Five Below weathering challenging retail environment

Everything sold at Five Below costs $5 or less. Credit: Mike Mozart / CC BY 2.0(Mike Mozart CC BY 2.0)

Five Below continues to post positive results, despite what many have referred to as a challenging retail environment for brick-and-mortar stores.

In its Q4 earning results, the discount retail chain's operating income rose 17.1% and net income rose 18.5% to $49.8 million. Revenues were up 19% and comparable store sales up 1%, according to reports. The company opened five new stores in the quarter, now operating a total of 522 locations in 31 states, up 19.5% year-over-year.

For the full year, Five Below is expecting sales of between $1.21 billion and $1.23 billion. 

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"Our performance in 2016 once again illustrates the strength, consistency and broad appeal of the Five Below model with a compelling merchandise assortment designed to 'wow' our customers at incredible values," said Joel Anderson, CEO, Five Below. "We achieved another strong year of 20% sales growth, reaching the $1 billion milestone in sales as we opened 85 net new stores and delivered our 11th consecutive year of positive comparable sales growth. This top line performance was accompanied by operating leverage, while we continued to invest in the business, resulting in a 24% increase in EPS for 2016.”

Looking ahead, the chain expects to open 100 new stores in 2017 to bring the concept to California, beginning with nine stores in the greater Los Angeles area at the end of April.

For 2020, the company has a five-year strategy that calls for a 20% sales growth and a greater than 20% net income growth. Anderson said in a conference call that the company more than exceeded its 2016 goals and reached the 11th consecutive year of positive comp sales growth. 

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"Customers in every market respond enthusiastically to our unique stores and trend-right merchandise that delivers the wow factor at incredible value. This is what has made each class of store successful and also what makes us even more excited about the future of Five Below. It is this strong consistent performance right out of the gate that results in a less than one year payback period on our new store investment," Anderson said

Five Below soft-launched e-commerce in August 2016. So far, Anderson is pleased with the performance during the first holiday season. He expects that they will soon be able to ship nationwide and digital will remain top of mind to drive store traffic and brand awareness.