May 17, 2021

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Five Below Stock Teases Buy Point As Discounters Surge

3 min read
Five Below

Five Below

FIVE


$1.94


1.17%


124%

IBD Stock Analysis

  • Five Below stock cleared a 168.07 buy point intraday then pulled back.
  • The relative strength line is nearing a recent high.
  • Shares have also bounced above their 50-day line.

Composite Rating

Industry Group Ranking

Emerging Pattern

Ascending Base

* Not real-time data. All data shown was captured at
1:06PM EST on
12/29/2020.

Five Below (FIVE) is the IBD Stock Of The Day, as holiday bargain hunters flocked to the discount retailer of teen fashions and accessories. Five Below stock cleared a buy point intraday Tuesday.




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The Philadelphia-based retailer reported better-than-expected Q3 earnings on Dec. 2, with same-store sales growth more than double expectations. EPS surged 88% to 32 cents, vs. views of 20 cents. Meanwhile, revenue jumped 26% to $476 million. Analysts had expected $444.9 million. Same-store sales rose 12.8% vs. analyst views of 5.3%.

Retailers such as Five Below, unlike many essential discounters like Target (TGT) and Walmart (WMT) that also sell groceries, had to weather store closures for months earlier in the year due to Covid.

In March, Five Below shut down all of its 950 stores in 38 states. In May, the retailer of teen-oriented merchandise priced generally at $5 and below reopened 75% of its stores, but foot traffic remained sluggish for several months as restrictions limited the number of shoppers allowed inside at one time.

But Five Below and others kicked off the holiday shopping season early, offering promotions in October. As a result, store visits at Five Below improved, rising 10% in October compared to the year-ago period.

President and CEO Joel Anderson said the focus for the fourth quarter would be on expanding checkout capabilities and offering same-day delivery for about 300 stores.


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Five Below Stock

Shares were up 1% at 167.20 on the stock market today after briefly breaking out of an ascending base with a buy point of 168.07 earlier. Five Below stock hit an all-time high of 169 intraday.

SwingTrader stock has rebounded from a steep drop in March when lockdowns began. MarketSmith chart analysis shows shares broke out of a cup-with-handle base in early September, following its Q2 earnings report.

The relative strength line, which compares its performance to the S&P 500, is close to retaking a recent high.

Five Below stock has also bounced above its 50-day line, another bullish indicator, after testing that key level of support last week.

IBD’s Stock Checkup shows Five Below has an EPS Rating of 91 and an RS Rating of 83. The No. 1 ranked stock in IBD’s Retail-Discount & Variety group has a Composite Rating of 87 out of a possible 99.

Meanwhile, Ross Stores (ROST) is within buy range from a 117.87 entry. Burlington Coat Factory (BURL) is slightly extended from a 243.22 buy point after hitting a new all-time high. And TJX (TJX) is just off its own record high.


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Five Below’s Competitive Advantage

Analysts say Five Below serves a niche in the value-oriented teen and tween demographic. The retailer is quick to pick up on trends, says CFRA Research analyst Camilla Yanushevsky.

“Our research has found that FIVE has a price advantage over peers, due to low-cost operating structure and merchandising strategy to take advantage of closeout channels, which gives it significant purchasing power,” she wrote in a note to clients.

Yanushevsky says the company competes with a broad range of retailers including discount, mass merchandise and grocery stores with both an online and physical presence. She says the company’s teen and preteen focus differentiates it from Dollar Tree (DLTR) and Dollar General (DG).

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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