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Five Below (FIVE) Posts Solid Holiday Sales Numbers for 2018

Unlike many other retailers, Five Below, Inc. FIVE posted solid sales results for the quarter-to-date period (starting Nov 4, 2018 until Jan 5, 2019). Notably, this period constituted the holiday season for the company.

However, shares of the company dropped roughly 2% on Jan 14, possibly on deceleration in holiday sales and comparable sales (comps) growth from the year-ago period. Moreover, management did not raise its guidance, and instead kept it intact.

Nonetheless, management remains satisfied with the holiday sales numbers and declared that comps came ahead of the expectations.

During the holiday period, the company’s net sales surged 24.6% to $526.1 million. Also, comps witnessed 4.9% growth. Notably, Five Below has been posting decent comps growth for quite some time now. In the first, second and third quarter of fiscal 2018, the metric increased 3.2%, 2.7% and 4.8%, respectively.

Coming back to Five Below’s holiday sales results, management reiterated its guidance for the fourth quarter and fiscal 2018. For the fourth quarter, net sales are expected to be in the range of $593-$600 million, while comps are anticipated to grow 3-4%. The company still forecasts fourth-quarter earnings in the range of $1.53-$1.57 per share.

For fiscal 2018, Five Below envisions net sales in the range of $1.550-$1.557 billion. Also, comps are expected to increase 3.3-3.7%. Earnings for the fiscal year is envisioned in the band of $2.60-$2.64 per share.

In the past one month, this Zacks Rank #2 (Buy) company has gained approximately 19% compared with the industry’s 9.3% growth.

Undoubtedly, Five Below is gaining from its impressive merchandise assortment, focus on pre-teen customers, enhancement of digital and e-commerce channels, and pricing strategy.

Also, the company remains committed toward expanding its store base and enhancing the in-store experience to draw traffic and enhance customer base. During fiscal 2017, Five Below opened 103 new stores and plans to open 125 new stores in fiscal 2018. Currently, the company has around 750 stores in 33 states. It envisions having a network of more than 2,500 stores in the long run.

All these factors are likely to propel the company’s top line.

3 Stocks to Watch

Office Depot, Inc. ODP delivered average positive earnings surprise of 11.9% in the trailing four quarters. It currently sports a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Michaels Companies, Inc. MIK delivered average positive earnings surprise of 6.4% in the trailing four quarters. It has long-term earnings growth rate of 8.7% and a Zacks Rank #2.

Tractor Supply Company TSCO has long-term earnings growth rate of 12.2% and a Zacks Rank #2.

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