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Alberto Abaterusso
Alberto Abaterusso
Articles (2394) 

2 Specialty Retailers Issue 3rd-Quarter Numbers

Five Below and RH beat forecasts on earnings and revenue

December 05, 2019 | About:

Five Below

Shares of Five Below Inc. (NASDAQ:FIVE) soared 5.62% to a price of $124.69 per unit in after-hours trading on Wednesday after surpassing consensus estimates on earnings and net sales for the third quarter of fiscal 2019.

The Philadelphia-based discount store chain company posted GAAP earnings per share of 18 cents which, though 25% lower year over year, exceeded estimates by 1 cent.

In contrast to the earnings decline, third-quarter net sales grew 20.7% year over year to $377.44 million.

In a statement, President and CEO Joel Anderson commented on the results:

“We are very pleased with our third quarter performance. Our strong top and bottom line results exceeded our expectations and were driven by continued strength from our new stores as well as broad-based performance across our worlds. We also opened a record 61 stores in diverse markets during the quarter, and have since completed our 150 planned new stores for the year.”

Five Below also noted that year over year same-store sales rose 2.4% and the number of operated stores increased 20% to 894 stores. The operating income declined 18.1% to $12.7 million as the company endured timing issues for specific merchandise expenses and wasn’t able to ease certain tariff costs. Overall, net income decreased 24.4% to $10.2 million.

Looking ahead, Five Below provided its own outlook on net sales, same-store sales, net income and earnings per share for the final quarter and full year of fiscal 2019.

For the final quarter, the American specialty retailer projects net sales of $717 million to $732 million versus analysts’ projections of $734.19 million. Five Below expects a 2-3% increase in same-store sales from the prior-year quarter. The company also points to a net income of $110.7 million to $115.2 million, which should result in earnings per share of $1.97 to $2.05 compared to consensus estimates of $2.02.

For the full year, Five Below anticipates that net sales will fluctuate in the $1.877-1.892 billion range, and it forecasts that same-store sales will rise 2.5% year over year. The company foresees net income in the $175.4-179.9 million range. Thus, earnings per share should be between $3.11 and $3.19. Wall Street analysts expect that Five Below will conclude the full year of fiscal 2019 posting earnings per share of $3.15 on revenue of $1.91 billion.

The balance sheet of the company had $131.57 million in cash on hand, equivalents and short-term investments as of Nov. 2. It had $419.34 million in total inventories, while total equity was worth $645.39 million.

The share price of Five Below has risen 15% so far this year, but it is still below the 120-, 70- and 50-day simple moving average lines. The stock traded at $118.05 at close on Wednesday for a market capitalization of $6.57 billion.

Wall Street issued an overweight recommendation rating for shares of Five Below Inc. with an average target price of $143.25.

RH

Shares of RH (NYSE:RH) were down 0.79% to a price of $204 per unit in after-hours trading on Wednesday despite topping consensus estimates on earnings and revenue for the third quarter of fiscal 2019.

The Corte Madera, California-based home furnishings retailer recorded adjusted earnings per share of $2.79, which marked a 74.4% increase from the prior-year quarter and topped estimates by 54 cents. Revenue came in at $677.53 million, beating projections by nearly $1 million. The top line grew 6.4% year over year.

Year over year, the company also noted a 44% rise in adjusted operating income to $88 million and a 340 basis points rise in adjusted operating income margin rate to 13% of net revenues. Also, the free cash flow boosted 500% to $96 million in the third quarter of fiscal 2019, up from $16 million in the third quarter of fiscal 2018.

RH provided its shareholders with guidance on adjusted net revenues and earnings per share for the last quarter and full year of fiscal 2019.

For the last quarter, the home furnishings retailer forecasts adjusted earnings per diluted share of $3.50 to $3.62 on adjusted net revenues of $703 million to $711.5 million. Analysts expect adjusted earnings per diluted share of $3.58 on revenues of $709.44 million.

For the full year, RH has lifted the lower limit of its outlook on adjusted revenues to $2.685-2.694 billion, up from the prior guidance of $2.68-2.694 billion and compared to analysts’ projections of $2.69 billion. The company anticipates adjusted earnings per diluted share of $11.58 to $11.70, up from the prior outlook range of $10.78 to $11.01 and versus consensus’ estimates of $10.86.

The balance sheet had $38.25 million in cash on hand and equivalents and $429.2 million in total merchandise inventories as of Nov. 2 earlier this year. Total debt was $898.17 million in term loan and convertible senior notes. Total equity was a deficit of $63.22 million.

Year to year the stock price has grown 72% to place above the 120-, 70- and 30-day simple moving average lines. The stock traded at around $205.62 per share at close on Wednesday for a market capitalization of $3.84 billion.

Wall Street issued an overweight recommendation rating for shares of RH and has established an average target price of $197.93.

Disclosure: I have no positions in any security mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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