Five Below: Here’s Why the Stock is On the Move

Five Below (NASDAQ:), the discount retail store chain, was one of the top gainers on Tuesday, with its stock rising some 7% on the day to roughly $115 per share.

The clear catalyst for the move was a massive upgrade from analysts at Citi, who bumped the price target up from $80 to $120 per share. It suggests only a slight gain over where the price wound up on Tuesday at nearly $115 per share.

But it was just the latest in a slew of upgrades for the stock, based on some promising recent news from the retailer.

Earlier this month, the firm announced a leadership transition on its board, as company co-founder Tom Vellios and board chair announced that he will not seek reelection and will take on an advisory role for the rest of 2025. He will be replaced by Mike Devine as chair. Devine has been on the Five Below board for 12 years and previously served as board chair at Deckers Outdoor (NYSE:).

But the more notable development is that Five Below raised its guidance for its fiscal first quarter.

Major Sales and Earnings Boost for Q1

In advance of its June 4 first-quarter earnings release, Five Below raised its guidance for Q1. It now expects net sales of approximately $967 million versus the prior guidance of $905 million to $925 million.

Further, it lifted its comparable store guidance, calling for a massive 6.7% increase versus the prior guidance that estimated comparable sales to be somewhere between flat and a 2% increase. It also raised its number of new stores to 55, from the prior guidance of 50 new stores.

Finally, it is calling for earnings to be in the range of 69 cents to 71 cents, up from the previous guidance of 44 cents to 55 cents. Further, adjusted earnings are expected to be in the range of 82 cents to 84 cents, up from the previous outlook of 50 cents to 61 cents.

Citi analyst Paul Lejuez was impressed by the comparable sales growth. He sees the opportunity for double-digit comparable sales with easier year-over-year comparisons, fueled by an improved assortment of goods and simplified pricing.

As a discount retailer, Five Below goods are likely more in demand in this slower-growing economic environment, with the possibility of rising inflation due to tariffs and other factors. The stock is up 9% YTD and has a P/E ratio of 23.

However, it imported about 60% of its items from China, according to PYMNTS. It has since paused shipments from China due to tariffs and is developing a tariff mitigation strategy. Interested investors should tune in to the June 4 earnings for more on how its dealing with tariffs.

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