New Trade for April 8th, 2021

Investors were optimistic this morning.  All major U.S. benchmarks were in the green in early trading.  The S&P 500 hit another record close in the previous session and traded higher again in early trading.  Will we see another record close today?  Time will tell.  

Our trade alert for today highlights a captivating retail play that will likely see gains in 2021 due to its digital strategy and expansion of its supply-chain network.



Five Below‘s (FIVE) focus on providing trend-right products, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. The company’s business model, financial strength and store growth opportunities bode well for the retail chain in 2021.

This extreme-value retailer for tweens and teens has a trailing four-quarter earnings surprise of 47.7%, on average. It has a long-term earnings growth rate of 32.8%. Moreover, the analyst estimates for its current financial year sales and earnings suggests growth of 34% and 96.7%, respectively, from the year-ago period.

In its mid-January update FIVE revealed that sales jumped 10% at existing locations in November and December.  That revenue spike rose to 21% after including the growth in its store footprint.  “We are very pleased with our holiday sales performance,” CEO Joel Anderson said in a press release.

Wall Street expected Five Below’s fourth quarter earnings to climb 8% to $2.11 per share. Revenue was seen growing 22% to $839.65 million, according to Zacks Investment Research.  Same-store sales to increase 11% in Q4 and to decrease 6.4% for full-year 2020, according to Consensus Metrix estimates.

The company exceeded expectations for fourth-quarter earnings.  On March, 17th Five Below reported that earnings per share rose 12% to $2.20 a share as revenue jumped 25% to $858.5 million.  Same-store sales climbed 13.8%.

As far as first quarter guidance, Five Below sees EPS of 56-68 cents in Q1 on sales of $540 million to $560 million.  Analysts expect Five Below earnings per share of 39 cents on revenue of $423 million. The tween-and-teen discounter also announced that it expects to open 60 locations in Q1.

Five Below will likely continue to benefit from the company’s digital strategy, expansion of supply chain network, enhancement of overall distribution capabilities and focus on merchandise assortment.  The company has been adding more essential households and wellness products at compelling prices.  Moreover, the company entered the new fiscal year with cash resources and plenty of momentum it can build on as it expands its store footprint yet again in 2021.  

Where to invest $1,000 right now...

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But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.

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