FIVE - (below) - the classier Dollar store

I, like most of you, am completely burned out on earnings plays. Alas, I’m throwing one out here based on the response retail has had this earnings season.

Five Below is not a store for very cold things. It sells assorted shit you don’t need at mostly $5 or under. They have a small smattering of things a bit more expensive than that.

To my eye, Five Below stores have started popping up everywhere. In my area, the stores are located in high traffic, higher end shopping centers. Their stores target a youngerish audience, but the variety of items they sell is vast, so you’ll see all generations in them. They also sell things that are brand name and/or generally more appealing than the stuff found at your usual dollar stores (they even have electronics and clothes). Like TJ Maxx, they always have different stuff, so customers cycle through more often.

Anywho, back to the stock. At $216 today, FIVE is a bit off its 52-week high of $237. They have beat earnings in their last four quarters, and some growth estimates are showing over 100% growth expectation next year. Earnings are being reported 12/1 afterhours. The stock declined fairly hard through September and October, but seems to be crawling back up.

Based purely on sentiment, I could see this stock performing very well at earnings, especially forward looking as we go into the holiday season. My biggest concern would be supply chain issues, but since they don’t have to sell any specific items, I’d think they could cycle through whatever items are more easily available. Based on what I’ve been seeing out in the world, I’m expecting these stores to have heavy traffic over the holiday season. Plus, at the price of the items, there’s hopefully less concern about inflation and economic issues.

Today is a red day, so I’m planning on picking up some Dec 220s. Interestingly, OI on puts for this date are quite low at the moment.


Copying a note from @Swiishy in the trading floor:

Took a quick glance at previous stock price action after last 4 earnings. They beat estimates on all 4 but the 2 that were beat by <5% had the stock drop. The 33% and 89% beat had the stock rise. Can’t look into the actual reports that’ll detail stuff like forward guidance since I’m at work. Puddle depth level insight into their previous earnings by yours truly (edited)

Five below is a retail stock I really like. I follow retail alot and five is near the top of the league. The convenience, innovation, and discount qualities they have are what you need to win in retail today.

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I’ll be updating with some more recent news mentions:

Five Below in early September revealed that revenue jumped 52% year over year in the fiscal second quarter. Sure, a lot of that spike can be attributed to temporary store closures a year ago. But sales are still up 21% year over year at locations that were open in both periods.

Most investors who follow the stock are expecting another strong result this week. Revenue should jump 15% to $562 million. Ideally, the company will achieve that growth through a healthy balance of new store launches and rising customer traffic at its existing locations. CEO Joel Anderson said three months ago that the chain was capitalizing on “broad-based” demand growth. Those trends likely accelerated in the weeks that followed.

Investors have two good reasons to expect rising profit margins. First, the selling environment should have supported higher prices on many products. Major retailers, including Walmart, have noted how consumers are spending freely these days.

Five Below also is pushing deeper into products priced beyond its traditional $5 ceiling. Sales in its $10-and-below niche helped push gross profit margin [above 35% of sales last quarter]

While the retailer likely dealt with rising costs on transportation, labor, and shipping, there’s a bright outlook for that key profitability metric in 2021 and over the long term as the company extends into more premium niches like home furnishings and video games.

Heading into earnings, investors are expecting to hear that sales will rise to roughly $2.8 billion for the full year compared to $1.96 billion in 2020.

twitter data slows slight bearish. opposite of what it’s showing for DG

Closing this with a W!

Hall of faming this. Congrats to @thots_and_prayers who has not only became an incredible asset on our administration side, but on the trading side as well. I’m going to take this opportunity to remind everything that she is a female, because it’s what she’d want me to do with this spotlight moment.