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Five Below (FIVE) Focus on Pre-Teen Customers to Fuel Sales

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Five Below, Inc. (FIVE - Free Report) is leaving no stone unturned to expand its customer base. The company’s impressive merchandise assortment, focus on pre-teen customers and pricing strategy help it cope in a tough retail landscape. Also, it is focused on expanding store base and targets to set up a network of more than 2,500 stores by 2020.

This Zacks Rank #2 (Buy) company primarily focuses on teens and pre-teens. Further, the company is known for its impressive range of merchandise as it is committed toward making innovation and refreshing its product range in line with evolving consumer trends. These factors combined with the company’s pricing strategy enable it to cater to demographic shoppers.

We believe that Five Below’s wide assortment of trending merchandise, solid in-store and online experience along with favorable pricing strategy are likely to remain major growth drivers. Further, the company is focused on achieving efficient cost structure, solid average net sales per store, supply-chain initiatives and economies of scale.

 

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

In fact, the company’s solid store remodeling is a major reason driving its comps performance. Incidentally, Five Below opened 103 new stores in fiscal 2017. The company plans to open 125 new stores in fiscal 2018, with 50% expected to be launched in the first half.

These endeavors have helped the stock gain 50.2%, outperforming the industry’s gain of 9.7%. However, stiff competition from both brick-&-mortar and e-retailers and higher SG&A expenses raises concern. Five Below’s seasonal nature of business may also act as a deterrent.

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