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Five Below Inc (FIVE), Target Corporation (TGT): Wal-Mart Stores, Inc. (WMT) Is Jealous of This Retailer

Discounting isn’t dead. Retailers just need to do a better job of selling the markdowns.

Five Below Inc (NASDAQ:FIVE) came through with another blowout quarter last night. Sales soared 35% to $117.1 million, well ahead of expectations for 30% top-line growth. Heady expansion was a major contributor, but same-store sales still managed to move 6.6% higher during the period.
Wal-Mart Stores, Inc. (NYSE:WMT)

Adjusted earnings of $0.11 a share easily landed ahead of the pros parked at their forecast of $0.09 a share.

The report is impressive enough on its own, but it takes on a little extra charm when you consider how many of the leading discounters have been faring this summer.

  • Wal-Mart Stores, Inc. (NYSE:WMT) saw its domestic comps decline 0.3% in its latest quarter. It blamed a lack of inflation, but store traffic still declined 0.5% during the period. Wal-Mart Stores, Inc. (NYSE:WMT) also singled out the end of the federal payroll tax stimulus that was giving employees a 2% tax break through the end of 2012.
  • Wal-Mart Stores, Inc. (NYSE:WMT) rival Target Corporation (NYSE:TGT) also had a soft quarter. Comps were positive — up 1.2% for the quarter — but that was softer than the cheap chic discounter was expecting. Target Corporation (NYSE:TGT) went on to lower its outlook for the entire fiscal year.
  • Closeouts and clearance specialist Big Lots, Inc. (NYSE:BIG) may have seen its share move higher after posting better-than-expected earnings growth two weeks ago, but where are the shoppers? Consolidated comparable-store sales tumbled 1.9% at Big Lots, Inc. (NYSE:BIG) for the quarter.

Why is Five Below Inc (NASDAQ:FIVE) doing what larger discounters have failed to do this summer?

The answer can be found in exploring its concept. True to its moniker,  Five Below Inc (NASDAQ:FIVE) sells a wide variety of products for $5 or less. Dollar stores carry largely useless junk, but Five Below stocks stylish items that teens and young adults aren’t embarrassed to buy. A fiver isn’t going to get you a Kors handbag or some Ugg boots, but youngsters with limited funds value the ability to stretch their disposable income through Five Below’s ever-changing assortment of apparel, home decor, and accessories.

Is Wal-Mart Stores, Inc. (NYSE:WMT) jealous? On the surface, it can’t be. Wal-Mart claims to have 60% of the country shopping at its stores in any given month. It will generate more than 900 times the sales this fiscal year that Five Below will ring up. Wal-Mart is a global juggernaut as the world’s largest retailer. Five Below has just 276 stores in unassuming strip malls where the rent is cheap.