Stock (Symbol) |
Five Below (FIVE) |
Stock Price |
$166 |
Sector |
| Retail & Travel |
Data is as of |
| April 6, 2022 |
Expected to Report |
| June 1 |
Company Description |
 Five Below, Inc. is a specialty retailer offering a range of merchandise for teen and pre-teen customer. The Company offers an assortment of products, including select brands and licensed merchandise across a range of categories, including Style, Room, Sports, Tech, Create, Party, Candy and Now. Its product groups include leisure, fashion and home, and party and snack. Its Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, and arts and crafts. Fashion and home includes items such as personal accessories, attitude t-shirts, beauty offerings, home goods and storage options. Party and snack includes items such as party and seasonal goods, greeting cards, candy and other snacks, and beverages. Source: Thomson Financial |
Sharek’s Take |
 Five Below (FIVE) announced its “Triple Double” growth vision after the company reported last qtr’s earnings. These plans are very exciting, and news sent the stock higher. This initiative is for the company to:
Five Below is a dollar-store concept for kids and teens that sells merchandise such as toys, games, party items, sports gear, clothes, candy & electronics for between $1 and $5.55 each. This company has the fastest dollar-store concept of all the dollar stores (including Dollar Tree and Dollar General). During the past seven years (2014-2021), Five Below has grown its store count from 366 to 437, 522, 625, 750, 900, 1020, and to 1190. Last qtr, the company opened 17 new stores across 40 states. During 2021, the company had construction and permitting delays caused by the pandemic, which slowed store growth, management. This year the company plans to add 15 stores in urban markets, 11 of which are planned to be in New York City. Five Below now has self-checkout in 60% of the chain, with plans to be chain-wide by 2025. Ecommerce sales are growing significantly faster than store sales. Here’s a run-down of the full product mix of the company:
Five Below has been one of the best retail concepts around, as same store sales have increased 15 consecutive years. New stores are approximately 9000 sq ft, cost $300,000 in cash to open, deliver sales of $2.2 million in the first year and payback the initial investment in less than one year. The company has no debt and has been buying back shares. Management bought back $60 million in stock last qtr. The stock has a solid Estimated Long Term Growth Rate 33% per year. FIVE is part of the Growth Portfolio. The stock has the potential to double in around two years. |
One Year Chart |
 FIVE is in a downtrend, but the stock looks to be bottoming here. I actually like this chart pattern.
This stock has (had) a P/E of 30 which is very reasonable. The P/E was 46, 42, 47, and 29 the past four qtrs. You can see what the P/E has been like during the years here . The Est. LTG falls from 46% to 33% this qtr. I used to think of this stock as a 25% grower. Now, I’m thinking it has the ability to grow profits 35% a year. Notice qtrly profit Estimates are poor. That’s because last year stimulus checks that wen to Americans were sometimes spent in Five Below stores. |
Earnings Table |
 Last qtr, Five Below delivered 13% profit growth and met expectations. Revenue increased 16%, year-on-year. Same-store sales grew 3%, on top of 14% growth last year qtr. Total number of new stores opened increased 17% to 1190 stores in 40 states.
Sales growth was attributed to new store openings, strong in-store and e-commerce business, assisted self-checkout, higher customer engagement and spending, better retention, and price increases. Annual Profit Estimates decreased, this qtr. Based on management’s Triple-Double goals, they plan to double sales to around $6 billion and more than double earnings to $10 per share by 2025. Qtrly Profit growth estimates for the next 4 qtrs are -33%, 6%, 49%, and 22%. Notice the year-ago figures in the top half of the Earnings Table. Management’s guidance anticipates a possible 2% decline of comps, for the upcoming qtr, as the retailer lapses the excessive increase in consumer spending in early 2021. But management expects sales to improve over the year. |
Fair Value |
 My Fair Value P/E moves down from 45 to 37 this qtr. I moved it down from 50 to 45 to 37 the past three qtrs.
With a target of $10 in profits in three years (2025) a 37 P/E on $10 would be a $370 stock, around double where the stock is now. |
Bottom Line |
 Five Below (FIVE) has been thriving for years, but the stock stayed under the radar until it broke out at $55 in September 2017. I’ve owned the stock since November 13, 2015 (bought for clients at $34).
Five Below’s management says it has multiple drivers for growth, including growth in e-commerce, new customers through higher brand awareness, sales increases from store remodels, price increases, and most importantly new stores. FIVE moves up from 13th to 9th in the Growth Portfolio Power Rankings. In the end, I imagine the company will eventually be acquired by a larger dollar store chain. |
Power Rankings |
Growth Stock Portfolio
8 of 25Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
