Five Below Q3 Profit Rises, Outlook Weak; Shares Down 7%

(RTTNews) - Discount retailer Five Below Inc (FIVE), Thursday reported an increase in profit for the third quarter as revenues jumped about 25 percent. Earnings came in line with analysts' estimates while revenues trumped Wall Street expectations.

Nevertheless, Five Below detailed a weak outlook for the fourth quarter and lowered its full year revenue estimates. Following the announcement, the company's shares dropped 5 percent in after-hours trade on the Nasdaq.

Philadelphia, Pennsylvania-based Five Below's third-quarter profit rose to $3.3 million or $0.06 per share from $1.7 million or $0.03 per share last year.

Adjusted earnings for the quarter improved to $0.06 per share from $0.05 per share last year. Analysts polled by Thomson Reuters estimated earnings of $0.06 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter jumped 24.6 percent to $138.0 million from $110.7 million last year. Analysts had a consensus revenue estimate of $136.95 million for the quarter.

On a same-store basis, sales for the quarter increased 1.5 percent. The company opened 12 new stores and ended the quarter with 365 stores, up 20 percent from last year. Five Below operates as a discount retailer, offering teens and pre-teen shoppers, products from headphones to fashion accessories, all priced at $5 or below.

CEO Thomas Vellios said, "We delivered another quarter of solid performance with sales and earnings at the high end of our guidance range despite the 9% comp comparison from the third quarter of 2013. We have now completed our 62 planned 2014 openings and are very pleased with the consistent strength in performance we continue to see out of our new stores."

Looking forward to the fourth quarter, the company expects earnings of $0.59 to $0.62 per share and revenues of $262 million to $266 million last year. Analysts currently estimate earnings of $0.63 per share and revenues of $268.83 million for the quarter.

For the full year, the company continues to expect adjusted earnings of $0.87 to $0.90 per share. The company now expects full-year sales of $678 million to $682 million, up from prior outlook of $681 million to $687 million. Analysts currently estimate earnings of $0.91 per share and revenues of $685.08 million for the year.

Separately, Five Below said it has appointed COO Joel Anderson as the new Chief Executive Officer and elected as a member of the company's Board of Directors, effective February 1. Current CEO and Co-founder, Tom Vellios, will work with Anderson in the coming months to ensure a smooth and orderly transition and will remain active in the company in the role of Executive Chairman.

FIVE closed Thursday's trading at $42.85, down $0.22 or 0.51%, on the Nasdaq. The stock further dropped $3.25 or 7.58% in the after-hours trade.