This Discounter Is Killing Wal-Mart

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It had been a pretty disappointing run for discount retailers this earnings season before Five Below (NASDAQ: FIVE  ) posted blowout quarterly results last night.

Dollar General (NYSE: DG  ) shares took a 9% hit the day it reported uninspiring quarterly results last week. The deep discounter lowered its guidance for the balance of the fiscal year. Wal-Mart (NYSE: WMT  ) and Target (NYSE: TGT  ) disappointed investors last month, surprising the market with negative same-store sales for the period.

Now we have Five Below -- a fast-growing retailer that sells fashionable clothing, accessories, and furnishings for $5 or less -- showing the market that there's still a way to do thriftiness right in this market.

Net sales soared 33% to $95.6 million in its latest quarter, fueled primarily by the popular concept's brisk expansion. However, unlike Wal-Mart and Target, which failed to surpass what their average store raked in a year earlier, Five Below's comps rose an encouraging 4.2%.

Results were just as impressive on the bottom line, where Five Below reversed a year-ago deficit by posting a better-than-expected profit of $0.05 a share. Unlike Dollar General, which offset any warm fuzzies about its positive comps by hosing down its outlook, Five Below is raising its guidance.

Five Below now sees an adjusted profit of $0.65 a share to $0.68 a share on $524 million to $529 million in net sales for the entire fiscal year. Three months ago it was targeting no more than $0.65 a share in earnings on $516 million to $521 million on the top line.

Why is Five Below doing so well at a time when Dollar General, Wal-Mart, and Target are struggling? The key here is Five Below's appeal to young shoppers. Teens and young adults have realistic expectations about what $5 will get them, but Five Below has managed to resonate with young consumers. Target may be cheap chic, but Five Below is succeeding with its cheaper chic approach.

Wal-Mart may not care. Five Below may be eating at Target's popularity with young shoppers, but Sam Walton's discount department store chain never really appealed to youthful penny pinchers. A whopping 60% of the country shops at Wal-Mart in any given month according to the chain! Why should it be bothered by a company ringing up less than $530 million in sales when it's eyeing nearly $500 billion in sales this year?

Well, Wal-Mart's slipping comps show that there's more to discounting than low prices. Five Below has excelled at figuring out what young shoppers want, and if Wal-Mart's smart, it may want to consider snapping up the trendy discounter -- possibly opening locations within its own stores -- before those young shoppers grow up without any kind of loyalty to the Wal-Mart that their parents used to shop at.

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Read/Post Comments (12) | Recommend This Article (14)

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  • Report this Comment On June 13, 2013, at 5:44 PM, Ronmc2 wrote:

    "A whopping 60% of the country shops at Wal-Mart in any given month according to the chain!"

    Despite the CONSTANT Liberals & Liberal Media Bashing.

    Note: Media Darling Target sell the Same % of Chinese Goods as Walmart, and is ALSO non union. But you don't hear about that, do you?

  • Report this Comment On June 13, 2013, at 6:33 PM, josh995 wrote:

    There's a Five Below in my town, and I've gone in there a few times.

    They have quite a large selection of merchandise but a lot of things in there you can definitely tell cost $5 or less, the quality of a lot of things in the store is not the greatest.

    But they're cool if you want to go buy a bunch of random things. I bought an iPhone 5 bumper and it's held up pretty good.

  • Report this Comment On June 13, 2013, at 6:41 PM, KevinS1527 wrote:

    I am proud to be a part of the 40%. I refuse to go to WalMart unless absolutely necessary. To be honest it has nothing to do with the imported merchandise. Its the fact that my local store always seems to be out of stock, or lacking the products I want, checkout can take more than 30 min, and store employees are uninformed, under trained and most of the time downright depressing. I purchased a couple pairs of rubber boots at Walmart and upon getting home found the insoles were missing out of them. After driving back to the store, waiting in the Customer Service line for about an hour, getting accused of stealing the insoles and having to talk to a manager to EXCHANGE the boots (I wasnt even trying to return them!) I started valuing my time more than going to Walmart saves me. Like I said, sell all the Chinese crap you want, but when you do that PLUS have the worst customer service I have ever experienced, horrible employee attitude, disorganized/dirty stores, and sub par products it doesnt make sense for me to shop there.

  • Report this Comment On June 13, 2013, at 6:50 PM, mr091468 wrote:

    FIVE may have a chance as long as they act like WMT and not like JCP or Sears.

  • Report this Comment On June 13, 2013, at 6:52 PM, mr091468 wrote:

    BTW, if you don't like WMT, then DON'T GO THERE AND QUIT COMPLAINING. If you don't go to WMT, there will be one less in line in front of me.

  • Report this Comment On June 13, 2013, at 8:30 PM, Teapartysucks wrote:

    Any body that takes away business from Wal-Mart if OK in my book!

  • Report this Comment On June 13, 2013, at 8:56 PM, ScamuelJones wrote:

    Ditto the comment from Teapartysucks! Walmart has lost me for three reasons: Customer NO service and not stocking what they used to stock and refusing to honor their "Low Price Match" even with documentation in hand--so they are nothing but lying SOBs just like Obumma bin Lying!

  • Report this Comment On June 14, 2013, at 12:51 AM, WeRunQuietly wrote:

    Walmart will buy the ompany when it becomes necessary.

  • Report this Comment On June 14, 2013, at 1:18 AM, hagar2935 wrote:

    Never heard of Five Below.

    Walmart continues to be a strong retailer in many markets, providing merchandise at reasonable prices. They also are a strong contender in smaller communities who don't have mega-malls or large competitor stores. Walmart in basically taking care of "middle America".

  • Report this Comment On June 14, 2013, at 10:08 AM, exwalmartshopper wrote:

    Do not buy a car battery at walmart .I have bought 3 and they all went dead in less then 1 year. Walmart would not return none of them.They had a 2 yr replacement on them and they were dated and they still would not take them back.Now they changed the 2 yr replacement to a 1 yr replacement.My family has not been to walmart in over a year and dont plan on going back.Its all junk made by kids in sweat shops in china.The management are a bunch of idiots that know nothing If you like getting riped off go to walmart suckers!!!!

  • Report this Comment On June 14, 2013, at 11:26 AM, sassystacy wrote:

    I do not and will never be a Walmart shopper...where do I shop? The same places I've always shopped before Walmart came into town. That is all the ma and pa shops that Walmart has not put out of business. Walmart comes into a small town, tax free for five years!! Puts ma and pa shops out of businees then if it isnt a big enough town to give Walmart millions in revenue, the board up and leave...DISGUSTING!!!

  • Report this Comment On June 14, 2013, at 11:30 AM, chelenejudge wrote:

    Dont go to Walmart, havent been there in over a year. I worked there for 5 years they are very unfair!

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