Updated at 1:43 pm EST
Get Five Below Inc. Reportstock fell Thursday after the discount retailer reported reduced-than-expected first quarter sales and stated that near-term margins would fall as shoppers remain cautious heading into the summer months.
Five Below said earnings for the three months ended in April fell 33% from last year to 59 cents per share, topping Street expectations by a penny, as sales rose 7% to $639.6 billion.
Five Below has said that its revenue range is between $675 million and $695 million in a full-year projection of $3.08 billion, both of whom have failed to meet Street expectations.
Five Below said it expects its operating margin to fall by 450 basis points from last year over the current quarter as gross margins are affected by "unanniversaried freight costs, increased store wages, and increased marketing expenses."
"I believe the greatest headwinds are behind us in the $1.9 trillion stimulus," says the consumer, who has faced a lot of challenges, most recently being the formula shortage, which for children is going to be something that''s front and center on their minds," said President Joel Anderson on a conference call Wednesday.
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Five Below shares were marked 2.11% down in early afternoon trading Thursday to raise their hands at $132.42 each, a move that would extend the stock''s year-to-date decline to 36.2%.
Impending discounts from Target (TGT) may also be pushed, according to Get Target Corporation Report, which noted earlier this year that the larger-than-expected $35% build-up in overall inventories would likely result in price reductions, adding Tuesday that additional discounts would be required to shift excess goods.
Target said that operating margins would go down to around 2% in the present quarter before returning to the second half of the year.
According to Citigroup analyst Paul Lejuez, average retail inventories in the United States are outpacing sales gains by about ten percent, the largest gap since the epidemic, as retailers struggle to handle both supply chain problems, fuel and freight costs, and rapidly shifting consumer habits.
Interestingly, that effect was not less evident than in Macy''s (M)''s (JWN) - Get Macy''s, Inc. Reportand Nordstrom (JWN) - Get Nordstrom Inc. Report, both of which saw significant shifts in demand for spring and summer attire.
Larger, more diverse retailers may, however, be stuck with large quantities of unwanted goods as a result of their eagerness to get in front of supply chain glitches, which might result in higher price cuts for inflation-strapped customers.
"FIVE faces similar consumer challenges, which we are generally seeing," said a KeyBanc Capital Markets analyst, who reduced his price target on the group by $20, to $210 per share, while holding his ''overweight'' rating in place following last night''s earnings report.
"While we are dissatisfied with these near-term challenges, we remain positive on the long-term narrative, with compelling product, new pricing points, and improved experience, along with strong store growth, which continues to increase. "FIVES long-term performance," he said.
