Discount retailer Five Below (NASDAQ: FIVE) announced better-than-expected revenue in Q1 CY2026, with sales up 32.5% year on year to $1.29 billion. On top of that, next quarter’s revenue guidance ($1.19 billion at the midpoint) was surprisingly good and 3.6% above what analysts were expecting. Its non-GAAP profit of $2.22 per share was 24.3% above analysts’ consensus estimates.
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Five Below (FIVE) Q1 CY2026 Highlights:
- Revenue: $1.29 billion vs analyst estimates of $1.22 billion (32.5% year-on-year growth, 5.7% beat)
- Adjusted EPS: $2.22 vs analyst estimates of $1.79 (24.3% beat)
- The company lifted its revenue guidance for the full year to $5.44 billion at the midpoint from $5.25 billion, a 3.6% increase
- Management raised its full-year Adjusted EPS guidance to $8.85 at the midpoint, a 10.7% increase
- Operating Margin: 12%, up from 5.2% in the same quarter last year
- Free Cash Flow Margin: 14.8%, up from 9.9% in the same quarter last year
- Locations: 1,970 at quarter end, up from 1,826 in the same quarter last year
- Same-Store Sales rose 22.7% year on year (7.1% in the same quarter last year)
- Market Capitalization: $12.19 billion
Winnie Park, CEO of Five Below, said, “We are thrilled with our outstanding first quarter performance, which is a testament to the team’s execution of our customer-centric strategy. The result was broad-based growth across our merchandising worlds, new and existing customers, and all demographic and geographic segments. Our continued focus on compelling newness at amazing value and great store execution are at the heart of our operating flywheel. We successfully amplified social media trends and drove outsized traffic through coordinated merchandising and marketing efforts.”
Company Overview
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.
With $5.08 billion in revenue over the past 12 months, Five Below is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.
As you can see below, Five Below’s 17.1% annualized revenue growth over the last three years was impressive as it opened new stores and increased sales at existing, established locations.
This quarter, Five Below reported wonderful year-on-year revenue growth of 32.5%, and its $1.29 billion of revenue exceeded Wall Street’s estimates by 5.7%. Company management is currently guiding for a 15.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is noteworthy and indicates the market is baking in success for its products.
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Store Performance
Number of Stores
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Five Below operated 1,970 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 12.7% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
A company’s store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Five Below has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 8%. This performance along with its meaningful buildout of new stores suggests it’s playing some aggressive offense.
In the latest quarter, Five Below’s same-store sales rose 22.7% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from Five Below’s Q1 Results
We were impressed by Five Below’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The market seemed to be hoping for more, and the stock traded down 8.5% to $204.05 immediately following the results.
Big picture, is Five Below a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
