Five Below, Inc. (FIVE) Earnings & Analysis

Latest quarter

Five Below reported Q2 FY2027 revenue of $1.3 billion, above the $1.2 billion consensus. Adjusted earnings per share were $1.68, compared with the $1.34 consensus.

Revenue rose 22.9% from a year earlier. The filing attributed the increase to comparable sales and sales from newer stores. Comparable sales increased 14.1%, with the filing citing increases of approximately 13.6% in transactions and approximately 0.4% in the average transaction value.

Gross margin rose to 48.5% from 33.3%. The filing said tariff refunds reduced merchandise costs and contributed to the increase, alongside a lower inventory shrinkage accrual rate. Operating margin increased to 21.8% from 5.10%.

Five Below reported diluted earnings per share of $3.99, up from $0.77 a year earlier. CFO Daniel Sullivan said adjusted results exclude the profit-and-loss impact of tariff refunds among other items; adjusted net income was $93 million. Free cash flow was $142.3 million, compared with $48.3 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Winifred Park said growth spanned customer groups, geographies and product categories. On the call, she said customers drawn in by the squishy trend were also buying across the assortment. CFO Daniel Sullivan told analysts that transaction growth exceeded the company’s expectations, while demand for trends and seasonal moments also outperformed its plans.

Park described a shift from individual items toward curated product stories, supported by social and digital marketing. She said Five Below was collecting customer details at checkout to develop email relationships, and that customers gained in 2025 had returned during the first half of 2026. Asked about social media, Park said she could not share exact figures but liked the results of shifting spending from traditional commercials to social channels.

On pricing and competition, Park said the company had simplified pricing and was focused on a value proposition for children and their families. She said Five Below was rearranging stores to group related products, including toys, games, collectibles and crafts, and to make shopping easier.

Sullivan said adjusted gross margin benefited from merchandise margin expansion, fixed-cost leverage and an improved shrink reserve rate, partly offset by higher fuel costs. Asked about tariff refunds, he said the company was considering investment in the in-store experience, its digital platform and products. He estimated the store-experience program would require $40,000 to $45,000 of capital expenditure per store.

For the third quarter, Sullivan said the comparable-sales outlook factored in trends’ direct effect on sales and their indirect effect on traffic and brand awareness. He expected comparable-sales growth to be driven largely by transactions, as in the first two quarters. Park said Five Below could bring in some holiday products that tariffs had prevented it from offering the prior year.

Guidance

On its Q2 FY2026 call, Five Below raised its full-year sales outlook to $5.63 billion to $5.71 billion from $5.4 billion to $5.48 billion, and its comparable-sales growth outlook to 10% to 12% from 6% to 8%.

The company raised its adjusted operating-margin midpoint to approximately 12.5% from 11.6%, and its adjusted diluted EPS midpoint to $10.07 from $8.85. It also increased expected capital expenditures, excluding tenant allowances, to $250 million to $260 million from $230 million to $250 million.