Dive Brief:

• Five Below said on Wednesday that quarter two net sales rose 28.7% to $283.3 million from $220.1 million in the year ago period and beating the Gordon Haskett analyst estimate for $275.1 million, as same-store sales rose 9.3%, according to a company press release.

• Net income in the quarter was $16.8 million, up from $9.8 million in the year-ago period, with diluted income per common share at 30 cents per share, compared to 18 cents per share a year ago, besting the Gordon Haskett expectation for 25 cents per share. Operating income in the quarter rose 67.4% to $26.3 million from $15.7 million in Q2 last year, according to the company.

• The discount retailer continued its investments in brick and mortar, opening 31 new stores, and ending the quarter with 584 stores in 32 states, an increase of 18.9% from the end of the second quarter last year.

Dive Insight:

Five Below’s second quarter report "had just about everything a bull would want," according to a note from Gordon Haskett analyst Chuck Grom that was emailed to Retail Dive, including strong traffic that led to a healthy same-store sales rise, "very solid [margins] with clean inventory levels" and "favorable yet conservative" guidance for third-quarter same-store sales of between 3% and 5%.

Key to Five Below’s success is the way the retailer capitalizes on fast-moving trends, knowing that they will wane some day soon. At the same time, they keep stores stocked with other merchandise that people can buy when they come in for, say, fidget spinners and slime.

"[T]his trend of spinners is no different than many other trends we have seen," CEO Joel Anderson told analysts, according to a transcript from Seeking Alpha. "They last a quarter or two. And let's not forget there is also the smiley trend, there is the slime trend. The smiley trend is one that's been kind of coming up here on about a year now and it's really had legs … [E]very trend is a little bit different, and we continue to buy with discipline into those trends and we exit with analytics."

Anderson said the company watches weekly trends and studies past history to determine when they’ll likely fall off. "[Spinners] brought in a lot of new customers to Five Below and we believe those will have a great halo impact on our core business both in Q3 here and then certainly into the holiday period," he said.

Indeed, many other things are boosting Five Below’s sales. "Certainly, spinners have helped to drive footfall and increase customer numbers, but we also believe that several other factors have boosted growth this quarter," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email. "Foremost among these are improvements to the assortment. Categories like technology now have more authority, include far more 'must have' lines, and deliver some very compelling prices. These 'wow' products have proved popular among existing shoppers, and there is some early evidence that they are helping to draw in new customers. Fortunately, the process of range enhancement seems to be an ongoing process and, as such, we believe it will provide buoyancy to future quarters."

Saunders praised the retailer’s ongoing plans to remodel and expand its number of stores, calling its plans for 2,000 stores nationwide "reasonable," in part because of the geography mix. "The company now comfortably operates stores in rural, suburban, and urban locations," Saunders said. "This allows much more headroom for growth and puts it ahead of other discount operators, many of which are still experimenting with urban shops."

While building out an already solid brick-and-mortar play, which Five Below executives said remains the primary focus, the retailer also has plans to expand e-commerce, particularly on mobile, and is expanding its New Jersey distribution center. "We continue to see e-commerce as the icing on the cake," Anderson said, adding that the strategy is to grow digital sales with "pace and diligence." "It's a convenience play. It's a great way for customers to have access to Five Below that aren't near Five Below. But it still remains a very small piece of our business."

Saunders sees Five Below as different than other discounters — in a good way. "Its assortment and the way in which it sells remains distinct from other discounters and has captured the attention and spending of younger demographics," he said. "This should insulate it from some of the competitive pressures in the market and ensure that it maximizes share in the new locations it enters. Meanwhile, more embryonic projects, like the push into e-commerce, will augment an already strong growth story."