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Valens Research

FIVE - Embedded Expectations Analysis - 2018 11 05

Five Below, Inc. (FIVE:USA) currently trades at recent highs relative to UAFRS-based (Uniform) Earnings, with a 32.3x Uniform P/E. However, even at these levels the market is pricing in relatively bearish expectations for the firm, and management may have concerns about their store remodels, the flexibility of their business model, and the sustainability of tailwinds from the closure of Toys “R” Us

Specifically, management may lack confidence in their ability to sustain earnings outperformance, and to meet their goal of opening 50 new stores in Q3 2018. Moreover, they may be exaggerating how flexible their business model is, and may lack confidence in their ability to attract new customers. Furthermore, they may be concerned about their ability to maintain strong TV ad performance, and to implement the new POS initiative before the holiday season. Additionally, they may lack confidence in their ability to find ways to innovate the customer experience, and may have concerns about the new looks of their stores. They may also lack confidence in the sustainability of tailwinds related to the closure of Toys “R” Us, and may have concerns about the strength of their licensed business. Finally, they may lack confidence in their ability to complete their remaining remodels before the holiday season, and to mitigate rising freighting costs
Underlying
Five Below Inc.

Five Below is a retailer providing a range of merchandise targeted at the tween and teen demographic. The company provides an assortment of products, all priced at $5 and below, including select brands and licensed merchandise across eight worlds: Style, Room, Sports, Tech, Create, Party, Candy and Now. The company operates in states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California and Arkansas.

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Valens Research
Valens Research

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