What Happened?

Shares of discount retailer Five Below (NASDAQ: FIVE) jumped 12.7% in the pre-market session after the company reported impressive fourth-quarter (Q1 2025) results: Revenue, EPS, and EBITDA all exceeded Wall Street's estimates. Sales growth was primarily driven by store expansion, with a 14.7% increase in locations compared to the previous year. 

However, operating income declined as higher costs (likely tied to its expansion efforts) offset revenue gains, leading to a slight dip in margins. The ongoing investments partly explained why full-year EPS guidance fell well short of expectations, despite revenue projections slightly exceeding estimates. Overall, this quarter had some key positives.

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What The Market Is Telling Us

Five Below’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for Five Below and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 8 months ago when the stock dropped 23.1% on the news that the company cut Q2'2024 sales and EPS guidance and announced that CEO and President Joel Anderson had stepped down. 

Separately, the company provided updated financial projections. The company guided for Q2'24 sales to be $820 million - $826 million (vs. previous guidance of $830 million to $850 million). EPS was expected to come in at 0.53 - 0.56 (vs. previous guidance of 0.57 - 0.69). 

Following the report, multiple Wall Street analysts downgraded the stock's rating. For example, Truist analyst Scot Ciccarelli lowered the stock's rating from Buy to Hold, stating, "Expectation for incremental softening in late July, the CEO change, mgmt comments on self-inflicted wounds and the potential scaling back of unit growth when new mgmt comes in, has completely eroded our confidence."

Five Below is down 19.8% since the beginning of the year, and at $79.51 per share, it is trading 62% below its 52-week high of $208.97 from March 2024. Investors who bought $1,000 worth of Five Below’s shares 5 years ago would now be looking at an investment worth $1,516.

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