Here's Why Five Below (Five) Stock Warrants Your Attention
Five Below, Inc. FIVE exhibited a decent run on the bourses in the past six months. Due to its operational initiatives — strengthening omnichannel solutions, expanding its customer reach and focusing on brand innovation — the stock has outpaced the Zacks Retail – Miscellaneous industry. In the said period, shares of this Zacks Rank #3 (Hold) company have rallied about 40.1% compared with the industry’s rise of 12.5%.
The company’s focus on providing trend-right products, improving the supply chain, strengthening digital capabilities and growing its brick-and-mortar footprint bodes well. The company is known for its impressive range of merchandise, per 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 Delve Deep
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 the operating margin and more than double earnings by fiscal 2025, provides investors with 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 doubling 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%. During fiscal 2023, Five Below plans to open 200 plus stores and convert more than 400 stores to the new Five Beyond format.
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Management foresees growth from the increased penetration of Five Beyond and the e-commerce business, new customer acquisitions, sales lift from remodels and conversions and selective merchandise price increases in response to inflation. The company has been digitizing vendor transactions, implementing a core merchandising 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. Markedly, the company extended its partnership with Instacart to bring expedited same-day delivery to all its outlets. The addition of Venmo and PayPal as payment options also enriches customers’ experience.
Wrapping Up
Five Below's solid range of products, seamless in-store and online experience and favorable pricing strategy are likely to remain major growth drivers. Following sturdy holiday sales results, management now expects fourth-quarter and fiscal-year results near the high end of the previously provided guidance range.
Five Below earlier guided fourth-quarter fiscal 2022 net sales between $1,085 million and $1,110 million. This suggests an improvement of 11.4% at the high end of the range. For fiscal 2022, Five Below projected net sales in the band of $3,038 million-$3,063 million. This indicates growth of 7.5% at the high end of the range.
Coming to the bottom line, this extreme-value retailer for tweens, teens and beyond guided earnings in the range of $2.93-$3.09 per share for the final quarter and between $4.55 and $4.71 per share for the fiscal year.
3 Picks You Can't Miss Out On
Here we have highlighted three better-ranked stocks, namely Urban Outfitters URBN, Arhaus ARHS and Albertsons Companies ACI.
Urban Outfitters, a leading lifestyle product and services company, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 18%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year revenues suggests growth of 5% from the year-ago reported figure.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Albertsons Companies, which operates food and drug stores in the United States, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 5.4%.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year revenues and EPS suggests growth of 7.8% and 6.5%, respectively, from the year-ago reported figure. Albertsons Companies has a trailing four-quarter earnings surprise of 17.2%, on average.
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Arhaus, Inc. (ARHS) : Free Stock Analysis Report
