Five Below, Inc. FIVE has demonstrated strong upward momentum, trading above its 50 and 100-day simple moving averages (SMAs). SMA is a key indicator of price stability and long-term bullish trends.
FIVE ended yesterday’s trading session at $104.01, above its 50 and 200-day SMAs of $96.41 and $91.09, respectively, highlighting a continued uptrend. This technical strength, combined with consistent momentum, reflects positive market sentiment and investor confidence in Five Below's financial stability and growth potential.
FIVE Trades Above 50 & 100-Day Moving Averages
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Shares of this specialty value chain retailer have gained 16.2% compared with the Zacks Retail-Miscellaneous industry’s 3.2% growth in the past three months. The company’s enhanced operational efficiency and growth initiatives have also helped it to outperform the broader Retail-Wholesale sector and the S&P 500 index’s growth of 7.2% and 5.3%, respectively, during the same period.
FIVE Stock Past Three-Month Performance
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Five Below’s Renewed Focus on Product and Value
FIVE has also renewed its focus on curating a product assortment that aligns closely with current consumer preferences while maintaining its core value proposition of offering affordable products. The company’s strategy of providing quality merchandise at a low price point resonates strongly with value-conscious shoppers. This has been key to driving customer traffic and improving sales conversions, ultimately increasing customer loyalty.
In the third quarter of fiscal 2024, the company achieved net sales of $843.7 million, a 14.6% year-over-year increase. Comparable sales (comps) grew 0.6%, driven by a 1.2% rise in comp ticket sales. This growth reflects the success of Five Below’s focus on offering trendy and cost-effective products, ensuring its appeal to a wide range of customers. By continuously adapting its product mix to match market trends, the company remains competitive in the discount retail space.
Ambitious Store Expansion Strategy of FIVE
A key driver of Five Below's growth is its commitment to expanding its store footprint across the United States. In the fiscal third quarter, the company opened 82 stores, reaching a milestone in its strategy to increase national coverage. Its ability to maintain this level of expansion despite a challenging macroeconomic environment is notable.
This expansion included the company’s entrance into Wyoming, bringing its total store count to 44 states. By the end of fiscal 2024, Five Below plans to open 227 more stores, bringing its total to 1,771 stores. The ongoing expansion not only broadens the company’s customer base but also enhances its brand recognition. Five Below’s selective store opening approach ensures that each new location contributes positively to its bottom line. The company’s ability to continue increasing its store count while maintaining profitability underlines the strength of its business model.
Five Below’s Operational Efficiency Fuel Growth
Another key area of focus for FIVE is improving its operational efficiency. The company has optimized its cost structures, resulting in a 25.7% year-over-year increase in adjusted gross profit for the third quarter of fiscal 2024. The adjusted gross margin improved approximately 290 basis points (bps) to 33.2%. This increase in profitability can be due to lapping the roughly 180 bps shrink true-up from the year-ago quarter, along with the timing of certain product margin benefits, including freight improvements and efficiencies in distribution.
Adjusted operating income was $27.6 million compared with $16.1 million in the third quarter of fiscal 2023. The adjusted operating margin increased approximately 110 bps to 3.3%. This was primarily due to lower-than-anticipated fixed cost deleverage, led by the sales fee.
Five Below has made significant strides in enhancing its customer experience. The company has improved its inventory management practices to ensure that products are always available for customers. Optimized store layouts and increased investment in employee training have also contributed to improved store performance and customer satisfaction.
Optimistic FY2024 Outlook of FIVE
Looking ahead, Five Below is optimistic about its growth prospects. For the fourth quarter of fiscal 2024, the company expects net sales of $1.35-$1.38 billion, indicating 5-7% year-over-year growth. Full-year sales are projected to increase 9-10% to $3.84-$3.87 billion. This outlook is driven by the continued expansion of its store network and operational improvements, signaling confidence in the company’s ability to sustain growth in a competitive retail environment.
Estimate Revisions Favor Five Below Stock
Analysts have responded positively to the company’s prospects, which has been reflected in upward revisions in the Zacks Consensus Estimate for EPS. In the past 30 days, analysts have increased their estimates for the current fiscal year by 30 cents. The consensus estimate for earnings is pegged at $4.88 per share.
The consensus estimate for earnings for the next fiscal year has been raised 25 cents to $5.05 per share. The Zacks Consensus Estimate for the current and the next fiscal years’ sales is pegged at $3.86 billion and $4.23 billion, indicating year-over-year growth of 8.5% and 9.6%, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Wrapping Up
Investors may consider the Five Below stock due to its strong momentum, supported by positive market sentiment and consistent performance above key moving averages. The company’s focus on value-driven products and ambitious store expansion has boosted customer traffic and sales, while operational improvements have increased profitability. With raised earnings expectations and a positive growth outlook, Five Below presents an attractive opportunity for investors seeking long-term growth. It currently has a Zacks Rank #2 (Buy).
Other Key Picks
Some other top-ranked stocks are The Gap, Inc. GAP, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.3% and 0.8%, respectively, from the fiscal 2024 reported figures. GAP delivered a trailing four-quarter average earnings surprise of 101.2%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 69.3% and 15%, respectively, from the fiscal 2024 reported levels. ANF delivered a trailing four-quarter average earnings surprise of 14.8%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Deckers’ fiscal 2024 earnings and sales indicates growth of 13% and 13.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 41.1%.
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