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Five Below Inc FIVE

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Solid Holiday Performance Leaves Our Outlook Intact for Five Below; Shares Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

We do not anticipate materially altering our $151 fair value estimate for no-moat Five Below after the company announced quarter-to-date sales performance (through Jan. 1). The 21% sales increase on 8% comparable growth should leave the company on track to meet our full-year targets. Our long-term view (low-double-digit annual revenue growth and low-teens adjusted operating margins for fiscal 2022-30, on average) is intact, and we suggest investors await a more attractive entry point.

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Company Profile

Business Description

Five Below is a value-oriented retailer that operated 1,020 stores in the United States as of the end of fiscal 2020. 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; 47% of fiscal 2020 sales), fashion and home (for example, beauty products and accessories, home goods, and storage solutions; 36% of fiscal 2020 sales), and party and snack (including seasonal goods, candy, and beverages; 17% of fiscal 2020 sales). The chain had stores in 38 states as of the end of fiscal 2020.

Contact
701 Market Street, Suite 300
Philadelphia, PA, 19106
T +1 215 546-7909
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Oct 31, 2021
Fiscal Year End Jan 30, 2022
Stock Type Cyclical
Employees 19,000