01:09 PM EDT, 08/16/2024 (MT Newswires) -- Five Below ( FIVE ) is facing internal and external challenges, likely making Wall Street's estimates "too optimistic" ahead of the discount retailer's fiscal second-quarter results that are scheduled for release later this month, Oppenheimer said in a Friday client note.

Oppenheimer now forecasts the company to report per-share earnings of $4.65 for the current year, down from its prior projection of $4.97, based on comparable sales being down 6% to 8%. The current consensus on Capital IQ is for normalized and GAAP EPS of $4.77 each.

The brokerage reiterated its cautious near-term stance on the perform-rated Five Below ( FIVE ) stock and recommended investors "stay on the sidelines." Revenue weakness could persist, if it doesn't deteriorate further, due to an increasingly challenged spending backdrop among low- to middle-income consumers, Oppenheimer said.

"Thus far in 2024, shares of (Five Below ( FIVE )) are down 65% and underperforming meaningfully the gain of 16% in the S&P 500, upon an abrupt slowing in fundamental trends and an unforeseen shakeup within senior leadership at the company," analysts led by Brian Nagel wrote in the note.

Five Below ( FIVE ) appointed Chief Operating Officer Kenneth Bull as interim chief executive last month after Joel Anderson stepped down from the top post to take the helm at Petco Health & Wellness (WOOF). Oppenheimer expressed concerns that a lack of executive leadership could disrupt strategic repositioning efforts at the retailer.

In July, the discount store chain said it anticipated second-quarter EPS to be in a range of $0.53 to $0.56. It expected revenue to come in between $820 million and $826 million and comparable sales to decrease about 6% to 7%. "Per our math, (comparable) sales likely exited (the second quarter) tracking down high-single- to low-double-digits," according to Nagel.

Oppenheimer expects second-quarter EPS of $0.53 on revenue of $820.7 million. Five Below ( FIVE ) is due to report its quarterly results on Aug. 28.

The brokerage said that an eventual improvement in top-line trends could serve as an "incremental earnings growth tailwind."

Price: 76.50, Change: +1.17, Percent Change: +1.55