Tariffs Still A Wildcard For Five Below As Growth Story Evolves, Says Analyst

Five Below, Inc. FIVE is showing signs of regaining momentum, with stronger sales growth, robust same-store performance, and an accelerating store expansion strategy positioning the discount retailer to capture demand across demographics.

While tariff pressures and higher labor costs weigh on margins, a sharper focus on value-driven merchandising and potential competitive relief from U.S. import rule changes could bolster its longer-term growth trajectory.

Telsey Advisory Group analyst Joseph Feldman reaffirmed a Market Perform rating on Five Below and raised his 12-month price forecast by $16 to $144 ($128 previous).

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He based this on a ~28x P/E multiple of his 2026 EPS estimate of $5.14, which aligns with the current market multiple on consensus earnings.

For the second quarter 2025, Feldman projects solid results, with comps rising 9.0% against FactSet’s 8.6% estimate and adjusted EPS of $0.62, in line with guidance.

He expects sales growth of ~20% to $994 million, driven by 30 new store openings (11.3% unit growth) and broad-based demand across categories, regions, and demographics. A favorable comparison to last year’s (5.7%) comp decline should provide an additional lift.

Feldman sees Five Below’s ongoing transformation beginning to yield benefits. He highlights a sharper focus on core customers, trend-right merchandising, and price-point adjustments, most items priced in whole dollars within the $1–$5 range, with stronger value messaging for $5+ items.

He also believes Five Below stands to gain from the U.S. government’s closure of the de minimis exemption loophole, which had favored low-cost competitors like Temu and Shein.

On profitability, Feldman forecasts operating margin contraction of 19 bps to 4.3%, with gross margin down 20 bps to 32.5% due to tariff pressures. SG&A should remain flattish at 28.3%, as cost leverage from strong comps offsets higher labor and incentive compensation costs.

Looking ahead to 2025, Feldman estimates EPS of $4.72, in line with consensus and the top end of company guidance, and sales growth of 14% to $4.42 billion.

He forecasts a 170 bps operating margin contraction to 7.5%, largely from tariffs, labor, and incentive costs. While visibility remains clouded by tariff risks, Feldman maintains a constructive stance on the Five Below story.

In the last month, analysts have turned more constructive on Five Below, with most raising price forecasts despite mixed ratings. Citigroup maintained a Neutral rating and lifted its forecast from $135 to $142.

Mizuho also reiterated a Neutral stance while increasing its forecast from $115 to $132. Evercore ISI kept an In-Line rating and raised its forecast from $129 to $132.

In a more bullish move, Loop Capital upgraded the stock from Hold to Buy and boosted its forecast from $130 to $165, the highest among the group.

Price Action: FIVE shares are trading lower by 0.33% to $141.31 at last check Friday.

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