What Happened:
Shares of discount retailer Five Below (NASDAQ:FIVE) fell 6.24% in the morning session after the company reported second quarter results that missed analysts' revenue expectations, but earnings per share (EPS) beat. In addition, gross margin increased year on year, which was a positive.
On the other hand, while Five Below's full-year revenue guidance was maintained, it missed analysts' expectations. The company also reduced full year EPS guidance due to an increase in "shrink reserves", and this reduction is likely a major cause of the stock's weakness. Overall, the results could have been better.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Five Below? Access our full analysis report here, it's free.
What is the market telling us:
Five Below's shares are somewhat volatile and over the last year have had 13 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
Five Below is up 3.1% since the beginning of the year, but at $177.19 per share it is still trading 18.4% below its 52-week high of $217.18 from April 2023. Investors who bought $1,000 worth of Five Below's shares 5 years ago would now be looking at an investment worth $1,520.
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