LOOK OUT FIVE BELOW (FIVE)

      Five Below (FIVE:NASDAQ) is a Philadelphia, PA based retailer with 600 stores in 32 states. They describe themselves on their website as “a leading high-growth value retailer offering trend-right, high-quality products loved by tweens, teens and beyond.” They are a store that sells merchandise that is typically below five dollars, obviously. A step above a dollar store, so to speak.

FIVE  delivered strong earnings and , most importantly, raised their guidance for the coming quarters. (They said they are going to make more money than expected). The stock had been on a tear anyway, this year, but further rallied more than twenty percent on their earnings surprise.

There was some interest in FIVE as a potential beneficiary of the Toys R Us bankruptcy. I’m not sure I ever understood that thesis as the cost of toys is obviously much higher than $5. In any event, the reason for the increased guidance was primarily due to new stores to be opened. That worries me a little bit. While the company obviously knows what they are doing in the markets they are in, there’s alot of competition out there in Dollar Store land.

With all the stores that they have and the low cost of the merchandise, I can’t help but wonder if they would be a good fit for an Amazon (AMZN:NASDAQ) purchase. I know that Amazon is interested in cultivating the premium branding in certain areas but they also have an extensive collection of “Add On Items” that are too small to make any money off of after shipping and overhead. Just a thought.

 

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