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Five Below Stock on the Rise as Future Prospects Look Bright

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Dec. 4 2020, Updated 10:51 a.m. ET

Impressive stock price movement

Five Below (FIVE) is a retail sector stock that investors may want to keep an eye on. The company’s stock has generated YTD (year-to-date) returns of 13.4% as of April 13, 2018. The stock rose ~66% in 2017. Ever since going public in July 2012 at the IPO price of $17, the company has generated a return of 342.6%.

In comparison, as of April 13, 2018, Dollar General (DG) is up 3.5%. Dollar Tree (DLTR), Fred’s (FRED), and Big Lots (BIG) are down 9.5%, 29.9%, and 25.2%, respectively, on a YTD basis. The SPDR S&P 500 ETF (SPY) is down 0.6% on a YTD basis. The SPDR S&P 500 ETF tracks the performance of the S&P 500 Index. The benchmark index has fallen as US-China trade war fears have escalated. Also, the US attack on Syria has kept investors on edge.

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Five Below’s growth initiatives

While Amazon has disrupted the whole retail sector, Five Below is thriving in this environment. Five Below’s focus on the teen and pre-teen demographic groups, its competitive pricing, and store locations in high traffic centers have proven to be major growth drivers. Five Below is rapidly expanding its store footprint and has upped its target of opening 2,500 stores across the US by 2020 from its earlier projection of 2,000.

To drive sales, the company is diverting resources towards the online sales portal as well revamping merchandise. The company is also significantly investing in the training of personnel to better assist customers. All these initiatives have contributed to the company’s stellar financial performance. Driven by its strong cash position, the company announced its first share buyback plan along with its fiscal 4Q17 earnings results on March 21, 2018.

Series overview

In this series, we’ll discuss Five Below’s growth strategies with special emphasis on store footprint expansion. Then, we’ll take a quick look at its recent quarterly performance. Lastly, we’ll assess the company from the valuation perspective and see what analysts recommend for the company.

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