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Five Below Inc - Stock Quote FIVE

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Morningstar's Five Below Inc Stock Analysis

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Is it the right time to buy or sell?
Is it the right time to buy or sell?

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Difficult Comparison, Consumer Reticence Weigh on Five Below, but Its Shares Seem Attractive

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Considering its disappointing start to fiscal 2022 (including a 3.6% first-quarter comparable sales decline versus our 0.5% growth target), we plan to reduce our $149 valuation of no-moat Five Below’s shares by a mid- to high-single-digit percentage, in line with their dip in after-hours trading. Despite our reduced near-term expectations, our long-term forecast still assumes low-double-digit annual top-line growth rates and low-teens average operating margins. We believe market sentiment is overly fixated on a difficult near-term environment and does not adequately credit the long-term benefits of scale and a now-fully formed distribution network that should enable continued profitable store growth. Consequently, we see some opportunity for long-term investors willing to endure near-term volatility.

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Key Statistics - FIVE

Five Below Inc's Company Profile

Business Description

Five Below is a value-oriented retailer that operated 1,190 stores in the United States as of the end of fiscal 2021. Catering to teen and preteen consumers, stores feature a wide variety of merchandise, the vast majority of which is priced below $6. The assortment focuses on discretionary items in several categories, particularly leisure (such as sporting goods, toys, and electronics; 48% of fiscal 2021 sales), fashion and home (for example, beauty products and accessories, home goods, and storage solutions; 30% of fiscal 2021 sales), and party and snack (including seasonal goods, candy, and beverages; 22% of fiscal 2021 sales). The chain had stores in 40 states as of the end of fiscal 2021.

701 Market Street, Suite 300
Philadelphia, PA, 19106
T +1 215 546-7909
Industry Specialty Retail
Most Recent Earnings Apr 30, 2022
Fiscal Year End Jan 28, 2023
Stock Type Cyclical
Employees 20,200