Five Below (FIVE) Financials

Five Below’s latest quarter shows a sharp rebound in profitability and operating cash flow versus the prior year, but also a meaningful slowdown from the unusually strong holiday quarter. In Q1 2026, revenue rose to $1.29 billion, up from $970.5 million in Q1 2025, while net income increased to $123.1 million from $41.1 million a year earlier. Cash from operations also improved to $227.2 million, and the balance sheet remains solid with $1.11 billion in cash and short-term investments combined.

That said, the comparison to Q4 2025 shows the business is highly seasonal and margin-sensitive. Revenue fell from $1.73 billion in Q4 2025, and net income dropped from $238.2 million, which is normal for Five Below’s calendar, but it highlights how much earnings depend on holiday demand. The key takeaway is that the company is still generating profits, but the pace of growth and cash generation can swing materially quarter to quarter.

• Revenue growth returned strongly year over year in Q1 2026, with sales up about 32% from Q1 2025.
• Net income more than tripled year over year, rising to $123.1 million from $41.1 million in the prior-year quarter.
• Operating cash flow improved significantly to $227.2 million, versus $132.7 million in Q1 2025.
• The company finished the quarter with a large liquidity cushion, including $638.9 million in cash and equivalents and $474.4 million in short-term investments.
• Gross profit margin held up well at roughly 37.2% in Q1 2026, showing the model still supports healthy merchandise economics.
• Leverage appears manageable with no short-term debt reported.
• Five Below remains a highly seasonal retailer, with Q4 typically much larger than Q1 and the most important period for profits and cash generation.
• Inventory remains elevated at $813.3 million, which is not unusual for a retailer but is worth watching for clearance risk if traffic weakens.
• Capital spending continues, with $37.2 million spent on property and equipment in Q1 2026, suggesting ongoing store and infrastructure investment.
• Interest and investment income helped earnings, but at $8.3 million it is still a relatively small contributor versus core retail operations.
• Quarter-over-quarter results were down sharply from Q4 2025, when revenue was $1.73 billion and net income was $238.2 million.
• Operating cash flow fell from the holiday quarter’s level, and Q1 2026 also showed a net cash outflow of $84.8 million after investing and financing activities.
• Investing activity was heavy, including $271.8 million of investment purchases and $37.2 million of capex, which consumed a lot of cash in the quarter.
• Operating income declined from Q4 2025 to $154.2 million, reflecting the company’s dependence on seasonal demand and holiday leverage.

Over the longer run, Five Below’s financial profile has improved materially from 2023 and 2024 lows. In 2023, the company experienced periods of weak or even negative operating cash flow, including Q3 2023 and Q3 2024, when operating income was near breakeven or negative. By contrast, the latest quarter shows much healthier profitability, better cash generation, and a stronger balance sheet than the company posted during those tougher periods.

Bottom line: Five Below appears financially healthier than it was a year ago, with stronger sales, better earnings, and ample liquidity. Investors should still watch inventory levels, holiday dependence, and margin pressure, but the trend in the latest quarter is clearly constructive.