Why Five Below Stock Was Moving Higher This Week

Shares of Five Below (NASDAQ: FIVE) were moving higher this week in response to a better-than-expected first-quarter earnings report. In addition, commentary from Dollar General, which is also reported earnings this week, led investors to believe that discount stores were well-positioned in the current economic environment.

As of 2:59 p.m. on Thursday, the retail stock was up 8.5%, according to data from S&P Global Market Intelligence.

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Five Below keeps growing

Five Below, which primarily sells items for $5 or less like toys, games, accessories, and snacks, said that comparable sales in the quarter rose 7.1%, driving overall revenue up 19.5% to $970.5 million, which edged out estimates at $966.5 million.

The growth in the quarter reflects new store openings, as the company added 55 locations in the period to bring its grand total to 1,826.

Comparable sales growth was also fueled by "trend-right product, extreme value, and a fun store experience," according to CEO Winnie Park. The tariff-related pressures in the macro environment may have helped too.

Adjusted operating income surged from $38.1 million to $59.6 million, and adjusted earnings per share jumped from $0.60 to $0.86, ahead of the consensus at $0.83.

The company also said CFO Kristy Chapman is stepping down, and it would begin a search for her replacement.

Can Five Below keep gaining?

Looking ahead, Five Below expects its momentum to continue into the second quarter, calling for comparable-sales growth of 7%-9% and revenue of $975 million-$995 million, with 30 new stores. On the bottom line, it sees adjusted earnings per share of $0.50-$0.62. That forecast compares to estimates of $958.3 million in revenue and EPS of $0.58.

Five Below expects slower top-line growth in the second half of the year. Still, the comparable-sales results are impressive in the current environment. The stock trades at a premium, but it's easy to see why after the latest report.

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