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Five Below (FIVE) Rides on Solid Product Range, Store Plans

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·4 min read
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Five Below, Inc.'s FIVE focus on providing trend-right products, improving the supply chain, strengthening digital capabilities and growing brick-and-mortar footprint bodes well. The company is known for its impressive range of merchandise, per the evolving consumer trends. These factors, combined with its pricing strategy, enable it to cater to demographic shoppers and resonate with value-seeking customers.

Let's Introspect

Five Below's business model, financial strength, store growth opportunities, and upside potential offered by Five Beyond make us optimistic. The company's "Triple-Double" growth vision with plans to double sales, expand operating margin, and more than double earnings by fiscal 2025 provide investors a clear road map.

Talking about the "Triple-Double" growth vision, management plans to triple the store count to 3,500 plus by fiscal 2030. Five Below anticipates to double sales to $5.6 billion and more than double earnings per share to $10.00 by fiscal 2025. FIVE expects to increase the operating margin to nearly 14%. The retailer targets to open roughly 1,000 stores by fiscal 2025, of which around 375-400 new stores will be opened in the next two fiscal years and 550-600 new stores during fiscal 2024 and 2025.

Zacks Investment Research
Zacks Investment Research


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Management foresees growth stemming from increased penetration of Five Beyond and e-commerce business, new customer acquisition, sales lifts from remodels and conversions, and selective merchandise price increases in response to inflation. The company has been digitizing vendor transactions, implementing a core merchandizing platform and applying cloud-based data and analytics to analyze the demand and accordingly manage inventory.

The company is adding assisted checkout capabilities and is committed to providing same-day delivery service to make shopping convenient. It also looks to accelerate the buy online, pick up in-store business model. We note that assisted self-checkout is already available in 60% of stores and will be chainwide by fiscal 2025.

Wrapping Up

Quite obviously, Five Below's solid range of products, seamless in-store and online experience and favorable pricing strategy are likely to remain major growth drivers. The company envisions fiscal 2022 net sales in the band of $3.16-$3.26 billion compared with $2.85 billion reported in the last fiscal year. The company foresees earnings between $5.19 and $5.70 per share compared with $4.95 in fiscal 2021.

Shares of Five Below, which carries a Zacks Rank #3 (Hold), have slid 4% in the past six months. In the same period, the Zacks Retail – Miscellaneous industry has declined 9.2%. We note that Five Below's shares have risen 16.9% in the past month.

3 Picks You Can't Miss Out On

Here we have highlighted three better-ranked stocks, namely, Target TGT, Tractor Supply Company TSCO, and Boot Barn Holdings BOOT.

General merchandise retailer Target currently carries a Zacks Rank #2 (Buy). TGT has an expected EPS growth rate of 16.5% for three-five years. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Target's current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the corresponding year-ago period's levels. TGT has a trailing four-quarter earnings surprise of 21.3%, on average.

Tractor Supply Company, a rural lifestyle retailer in the United States, carries a Zacks Rank of 2 at present. TSCO has an expected EPS growth rate of 9.8% for three-five years.

The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and EPS suggests growth of 8.1% and 8.9%, respectively, from the corresponding year-ago period’s actuals. TSCO has a trailing four-quarter earnings surprise of 22%, on average.

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, carries a Zacks Rank #2. BOOT has an expected EPS growth rate of 20% for three-five years.

The Zacks Consensus Estimate for Boot Barn Holdings' current financial year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period.


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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

Five Below, Inc. (FIVE) : Free Stock Analysis Report

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