit grew 26.2% year over year to $343.3 million, with an adjusted gross margin increase of approximately 60 basis points to 33.4% [5]. - Selling, general and administrative (SG&A) costs rose 28.3% to $242.3 million, with SG&A as a percentage of net sales increasing by approximately 90 basis points to 23.6% [5]. Store Expansion - The company opened 32 net new stores, bringing the total to 1,858 stores across 44 states, marking an 11.5% increase from the previous year [8]. - Plans are in place to open 150 additional stores by the end of fiscal 2025, aiming for a total of 1,921 stores [8]. Future Guidance - For Q3 fiscal 2025, net sales are projected between $950 million and $970 million, indicating a 5-7% increase in comparable sales [9]. - The company expects net income to fall between $5 million and $12 million, with adjusted net income projected between $7 million and $13 million [11]. - Fiscal 2025 net sales are now projected to be $4.44-$4.52 billion, an increase from the previous estimate of $4.33-$4.42 billion [12]. Financial Outlook - The midpoint of the operating margin guidance has increased by about 60 basis points to 7.9%, although a year-over-year decline of approximately 130 basis points is expected due to tariff and compensation pressures [13]. - Net income is forecasted between $253 million and $275 million, with adjusted net income projected between $264 million and $286 million, both reflecting upward adjustments from previous estimates [14]. - Earnings per share are expected to be $4.56-$4.96, up from the prior range of $4.04-$4.51 [15]. Market Sentiment - Since the earnings release, there has been a significant upward trend in estimates, with a consensus estimate shift of 3512.5% [16]. - Five Below currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return from the stock in the coming months [18].