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Five Below's Second Quarter Was Better Than You Think

Summary

  • FIVE has followed a very similar trajectory to DLTR over the last few years.
  • That trajectory appears to have taken a step back with FIVE latest quarter.
  • However, FIVE is still tracking very similar to DLTR, suggesting far more growth ahead.

In June of last year I made an observation that Five Below (NASDAQ:FIVE) was growing at a similar rate as Dollar Tree (NASDAQ:DLTR) when it was of similar size. For Dollar Tree, its been nearly two decades since it was Five Below's size by revenue, and so long as Five Below continues to keep pace with the growth rate that Dollar Tree did back in the late 90s, then theoretically Five Below could grow much larger, maybe one day become the next Dollar Tree 15 years from now. However, Five Below is currently trading lower by 8% after reporting second quarter earnings, with its revenue growth decelerating significantly. So, does this suggest that Five Below is no longer on the same trajectory as Dollar Tree was? Or, do investors just need a refresh in history?

Five Below

Dollar Tree

Second Quarter 2015

Third Quarter 1998

Revenue

$182.2 million

$176.1 million

Revenue Growth

19.5%

23.6%

Comparable Sales Growth

3%

2.9%

# of Stores

417

1,054

Revenue per store in quarter

$436,930

$167,077

Operating income

$11.6 million

$20 million

Operating income growth

(13%)

33%


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