What led to Five Below Inc (NASDAQ: FIVE) stock rise

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Five Below Inc (NASDAQ: FIVE) stock rose over 5.6% in the pre-market session of December 5th, 2019 (Source: Google finance) after the company posted better than expected results for the third quarter of FY 19. The company has opened one new stores during the third quarter compared to 53 new stores opened in the third quarter of 2018. FIVE has ended the quarter with 894 stores, an increase of 149 stores compared to 745 stores at the end of the third quarter of 2018. The company had reported the adjusted revenue growth of 20.7 percent to $377.44 million in the third quarter of FY 19, beating the analysts’ estimates for revenue by 0.93%. Comparable sales increased by 2.9% due to an increase in comp ticket of 1.9% and a comp transaction increase of 1%.

Net income fell 24.6% to $10.2 million during the period versus $13.5 million last year. FIVE has ended the third quarter with $132 million in cash, cash equivalents and investments and no debt.

FIVE in the third quarter of FY 19 has reported the adjusted earnings per share of 18 cents, beating the analysts’ estimates for the adjusted earnings per share of 17 cents, according to Zacks Consensus Estimate. Gross profit for the third quarter rose 16.3% to $118.7 million and gross margin fell approximately 120 basis points to 31.4% mainly due to net unmitigated tariff costs and the shift of certain other merchandise costs from Q2 to Q3.

Additionally, FIVE has repurchased approximately 191,000 of our shares at a cost of $20.3 million during the third quarter. To date in 2019, the company has repurchased approximately 338,000 shares at a total cost of $36.9 million.

For FY 19, the company expects sales to be in the range of $1.877 to $1.892 million an increase of 20.4% to 21.3%. The comparable sales increase is expected to be approximately 2.5%. The company expect to end the year with 900 stores or unit growth of 20%. 2019 operating margin is expected to decline due primarily to the cost of opening the new owned Southeast distribution center and the new lease accounting standard, both of which affect SG&A. Net income is expected to be in the range of $175.4 million to $179.9 million representing a growth rate of approximately 17.2% to 20.2% over 2018 and diluted earnings per share to be in the range of $3.11 to $3.19.

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