Teens shop differently from adults, and so it's natural that a teen retailer might perform much differently from peers who focus on adult shoppers. Five Below (NASDAQ:FIVE) has done a great job of avoiding many of the downward pressures that have hit its counterparts, taking advantage of demand for everything from accessories to fidget spinners to capture the attention of its target audience.

Coming into Thursday's fiscal third-quarter financial report, Five Below shareholders were fully expecting that the teen retailer would be able to sustain and build momentum heading into the key holiday shopping season. Five Below's results were once again better than most had expected, and the company has never been more optimistic about its prospects. Let's take a closer look at Five Below and what its latest results say about its future.

Five Below logo in front of a background with the $1 bill design.

Image source: Five Below.

Five Below spins higher

Five Below's fiscal third-quarter results were nothing short of sensational. Sales came in $257.2 million, which was 29% higher than in the year-ago quarter and represented an even faster growth rate than Five Below had posted in recent quarters. Net income jumped by more than 80% to $9.9 million, and that resulted in earnings of $0.18 per share, easily topping the consensus forecast among investors for $0.15.

What was particularly noteworthy about Five Below's results was just how well the company is balancing its growth levers to produce rising financial metrics. Comparable sales were up 8.5%, nearly keeping up with the retailer's record comps in the fiscal second quarter. Costs of goods sold rose by nearly as much as revenue, keeping gross margin improvement to a minimum, but a slower pace of rising overhead costs helped boost operating income by more than 70%. Interest expense and tax charges were higher, but the impact on the bottom line was relatively minor.

Five Below is also continuing to look at growing its store network in order to take advantage of high demand. The retailer opened 41 new stores during the quarter, which was 10 more than it did in each of the first two quarters of the year. That brought the total number of Five Below locations to 625, which is higher by more than 20% from where it was just 12 months ago.

CEO Joel Anderson couldn't have been happier with the results. "This quarterly performance reflects a strong customer response to our WOW product," Anderson said, "incredible price points, differentiated in-store experience, and increasingly targeted marketing efforts." The CEO also noted how the performance exceeded the high end of its previous projections.

Can Five Below finish the year strong?

Five Below is also optimistic about its ability to sustain those strong results. Anderson noted that its success has made it a desirable tenant for retail property owners. The company says that it sees plenty of good opportunities in attractive shopping centers that have favorable traffic trends and strong anchor tenants. That's especially important in an industry environment in which many malls are seeing large stores that drive traffic close their doors.

Five Below was able to boost its guidance for the remainder of the year. In the fourth quarter, Five Below expects revenue of $491 million to $503 million, resulting in a 4% to 6% rise in comparable sales and earnings of $1.09 to $1.16 per share. Full-year projections increased from where they were three months ago, with new guidance for sales of $1.264 billion to $1.276 billion and a 5.7% to 6.5% gain in comps. That should work out to earnings of $1.72 to $1.79 per share, which would be higher by more than $0.10 per share from what Five Below expected just a few months ago.

Five Below shareholders were pleased with the news, and the stock climbed 2% in pre-market trading on Friday morning following the Thursday afternoon announcement. With no signs of any slowing in its growth trends, Five Below is well positioned to buck the challenges that other retailers are facing and to go into the holidays stronger than ever.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.