UPDATE: Sterne Agee Initiates Five Below With Neutral on Positive Differentiating Factors

In a report published Wednesday analysts from Sterne Agee initiated coverage on

with a Neutral rating and $39.00 price target. In the report lead analyst Charles Grom commented that, "FIVE's execution is strong with a few underlying principles: (1) a value-oriented retailer focused on name brands at a value (all items under $5); (2) sizeable store growth ahead with a potential to see almost a ten-fold increase; (3) an impressive new store model with a 1-year payback/returns greater than 100%; (4) traffic led MSD-HSD comp story; and (5) respectable EBIT margin growth ahead with a 4% fixed cost hurdle rate. As a result, FIVE compares favorably vs. its dollar store peers – FDO, DG, DLTR, and FRED – across several metrics, including (a) sales productivity (~$256/peer avg. of $200); (b) inventory turns (6.0x/5.2x); & (c) EBIT margins (11.6%/peer avg. of 8.0%)." Five Below closed on Wednesday at $37.11