Entering text into the input field will update the search result below

Five Below: Toss The Quarter, Focus On The Rest Of 2020

Jun. 09, 2020 9:55 PM ETFive Below, Inc. (FIVE) Stock


  • Five Below's first quarter performance was pitiful, although largely in line with store closures that lasted five to six weeks.
  • There is still quite a bit of uncertainty on Five Below's horizon, but the reopening efforts in 2Q20 have produced encouraging results.
  • I see a compelling buy-and-hold opportunity here, even if share price is only a few dollars away from pre-COVID levels.
  • Looking for a helping hand in the market? Members of Storm-Resistant Growth get exclusive ideas and guidance to navigate any climate. Get started today »

Five Below (NASDAQ:FIVE) delivered the worst results that it has ever produced - and probably ever will. Revenues fell off a steep cliff: down 45% YOY. The top-line decline would have been worse, if not for an increase of 20 in the total number of stores. The sales drop was substantially worse than analysts had been expecting.

In great part due to the loss of scale (i.e. operational deleverage), margins evaporated. As a result, a more benign estimated net loss of 30 cents per share gave way to an adjusted net loss of $0.93 in 1Q20.

But not all was bad news, far from it. As I projected in my earnings preview, the focus of attention would quickly turn to the recovery process, after the shock of terrible financial results wore off. With Five Below on track to return to something close to business as usual in the second quarter, the share price increased by about 10% in after-hours trading.

Credit: The Street

Looking strong so far in 2Q20

First quarter P&L results need no more than a brief paragraph to be analyzed. Five Below shut down all of its stores on March 20 and reopened them slowly at the end of April. Therefore, the retailer kept its doors open for a bit more than half of the quarter, which largely justifies the sharp reduction in revenues. E-commerce did not help sales much, since the company's digital channel accounts for a very small piece of the business.

Five Below went from all stores closed in late April to 75% of them open last week to 90% today. The initial read on shopping activity in these first few weeks of 2Q20 has been overwhelmingly positive. In the earnings call, the management team shared May comps in reopened stores of 8%, which is great compared to the "post-fidget

I use an approach that favors predictability of financial results and broad diversification when choosing stocks for my All-Equities Storm-Resistant Growth portfolio. So far, the small $229/year investment to become a member of the SRG community has lavishly paid off, as the chart below suggests. I invite you to click here and take advantage of the 14-day free trial today.

This article was written by

DM Martins Research profile picture

Daniel Martins is a Napa, California-based analyst and founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk.

- - -

Daniel is the founder and portfolio manager at DM Martins Capital Management LLC. He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research instructor for Wall Street Prep.

He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.

- - -

On Seeking Alpha, DM Martins Research partners with EPB Macro Research, and has collaborated with Risk Research, Inc.

DM Martins Research also manages a small team of writers and editors who publish content on several TheStreet.com channels, including Apple Maven (thestreet.com/apple) and Wall Street Memes (thestreet.com/memestocks).

Analyst’s Disclosure: I am/we are long FIVE. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You


Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About FIVE

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on FIVE

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.