Why Five Below Stock Rose 12% in November

What happened

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Five Below (NASDAQ: FIVE) stock gained 12% last month, according to data provided by S&P Global Market Intelligence, compared to a 2.8% increase for the broader stock market.

The rally added to market-thumping gains for the youth-focused retailer’s shareholders, who are up over 60% in 2017 while the S&P 500 has gained 18%.

So what

Like many of its retailing peers, Five Below announced better-than-expected third-quarter sales results last month. But its growth metrics are strong enough right now that it is standing out from the crowd.

Comparable-store sales were up 8.5%, the company revealed on Nov. 30, which blew past management’s forecast of between 3% and 5% gains. Five Below expanded profitability during the quarter, too, as young shoppers responded enthusiastically to its merchandising and marketing efforts.

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Now what

CEO Joel Anderson and his team lifted their full-year forecast on both the top and bottom lines and they now see comps rising by between 5.7% and 6.5%, compared to the prior target range of 3.5% to 4.5%. Five Below’s overall revenue base will grow at a much faster rate, since the company aims to open as many as 100 new locations this year, including in many new markets.

The retailer has 600 stores across 32 states today, but with comps expanding at a market-beating rate right now, management’s hope of eventually reaching 2,000 locations is looking more achievable with each passing quarter.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.

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