'Slime, squishy' sales boost Five Below profits, and stock jumps 23%

CEO Joel Anderson poses in the entryway in the new corporate headquarters – dubbed "WowTown" – of his Philadelphia-based Five Below February 12, 2018, in the former Lit Brothers building.

Shares of Five Below, the Center City-based chain of youth-oriented dollar stores, jumped as much as 23 percent in trading Thursday morning — to nearly $100 a share, the highest since it went public in 2012 — after posting higher-than-expected first-quarter sales and profits late Wednesday.

The stock closed up 22 percent to $99.05 on Thursday.

“Slime, smiley, squishy, spa, and mermaid trends continued to be popular,” chief executive Joel Anderson told investors in a conference call. But he warned that it could be hard to show similar growth in the second quarter: Last year’s “spinners craze” will be tough to top.

Five Below total sales jumped 27 percent over a year earlier, to $296 million for the quarter. After-tax profits nearly doubled, to $25.8 million from $13.1 million in the year-earlier quarter, as Five Below opened 33 new stores in 18 states. The company also benefited from the Trump cuts in corporate tax rates: While pretax profits nearly doubled, Five Below’s income tax payments declined, compared with a year earlier.

The 33 new stores mark an “all-time high in terms of grand openings this quarter,” noted analyst Scot Ciccarelli of RBC Capital Markets. Anderson said most of the stores were in states where Five Below already does business. The company has also added stores for the first time in California. The company plans to boost the current 658 stores to 750 by the end of the year.

Anderson added that the company has upgraded its point-of-sale computer and financial systems and is adding new warehouses, including a facility as big as one million square feet  near Atlanta, to support an eventual network of 2,500 U.S. stores.

Five Below’s business is highly seasonal, with fourth-quarter sales around Christmas roughly double those of other quarters. There’s also a bump in the summer months.

This summer, Anderson told investors that Five Below will chase your kids’ dollars with “mobile social-media campaigns, designed to promote interest and brand awareness at a local level and many of our markets.” The company is also pushing print circulars pushing the “giant llama pool float, make-your-own squishy toys, and a new jumbo umbrella tent” for the beach.