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Five Below (Five) Rides on Solid Product Range, Store Plans

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Five Below, Inc.'s (FIVE - Free Report) focus on providing trend-right products, improving the supply chain, strengthening digital capabilities and growing brick-and-mortar footprint bodes well. The company is known for its impressive range of merchandise, per the 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 Introspect

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 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.

Management foresees growth from increased penetration of Five Beyond and e-commerce business, new customer acquisition, sales lifts 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 customer experience.


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Wrapping Up

Quite obviously, Five Below's solid range of products, seamless in-store and online experience and favorable pricing strategy are likely to remain major growth drivers. This is evident from Five Below’s impressive performance during the holiday season.

Five Below highlighted that net sales for the holiday period — from Oct 30, 2022 through Jan 7, 2023 — increased 11.2% to $1,003.7 million from $902.3 million reported in the comparable fiscal week period of 2021-2022. Markedly, comparable sales for the holiday shopping season rose 0.9%.

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.

Shares of Five Below, which carries a Zacks Rank #2 (Buy), have rallied 37.4% in the past three months. In the same period, the Zacks Retail – Miscellaneous industry has risen 22.9%.

3 More Picks You Can't Miss Out On

Here we have highlighted three other top-ranked stocks, namely Build-A-Bear Workshop (BBW - Free Report) , Capri Holdings (CPRI - Free Report) and Ulta Beauty (ULTA - Free Report) .

Build-A-Bear Workshop, which operates as a multi-channel retailer of plush animals and related products, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Build-A-Bear Workshop’s current financial-year revenues and EPS suggests growth of 11.9% and 21.5%, respectively, from the year-ago reported figures. Build-A-Bear Workshop has a trailing four-quarter earnings surprise of 14.7%, on average.

Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1. The expected EPS growth rate for three to five years is 11.8%.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year revenues and EPS suggests growth of 1% and 10.6%, respectively, from the year-ago reported figures. Capri Holdings has a trailing four-quarter earnings surprise of 21%, on average.

Ulta Beauty currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 13.8%.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 15.7% from the year-ago period. This beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 26.2%, on average.

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