It may feel like you've seen this story a hundred times this week: retailer posts strong (or, in some case, record) holiday sales to close out 2022. It was the case with American Eagle (AEO), Walmart (WMT), and even Rolls Royce (RYCEF) .
In some cases, these bumper sales were spurred by broad price hikes thanks to record 40-year inflation highs. (All told, shoppers spent a total of $212 billion this holiday season.)
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But that's not necessarily the case with Five Below (FIVE). The discount specialty retailer saw its net sales balloon by 11% during the period between Oct. 30 - Jan. 7 compared to that period in the prior year. Comparable sales, or sales in stores that have been open for over a year, rose by nearly 1%. And management added it anticipates fourth-quarter and fiscal-year earnings to clock in on the high end of analysts' expectations.
These are good numbers. And yet, in a news cycle where almost every retailer is posting about their very good holiday, the gravity of Five Below's success may not get the recognition it deserves.
Five Below Is Doing What Few Retailers Can Right Now
Five Below's cheery reporting isn't just a bright spot on an otherwise dim page.
The company represents a new guard, a brand with an incredibly efficient strategy and distribution. It also firmly understands its own identity.
Five Below, which was ranked the fastest growing teen retailer in 2014, has certainly lived up to the hype. As its name suggests, everything in stores is $5 or less (you can snag some "extreme value" products for just north of that in its Five Beyond sister stores, now rolling out across the country). Each store is divided into 8 "worlds," which are currently categorized as Style, Room, Sports, Tech, Create, Party, Candy, and New & Now. Its New & Now world is of particular value, since it allows Five Below to get in on (and occasionally, create) trending toys and goods among its younger customer base.
And capturing the allure of a younger audience is where Five Below thrives. While older retailers try to lure a younger demographic with things like fast fashion and sustainable products, Five Below has instead met teens and young adults where they are: in the center of their trends. Goods like the popular stuffed animal Squishmallows, deep discount candies, and even services like ear piercings at select locations fly off the shelves here.
“It’s not only about getting into a trend, but also knowing how to land the plane and get out of it,” CEO Joel Anderson said in a recent interview. “You’re not going to walk into our stores today and see any leftovers of past year’s trend products.” The company famously cranks through "product flow" efficiently and rarely has goods sit on shelves for long.
Unlike Other Retailers, Five Below Has Plenty Growing to Do
It's one thing to have a moment with teens and young shoppers. But maintaining staying power is quite another, and Five Below is somehow finding a way.
And if you pair a loyal, young consumer base with strong fundamentals and leadership with expansionist aspirations, you get a tempting stock and company.
In fact, Five Below plans to triple its store count by 2030 and double its earnings by 2025. Those eye-popping numbers are only seen in retailers still relatively nascent in their market penetration. In other words, you rarely see legacy big box stores like Walmart (WMT) or Target (TGT) setting these kinds of lofty goals. And if you do, check the prices on their staple items, because you may be getting ripped off.
