Discount retailer Five Below on Thursday reported fiscal 2016 fourth quarter net sales increased 18.9% to $388 million, up from $326.4 million in year-ago period and same-store sales in the quarter rose 1%. Q4 operating income increased 17.1% to $78.9 million from the year-ago period.
For the full fiscal year 2016, net sales increased 20.2% to hit $1 billion, up from $832.0 million in the comparable period in fiscal 2015, and full-year same-store sales increased 2%. Operating income for the year rose 22.6% to $114.0 million, up from $92.9 million in fiscal 2015.
The retailer is also accelerating its store expansion plans: Five Below opened 85 net new stores last year, compared to 71 net new stores in fiscal 2015; five net new stores in the fourth quarter alone, a 19.5% increase from fiscal 2015. It ended the year with 522 stores in 31 states and plans to open about 100 stores this year, including in California, a new market for the company.
Five Below apparently hasn't received the memo about how over-stored the country is — but it’s hard to argue with its results.
"Our performance in 2016 once again illustrates the strength, consistency and broad appeal of the Five Below model with a compelling merchandise assortment designed to 'wow' our customers at incredible values,” CEO Joel Anderson said in a statement. “We achieved another strong year of 20% sales growth, reaching the $1 billion milestone in sales as we opened 85 net new stores and delivered our 11th consecutive year of positive comparable sales growth.”
At at time when most brick-and-mortar stores are investing heavily in digital paths to purchase, the discount retailer is betting big on stores, and it seems to be working for them. While e-commerce sales are accelerating faster than overall retail sales, they remain a tiny portion of retail in general. E-commerce sales in the fourth quarter of 2016 accounted for just 8.3% of total retail sales in the U.S., according to the U.S. Department of Commerce.
Five Below isn’t the only retailer finding success with a brick-and-mortar focus, says retail analyst Nick Egelanian, president of retail development consultants SiteWorks International. He sees Five Below, as well as Dollar General and no-frills grocery stores Aldi and Lidl — all retailers that emphasize and are growing their physical store footprint — as taking market share from Wal-Mart, which has nevertheless turned its focus to e-commerce in a major way.
The shiny object diverting Wal-Mart’s attention is Amazon, which by Egelanian’s measure controls even less of retail sales, considering its other business. “[Wal-Mart] is in a price war with Amazon for 1% of the market, and Amazon has a 20-year lead on them,” he told Retail Dive. By contrast, Five Below is providing customers with a treasure hunt atmosphere and low prices — in stores — he said.