Five Below Analyst Warns Of 'Eroding Value' As 'Quality Did Not Always Keep Pace'

Five Below Inc FIVE and other discount retailers were benefited by the Federal Reserve's interest rate cut in October.

The company is currently undergoing a "major strategic transition across its business model" as well as leadership changes, according to Telsey Advisory Group.

Analyst Joseph Feldman downgraded Five Below’s rating from Outperform to Sector Perform and reduced the price target from $102 to $95.

The Five Below Thesis: The search for a permanent CEO is on, with Ken Bull having been named Interim CEO after the resignation of Joel Anderson, while SVP of General Merchandise Andy Kunselman has replaced retiring Chief Merchant Michael Romanko, Feldman said in the downgrade note.

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"The company dealt with the last round of tariffs by breaking the $5 price point and gradually increasing prices since then, while quality did not always keep pace, thereby eroding value," the analyst wrote.

He stated that Five Below has begun to focus on recapturing its value proposition in merchandising, reducing the number of price points to simplify execution, and adding more value to products.

The impact of new merchandising is likely to be more visible in the back half of 2025, Feldman said. Five Below's strategic transition, leadership changes and potential tariffs clouds visibility into 2025 and beyond, he added.

FIVE Price Action: Shares of Five Below were up 8.2% to $94.19 at the time of publication on Monday.

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