Five Below Q2 Earnings Call Highlights

Key Points

• Five Below exceeded Q2 expectations: Sales rose 23% to $1.3 billion, comparable sales increased more than 14% for a fifth straight quarter, and adjusted diluted EPS more than doubled to $1.68. Strong traffic, trend-driven merchandise and approximately 9% unit growth drove the results.
• The retailer opened 52 net new stores, reaching 2,022 locations, while adjusted operating margin expanded to 9% on merchandise-margin gains and cost leverage. Five Below also authorized a new $600 million share-repurchase program and plans to invest tariff refunds in stores, digital capabilities and sourcing.
• Management raised its full-year outlook to $5.63 billion-$5.71 billion in sales, 10%-12% comparable-sales growth and $10.07 adjusted diluted EPS, with plans for 115 net new stores. Third-quarter sales are projected to grow about 18% at the midpoint, though higher fuel costs are expected to offset some tariff-related benefits.

Five Below NASDAQ: FIVE reported second-quarter fiscal 2026 results that exceeded its expectations, with sales rising 23% to $1.3 billion and adjusted diluted earnings per share more than doubling to $1.68.

Chief Executive Officer Winnie Park said the retailer’s performance reflected progress in its customer-focused strategy, which emphasizes trend-driven merchandise, social and digital marketing, simplified pricing, and a more engaging store experience. The company raised its full-year outlook following strong first-half results and an improved view of the second half.

Comparable Sales, Traffic and Store Growth

Comparable sales increased more than 14% in the quarter, marking Five Below’s fifth consecutive quarter of double-digit comparable-sales growth. The two-year comparable-sales stack was 26.5%. Sales growth was driven primarily by transaction gains, including robust traffic, as well as approximately 9% unit growth.

Park said growth was broad-based across customer groups, regions and merchandise categories, including room decor, toys, technology and snacks. She pointed to customer response to new products and trends, such as Asian snacks, slime, craft products and the retailer’s squishy collections.

Chief Financial Officer and Treasurer Dan Sullivan said the company’s outperformance versus its prior outlook was driven by stronger-than-expected transaction growth, continued demand for trend merchandise, improved in-stock positions and better-than-anticipated performance during seasonal and cultural moments including the Fourth of July, the World Cup and early back-to-school shopping.

Five Below opened 52 net new stores across 26 states during the quarter, compared with 32 net new stores in the year-earlier period, ending the quarter with 2,022 locations. The company opened its 2,000th store in July and entered its 47th state, Idaho, in August.

Park also announced plans to enter Puerto Rico in the second half of 2027, initially with a handful of stores. The company said it sees a strong customer fit and attractive real estate opportunities in the U.S. territory.

Margins, Cash Flow and Capital Allocation

Adjusted gross profit rose 31% to $449 million, while adjusted gross margin expanded about 220 basis points to 35.6% of sales. Sullivan attributed the improvement to merchandise margin expansion, leverage of fixed costs on strong comparable sales, and an improved shrink reserve rate based on 2025 physical inventory results. Higher fuel costs partially offset those gains.

Adjusted selling, general and administrative expense was $336 million, or 26.6% of sales, representing 140 basis points of leverage from the prior-year quarter. The company said fixed-cost leverage helped offset planned higher marketing spending and incremental labor costs related to the timing of physical inventory counts.

Adjusted operating income more than doubled to $113 million, and adjusted operating margin increased about 360 basis points to 9%. Adjusted net income was $93 million, compared with a result less than half that amount in the prior-year quarter.

Five Below ended the quarter with approximately $1.2 billion in cash equivalents and investments, including $170 million in pre-tax IEEPA tariff refunds. The company repurchased about 311,000 shares for roughly $60 million during the quarter under its prior authorization. Its board subsequently approved a new $600 million share-repurchase authorization with no expiration date.

Sullivan said the company expects to use tariff refunds to accelerate investments in store experience, digital capabilities and merchandise sourcing. He said those investments are expected to be disproportionately reflected in capital expenditures over time.

Store Experience and Marketing Efforts

Park said Five Below is working to make its stores easier to shop while preserving the treasure-hunt experience. The retailer has moved Five Beyond products from a dedicated back-of-store area into their associated departments and is beginning to repurpose the former space.

The company plans to create a “world at play” focused on toys, games, collectibles and crafts, while grouping style, beauty and room products for Generation Z shoppers. Park said improved product adjacencies, signage and sight lines are intended to help customers navigate stores and build their baskets.

Sullivan said the store changes are expected to require approximately $40,000 to $45,000 in capital expenditures per store. The initiative was a factor in the company’s increased full-year capital-expenditure outlook.

On marketing, Park said Five Below has shifted working media spending from traditional commercials toward social media and digital channels. The retailer is also expanding its customer database and email marketing capabilities. She said customers acquired during 2025 returned in the first half of 2026, while customers acquired in the first quarter returned during the second quarter.

Management said licensing is becoming a larger part of its product strategy, with expanded collections tied to entertainment properties and cultural moments. Park cited Toy Story merchandise during the quarter and said the company expects a continuing flow of movie-related product later in the year.

Raised Outlook

For the third quarter, Five Below expects sales of $1.21 billion to $1.23 billion, representing approximately 18% growth at the midpoint, with comparable-sales growth of 8% to 10%. The company expects to open approximately 40 net new stores during the quarter.

• Third-quarter adjusted operating margin is expected to be about 6% at the midpoint.
• Third-quarter adjusted diluted EPS is projected at $1.70 at the midpoint, compared with $0.68 a year earlier.
• Full-year sales are now expected to range from $5.63 billion to $5.71 billion.
• Full-year comparable-sales growth is projected at 10% to 12%.
• Full-year adjusted operating margin is expected to be approximately 12.5% at the midpoint.
• Full-year adjusted diluted EPS is projected at $10.07 at the midpoint.
• Capital expenditures are forecast at $250 million to $260 million, supporting 115 net new stores as well as store-experience, infrastructure and technology investments.

Sullivan said the outlook excludes IEEPA tariff refunds and does not contemplate future share repurchases. He added that lower tariff costs are expected to provide some benefit in the second half, though higher fuel costs are expected to offset much of that advantage.

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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