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Why Five Below, Inc. Stock Popped Today

By Jeremy Bowman - Mar 23, 2017 at 12:58PM

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The discount retailer surged on another strong earnings report and expectations for 2017.

What happened

Shares of Five Below, Inc. (FIVE -3.12%) were surging higher today after the discount retailer beat expectations in its fourth-quarter earnings report. As of 11:04 a.m. EDT, the stock was up 11.6%.

So what

The retailer, which sells everything for $5 or less, said revenue increased 18.9% to $388.1 million, ahead of estimates at $387 million, as comparable sales increased 1%. Earnings per share, meanwhile, also bumped up 17% to $0.90, topping the consensus by $0.01.

A Five Below store inside a mall

Image source: The Motley Fool.

CEO Joel Anderson commented, "Our performance in 2016 once again illustrates the strength, consistency and broad appeal of the Five Below model with a compelling merchandise assortment designed to 'wow' our customers at incredible values." He also noted the company completed its 11th consecutive year of comparable-sales growth.

Now what 

Investors were also impressed with Five Below's guidance for 2017, as the company expects to open another 100 stores in the current year, increasing its base by 19%. Management also projected revenue of $1.21 billion to $1.23 billion, which includes an extra week in the year, representing an increase of 21% to 23% over the $1 billion in 2016. On the bottom line, the company expects earnings per share to improve from $1.30 to $1.55-$1.61. Both projections were in line with analyst estimates. Management also called for a low-single-digit increase in comparable sales this year.

In a challenging retail climate, Five Below's ability to aggressively open new stores and grow comparable sales is impressive, and the company's mixture of cheap, fun products appears to be protected from e-commerce threats. Considering that, I'd expect profits to continue marching higher.

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