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Here's Why Five Below (FIVE) is a Healthy Investment Option

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Strength in the company’s digital strategy, expansion of supply chain network, enhancement of overall distribution capabilities and focus on merchandise assortment including essential items are working in favor of Five Below, Inc. (FIVE - Free Report) . The Zacks Rank #2 (Buy) company’s commitment toward enhancing customer experience via refresh store format and remodeling program is also commendable. Impressively, the Philadelphia, PA-based company’s shares have surged 48.1% over the course of the past six months and outpaced the industry’s 23.2% rally.

Let’s Delve Deep

Five Below has been working on digitizing vendor transactions, implementing core merchandizing platform and rolling out cloud-based data and analytics platform to analyze demand and accordingly manage inventory. Five Below rolled out curbside pickup, launched the app and looks to accelerate buy online, pick up in-store business model. Markedly, the company is now offering same-day delivery service in roughly 300 stores. E-commerce sales were robust in the third quarter of fiscal 2020.

Moreover, Five Below’s partnership with Instacart to offer expedited delivery services is impressive. This collaboration aids the retailer in providing same-day delivery and curbside pickup across select stores in Baltimore, Buffalo, Chicago, Cleveland, OH; Detroit, and parts of Florida, California and Texas. Also, the company had earlier made an investment in a gaming company called Nerd Street Gamers in order to attract children and teenagers. The company has also teamed up with Kyle Giersdorf aka Bugha, 2019 Fortnite World Cup Champion for its new line of gaming products. These initiatives are likely to boost the company’s overall performance.

Further, the company is known for its impressive range of merchandise as it remains committed toward making innovations and refreshing its product range per the evolving consumer trends. With respect to merchandise, the company is focusing on essential goods, consumables and everyday items, such as health- and personal-care products that customers are looking for nowadays. On the marketing front, the company is focusing on digital advertising. Moreover, the company continues to build new prototype Five Beyond with vast majority of products priced between $6 and $10. We believe that 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.

Talking of its store-related efforts, the company remains committed toward expanding its store base as well as enhancing the in-store experience to draw traffic and enhance customer base. The company believes that expanding scale helps it gain access to renowned shopping centers, capitalize on the emerging market trends and increase brand value. Management expects to open 120 net new stores in fiscal 2020. Notably, the company plans to invest roughly $200 million in fiscal 2020 in new stores and remodels, the new distribution centers, and systems and infrastructure. Going forward, the company envisions having a network of more than 2,500 stores in the United States in the long run.

Given the impressive prospects including prudent digital- and store-growth strategies, we expect Five Below to be poised well for growth.

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