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Why Polen Capital own retailer Five Below

Why Polen Capital own retailer Five Below

Our global investment partner, Polen Capital, seeks to invest in high-quality companies that have strong growth potential and competitive advantages. In this article, I explore a U.S.-based retail businesses owned by the Polen Capital Small and Mid Cap Fund – Five Below.

Five Below is a discount chain that sells products that cost up to U.S.$5, with a small assortment of products which cost up to US$25. It was founded by David Schlessinger, who is also the founder of Zany Brainy, a popular U.S. chain of educational toys in the late-1990s and early 2000s. His experience in the retail industry was instrumental in shaping the direction of Five Below, which targets teens and pre-teens.

Five Below has over 1,367 stores (in 42 U.S. States and with an average floor size of 740 square metres), up 650 stores in five years, and 14,000 staff. Revenue for the year to January 2023 hit US$3.1 billion, up 8 per cent on the previous corresponding period.  Momentum increased with new store openings, and revenue for the three months to April 2023 jumped 13.5 per cent to US$726 million. 

Joel Anderson, President and CEO of Five Below, is determined to grow store numbers to 3,500 by 2030, an average annual growth rate of 13 per cent. Analysis over the past five years, when store numbers have grown at an average annual 16 per cent, indicates earnings per share (EPS) growth and total revenue growth have been closely correlated.

Polen Capital’s investment in Five Below is supported by the retailer’s impressive growth, strong financial performance, and unique market position. With a focus on teens and pre-teens and ambitious expansion plans, Five Below presents an exciting opportunity for investors seeking growth in the retail sector.

The Polen Captial Global Small and Mid Cap Fund owns shares in Five Below. This article was prepared 21 July 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Five Below you should seek financial advice.

INVEST WITH MONTGOMERY

Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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