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Five Below’s Q3 Sales Are Expected to Grow 18.3%

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Wall Street projections

Analysts expect Five Below (FIVE) to report net sales growth of 18.3% to $304.2 million in the third quarter. New stores and deals are expected to be the primary growth drivers. For the third quarter, Five Below’s management has projected overall sales at about $301 million–$304 million and comps growth in the range of 3%–4%. The company plans to report third-quarter results on December 5.

For the third quarter, Wall Street analysts expect Dollar General (DG) to report revenue of $6.38 billion, representing 8.1% growth on a YoY basis. On the other hand, analysts expect Dollar Tree (DLTR) to report revenue of $5.56 billion for the third quarter, up 4.5% on a YoY basis.

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What is driving sales?

Five Below’s sales are likely to benefit from new store openings. In the third quarter, the company had estimated 50 new store openings. Attractive merchandise and compelling deals are the other major driving factors. The merchandise at Five Below is priced at $5 or less, which is very attractive for the demography it serves, which is pre-teens and teens.

Five Below also views the closure of Toys “R” Us as an opportunity to expand its business. On its second-quarter earnings conference call, Five Below CEO, Joel Anderson, stated that the company had been talking to quite a few vendors and was working on getting a larger and better assortment to boost its presence in the toy market.

Also, the third quarter included the back-to-school season, which is the second most important shopping season for retailers. At the second quarter conference call, Five Below management added that it was confident that its back-to-school season assortment would resonate with customers.

A brief look at past performance

For the second quarter, Five Below’s sales increased 22.7% to $347.7 million driven primarily by its new store openings. Furthermore, the calendar shift added $7 million to its second-quarter sales. Comps were up 2.7% in the quarter driven by an increase in its average ticket size.

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