Spotting Winners: Five Below (NASDAQ:FIVE) And Discount Retailer Stocks In Q1

As the Q1 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers in the discount retailer industry, including Five Below (NASDAQ:FIVE) and its peers.

Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.

The 6 discount retailer stocks we track reported a slower Q1; on average, revenues missed analyst consensus estimates by 0.6%. while next quarter's revenue guidance was 5% below consensus. Valuation multiples for many growth stocks have not yet reverted to their early 2021 highs, but the market was optimistic at the end of 2023 due to cooling inflation. 2024 has been a different story as mixed signals have led to market volatility, and discount retailer stocks have had a rough stretch, with share prices down 10.7% on average since the previous earnings results.

Weakest Q1: Five Below (NASDAQ:FIVE)

Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ:FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.

Five Below reported revenues of $811.9 million, up 11.8% year on year, falling short of analysts' expectations by 2.7%. Overall, it was a weak quarter for the company with underwhelming earnings and revenue guidance for next quarter.

Joel Anderson, President and CEO of Five Below, said, "While our first quarter sales were disappointing, disciplined cost management enabled us to deliver adjusted EPS within our earnings outlook. Needs-based items such as those in our Candy, Food and Beauty departments outperformed expectations and drove positive sales results. We also saw positive comparable sales from our higher income customers; however, the macro environment disproportionately impacted our core lower income customers, resulting in overall comparable sales declines. Five Below Total Revenue

Five Below scored the fastest revenue growth but had the weakest full-year guidance update of the whole group. The stock is down 49.8% since reporting and currently trades at $66.63.

Read our full report on Five Below here, it's free.

Best Q1: Ollie's (NASDAQ:OLLI)

Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ:OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.

Ollie's reported revenues of $508.8 million, up 10.8% year on year, in line with analysts' expectations. It was a solid quarter for the company with a decent beat of analysts' gross margin and earnings estimates. Ollie's Total Revenue

Ollie's scored the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 13.2% since reporting. It currently trades at $93.02.

Is now the time to buy Ollie's? Access our full analysis of the earnings results here, it's free.

Big Lots (NYSE:BIG)

Priding itself on carrying brand-name items, Big Lots (NYSE:BIG) is a discount retailer that acquires excess inventory and then sells at meaningful discounts to the prices of traditional retailers.

Big Lots reported revenues of $1.01 billion, down 10.2% year on year, falling short of analysts' expectations by 3%. It was a weak quarter for the company with a miss of analysts' earnings and gross margin estimates.

Big Lots had the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 71.9% since the results and currently trades at $0.99.

Read our full analysis of Big Lots's results here.

Ross Stores (NASDAQ:ROST)

Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ:ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.

Ross Stores reported revenues of $4.86 billion, up 8.1% year on year, in line with analysts' expectations. Revenue aside, it was an ok quarter for the company with a decent beat of analysts' gross margin estimates but underwhelming earnings guidance for the next quarter.

Ross Stores achieved the biggest analyst estimates beat among its peers. The stock is up 5.7% since reporting and currently trades at $139.42.

Read our full, actionable report on Ross Stores here, it's free.

Burlington (NYSE:BURL)

Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE:BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.

Burlington reported revenues of $2.36 billion, up 10.5% year on year, in line with analysts' expectations. More broadly, it was a decent quarter for the company with an impressive beat of analysts' earnings estimates.

The stock is up 27.6% since reporting and currently trades at $255.70.

Read our full, actionable report on Burlington here, it's free.

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