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Five Below on Track With Store Expansion, Reaches 1000 Mark

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When it comes to strengthening store base, Five Below, Inc. (FIVE - Free Report) strives at keeping no stones unturned. Recently, the company achieved a major milestone by opening its 1000th store at Houston, TX, at Brookhollow Marketplace. Besides, the company announced that it has begun shipping merchandise from a new distribution centre in Conroe, TX.

Although many retailers are resorting to store rationalizing and closures amid the ongoing pandemic, few like Five Below have been gaining despite the odds. This was well reflected in the company’s second-quarter fiscal 2020 results, with net sales increasing 2.1% to $426.1 million and surpassing the Zacks Consensus Estimate. The company’s prudent efforts to expand supply chain, distribution capabilities, digital offerings as well as focus on strengthening merchandise assortment, including essential items, contributed to the results.

That said, let’s take a closer look at the company’s recent store-expansion efforts.

Widening Operations in Texas

The latest store opening marks the 15th store of the company in the Houston metro area and its 111th store in Texas. Markedly, Five Bellow has its widest store base in Texas. The store opening ceremony, which took place on Sep 11, will be followed by a week-long celebration that includes surprise giveaways and exciting new offers.

With respect to store hours, the new location will be open Sunday through Thursday from 11 a.m. to 7 p.m., while on Friday and Saturday it shall stay open between 10 a.m. to 8 p.m. Management encourages customers to follow the company’s social media handles in order to stay updated on latest brand happenings.  

The new distribution center in Conroe began shipping merchandise from July 20th. This 850,000 square feet centre currently employs 115 workers and offers services to more than 170 Five Below stores across Texas, Southwest and West Coast markets.

Expanding Store Base: Key Growth Catalyst

Five Below is committed toward expanding its store base as well as enhancing in-store experience to draw traffic. The company believes that expanding scale helps it gain access to renowned shopping centers, capitalize on the emerging market trends and increase brand value.

The company had opened 150 new stores in fiscal 2019. Management plans to open 110-120 new stores in fiscal 2020 with expectation to end the year with 1,010-1,020 stores. The company envisions a network of more than 2,500 stores in the United States in the long run. During the second quarter of fiscal 2020, the company opened 62 net new stores, while remodeling eight additional stores.

Going ahead, the company plans to remodel about 45 stores and add self-checkout capabilities to more than 100 additional existing stores. Notably, the company plans to invest nearly $200 million in fiscal 2020 toward new store openings and remodels, new distribution centers as well as for systems and infrastructural developments.

Final Thoughts

In its last earnings call, management had informed that third quarter comparable sales, until Sep 2, are tracking up approximately 6%.  The company expects to witness higher baskets and fewer transactions in the impending quarter, as consumers continue consolidating store trips amid the ongoing coronavirus pandemic.

That said, we expect the company to keep gaining from its widening brick-and mortar presence. Such efforts along with dedicated endeavors to enhance supply chain and digital capabilities as well as brand offerings are likely to continue favoring the top line. This Zacks Rank #3 (Hold) company has gained 18.4% in the past three months compared with the industry’s rise of 13.4%.

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