On Monday, Truist Securities reaffirmed its Hold rating on Five Below stock (NASDAQ:FIVE) with a steady price target of $118.00. Following the release of the company's holiday sales figures, Truist's analysts pointed out that although the results were aligned with their forecasts, there are ongoing concerns regarding the company's recent performance and future prospects.
Five Below's holiday sales revealed a comparable store sales decline of 3.2% and a year-over-year sales growth of 8.7%. This performance resonates with the trends captured by Truist Card Data. The analysts acknowledged Five Below's strong historical growth algorithm and unit economics but also noted the significant sales decline in the first half of 2024, highlighting underlying merchandising and execution issues.
The recent appointment of a new CEO at Five Below is seen as a potential positive step, but the analysts cautioned that meaningful changes to the company's trajectory are not expected until the second quarter of 2025 due to the time required for the new leadership to make an impact and the lead times associated with merchandise changes.
Margins are anticipated to continue being a challenge throughout 2025. Despite the stock's substantial re-rating recently, Truist's stance remains cautious, opting to maintain a Hold rating based on the current risk/reward balance.
In conjunction with the ICR conference, Five Below also provided an update on its fourth-quarter expectations. The company is bracing for a comparable sales decrease of between 3.0% and 5.0%, with net sales projected to hit the upper half of the $1.35 billion to $1.38 billion range. This guidance is slightly below Truist's estimate of approximately $1.39 billion. Nevertheless, Five Below has reiterated its adjusted earnings per share forecast of $3.23 to $3.41, closely aligning with Truist's estimate of $3.40.
The company emphasized its commitment to enhancing product offerings, value, and the store experience as part of its strategy to recover from the substantial sales slowdown experienced in the previous year.
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