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Five Below (Five) Rides on Trend-Right Products, Digital Push

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  • FIVE

Five Below, Inc.’s FIVE focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. The company’s decent second-quarter fiscal 2021 performance is a testament to the same. Both the top and the bottom lines not only improved year over year but also surpassed the pre-pandemic level. Comparable sales also increased significantly during the quarter. Five Below stated that the third quarter is off to a robust start from a sales perspective.

Let’s Introspect

Five Below’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 merchandising platform and applying cloud-based data and analytics to analyze demand, and accordingly manage inventory.

The company has rolled out curbside pickup, launched the app and looks to accelerate buy online, pick up in-store business model. Markedly, the company extended its partnership with Instacart to bring expedited same-day delivery to all its outlets. To make shopping convenient, it is expanding self-checkout capabilities.

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We note that comparable sales in the second quarter climbed 39.2% against a decline of 12.2% in the year-ago quarter. For the comparable subset of stores that were open in both the second quarter of fiscal 2019 and the second quarter of fiscal 2021, sales jumped 21%. The company witnessed strength in the Sports, Tech, Style, Candy and Room worlds. The company has guided mid-single digit growth in comparable sales for the third quarter.

Talking of its store-related efforts, Five Below is on track to open 170-175 new stores and complete approximately 30 remodels in fiscal 2021. The company inaugurated 34 new stores during the second quarter, and now plans to open about 40-45 new stores in the third quarter. Approximately 270 stores featured the five beyond section at the end of the second quarter. The company expects approximately 30% of stores to offer five beyond by the end of fiscal 2021 and roughly 50% of the chain by the end of fiscal 2022.

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 obviously, 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 third-quarter fiscal 2021 net sales in the range of $550 million to $565 million compared with $476.6 million reported in the year-ago period.

Five Below 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 — this Zacks Rank #3 (Hold) stock has outperformed the Zacks Retail – Miscellaneous industry. In the said period, shares of this Philadelphia, PA-based company have increased about 10.5% compared with the industry’s rise of 1.6%.

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