Dive Brief:

• Five Below on Wednesday reported fourth quarter net sales rose 30.1% to $504.8 million, up from $388.1 million in the year-ago quarter. Excluding the impact of the 53rd week, net sales rose 26% and same-store sales rose 5.9% on a thirteen week basis, which was the upper end of the company's guidance and well past last year's 1% rise.

• Net sales in that 53rd week were $15.7 million and added some 3 cents in diluted earnings per share, according to a company press release. Operating income rose 31.2% to $103.5 million from $78.9 million in the year-ago quarter. Net income rose 35.3% to $67.4 million, up from $49.8 million in the year-ago period. Adjusted earnings rose 31.1% year over year to $1.18 per share, better by a penny than the Zacks Consensus Estimate. 

• The company ended the quarter with 625 stores in 32 states, an increase of 19.7% from a year ago, and its "most diverse class with stores opened across a range of rural, suburban and urban markets in 28 states," executives told analysts Wednesday. The retailer has plans for another 125 or so new stores this year, mostly in existing markets and states except for the addition of Arkansas.

Dive Insight:

Five Below is on quite a roll, although the lingering winter weather in the Northeast has taken a toll in recent weeks, CEO Joel Anderson said Wednesday.

Total net sales for the 53 weeks in fiscal 2017 rose 27.8% to $1.28 billion or 26.2% on a 52-week basis. Same-store sales last year rose 6.5%, up from the 2% increase in 2016, driven by an increase in comp transactions. Anderson said the operating margin of 12.3% was a record for the company, as net income grew 41.5%. For fiscal 2018, the company expects sales to land between $1.495 billion and $1.510 billion, an increase of 18.4% to 19.6% on a 52-week basis, and same-store sales to grow 1% to 2%. Capital expenditures will likely be some $137 million in 2018, excluding the impact of tenant allowances, according to CFO Ken Bull.

"Even as [management] highlighted tough upcoming comparisons, it continues to sound very upbeat about business momentum, merchandising, marketing and the prospects for growth as new stores open up strongly – given results, we are optimistic about its future too," Jeffries analysts said in comments emailed to Retail Dive. "It should come as no surprise that there is a possibility for slightly negative comp sales against a challenging fidget spinner driven comp in Q2. Shorter-term, a decelerating comp against tough compares could keep shares range bound, but investors with a longer time horizon should be rewarded as [management] is taking the right steps to successfully grow brand awareness and traffic while increasing sourcing and distribution efficiencies."

Like dollar stores, Five Below is mostly bypassing e-commerce, although Anderson called its website "a vital marketing tool that creates brand awareness and traffic to our stores" despite its small contribution to sales.

"We believe our efforts are working, as evidenced by the 15 percentage point increase in our aided brand awareness and markets open 2 years and more," he said, noting that the company is amplifying its message into digital and television, which includes mobile, social and e-commerce.

Tax relief from the recent reform law will go to store associates' wages, benefits and training, enhancements to systems and the in-store customer experience, as well as about $1 million to launch the Five Below Foundation. Such investments could hit full year operating margins by 50 basis points, executives said.