'Frozen' Effect Has Passed Just In Time For 'Star Wars' Mania At Five Below

Step Aside, Elsa; Star Wars' Rey Has Arrived

Analyst Meredith Adler believes that although 3Q is a small quarter, it does indicate that Five Below is entering the holiday season with robust momentum.

According to the Barclays report, “FIVE does have a particularly tough comparison in November, when sales of products related to Disney's Frozen movie peaked.”

However, this year, the "Star Wars" movie is expected to drive sales, although not till later in 4Q following the movie’s opening.

Merchandising Initiatives

Management has attributed its robust comps partly to the new merchandising initiatives driven by the company’s new chief merchant, who joined Five Below in January 2015.

“He has encouraged his team to look for exciting products, constantly add newness, be on trend, and take risks. He has also been focused on in-store merchandising and display, and all of this is clearly resonating with customers,” Adler noted.

Marketing

Five Below is also focused on marketing, with the company using a variety of combinations of digital communication, social media, television and print. Adler expressed confidence in management’s ability to develop a comprehensive marketing plan for 2016.

In addition, productivity and new store openings have also remained strong, with robust results across all of the company’s geographies. Adler believes that the company would be able to open at least 2,000 stores across the US over time.

The 4Q15 EPS estimate has, however, been lowered by $0.02 to $0.76, in line with the high-end of the guidance range of $0.74-$0.76, as well as in line with the consensus.