Five Below Up 11% After Solid Q4 Beat; Loop Capital Reiterates A Buy

Discount retailer Five Below Inc FIVE was performing strongly Thursday, up over 12 percent at one point during the day following a Q4 earnings beat on both the top and bottom lines.

Loop Capital reiterated its Buy rating and $54 price target on Five Below, saying the company’s growth story remains intact. While the retail sector has seen considerable pressure as of late, analyst sentiment surrounding discount retailers has become more bullish in comparison to sentiment toward more expensive counterparts. Off-price retailers TJX Companies Inc TJX, Ross Stores, Inc. ROST and Burlington Stores Inc BURL have announced plans to open 300 stores, similar figures to announced store closings by Macy's Inc M, Sears Holding Corp SHLD, and J C Penney Company Inc JCP.

Analyst's Commentary

“We were encouraged by Five Below’s better-than-expected F4Q 2016 earnings, including sequential improvement in post-holiday sales trends,” said analyst Anthony Chukumba of Loop Capital.

“We continue to believe Five Below is one of the more compelling long-term organic square footage growth stories in the retail industry today,” he added.

Net sales in the fourth quarter increased an impressive 18.9 percent to $388 million. Management is forecasting net sales of $1.21 billion–$1.23 billion in FY 2017, as the company prepares to open approximately 100 new stores, including a California expansion that includes nine new stores in Los Angeles with plans to enter the San Diego market.

Shares were up 11.67 percent at $42.58 at time of publication.

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