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Five Below Goes Back Up

The low-cost retailer's blow-out earnings report lights a fire


In a retail stock roundup for InvestorPlace two weeks ago, I picked Five Below (NASDAQ:FIVE) as a stock to watch. It came public in July at $17, ran up to $40 and then came back to $29.

Well, now the stock has bounced back to around $35, and it’s up about 18% for the past three days.

Five Below, which sells apparel at $5 or less, posted a blowout earnings report after the close on Thursday. Revenues spiked by 39.9% to $86.6 million, and adjusted earnings came to 3 cents a share. The Street was looking for $83.7 million and earnings per share of 1 cent.

However, going forward, the growth ramp will be somewhat tempered. For the next quarter, Five Below forecasts revenues of $167 million to $170 million and profits of 35 cents to 37 cents. The consensus is for $171.7 million and profits of 39 cents.

Why? Blame Hurricane Sandy.

Even so, the quarter will still be strong. Five Below’s low-cost retail strategy should be attractive as customers stay conservative and unemployment remains a problem. The company also has a knack for finding merchandise that consumers seem to like.

And the long-term potential looks bright as well. Five Below is still fairly small, with 243 stores, mostly on the East Coast. Consider that the company plans to expand that to 2,000 locations over the next 20 years.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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