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Five Below Stock Surges On Q3 Earnings Beat, Improving Sales Trends

"We're really off to a very solid start to the quarter. It's in line with our forecast, and we see no reason for that to stop," said CEO Joel Anderson.

Updated at 11:44 am EST

Five Below  (FIVE) - Get Free Report shares surged higher Thursday after the discount-focused retailer posted stronger-than-expected third quarter earnings and noted the sales continued to accelerate over the final weeks of the period.

Five Below, which recently began selling items for as much as $10, said said earnings for the three months ending in October fell 32% from last year to 29 cents per share, topping Street forecasts by 15 cents, as revenues rose 6.2% to $645 million. Comparable sales were down 2.7%, but that tally was well inside Street forecasts of a 7.8% slump.

The solid momentum, which contrasts many of its retail-sector rivals, allowed Five Below to boost its full-year profit forecast to between $2.97 and $3.02 per share, with revenues coming in just over $3 billion.

"We had a better-than-expected third quarter and are off to a good start for the fourth quarter. It remains a dynamic economic environment. However, Five Below is a resilient retailer," CEO Joel Anderson told investors on a conference call late Wednesday.

"Our goal, especially this holiday inflation-induced season, is to drive even more value for our customers, and we will continue to selectively pursue opportunistic buys that will drive traffic and attract new customers to Five Below," he added.

Five Below shares were marked 14.8% higher in early Thursday trading to change hands at $185.03 each, a move that would extend the stock's six-month gain to around 45%.

"While the investing landscape for consumer/retail remains difficult at this time, we believe FIVE has strong merchandising and store remodeling opportunities to help navigate the next two to three years," said KeyBanc Capital Markets analyst Bradley Thomas, who carries and 'overweight' rating on the stock and boosted his price target by $4, to $188 per share, following last night's earnings report. 

"As such, we believe FIVE remains one of the most compelling growth opportunities in retailing as we look out long-term," he added. "With the ability to triple its store fleet, we see FIVE as a retailer with among the most favorable growth profiles in our coverage."