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Five Below: Rapid Expansion In Full Swing

Dec. 04, 2018 12:19 PM ETFive Below, Inc. (FIVE)3 Comments
David Krejca profile picture
David Krejca


  • Five Below is a rapidly expanding U.S. discount store.
  • The company has an outstanding new store economics and is just at the early beginning of its expansion.
  • Valuation suggests the company’s shares could provide a superior long run return potential.

Investment thesis

Five Below (NASDAQ:FIVE) is a small U.S. rapidly expanding retailer with its presence established in 33 states. As the company’s expansion is still just at its very beginning and valuation of the company is attractive from a long run perspective, I believe the company’s shares are poised for a massive rally.

Corporate profile

Founded in 2002, Five Below is an American discount retailer currently operating in 33 states. The company’s product portfolio is primarily made of $5 U.S. dollar and below items which are targeted primarily on the pre-teen and teen population. Besides popular brands, the company is also capitalizing on various ‘craze trends’ items such as selfie sticks, yoga mats and camera drones. As of February, the company’s total store count has exceeded over 700 stores, with 67 new stores being opened during the second half of 2018. As of February, the company’s workforce had approximately 2700 full-time employees and 9400 part-time personnel who is trained to quickly identify relevant merchant trends and introduce them to the company’s business. The company is also just two years on its way of selling on the internet as it commenced selling merchandise as late as in August 2016.

Earnings surprise’s inflection point

Big picture shifts can be observed even on the company’s track record of earnings surprises. Over the last five years, only this year the company has managed to exceed analysts’ earnings expectations. This suggests the company’s business might have passed an inflection point after which a series of earnings surprises will be a new normal.

Source: F.A.S.T. Graphs

Accelerating expansion

As already mentioned in the paragraph above, this year the company has already managed to open over 67 stores which is more than a half of the current year’s store openings target. Last quarter, the company opened 34 new stores and

This article was written by

David Krejca profile picture
Research analyst, individual investor. Queen Mary University of London alumnus. Successfully passed Level I of the CFA Program (June 2016). Seeking growth-at-a-reasonable-price (GARP), income and profitable growth opportunities regardless of geography, industry and market cap. Value, recent IPOs and high-growth companies. All articles are my opinions and do not constitute investment recommendations or advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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