Why Five Below Stock Fell Today

Shares of Five Below (NASDAQ: FIVE) declined on Thursday as investors questioned whether the extreme-value retailer's heady growth can persist.

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Strong Q1 performance

Five Below's net sales surged 32.5% year over year to $1.3 billion in its fiscal first quarter, which ended on May 2.

The discount retail chain opened 49 net stores during the quarter. That brought its total count to 1,970 locations across 46 states.

Moreover, sales at Five Below's existing stores grew at a blistering pace. Comparable sales, which measure revenue from locations open for at least 13 months, jumped 22.7%.

CEO Winnie Park said the company saw "broad-based growth across our merchandising worlds, new and existing customers, and all demographic and geographic segments."

All told, Five Below's adjusted net income soared 160% to $123.5 million, or $2.22 per share. That topped Wall Street's estimates, which had called for per-share profits of $1.79.

But can the good times last?

Five Below's results were so strong that analysts began to wonder whether its growth may have peaked. Part of the company's success in the first quarter was due to its ability to capitalize on viral social media trends surrounding the popular "Squishy Dumplings" toys, as well as higher tax refunds that boosted consumer spending.

For its part, Five Below expects full-year net sales to grow roughly 14% to $5.4 billion, driven by 150 net store openings and comparable sales growth of 6% to 8%. Management also projects adjusted net income of $482 million to $504 million, or $8.65 to $9.05 per share.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.