Buy The Weakness In Five Below, Says Jefferies

Jefferies says buy the weakness in Five Below Inc FIVE shares, which were down after the retailer guided third quarter comp below Street.

The company's third quarter comparable store sales guidance of +1-2 percent was below the Street's +2.5 percent estimate. The company indicated it was the same as it planned earlier in the year and reflect the tougher comparison. On a two-year stacked comp basis, Jefferies said guidance is consistent with two-year trends in the first half.

For the second quarter, the company's comp store sales growth at +3.1 percent was in line with guidance, but slightly behind the Street's 3.4 percent. Nonetheless, total EPS and sales topped Street as new store opened strong at 97 percent of average store volumes.

"The comp growth was driven by an increase in ticket and partially offset by a slight decline in transactions, reflecting weakness at the beginning of the quarter when unfavorable weather hurt seasonal sales," analyst Daniel Binder wrote in a note.

Meanwhile, the company raised its topline guidance for the year to $1-$1.009 billion from $995 million - $1.005 billion to reflect first half sales beats.

Binder has a Buy rating and $55 price target, which suggests a potential upside of 23 percent over the recent close of $44.56.

Shares of Five Below gapped open lower on Thursday at $42.20 and fell as much as 5 percent to $42. At time of writing, they dropped 2.49 percent to $43.45.