Teen-centric discount chain Five Below fell in after-hours trade on Wednesday after it reported first-quarter sales that fell short of expectations and gave a weak full-year forecast, following a mixed day for retail stocks.
Earlier Wednesday, discount retailer Ollie's Bargain Outlet reported quarterly results and full-year outlook that came up short of Street forecasts. But its outlook for second-quarter same-store sales came in a bit better than expected, and it noted "improved" demand for that quarter. Shares rallied during the day.
The two companies report as Wall Street tries to gauge the retail world's ability to manage rising costs amid signs of growing consumer anxiety over price increases. Both retailers also report after retail stocks in the prior year got a boost from government stimulus payments and an expanded child tax credit.
Pandemic-related supply-chain backups and Russia's war in Ukraine have driven shipping, fuel and food prices higher. Those rising costs could force more customers to hunt for bargains more aggressively. But higher prices will also have a harsher effect on the lower-income shoppers likelier to shop at discount chains.
Ollie's Bargain Outlet Earnings
Ollie's kicked off the day with first-quarter earnings per share of 20 cents, below Wall Street's expectations for 30 cents. Revenue of $406.7 million missed forecasts for $417 million. Same-store sales slid 17.3%, worse than expectations for a 15.6% drop.
The company noted that "headwinds including strong stimulus-induced sales a year ago." And it also cited "cooler weather which impacted sales of our seasonal products, and a consumer faced with significantly higher inflation, particularly on gas and food."
Ollie's sells closeout, discontinued brand-name merchandise and excess inventory at steep markdowns. Those items include toys, books and home-improvement supplies. CEO John Swygert said in a statement said the second quarter, so far, was better.
"Our current sales trends have improved meaningfully in the second quarter fueled by increased demand for warm weather seasonal products, combined with our incredible deals and strong inventory position," he said. He added that the company had not yet seen "the full benefit of consumers trading down."
Either way, Ollie's cut its full-year profit and sales outlook. The company now expects sales of $1.87 billion to $1.9 billion, below forecasts and down from a range of $1.908 billion to $1.926 billion. It now expects earnings per share of $1.83 to $1.98, also below expectations and down from an earlier range of $2.15 to $2.22.
The company also cut its same-store sales forecast, to a range of down 2% to flat. That compared to an earlier outlook for flat to a 1% gain. Wall Street expected a 1.1% decrease for the year.
Ollie's same-store sales forecast for the second quarter was for a range of flat to up 3.0%. Wall Street expected a 0.8% gain. Its sales and earnings-per-share outlooks for the quarter missed expectations.
OLLI stock rose 0.5% to 53.62 after hours in the stock market today. The stock gained 4.7% during regular trading.
Shares were in a cup base with a 55.32 buy point. But the stock is well off the highs it reached last year.
Among larger retail stocks, Walmart was down 0.9% during regular hours. Home Depot closed 1.4% lower.
Shares of Target added 0.5% during the day. The company on Tuesday lowered its second-quarter margin forecast, and announced efforts to cut some prices, slim down bloated inventories and rein in rising fuel and transportation costs.
Ollie's Bargain Outlet has a 47 Composite Rating and a 67 EPS Rating.
Five Below Earnings
Five Below's revenue rose 7% to $639.6 million, missing estimates for $653 million. It earned 59 cents per share, above an outlook for 58 cents. Same-store sales fell 3.6%, rose than the 1.3% drop expected by analysts.
The company said it expected full-year sales of $3.04 billion to $3.12 billion, based on the opening of around 160 new stores. That was shy of expectations for $3.208 billion.
Five Below said it expected earnings per share of $4.85 to $5.24. That was below Wall Street forecasts for $5.46.
The chain said it expected same-store sales to range between flat and down 2%. Wall Street expected a 1.5% dip.
Five Below stock slid 5.3% after hours in the stock market today. Shares have a 60 Composite Rating. Their EPS Rating is 90.
Five Below sells toys, games, home goods and other items, many priced below $5. The company also has a segment for higher-priced items, such as gaming and tech supplies, called Five Beyond. Management, during the company's investor day in March, said Five Beyond was a "significant part of our growth strategy."
Target, Walmart, Other Retail Stocks
Five Below — like discount retailers Dollar General and Dollar Tree — has leaned more on those higher-priced goods as costs rise elsewhere.
Both Dollar Tree and Dollar General rallied late last month after reporting strong quarterly results. Moody's said the results showed that "the consumer is trading down and looking for the best value" as rising prices for basics chew up consumers' income.
Target and Walmart weren't so fortunate. Shares of both crashed last month after they took a hit from "unexpected" costs. Other retail stocks followed.
Walmart, while noting it served a wide variety of customers, said some customers were starting to seek out cheaper groceries. Target, at that time, noted a "rapid slowdown" in sales trends in March for clothing, home goods and electronics. And it said it miscalculated consumers' shift away from bigger items like TVs and outdoor furniture.
Target on Tuesday said its steps to tackle those issues included "additional markdowns, removing excess inventory and canceling orders." However, it also said it would take "pricing actions to address the impact of unusually high transportation and fuel costs."
The company said it would add five distribution centers over the next two fiscal years. And it said it was working with suppliers to contain costs and speed up the movement of product along the company's supply chains.
