12-month performance: -15% Insider activity: Bearish Selling pattern: Large sales from Chairman and CFO Recent news: Poor Q1 results
Five Below is a specialty retailer that sells a range of merchandise aimed at teen and pre-teen customers. Headquartered in Philadelphia, it has more than 900 stores across the US. The company is listed on the NASDAQ Global Select Market and currently has a market capitalisation of $5.8 billion.
Five Below has been impacted significantly by Covid-19 this year. Due to the pandemic, the company temporarily closed all of its stores on 20 March. First-quarter results, issued in June, reflected the impact of the store closures. For the quarter, net sales decreased by 44.9% to $200.9 million while operating loss was $72.2 million compared to operating income of $24.5 million in the first quarter of 2019. As of 9 June, Five Below had reopened around 90% of its stores, however, given the uncertainty associated with Covid-19, it has advised that it will not be providing sales or earnings guidance for the second quarter of fiscal 2020.
Source: 2iQ Research
What stands out to us here is that Five Below Chairman Thomas G. Vellios has sold a large number of shares over the last month. Since 22 June, the insider – who co-founded the company in 2002 – has sold 200,000 shares, generating total proceeds of $21.3 million. These sales reduced his holding in the company by around 33%. In addition, both CFO Kenneth Bull and Chief Merchandising Officer Michael Romanko sold large amounts of Five Below stock in June. Combined, these two insiders sold over $2 million worth of FIVE stock during the month, on top of sales related to employee options. Overall, we see this pattern of insider selling as a bearish signal. Given that multiple insiders have been selling shares, we think caution is warranted towards FIVE shares at the moment.
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