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Five Below's (FIVE) Operational Strength Fuels Bull Run

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Five Below, Inc.’s (FIVE - Free Report) focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. Thanks to the business model, financial strength and store growth opportunities, this extreme-value retailer for tweens and teens, has exhibited an outstanding run on the bourses in the past six months.

In the said period, shares of this Philadelphia, PA-based company have surged about 47.6% compared with the industry’s rally of 28.8%. Meanwhile, the Retail-Wholesale sector has increased 3.4%.

Let’s Delve Deeper

Five Below’s commitment toward enhancing merchandise assortment, strengthening digital footprint and achieving efficient cost structure is commendable. The company 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.

The company has rolled out curbside pickup, launched the app and looks to accelerate buy online, pick up in-store business model. Its e-commerce business continues to grow at a pace faster than stores. Markedly, the company is now offering same-day delivery service in more than 350 locations in collaboration with Instacart. Moreover, to make shopping convenient, it is expanding self-checkout capabilities.

Now, talking of its store-related efforts, the company plans to open 170-180 new stores and complete approximately 30-35 remodels in fiscal 2021. The company will enter Utah and New Mexico this fiscal, which will expand its presence to 40 states. It plans to open about 60 new stores in the first quarter of fiscal 2021. Further, the company envisions a network of more than 2,500 stores in the United States in the long run. Five Below anticipates capital expenditures of approximately $315 million in fiscal 2021.

Wrapping Up

Given the impressive prospects including prudent digital and store-growth strategies, we expect Five Below to be well-poised for growth in 2021 and beyond. Taking into account the current trajectory and the expected benefit from the new coronavirus relief package, Five Below envisions first-quarter fiscal 2021 net sales in the range of $540 million to $560 million. Management forecast first-quarter earnings between 56 cents and 68 cents a share.

Additionally, this Zacks Rank #2 (Buy) stock’s long-term earnings growth rate of 32.8% and Growth Score of A indicates its inherent strength.

Other Key Picks

Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MarineMax (HZO - Free Report) , also a Zacks Rank #1 stock, delivered an earnings surprise of 125.8% in the last four quarters, on average.

L Brands has a long-term earnings growth rate of 13%. Currently, it flaunts a Zacks Rank #1.

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Abercrombie & Fitch Company (ANF) - free report >>

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