Five Below Holiday top, bottom-line 'incremental,' says JPMorgan
JPMorgan analyst Matthew Boss notes that Five Below reported Holiday same-store-sales of (-2.6%) and cut its Q4 EPS range on negative 2.0%-2.5% same-store-sales. Taking a step back, while not providing excuses, management cited a more discretionary offering driving a larger condensed calendar impact, noting a Q4 2013 similar 450bps Holiday miss versus guidance, he pointed out. Adjusting the calendar "apples to apples," Boss says Five Below comped positive over the key Black Friday, Cyber Week, with material acceleration in the 7 days leading into Christmas with same-store-sales returning to "at least" 2%-3%-plus January-to-date. Specific to gross margin, the company's CFO cited pricing actions on track and key to holding line item guidance in Q4 despite softer-than-plan sales, confirming customer reception to price hikes inline to plan supported by the announcement of rollout of a "$10 Below Zone" to the "vast majority" of stores in FY20, the analyst adds. Boss has an Overweight rating on the shares.