The US discount retailer Five Below significantly increased sales and profits in the second quarter and revised its annual forecast upwards. The demand for affordable products is driving business – a trend the company aims to leverage for further growth.

Revenue climbed by 24 percent in the quarter ending August to $1.03 billion, significantly above analyst expectations of $995 million. Comparable sales increased by 12.4 percent, while the market had only expected 8.9 percent. Net profit rose from $33 million to $42.8 million, and earnings per share increased from 60 to 77 cents. On an adjusted basis, Five Below reached 81 cents per share – almost a third above forecasts.

Particularly in demand were inexpensive school items such as backpacks for five or seven dollars, but toys, beauty products, and lounge items also increased. CEO Winnie Park stated that the key lies in the clear price promise: "Delivering extreme value" is the most important growth driver. As part of a simplification, prices were rounded to whole amounts, mostly between one and five dollars. Customers accepted the minimal rounding.

For the current third quarter, the company expects revenues between $950 and $970 million and earnings per share of 12 to 24 cents, far above the 2 cents estimated by analysts. For the full year, Five Below raises its revenue forecast to $4.44 to $4.52 billion, up from the previous $4.33 to $4.42 billion. The adjusted earnings per share are now expected to reach $4.76 to $5.16, up from the previous $4.25 to $4.72.

Investors reacted positively: The stock rose by 3.4 percent to $149.35 after hours. Since the beginning of the year, the shares have already gained 38 percent.