FIVE jumps after reporting first positive SSS growth in four quarters
2min read Five Below (FIVE) delivered an impressive set of Q3 results, significantly exceeding expectations on both earnings and revenue. The company reported adjusted EPS of $0.42, more than doubling the consensus estimate of $0.17, and net sales of $843.7 million, well ahead of the $800.9 million expected by analysts. Same-store sales, a key retail metric, turned positive at +0.6%, a sharp improvement from the -5.7% decline in Q2 and well above the estimated -4.41%. This marked the first positive comp growth since Q4 of last year, signaling strong execution during the quarter.
Guidance for Q4 and full-year fiscal 2025 was also a bright spot, albeit with a cautious tone. Five Below expects Q4 net sales of $1.35 billion to $1.38 billion, slightly above analyst estimates of $1.36 billion, despite an adverse calendar shift reducing year-over-year comparisons. Comparable sales are expected to decline by 3% to 5%, better than the forecasted -5.44%, while adjusted EPS guidance for Q4 is set at $3.23 to $3.41 per share. The company also raised its full-year revenue guidance to $3.84 billion to $3.87 billion, up from the prior range of $3.73 billion to $3.8 billion, reinforcing its improving trajectory.
Key metrics showed broad-based strength across the business. The company’s “8 Worlds” merchandising strategy saw acceleration in transactions across all segments, which drove outsized margin gains. Store openings continued at a robust pace, with 82 new locations added during the quarter, representing an 11% year-over-year increase and bringing the total store count to 1,749. This rapid expansion highlights Five Below’s commitment to its growth strategy even as it navigates a challenging retail environment.
The turnaround was largely driven by strategic discounting and a return to its core value proposition. Five Below’s ability to attract its young, value-conscious customer base with compelling price points and improved merchandising contributed to the strong recovery in sales. The appointment of Winnie Park as the new CEO also signals a strategic reset. Park’s background in transforming retail brands into omni-channel powerhouses, including her leadership at Forever 21 and Paper Source, is expected to drive further innovation and digital integration for Five Below.
One of the standout aspects of the report was the acceleration in transaction volumes, which reflects improved foot traffic and customer engagement. This is a crucial development for Five Below, which had struggled with declining comps earlier in the year. The better-than-expected results underscore the resilience of its business model and its ability to adapt to consumer preferences amid a challenging macroeconomic backdrop.
Despite the strong results, challenges remain. The company’s guidance for Q4 comp sales still points to a decline, reflecting the lingering impact of the calendar shift and softer trends quarter-to-date. Additionally, competition from other discount retailers and new entrants like Amazon’s Haul platform poses ongoing risks. However, the strength of Five Below’s recent performance provides confidence in its ability to execute its turnaround plan effectively.
Shares of Five Below surged more than 8% after the earnings release, reflecting investor optimism about the company’s improving fundamentals. Analysts have been quick to revise price targets upward, with UBS raising its target to $150 from $108, citing the “power of the retailer's model when it executes well.” The better-than-expected Q3 performance and raised guidance demonstrate that Five Below is on a stronger footing heading into the crucial holiday quarter.
In summary, Five Below’s Q3 results highlight the early success of its turnaround efforts. Positive comp growth, strong transaction momentum, and robust margin improvements indicate that the retailer is regaining its stride. While challenges remain, the combination of a new CEO, strategic initiatives, and an improving consumer response positions Five Below well for continued growth in 2025. Investors will be closely watching how the company navigates the holiday season and builds on the momentum from this impressive quarter.
