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Here's Why Five Below Scored Decent Numbers in Holiday Season

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The retail sector’s prospects are closely tied with the purchasing power of consumers. In fact, a buoyant consumer environment, courtesy of a robust job market and higher disposable income, worked in favor of the retailers during the holiday season. These attributes as well as strategic endeavors aided Five Below, Inc. (FIVE - Free Report) to deliver decent comparable sales numbers during the festive season.

A Synopsis

This Philadelphia, PA-based company posted solid sales results for the quarter-to-date period (starting Nov 4, 2018 until Jan 5, 2019). The company’s net sales surged 24.6% to $526.1 million, while comparable sales witnessed growth of 4.9%.

As a result of impressive quarter-to-date performance, management now expects fourth-quarter sales to marginally surpass the previously provided view and record earnings at the high-end of the guidance range. Five Below had projected fourth quarter net sales in the range of $593-$600 million with comparable sales growth of 3-4% and earnings per share between $1.53 and $1.57.

For fiscal 2018, the company envisioned net sales in the range of $1.550-$1.557 billion with comparable sales growth of 3.3-3.7%. Earnings for the fiscal year is estimated to be in the band of $2.60-$2.64 per share.

What Aided the Performance?

Five Below’s impressive merchandise assortment, focus on pre-teen customers, enhancement of digital and e-commerce channels, and pricing strategy aids the company to stand tall amid a competitive retail landscape. These along with healthy performance of new outlets and decent comparable sales run help propel the top line.

Management’s primary focus on teens and pre-teens, helps the company enhance customer base by attracting shoppers. The company is known for its impressive range of merchandise, as it remains committed toward making innovations and refreshing product range per the evolving consumer trends. During the holiday season, management expanded their selection with amazing value toys and games, cashing in on the toy opportunity.

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 primary growth drivers. Further, the company remains focused on achieving efficient cost structure, solid average net sales per store, supply-chain initiatives and economies of scale.

We note that shares of this Zacks Rank #2 (Buy) company have risen roughly 92.5% in a year. In fact, the stock has fared better than the Zacks Retail - Miscellaneous industry’s growth of 7.6%. Meanwhile, the Zacks Retail-Wholesale sector has declined 6.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Five Below, there are other retailers who scored decent numbers holiday sales numbers.

Here Are 3 Retailers That Had a Successful Holiday Feat

Retailers like Target Corporation (TGT - Free Report) , American Eagle Outfitters (AEO - Free Report) and Ollie's Bargain Outlet Holdings (OLLI - Free Report) witnessed decent holiday performance. Notably, these companies reported comparable sales growth of 5.7%, 6% and 7.1%, respectively.

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