This Hot Retail Stock Has Nearly Tripled Over the Past Year
Key Points
Five Below posted better-than-expected financial results for its fiscal fourth quarter.
The turnaround has been stellar for the chain since Forever 21 CEO Winnie Park came over to lead the deep discounter.
The stock may not seem cheap at 27 times forward adjusted earnings guidance, but momentum may push its forecasts higher and its multiples lower through fiscal 2026.
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In a world of fickle retailers, Five Below (NASDAQ: FIVE) keeps rising above. The colorful seller of whimsical merchandise -- which, true to the name on its storefront, is priced largely at a $5 price point or less -- moved higher on Wednesday night after posting blowout financial results.
The chain has been a big winner since Winnie Park was tapped as its new CEO near the end of 2024. The stock is turning heads, more than doubling since Park was introduced as the retailer's new leader 15 months ago. There was a lot riding on Wednesday's report for the seasonally potent holiday quarter, which historically accounts for the lion's share of its fiscal-year profit.
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Image source: Five Below.
Shifting into Park
Net sales soared 24.3% to $1.73 billion for the fiscal 2025 fourth quarter that concluded at the end of January. That's the chain's strongest top-line growth in four years. Expansion has been a big part of some Five Below's strongest top-line performances, but it wasn't the one doing the heavy lifting this time.
Five Below has slowed its once-torrid expansion since Park took over, making sure it executes the basics before flooring it again. The 1,921 stores it was operating at the end of January represent a modest 8% year-over-year increase. The real driver behind the strongest sales surge since the fall of 2021 was a 15.4% jump in comparable-store sales.
Whenever you see effervescent double-digit comps, it pays to check how store-level sales shook out a year earlier. For Five Below, comps declined 3% in the fiscal fourth quarter of 2024. That's not ideal, but zoom out. Store-level sales are still up double digits from two years earlier. At the end of the day, analysts knew that momentum was on Five Below's side. They were modeling 23% growth, and the cheap-chic chain topped those lofty expectations.
The story gets better on the bottom line.
Shifting into drive
In a world where many retail stocks are struggling to draw shoppers, Five Below doesn't have that problem. However, keeping the registers busy is just half the battle. It's an incomplete feat if a chain can't deliver on the bottom line.
In a seasonal business like retail, you have to make sure the holiday quarter is particularly strong. You can't fail. In fiscal 2024, its fourth-quarter profit accounted for 69% of its annual earnings. Wall Street pros were modeling $4 a share in adjusted earnings. Five Below came through with adjusted earnings of $4.31 a share.
| Quarter | Adj. EPS (Estimate) | Adj. EPS (Actual) | Surprise |
|---|---|---|---|
| Q1 2025 | $0.83 | $0.86 | 3% |
| Q2 2025 | $0.63 | $0.81 | 29% |
| Q3 2025 | $0.26 | $0.68 | 165% |
| Q4 2025 | $4.00 | $4.31 | 8% |
Date source: Yahoo! Finance.
The beat isn't a fluke. It seems to be a default setting. The stock's twofold gain over the past 15 months isn't a surprise. It's a reward for a turnaround served well done.
Park arrived at Five Below with an interesting body of work. She was CEO at Forever 21 for three years before getting the top post at Five Below. She was the CEO of Paper Source before that. From stationery and gift products to trendy apparel to big-box treasure hunts? That's an unusual heroine arc, but it's working for Five Below and its investors.
Guidance that Five Below publicly initiated after Wednesday's market close calls for another year of healthy but decelerating growth. It sees $5.2 billion to $5.3 billion in net sales in the year ahead, a 10% increase. Five Below sees a big jump in sales and comps in the current quarter, dissolving into a 3% to 5% uptick in same-store sales for the full fiscal year.
The news is better at the other end of the income statement. The $7.74 to $8.25 it's forecasting for adjusted earnings per share this year represents a 20% improvement at the midpoint. The stock isn't as cheap as the inventory it stocks. It's trading for 27 times the midpoint of its adjusted net income guidance. However, investors saw how modest guidance a year ago kept appreciating as fiscal 2025 played out.
Five Below's retail concept has a strong grasp of its target audience, largely teen and tween girls. The stock's fundamentals have a strong grasp of the market's attention, and for now, the attraction is well earned.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.
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