After Hours Drop Provides Buying Opportunity In Five Below Shares

| About: Five Below (FIVE)

Specialty retailer Five Below (NASDAQ:FIVE) reported second quarter earnings after hours Monday. The company saw shares drop 6% after reporting a GAAP net loss from one time items. The company beat earnings and net sales estimates after adjustments. Monday's drop in price may offer a great entry point for this hot 2012 IPO.

In the second quarter, the company saw net sales increase 40% to $86.8 million. Estimates on Yahoo Finance called for sales of $81.95 million. Five Below saw comparable store sales increase 8.6%. Operating income increased to $4.7 million. Net income saw a decrease to $1.2 million, after one time costs were factored in. The company reported adjusted earnings per share of $0.04.

In the first half of the year, the company has seen net sales of $158.6 million. Five Below has reported earnings per share of $0.09, compared to $0.07 in the first half of last year.

Back in a July article, I recommended buying shares of Five Below rather than selling and taking profits from the IPO. Shares were trading at $26.50 at the time of that article. The company's four forward goals were laid out in that article. To refresh people looking at this company, the goals are:

· Grow our store base

· Drive comparable store sales

· Increase brand awareness

· Enhance operating margins

Five Below opened 27 stores in the second quarter. In the fiscal year, the company has now opened 34 new locations. The company ended the second quarter with 226 stores in 18 states. The company is set to open 14 stores in the third quarter. Four stores are set to be opened in the fourth quarter, bringing the year total to 52 new stores. Five Below would then end the year with 244 stores. The company's long term goal is 2000 stores in twenty years.

For the third quarter, Five Below is forecasting net sales of $79-$81 million. The company sees adjusted earnings per share coming in at $0.00 to $0.01. The company sees full year net sales of $402-$407 million. The company also is expecting earnings per share of $0.45 to $0.47 on an adjusted basis. Analysts see the company posting net sales of $79.57 million in the third quarter. For the full fiscal year, analysts see the company posting sales of $399.23 million.

Shares of Five Below have sold between $25.00 and $35.98 over the last fifty two weeks. Since the company's IPO, shares have shot up 31% since hitting the open market at $26.50. Shares have not dropped below $30 since August 3rd. Monday's selloff now marks the lowest price since the end of August. Look to buy shares Tuesday if they continue to trend down. This may be the last time to get in on this growing retailer.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FIVE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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