Meet a Retailer That Amazon Isn't Disrupting

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Retailers have grown to fear Amazon (NASDAQ: AMZN) as a gobbler of market share. We may never know how many brick-and-mortar chains have gone under because they can't compete with Jeff Bezos on price and lately convenience, but it's probably not a stretch to say that the leading online retailer's fingerprints are all over many of the vacancy signs at a strip mall near you.

Not every chain is crying "Uncle!" Five Below (NASDAQ: FIVE) continues to thrive in Amazon's growing shadow, despite the dot-com darling's move earlier this year to take a bite out of novelty discounters. Amazon quietly unveiled a section of its site eight months ago, offering up a wide assortment of products available at $10 or less with free shipping. The media played this out as an attack on the country's traditional dollar stores, but who are we kidding? Scrolling through the offerings shows a lot of the media, home decor, and trendy accessories that line the aisles at Five Below.

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Ten Below

If Amazon was gunning for Five Below's thrifty deal-seeking teens with its cheap-chic hub, it may have missed. Five Below is doing just fine. It has rattled off six consecutive quarters of top-line growth north of 20%, and earlier this month, the shares hit another all-time high after posting another blowout financial report.

Net sales soared 23%, and while most of that growth is the handiwork of new units -- Five Below's store count has increased 19% over the past year to hit 692 locations across 33 states -- store-level sales continue to move higher. Comps rose 2.7% in Five Below's fiscal second quarter.

Adjusted earnings soared 49% in the quarterly report, but sharply lower taxes and a one-time accounting benefit propped up the bottom line. Operating income rose at a more modest 16% clip, but one can argue that any growth is applause-worthy when Amazon's telling penny-pinchers everywhere that they can stay home and have thousands of items priced $10 or less delivered to them at no additional cost.

Five Below isn't just surviving Amazon's lightly publicized attack: Five Below is thriving. A couple of years ago, the secret to Five Below's success was the rising popularity of fidget spinners among the younger set, but now that the fad has been played out -- and Five Below's comps remain squarely positive -- it's time to give the fast-growing deep discounter some props.

The stock has become a market darling, and rightfully so. Five Below is routinely boosting its guidance with every passing quarter. Amazon is a beast, and it may very well be gnawing away at some of Five Below's growth. However, the flip side to that story is that Amazon is making Five Below's expansion easier by clearing out fading storefronts owned by landlords desperate to nab Five Below as a tenant. Both players can win, and that's exactly what they're both doing right now.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.