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