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From August 1, 2012 to September 6, 2019 Five Below stock has returned roughly 333% versus the S&P 500 return of 116%

COMPANY PROFILE

Five Below is a leading high-growth value retailer oering trend-right, high-quality products loved by tweens, teens and beyond. We know life is way better when you’re free to “let go & have fun” in an amazing experience lled with unlimited possibilities. We make it easy to say YES! to the newest, coolest stu across awesome Five Below worlds: Style, Room, Sports, Tech, Create, Party, Candy and Now. Founded in 2002 and headquartered in Philadelphia, Pennsylvania, Five Below today has over 800 stores in 36 states. For more information, please visitwww.vebelow.com and a store!

 

Recent Earnings

  • Net sales increased by 20.0% to $417.4 million with comparable sales increased by 1.4% (less than expected).

  • The Company opened 44 new stores and ended the quarter with 833 stores in 36 states. This represents an increase in stores of 20.4%.

  • Operating income increased by 18.4% to $36.0 million.

  • Net income increased by 15.0% to $28.8 million.

  • Diluted income per common share was $0.51.

  • The Company repurchased 146,185 shares at a cost of approximately $16.6 million in the second quarter of scal 2019.

  • For the year to date period ended August 3, 2019:

    • Net sales increased by 21.4% to $782.2 million, comparable sales increased by 2.2%.

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Opinion

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where FIVE scores well as of 9/17/19:

  • 87% for 3YR sales growth

  • 84% 1YR sales growth

  • 83% strong price momentum

  • 78% high ROIC

FIVE is my favorite retail stock at the moment. This is a story about store growth and solid unit economics. They run off low margins and high inventory turns, similar to Costco. As they build their store network, margins will begin to rise but they will stay low while in hyper growth mode. The brand is highly relevant and resonating with a few key demographic groups (millennials and Gen-Z), the store experience is fun, store layouts are smart and easy to follow, and store counts will double+ over the next 5 years. When you get a brand that resonates with super strong store economics and an aspiration to double store counts with strong merchandise management, you generally get a very explosive stock. I believe FIVE’s shares will also double over time so these shares are a buy on big dips. The tariff rhetoric tends to offer good entry opportunities and I’m sure we will have more in the near future. Management is managing through the tariff issues well and the price increases are being absorbed well so far. Once the tariff issues get put to bed, margins should rip higher as price increases hold firm.