Five Below Slumps as Growth Plan Fails to Impress, Sales Sputter

(Bloomberg) -- Discount retailer Five Below Inc. slumped after announcing plans to triple its store count even as sales languish.

The company said Wednesday that it seeks to open about 1,000 new stores over the next four years, doubling sales and more than doubling earnings over that time. By the end of fiscal 2030, the company is targeting at least 3,500 locations in the U.S.

Dollar stores and other off-price retailers have been expanding rapidly. As Five Below looks to keep up with its rivals, it’s also struggling to meet Wall Street expectations. The company gave a disappointing outlook for sales and earnings this year, which it attributed to inflation along with pandemic-driven delays in construction and permitting that have delayed store openings.

The company plans to improve the shopping experience this year Chief Executive Officer Joel Anderson said in the statement, adding that Five Below is navigating “a dynamic macro environment related to the lingering impacts of the pandemic.” 

Shares of Five Below fell as much as 6.4%, their biggest intraday drop since Jan. 10. The stock had already fallen 17% to start the year, while the S&P 400 Consumer Discretionary Index was down only 10% through Tuesday’s close.

Analysts have been overwhelmingly bullish on Five Below and some recommended taking advantage of Wednesday’s slump as a buying opportunity.

Five Below expects same-store sales, a key retail metric, will be flat to up 3% in the year ending around January 2023. Analysts surveyed by Bloomberg had projected growth of 2.9%, on average. The retailer projected earnings per share in the range of $5.19 to $5.70, compared with the $5.86 average analyst estimate.

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