Why Five Below (FIVE) Shares Are Getting Obliterated Today

What Happened:

Shares of discount retailer Five Below (NASDAQ:FIVE) fell 23.1% in the afternoon session after the company cut Q2'2024 sales and EPS guidance and announced that CEO and President Joel Anderson had stepped down. 

According to the company's press release, Kenneth Bull will serve as interim CEO. Thomas Vellios, Co-Founder, Non-Executive Chairman, and former CEO, is assuming the role of interim Executive Chairman. He will also assist the leadership team in searching for a permanent CEO. Separately, the company provided updated financial projections. The company now expects Q2'24 sales to be $820 million - $826 million (vs. previous guidance of $830 million to $850 million). EPS is expected to come in at 0.53 - 0.56 (vs. previous guidance of 0.57 - 0.69). 

Following the report, multiple Wall Street analysts downgraded the stock's rating. For example, Truist analyst Scot Ciccarelli lowered the stock's rating from Buy to Hold, stating, "Expectation for incremental softening in late July, the CEO change, mgmt comments on self-inflicted wounds and the potential scaling back of unit growth when new mgmt comes in, has completely eroded our confidence."

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 not very volatile than the market average and over the last year have had only 7 moves greater than 5%. Moves this big are very rare for Five Below and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was about a month ago, when the stock dropped 20.2% on the news that the company reported first quarter earnings results. Its full-year revenue and earnings guidance both missed analysts' expectations and were lowered from the previous outlook. Like some retailers that reported earnings during the season, the company called out a challenging macro environment that "disproportionately impacted core lower-income customers." Overall, the results could have been better.

Five Below is down 63.4% since the beginning of the year, and at $78.92 per share it is trading 63.4% below its 52-week high of $215.51 from January 2024. Investors who bought $1,000 worth of Five Below's shares 5 years ago would now be looking at an investment worth $639.87.

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