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Five Below's (FIVE) Trend-Right Products, Strategies Bode Well

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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. Impressively, the company’s solid first-quarter fiscal 2021 performance is a testament to the same. We note that both the top and bottom lines not only beat the Zacks Consensus Estimate but also grew year over year. Impressively, both the metrics even surpassed pre-pandemic level.

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 merchandizing 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. Its e-commerce business continues to grow at a faster pace, registering double-digit growth year over year in first-quarter fiscal 2021. Markedly, the company is testing same-day delivery service in collaboration with Instacart. Moreover, to make shopping convenient, it is expanding self-checkout capabilities.


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Now, talking of its store-related efforts, Five Below is on track to open 170-180 new stores and complete approximately 30 remodels in fiscal 2021. The company opened 67 net new stores during the first quarter, and now plans to open about 30 new stores in the second quarter. During the first quarter, the company remodeled about a dozen stores into Five Beyond prototype and now expects to conclude fiscal 2021 with approximately 30% of stores in the Five Beyond format.

Well, the company envisions a network of more than 2,500 stores in the United States in the long run.

Quite apparently, 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 envisions second-quarter fiscal 2021 net sales in the range of $640 million to $660 million. Management forecast earnings between $1.01 and $1.13 per share.

Wrapping Up

Thanks to the business model, financial strength and store growth opportunities, this extreme-value retailer for tweens, teens and beyond, has exhibited a decent run on the bourses in the past six months.

In the said period, shares of this Philadelphia, PA-based company have jumped about 19.9% compared with the industry’s rally of 8.8%. Notably, this Zacks Rank #2 (Buy) stock’s long-term earnings growth rate of 32.5% and a VGM Score of B indicate its inherent strength.

Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimates for the current and next financial year have increased about 9.2% and 6.5% to $4.62 and $5.43, respectively, over the past 30 days. Also, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 41.5% and 117.9%, respectively, from the year-ago period.

Here are 3 More Key Stocks for You

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

Boot Barn Holdings (BOOT - Free Report) has a trailing four-quarter earnings surprise of 51.7%, on average. The stock flaunts a Zacks Rank #1.

L Brands has a long-term earnings growth rate of 13%. It currently carries a Zacks Rank #2.

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