Five Below Raises Full-Year Outlook Despite ‘Ever-Changing Tariff Environment’

Philadelphia, PA – August 28, 202, Five Below, Inc. (NASDAQ: FIVE), the popular discount retailer targeting preteens and teens with trendy items priced mostly under $5, reported robust second-quarter fiscal 2025 results that exceeded Wall Street expectations, prompting the company to lift its full-year guidance. Despite ongoing challenges from an “ever-changing tariff environment,” CEO Winnie Park highlighted the team’s execution and strategic focus as key drivers behind the upbeat performance. Shares of Five Below rose over 4% in after-hours trading following the announcement, reflecting investor optimism amid broader retail sector headwinds.

The Philadelphia-based chain posted Q2 net sales of $1.03 billion, marking a 23.7% year-over-year increase and surpassing analyst estimates by 3.5%. This growth was fueled by a strong 12.4% rise in comparable-store sales—the first positive comps in recent quarters after a -5.7% decline in the prior-year period—and the addition of new locations. Five Below ended the quarter with 1,858 stores, up from 1,667 a year earlier, as it continues an aggressive expansion plan averaging 15.5% annual store growth. Adjusted earnings per share (EPS) came in at $0.81, beating consensus forecasts by 29.4%, while operating margins held steady at 5.1%.

In a prepared statement, Park emphasized the company’s resilience: “We are excited to deliver second quarter results that exceeded our sales and earnings expectations. These results demonstrate the effectiveness of our strategy and are a testament to the hard work, dedication and tight collaboration of our teams across the company, especially in an ever-changing tariff environment.” She credited “maniacal focus on executing with excellence,” including curating “Wow!” products and optimizing inventory, for the turnaround. Free cash flow also improved dramatically to $48.28 million from a negative $32.35 million last year, underscoring better operational efficiency.

The raised full-year outlook reflects this momentum. Management now projects adjusted EPS of $4.96 at the midpoint—a 10.6% increase from prior guidance—while anticipating net sales growth of around 8.7% over the next 12 months. For the upcoming quarter, revenue is guided at $960 million at the midpoint, 3.8% above expectations. This comes after a strong Q1 where sales surged 19.5% to $970.5 million and comps rose 7.1%, leading to an initial guidance lift in June. Analysts had anticipated a more modest performance, but Five Below’s results highlight its ability to capture demand in a value-driven market.

Tariffs remain a persistent concern for Five Below, which sources a significant portion of its merchandise from China. The company has been navigating heightened trade tensions, including U.S. restrictions that could raise costs by up to 150 basis points on gross margins in 2025. To mitigate this, Five Below is diversifying its supply chain—establishing a sourcing office in India and exploring pricing adjustments beyond the $5 threshold for select items. Park noted that while tariffs introduce uncertainty, the firm’s agile teams and vendor negotiations are helping maintain its extreme-value proposition. This echoes broader industry trends, where retailers like Walmart have signaled price hikes due to tariffs, but off-price players like Five Below may benefit from excess inventory shifts.

The positive results cap a year of strategic resets for Five Below, which faced headwinds in 2024 from inflation impacting its core lower-income customers, leading to a Q1 comp sales drop of -2.3% and a lowered outlook at the time. Under Park’s leadership since 2022, the company has refocused on its tween and teen demographic, simplifying assortments, and enhancing store experiences. Recent initiatives, such as associate-monitored self-checkout and partnerships like Uber Eats for delivery, are aimed at boosting efficiency and accessibility.

Analysts remain cautiously optimistic. While the stock trades at a forward P/E of about 20x for 2025—below its 10-year average of 34x—some see upside if tariff mitigation succeeds. “Five Below’s ability to deliver comp growth in this environment is impressive, but sustained execution will be key amid macroeconomic pressures,” said one retail analyst. The company plans to open around 150 net new stores in fiscal 2025, with capital expenditures between $210 million and $230 million to support infrastructure.

As consumer spending patterns evolve, Five Below’s emphasis on fun, affordable trends positions it well in a competitive landscape against dollar stores and e-commerce giants. With the full-year outlook raised, investors are betting on the retailer’s agility to “let go & have fun” through turbulent times.