Company profile: Five Below (FIVE)

Consumer cyclicals underperform in a weaker economy as consumers delay non-essential purchases. Dollar stores, however, have fared well compared with the rest of the industry in the past decade, as incomes stagnated for most Americans amid an economic crisis and sluggish recovery.

Budget retailers:  TJX Cos. (TJX), Ross Store (ROST), Five Below (FIVE).

Five Below

• Five Below was founded by David Schlessinger, creator and founder of Encore Books and Zany Brainy, along with Tom Vellios, former CEO of Zany Brainy. 
• Targeting teen and pre-teen shoppers, Five Below offers everything from headphones to Sour Patch candies, flip flops, water guns and nail polish.
• Five Below says its target market is the 60 million Americans aged 5 to 19, who are estimated to account for at least $250 billion in annual spending.
• As its name suggests, at a Five Below outlet all items are priced under $5.
• The company's quickly revolving merchandise is intended to draw in repeat customers, helping it book 25 straight quarters of same-store sales growth.
• Five Below opened its first store in Wayne, Pennsylvania in October 2002. It currently has more than 430 stores and is primarily located in the eastern part of the country in 27 states. It expects to cut the ribbon on approximately 85 new stores and enter four new states in 2016
• Analysts say the chain can ultimately support over 2,000 stores, and that distribution centers already opened can handle 500 to 600 stores.
• Five Below can open a new store with only $300,000 in cash up front, and earn that back in just 10 months, according to Jeremy Hamblin, an analyst for the investment bank Dougherty & Company.
• The retailer had a public offering at $17 a share last July 2012.
• HQ: Philadelphia, PA 19103, United States
• http://www.fivebelow.com/

(click for a live 10-month daily chart, new window)

Current store locations

©Artremis / Eva Sawicka (4/16)

Michael Kors (KORS) handbags, accessories trendy among teens

Michael Kors (KORS) is rapidly gaining popularity with its high-end handbags, watches and jewelry among the younger set.

Piper Jaffray found in its latest Taking Stock With Teens survey a "staggering" jump in "mindshare" for the former "Project Runway" judge's accessories. It also found Kors handbags were the second most preferred among both average- and upper-income consumers, taking a 21% share in both brackets.

As a result, Piper Jaffray analyst Erinn Murphy upgraded Kors to overweight from neutral and the price target to $90 from $73. She thinks Europe will be the next "catalyst" that could help drive earnings to near $6 a share going forward. Analysts expect $2.76 a share for fiscal 2014.

Kors has soared 260% since its stock debuted at $20 a share in December 2011.

The 3 As of teen fashion are not cool anymore

The 3 As of teen fashion - Abercrombie & Fitch (ANF), Aeropostale (ARO) and American Eagle Outfitters (AEO) - are not cool anymore

That was the message this morning of a horrendous financial update from Abercrombie & Fitch (ANF). Same-store sales at the teen apparel giant, including Web commerce, slid 10 percent, and profit fell by one-third, to $11.4 million. Results were particularly bleak in the U.S., where revenue declined 8 percent; overseas sales actually rose 15 percent.

Maybe Abercrombie and its Hollister brand have simply fallen out of favor with its target demographic. So says Erik Gordon, a professor at the University of Michigan’s Ross School of Business: “One generation of customers has moved on, and the next generation doesn't see Abercrombie as cool,” he told Reuters (TRI).

Teens’ financial struggles, however, seem to extend past any one brand. Aéropostale (ARO) is also having trouble separating them from their lawn-mowing earnings and ice-cream-scooping tips: Earlier this month, the mall-focused retailer cut its outlook for the summer quarter and projected a loss. Yesterday, American Eagle Outfitters (AEO)forecast third-quarter profit less than half of what analysts expected. “The environment has been extremely challenging,” American Eagle CEO Robert Lee Hanson told analysts. “With high teen unemployment, there is intense promotional competition for every dollar.”

ANF vs ARO vs AEO vs S&P500  (2 years)

Other teen and young adult retailers:

• BEBE bebe stores, inc.
• BKE The Buckle
• EXPR Express, Inc.
• GES Guess?
• GPS The Gap Inc.
• LTD L Brands Inc
• TJX The TJX Companies
• TLYS Tilly's 
• PSUN Pacific Sunwear 
• RUE rue21, inc.
• URBN Urban Outfitters
• WTSL The Wet Seal
• ZUMZ Zumiez Inc.
• APP American Apparel: Acquired by Canadian apparel maker Gildan Activewear (GIL), Feb 2017.

All teen retailers above: finviz charts (day's change): http://finviz.com/screener.ashx?v=211&ta=0&o=-change&t=ANF,ARO,AEO,TJX,GPS,URBN,GES,BKE,TLYS,PSUN,APP,EXPR,BEBE,ZUMZ,RUE,WTSL,LTD

          

Please note:

• 4/22/16: Aeropostale confirms delisting by NYSE; shares to begin trading on OTCQX Market under the symbol AROP

ARO monthly chart