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Five Below (FIVE) Outpaces Industry Year to Date: Here's Why

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Five Below, Inc. FIVE has exhibited a decent run on the bourses so far this year. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outperformed the Zacks Retail – Miscellaneous industry and the Retail-Wholesale sector. In the said period, shares of this Philadelphia, PA-based company have increased about 11.4% against the industry’s decline of 8%. Meanwhile, the sector has risen 0.6%.

Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimates for the current and next financial year have increased about 9.5% and 6.3% to $4.62 and $5.43, respectively, over the past 30 days. Notably, this Zacks Rank #1 (Strong Buy) stock’s long-term earnings growth rate of 32.5% indicates its inherent strength. Let’s delve deeper.

Offering Trend-Right Products

Five Below’s focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. Markedly, the company’s solid first-quarter fiscal 2021 performance is a testament to the same. We note that both the top and bottom lines not only beat the Zacks Consensus Estimate but also grew year over year. Impressively, both the metrics even surpassed pre-pandemic level.

Without a doubt, the company’s commitment toward enhancing merchandise assortment, strengthening digital footprint and achieving efficient cost structure is commendable. The company has been digitizing vendor transactions, implementing core merchandizing platform and applying cloud-based data and analytics to analyze demand, and accordingly manage inventory.

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Zacks Investment Research

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Enhancing Delivery Capabilities

Five Below has rolled out curbside pickup, launched the app and looks to accelerate buy online, pick up in-store business model. Its e-commerce business continues to grow at a rapid pace, registering double-digit growth year over year in first-quarter fiscal 2021.

The company recently extended its partnership with Instacart bringing same-day delivery to more than 700 new locations. Hence, the delivery service is now available at the company’s 1,100 stores.

Encouragingly, the expansion of this partnership enables customers to avail same-day delivery of outstanding assortment of essentials for summers and other items, such as pool floats, outdoor games, cell phone cases among others. They can also shop pet products, apparel, beauty and wellness items and more via the Instacart delivery. Additionally, to make shopping convenient, it is expanding self-checkout capabilities.

Store Expansion Opportunities

Now, talking of its store-related efforts, Five Below is on track to open 170-180 new stores and complete approximately 30 remodels in fiscal 2021. The company opened 67 net new stores during the first quarter, and now plans to open about 30 new stores in the second quarter. During the first quarter, the company remodeled about a dozen stores into Five Beyond prototype and now expects to conclude fiscal 2021 with approximately 30% of stores in the Five Beyond format.

Well, this extreme-value retailer for tweens, teens and beyond envisions a network of more than 2,500 stores in the United States in the long run.

Bottom Line

Quite apparent, Five Below’s wide assortment of trend right merchandise, solid in-store and online experience along with favorable pricing strategy are likely to remain major growth drivers. The company projected second-quarter fiscal 2021 net sales in the range of $640 million to $660 million and guided earnings between $1.01 and $1.13 per share.

3 More Stocks Worth a Look

Hibbett Sports, Inc. HIBB has a long-term earnings growth rate of 17.7%. It presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings BOOT has a trailing four-quarter earnings surprise of 51.7%, on average. It currently carries a Zacks Rank #1.

Abercrombie & Fitch ANF has a long-term earnings growth rate of 18%. It presently flaunts a Zacks Rank #1.

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