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01/10 17:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: while sales and store expansion were positive, comparable sales and margins declined. The Q&A highlighted concerns about tariffs and lack of specific guidance on pricing, offset by optimism in product offerings and store growth potential. Despite strong revenue growth, declining margins and lack of share repurchase plans temper enthusiasm. The neutral sentiment reflects these balanced factors.
Total Sales Q4 2024 $1.39 billion, an increase of 7.8% from $1.29 billion in Q4 2023.
Comparable Sales Q4 2024 Decreased 3.0%, driven by a decrease in comp transactions of 1.9% and a comp average ticket of 1.0%.
Adjusted Gross Profit Q4 2024 $563.2 million, an increase of 6.2% over Q4 2023.
Adjusted Gross Margin Q4 2024 Decreased by approximately 60 basis points to 40.5%, driven by fixed cost deleverage on the negative comp and timing of certain product costs.
Adjusted SG&A Q4 2024 Increased approximately 110 basis points to 22.3% versus last year's fourth quarter, driven by deleverage of fixed costs on the negative comp and higher store wages.
Adjusted Operating Income Q4 2024 $253.3 million, with an adjusted operating margin declining 170 basis points to 18.2%.
Adjusted Net Income Q4 2024 $192.4 million, compared to $193.8 million last year.
Adjusted EPS Q4 2024 $3.48 compared to $3.50 last year.
Total Sales FY 2024 Approximately $3.88 billion, an increase of 10.4% from $3.51 billion last year.
Comparable Sales FY 2024 Decreased 2.7%, driven entirely by a decrease in comp transactions.
Adjusted Gross Margin FY 2024 Decreased approximately 10 basis points to 35.6% due to fixed cost deleverage on the negative comp.
Adjusted SG&A FY 2024 Increased 140 basis points to 26.4%, driven primarily by fixed cost deleverage and investment in store hours.
Adjusted Operating Margin FY 2024 9.2%, or 150 basis points lower than last year.
Adjusted Net Income FY 2024 $277.8 million, with adjusted diluted EPS of $5.04 compared to $5.26 last year.
Cash Position FY 2024 Approximately $529 million in cash, cash equivalents, and short-term investment securities with no debt.
Inventory FY 2024 $659.5 million compared to $584.6 million at the end of FY 2023.
CapEx FY 2024 Approximately $324 million, reflecting 228 new store openings and investments in systems and infrastructure.
New Product Focus: Five Below plans to sharpen its focus on delivering fresh trend-right products at great price value, emphasizing a commitment to newness and curated assortments.
Exclusive Product Launches: In Q4, Five Below chased exclusive beauty products that resonated well with customers, indicating a strategy to capitalize on trending items.
Market Expansion: Five Below opened a record 228 new stores in 2024, including entry into Wyoming, bringing the total to 1,771 stores across the US.
New Store Openings: In Q1 2025, Five Below expects to open approximately 50 new stores.
Geographic Expansion: Plans to expand into new markets, including the Pacific Northwest.
Operational Improvements: Improved operational execution in the second half of 2024 with better staffing, optimized labor, and higher customer engagement.
Inventory Management: Inventory health has improved, although some categories still require attention.
Strategic Shift in Pricing: Five Below will simplify pricing with a focus on $1 to $5 price points and enhance value for products above $5.
Marketing Strategy: Hiring a new Chief Marketing Officer to enhance brand awareness and customer engagement.
Tariffs: Approximately 60% of total cost of goods are imported from China, and the recently announced tariffs are significant, leading to expected margin headwinds despite mitigation efforts.
Supply Chain Challenges: The company is still chasing inventory in some categories, indicating that inventory depth is not where it should be, which may affect sales performance.
Competitive Pressures: The need to maintain a compelling value proposition in a competitive retail environment, especially as customers seek budget-friendly options in uncertain economic times.
Economic Factors: The overall economic environment is uncertain, impacting consumer spending and the company's pricing strategies.
Operational Execution: The company faced challenges in the first half of the year, leading to a reset of business strategies to improve product, value, and store experience.
Labor Costs: Increased store wages and investments in store hours have contributed to SG&A deleverage, impacting operating margins.
Store Openings: Opened a record 228 new stores across 39 states in 2024, ending the year with 1,771 stores.
Customer Focus: Sharpening focus on the core customer, particularly kids and their parents, to build long-term relationships.
Product Strategy: Focusing on delivering trend-right products at core price points of $1 to $5, with an emphasis on key items above $5.
Marketing Initiatives: Hiring a new Chief Marketing Officer to enhance brand awareness and customer engagement.
Operational Improvements: Improving operational execution with better staffing, optimized labor, and higher customer engagement.
Inventory Management: Addressing inventory challenges and improving inventory health.
Sales Guidance: For full year 2025, sales expected to be in the range of $4.21 billion to $4.33 billion, a 10.1% increase at midpoint.
Comparable Sales Guidance: Expected to be between flat and positive 3% for full year 2025.
Adjusted Operating Margin Guidance: Expected to be approximately 7.3%, a decline of about 180 basis points year-over-year.
Adjusted EPS Guidance: Expected to be in the range of $4.10 to $4.72 for full year 2025.
CapEx Guidance: Expected to be between $210 million and $230 million for full year 2025.
First Quarter Sales Guidance: Expected total sales in the range of $905 million to $925 million, a growth of 12.7% at midpoint.
First Quarter Adjusted EPS Guidance: Expected to be in the range of $0.50 to $0.61.
Share Repurchase Program: None
The earnings call summary shows strong sales growth and positive product development initiatives, but declining operating margins and unclear guidance on potential negative comps pose concerns. The Q&A reveals management's focus on growth and customer engagement, but also highlights uncertainties in EBIT margin and licensing impact. The balance of positive and negative factors suggests a neutral stock price reaction.
The earnings call indicates strong performance and positive guidance, with an 18.7% sales growth forecast and a significant increase in comparable sales. Despite a decline in operating margin, the optimistic sales and EPS guidance, along with strategic initiatives such as product sourcing and store improvements, suggest a positive outlook. Q&A insights highlight effective risk management and strategic focus, further supporting a positive sentiment. The company's proactive approach to tariffs and operational efficiency, coupled with growth in store openings, enhances the positive sentiment despite some guidance clarity issues.
The earnings call shows strong financial performance with increased sales, improved margins, and strong customer acquisition. Despite some challenges like tariffs and competitive pressures, the company is addressing these through strategic actions. Positive guidance and a focus on operational improvements further support a positive outlook. The lack of a share repurchase program and margin compression are minor negatives, but the overall sentiment is positive, suggesting a stock price increase of 2% to 8%.
The earnings call presented mixed signals: while sales and store expansion were positive, comparable sales and margins declined. The Q&A highlighted concerns about tariffs and lack of specific guidance on pricing, offset by optimism in product offerings and store growth potential. Despite strong revenue growth, declining margins and lack of share repurchase plans temper enthusiasm. The neutral sentiment reflects these balanced factors.
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