Five Below Inc. (FIVE) shares popped in premarket trading Thursday after the discount retailer delivered a second-quarter earnings beat that had investors feeling good about the value retail space.
The company reported adjusted earnings of $1.68 per share, comfortably ahead of the $1.38 analysts were looking for. Net sales climbed 23% year over year to $1.26 billion, also topping the $1.22 billion Street estimate.
CEO Winnie Park credited the company's crew for strong execution, trend-driven assortments and value-focused products. She also pointed to stores that are easier and more enjoyable for customers to shop, which seems to be resonating with shoppers looking for deals.
Comparable Sales Growth Continues
The second quarter marked Five Below's fifth straight quarter of double-digit comparable sales growth. Two-year stacked sales increased 26.5%, showing that the momentum isn't just a blip.
Comparable sales growth was driven mainly by higher transactions. The company said traffic was strong, with better engagement from both new and returning customers. Growth was broad-based across customer groups, regions and categories, including Room, Toys, Tech and Snacks.
Adjusted gross profit rose 31% to $449 million. Adjusted gross margin expanded 220 basis points to 35.6%, helped by merchandise margin gains, fixed-cost leverage and a better shrink reserve rate. Adjusted operating income more than doubled to $113 million, with adjusted operating margin rising about 360 basis points to 9%.
Five Below also returned cash to shareholders, repurchasing about 311,000 shares for about $60 million during the quarter. The board later approved a new $600 million share repurchase authorization with no expiration date.
The company ended the quarter with about $1.2 billion in cash, cash equivalents and investments, including $170 million in pre-tax IEEPA refunds.
On the expansion front, Five Below opened 52 net new stores across 26 states during the quarter, ending the period with 2,022 stores. It also entered Idaho, its 47th state, and plans to enter Puerto Rico in the second half of 2027.
Outlook Raised
Looking ahead, Five Below raised its guidance, which is always a good sign. For the third quarter, the company expects GAAP earnings of $1.01 to $1.13 per share, above the 83-cent estimate. It expects sales of $1.21 billion to $1.23 billion, above the $1.143 billion consensus estimate.
The company expects third-quarter comparable sales growth of 8% to 10% and plans to open about 40 net new stores in the quarter.
For fiscal 2026, Five Below raised its adjusted earnings forecast to $9.83 to $10.31 per share from $8.65 to $9.05. Analysts had expected $9.23 per share. The company also raised its sales forecast to $5.63 billion to $5.71 billion from $5.4 billion to $5.48 billion, versus the $5.541 billion analysts expected.
Five Below expects fiscal-year comparable sales growth of 24% at the midpoint on a two-year stacked basis. Capital spending is now expected to be $250 million to $260 million.
FIVE Price Action: Five Below shares were trading up 5.73% at $257.02 at the time of publication on Thursday. The stock is approaching its 52-week high of $263.87, according to market data.
