Five Below NASDAQ: FIVE reported a sharply stronger first quarter than management expected, with executives pointing to broad traffic gains, social-media-driven merchandising, new store growth and higher tax refunds as key contributors.
Chief Executive Officer Winnie Park said the quarter reflected progress in the company’s effort to strengthen its position as a destination for “the kid and the kid in all of us.” Net sales rose nearly 33% to $1.3 billion, driven by comparable sales growth of about 23% and strong performance from new stores. The company opened 49 net new stores during the quarter.
Adjusted earnings per share were $2.22, up 158% from the prior-year quarter. Chief Financial Officer and Treasurer Dan Sullivan said the company’s results exceeded expectations and marked Five Below’s fifth consecutive quarter of positive comparable sales growth and fourth straight quarter of double-digit comparable growth.
Traffic, trends and broad category strength drove sales
Park said the company’s sales growth was supported by three main factors: improved execution of its value-focused retail strategy, stronger engagement with social trends and a boost from customers spending larger tax refunds.
The comparable sales increase was “disproportionately driven by transactions,” Park said. Transactions rose 19%, while ticket increased 4%. She said the growth was broad-based, with 15 of 18 departments posting positive comparable sales. Games and toys were especially strong, supported by collectibles and what executives described as the broader “squish” trend.
Park emphasized that Five Below’s performance was not dependent on a single product. She said the company is focused on a full assortment of merchandise at strong relative value, supported by better marketing and store execution. Still, executives repeatedly discussed the company’s success around RMS Squishy Dumplings, which Park said Five Below amplified through social listening, creator content, reposting and in-store activation.
“This end-to-end approach, from detecting a burgeoning trend to amplifying it in social, to creating an amazing in-store experience, that’s our special sauce,” Park said.
The company also highlighted strength in candy, beauty, toys, licensed products and seasonal gift-giving around Valentine’s Day and Easter. Park said Five Below hosted store activations for occasions including National Pokémon Day, and said trading cards remain a strong business driver, with the company looking for more opportunities in Pokémon and other collectible card products.
Margins expanded as sales leverage improved
Sullivan said adjusted gross profit increased 46% to $479 million, or 37.2% of sales, up about 340 basis points from the prior year. Adjusted SG&A expenses were $324 million, or 25.2% of sales, down about 250 basis points, primarily due to fixed-cost leverage from strong comparable sales. That leverage was partly offset by higher incentive costs and store labor tied to April physical inventory counts.
Adjusted operating income rose 160% to $155 million, while adjusted operating margin expanded by about 600 basis points to 12%. Adjusted net income also rose 160% to $123 million.
Five Below ended the quarter with about $1.1 billion in cash equivalents and investments. Inventory totaled $813 million, up approximately 16%, with units up 10%. Sullivan said the inventory increase reflected opportunistic buying in a favorable tariff environment and steps to ensure product flow amid a more challenging global supply chain backdrop.
Company raises outlook but stays cautious on consumer environment
Five Below raised its full-year outlook, citing first-quarter outperformance and a better second-quarter sales forecast, while leaving its second-half comparable sales assumptions unchanged.
For the second quarter, management expects:
- Total sales of $1.18 billion to $1.20 billion.
- Comparable sales growth of 7% to 9%.
- About 50 new store openings.
- Adjusted operating margin of about 7% at the midpoint.
- Adjusted diluted EPS of $1.23 at the midpoint.
For the full year, management expects:
- Sales of $5.4 billion to $5.48 billion.
- Comparable sales growth of 6% to 8%.
- Adjusted operating margin of 11.6% at the midpoint, up 170 basis points.
- Adjusted diluted EPS of $8.85 at the midpoint.
- Capital expenditures of $230 million to $250 million, excluding tenant allowances.
- Approximately 150 net new store openings.
Sullivan said the company remains cautious because of the macroeconomic backdrop, including rising fuel costs, sticky inflation and a somewhat soft labor market. However, he said management has not seen evidence of trade-down behavior or a clear shift in customer behavior.
On tariffs, Sullivan said Five Below’s guidance reflects the estimated benefit of a 10% global tariff rate through July 24, after which the company assumes tariffs revert to the rates in place at the start of the fiscal year. He said the outlook does not assume any benefit from IEEPA tariff refunds, though the company has taken steps to preserve claims for potential refunds.
Marketing and customer data remain early-stage opportunities
During the question-and-answer portion of the call, Park said Five Below still has relatively low aided and unaided brand awareness compared with competitors, suggesting room for growth. She said the company’s shift away from more traditional marketing and toward social media has helped drive traffic and new customer acquisition.
Park said Five Below is also building its email database to improve direct marketing and eventually support more personalized customer relationships. She said the company is still in the early stages of exploring what loyalty could look like, including whether it might involve an app, rewards points or early access to product launches.
Online sales grew during the quarter, Park said, but remained a small percentage of the overall business. She described e-commerce as a future “white space” opportunity, while noting that digital marketing currently serves largely as a way to introduce customers to the brand and drive store traffic.
Executives also said the company continues to see opportunity in new stores. Sullivan said Five Below remains committed to high-single-digit unit growth, with an emphasis on better site selection, pre-opening, grand opening and post-opening execution.
Park closed the call by saying the company is making progress on its customer-centric strategy and is preparing for the remainder of the year, including the summer and holiday selling periods.
About Five Below NASDAQ: FIVE
Five Below, Inc NASDAQ: FIVE is an American specialty discount retailer offering a broad assortment of merchandise priced primarily at $5 or below. Since its founding in 2002 by David Schlessinger and Tom Vellios, the company has pursued a value-focused retail model targeting tweens, teens and beyond, with stores designed to deliver trend-driven products at an accessible price point. Headquartered in Philadelphia, Pennsylvania, Five Below has grown into a national chain operating in dozens of U.S.
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