FIVE Q2 Deep Dive: Broad-Based Sales Growth and Strategic Pricing Simplification

August 28, 2025 at 09:50 AM EDT

FIVE Cover Image

Discount retailer Five Below (NASDAQ: FIVE) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 23.7% year on year to $1.03 billion. On top of that, next quarter’s revenue guidance ($960 million at the midpoint) was surprisingly good and 3.8% above what analysts were expecting. Its non-GAAP profit of $0.81 per share was 29.4% above analysts’ consensus estimates.

Is now the time to buy FIVE? Find out in our full research report (it’s free).

Five Below (FIVE) Q2 CY2025 Highlights:

Revenue: $1.03 billion vs analyst estimates of $991.8 million (23.7% year-on-year growth, 3.5% beat)
Adjusted EPS: $0.81 vs analyst estimates of $0.63 (29.4% beat)
Adjusted EBITDA: $102.8 million vs analyst estimates of $89.35 million (10% margin, 15.1% beat)
The company lifted its revenue guidance for the full year to $4.48 billion at the midpoint from $4.38 billion, a 2.4% increase
Management raised its full-year Adjusted EPS guidance to $4.96 at the midpoint, a 10.6% increase
Operating Margin: 5.1%, in line with the same quarter last year
Locations: 1,858 at quarter end, up from 1,667 in the same quarter last year
Same-Store Sales rose 12.4% year on year (-5.7% in the same quarter last year)
Market Capitalization: $7.95 billion

StockStory’s Take

Five Below’s second quarter results were marked by strong sales momentum, which management attributed to a combination of curated new product assortments, operational improvements, and pricing simplification. CEO Winnie Park emphasized that “broad-based performance across our worlds” and a focus on efficient inventory flow helped drive both transaction growth and higher average purchase values. Park highlighted that the company’s ongoing commitment to delivering trend-right, value-focused products resonated with both new and existing customers, supporting a notable increase in same-store sales and customer transactions.

Looking ahead, Five Below’s updated guidance is shaped by plans to further capitalize on operational agility, refreshed marketing initiatives, and continued adaptation to a volatile tariff environment. COO Ken Bull highlighted that disciplined inventory management and ongoing pricing strategies are expected to help offset cost headwinds. Management remains focused on leveraging fixed cost advantages and store labor optimization, while CEO Winnie Park noted, “We believe we are in a strong position heading into the fall with exciting plans for both Halloween and holiday.”

Key Insights from Management’s Remarks

Management pointed to several operational and merchandising improvements as drivers of the quarter’s outperformance and outlined key factors expected to support ongoing sales and margin stability despite external headwinds.

Assortment Curation and Trend Focus: Five Below’s success was driven by “Wow newness” in product assortments and exclusive collaborations, such as the Stitch Surf Shop. Management noted that six out of eight product categories contributed to growth, reducing reliance on single-product trends and enhancing sales resilience.
Pricing Simplification: The company shifted to whole-dollar price points ($1, $2, $3, $4, and $5), streamlining the shopping experience and store operations. Management reported that customer response to price adjustments was positive, with minimal impact on unit sales despite tariff-driven cost pressures.
Operational Execution and Inventory Flow: Enhanced inventory flow and in-stock positions were highlighted as key contributors to sales growth. The team credited improved supply chain coordination and store labor optimization for higher transaction rates and better conversion.
Marketing Initiatives and Customer Engagement: Five Below increased its focus on digital marketing and creator-led content to build brand awareness. Management believes these efforts contributed to higher new customer acquisition rates and repeat visits.
Store Expansion and Productivity: The opening of 32 new stores, including successful launches in diverse markets, showcased the effectiveness of Five Below’s selective expansion strategy. New stores achieved productivity in line with internal targets, supporting long-term unit growth ambitions.

Drivers of Future Performance

Five Below’s forward guidance is supported by continued investment in merchandising, marketing, and store operations while navigating tariff-related cost pressures and shifting consumer trends.

Tariff Mitigation and Pricing Strategy: Management expects ongoing tariffs to remain a headwind but plans to offset much of the impact through selective price increases, product mix adjustments, and vendor diversification. COO Ken Bull noted that customer acceptance of higher price points provided flexibility to manage gross margin pressures.
Holiday and Seasonal Product Focus: The company is prioritizing strong seasonal assortments—particularly for Halloween and the holidays—with an increased emphasis on gifting, decor, and licensed products. CEO Winnie Park stated that Five Below aims to be a “gift destination for America at great value,” with targeted marketing to drive customer traffic during key periods.
Store Growth and Operational Efficiency: Continued selective store expansion and ongoing labor optimization are expected to drive fixed cost leverage. Management also highlighted investments in supply chain agility and inventory management as critical to supporting future sales growth and margin improvement.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) gross margin trends and the effectiveness of tariff mitigation strategies, (2) the performance of holiday and seasonal assortments as a barometer for ongoing customer engagement, and (3) the pace and productivity of new store openings, especially in underpenetrated markets. Execution on enhanced marketing and inventory flow will also be key to sustaining transaction growth.

Five Below currently trades at $149.64, up from $144.64 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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