The Outlook for retailer Five Below, Inc. (FIVE) was upgraded from “Neutral” to “Buy” by Goldman Sachs analysts this month, raising the target price from $124 to $194. The explanation for the confidence of investors was the quarterly report that was published by Five Below in early December. At the time, the company posted 26 percent revenue growth, while analysts had predicted just 18 percent growth. The expansion of the store base led much of the growth, with 36 new outlets opening in the quarter. Yet Five Below saw a 13 percent gain in comparable revenue at the same time. The rise was 6 percent in the second quarter.
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According to management, the two-fold consecutive increase in comparable revenue is consistent with a strong consumer reception to the company’s latest pricing bid. At a price not above $5, the Five Below network offers souvenirs, CDs, watches, stationery and other items. Not too long after, though, the brand added a new category of products (worth $10), allowing the variety and, as a result, the customers to grow considerably.
Five Below nearly doubled its third-quarter earnings, from $13 million a year earlier to $24 million, thanks to high rates and moderate cost growth. Year-on-year, net profits rose 101 percent to $20 million.
Five Below has a particular commodity which is strongly reliant on shopping center traffic. The business is also increasing its e-Commerce capabilities, though. Sameday shipping is now available in around one third of its shops and is expected to play a crucial role in maintain holiday sales.
Management admits that COVID-19 have a big effect on the business of the group, in particular on the pace of launching new outlets. Five Below had intended to raise the number of stores to 2,500 in the United States right before the pandemic, but these proposals are now being updated.
Five Below, though, has proven that, even in the young buyer category, it has loyal consumers. Thanks to such clients, even in an unfavorable time for conventional retail, the business might show development.
Five Below, Inc. (FIVE) was up +4.22% on Monday to conclude the trading at $165.56.