Does Five Below (FIVE) Holiday Sales Heralds A Strong 2018?

Five Below, Inc. (NASDAQ:FIVE) , whose shares gained 66% against the industry’s decline of 10.1% in 2017, has kicked off 2018 with solid holiday sales numbers. The company’s net sales for the holiday period rose 26.7% to $442.6 million. Meanwhile, comparable sales witnessed robust growth of 6.7%.

Further, the company stated that this holiday sales performance was the best since its IPO in 2012. Going forward, the company remains committed to strategic initiatives such as enhancement of digital and e-commerce channels, improvement in customers’ shopping experience, store openings as well as marketing efforts.

Following robust holiday sales data, the company stated it expects fourth-quarter and fiscal 2017 guidance to be in the higher end of earlier provided guidance range. Five Below projects sales in the band of $1.264-$1.276 billion. Earnings for fiscal 2017 are envisioned in the band of $1.72-$1.79 per. Fiscal fourth-quarter sales are projected to be between $491 million and $503 million. Earnings are expected in the band of $1.09-$1.16 cents per share compared with 90 cents in the year-ago quarter.

The company’s primary focus on teens and pre-teens, helps the company enhance customer base by attracting shoppers. Further, it is known for impressive range of merchandise, as the company remains committed toward making innovations and refreshing product range per the 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, alongside resonating with value-seeking customers.

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.

Enhancing margins is one of Five Below’s key growth strategies. The company remains focused on achieving margin expansion through efficient cost structure, solid average net sales per store, supply-chain initiatives and focus on attaining economies of scale. Evidently, the company witnessed operating margin growth of 150 basis points in third-quarter fiscal 2017, driven by improved gross margin and lower SG&A expenses.

Apart from Five Below, other retailers such as Urban Outfitters (NASDAQ:URBN) and Kohl’s Corp. (NYSE:KSS) registered sales growth of 3.6% and 6.9%, respectively, during the November-December period, while both J. C. Penney (NYSE:JCP) and Target (NYSE:TGT) recorded comparable store sales growth of 3.4%.

Five Below currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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