Five

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Thrifty teens continue flocking to Five Below (NASDAQ:FIVE). The deep discounter posted fiscal second-quarter results after Wednesday's market close.

Net sales climbed 30.2% to $152.5 million, fueled primarily by a 28% increase in the number of namesake stores but also by a 3.2% uptick in comparable-store sales. Adjusted earnings grew even faster, soaring 37% to $0.15 a share.

Analysts were only holding out for a profit of $0.14 a share on $152.2 million, so Five Below did manage to land slightly ahead of Wall Street targets on both ends of the income statement. The showing was also ahead of its own guidance which back in June was calling for $0.12 a share to $0.13 a share in earnings on $150 million to $152 million in sales. However, the stock initially moved lower in after-hours trading on Wednesday night following uninspiring guidance for the current quarter.

The 353-store chain sells discount merchandise, and true to its name it's all priced at five bucks or less. This has been a successful model, especially for "cheap chic" teens and preteens who don't have a lot of money to spend. At a time when traditional discount department stores are mired in negative comps and dollar stores are busy in a wave of consolidation, Five Below has been resilient as a markdown specialist that's expanding quickly and growing in popularity.

Five Below boosted its guidance for all of fiscal 2014, just as it did three months ago. It now sees an adjusted profit of $0.87 to $0.90 a share on $681 million to $687 million in net sales. However, most of that sales increase -- and more than all of the earnings uptick -- was accounted for in the second quarter. Five Below's outlook for the current quarter -- calling for $0.05 to $0.06 a share in profitability on $136 million to $138 million -- is actually in line with Wall Street's top-line target and below what analysts were forecasting on the bottom line.

Perhaps the biggest disappointment in the current quarter's guidance is that Five Below sees flat to slightly positive comparable store sales for the period. Flat comps would be an unwelcome surprise for a company that has delivered consistently positive store-level growth since going public at $17 two summers ago. It's one of the reasons Five Below has warranted a market valuation premium. The good news is that Five Below still sees comparable-store sales rising 4% for all of fiscal 2014 after rising 4.6% through the first six months of the year. A flat third quarter would, in theory, pave the way for a robust holiday quarter if the 4% target for the entire year holds up. 

With an ambitious slate of 62 new stores to open this year -- and nearly half of them having made their debut during the recently concluded second quarter -- Five Below is hoping that it still has its pulse on what thrifty young shoppers want.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and Five Below, owns shares of Berkshire Hathaway, and is short Five Below. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.