Five Below, Inc. FIVE is well poised to usher in the New Year with the same vigor it displayed this year. Shares of this Philadelphia, PA-based company have surged roughly 32.1% in the past year. This Zacks Rank #2 (Buy) stock has not only fared better than the industry that declined 9.4% but also the Zacks Retail-Wholesale sector that fell 10.4%. Additionally, the stock’s long-term earnings growth rate of 30% and a Momentum Score of A reflect its inherent strength.
The company’s impressive merchandise assortment, focus on pre-teen customers, enhancement of digital and e-commerce channels, and pricing strategy aid the company in standing firm amid a tough retail landscape. These along with healthy performance of new outlets and decent comparable sales run are likely to propel the top line. The aforementioned factors may be cited as reasons behind the company’s bullish run on the bourses.
Five Below’s strategic initiatives remain well on track and are likely to help fuel sales and earnings growth. The Zacks Consensus Estimate for revenues and earnings is pegged at $1.90 billion and $3.14 for fiscal 2019 and reflects year-over-year increase of 21.7% and 18.4%, respectively.
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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 its product range per evolving consumer trends. These factors combined with the company’s pricing strategy of selling products for $5 or below enable it to cater to demographic shoppers.
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 major 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.
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These endeavors have helped Five Below to score decent comparable sales growth. Comparable sales increased 3.2%, 2.7% and 4.8% in the first, second and third quarter of fiscal 2018. Five Below now expects comparable sales to increase in the band of 3.3-3.7% during fiscal 2018 and between 3-4% in the final quarter. The company’s solid store remodeling is a major reason behind its healthy comparable sales performance.
The company remains committed toward expanding its store base, as well as enhancing the in-store experience to draw traffic and enhance customer base. Incidentally, Five Below opened 103 new stores during fiscal 2017. The company plans to open 125 new stores during fiscal 2018. The company envisions having a network of more than 2,500 stores in the long run.
3 More Retail Stocks That Appear Well Poised
Fossil Group, Inc. FOSL outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shoe Carnival, Inc. SCVL delivered average positive earnings surprise of 31.4% in the trailing four quarters. It carries a Zacks Rank #1.
Canada Goose Holdings Inc. GOOS delivered average positive earnings surprise of 83.2% in the trailing four quarters. It has a long-term earnings growth rate of 31.3% and a Zacks Rank #2.
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