On Sept. 1, Five Below (FIVE -0.98%) reported its most recent financial results for the second quarter of fiscal 2021. The market wasn't pleased with the numbers, and the stock is down meaningfully since then. But if we take a step back and focus on the bigger picture, it's obvious that this brick-and-mortar retail business is thriving. 

Here are three takeaways from Five Below's second-quarter earnings that you need to know. 

Five Below store exterior

Image source: Five Below.

1. Revenue increased at a rapid clip

During the 13-week period that ended July 31, sales increased 52% compared to the year-ago period and 55% compared to the second quarter of 2019. And same-store sales, which is a key metric for any retail company, grew 21% on a two-year basis. To be able to post this kind of performance while we're still in a pandemic is a testament to Five Below's value proposition to customers. 

The back-to-school season in particular has supported demand heading into the fall. "Our merchandising team sourced some great value products like denim jackets, flannel shirts, and backpacks for the new school year," said CEO Joel Anderson on the most recent earnings call. "We are very pleased with our performance through August." 

Additionally, expect the busy holiday shopping season to provide another near-term lever of growth for Five Below. "I would expect the average inventory per store to increase significantly," CFO Ken Bull said in response to an analyst question about how leadership plans to meet the challenge. Since Five Below sells anything from tech gadgets and apparel to home décor and beauty products, the fiscal fourth quarter can be a boon for business. 

2. Expanding with store openings

A major part of Five Below's growth strategy is to open large amounts of stores over time. The most recent quarter was no different, as the company opened 34 new locations, bringing the total to 1,121. The store count is now 14% higher than it was just 12 months ago, and full-year fiscal 2021 is shaping up to be Five Below's most aggressive opening year yet. 

Over the long term, the business expects to one day operate 2,500 total locations in the U.S., which would be more than double the current count. Five Below has a presence in only 19 states today, so there is plenty of runway for expansion. 

What's probably most impressive is that the company carries zero long-term debt on its balance sheet. This means that Five Below's remarkable development thus far has been financed with cash generated from operations, a rarity in the capital-intensive retail sector. 

3. Positive guidance

Management is extremely optimistic about Five Below's momentum. Sales in the current quarter are forecast to come in between $550 million to $565 million, or a rise of 15% to 18% from the third quarter of 2020. Given that this will be the company's first difficult year-over-year comparison since the start of the pandemic, that level of growth is outstanding. Comps are expected to jump by the mid single digits, with up to 45 new store openings planned for the quarter. 

Due to pandemic-related uncertainty, Five Below isn't providing guidance past the third quarter. And near-term profitability will be hurt by global supply chain issues. CFO Ken Bull highlighted this concern, saying, "We also expect gross margin to de-lever versus last year as supply chain disruptions are increasing our inbound freight costs." Although this is a problem that nearly every business faces today, it's something investors will want to keep an eye on, primarily because Five Below sells its goods at such low prices and has less ability to pass on higher costs to shoppers. 

All in all, I think this was a great quarter for Five Below. The market's shortsightedness and focus on the next quarter's or next year's results provide investors with the opportunity to buy shares in this top retail chain at a meaningful discount from its all-time high. Add Five Below to your shopping list.