It has been about a month since the last earnings report for Five Below (FIVE Quick QuoteFIVE - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Five Below due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Five Below, Inc. before we dive into how investors and analysts have reacted as of late.

Five Below Q2 Earnings Beat Estimate, FY’26 Outlook Raised

Five Below reported strong second-quarter fiscal 2026 results, with the top and bottom lines beating the Zacks Consensus Estimate and increasing year over year. Robust traffic, double-digit comparable sales growth and new store openings supported the performance, while margin expansion boosted profitability. Following the better-than-expected second-quarter results and continued business momentum, management raised its fiscal 2026 sales and earnings outlook.

More on Five Below’s Q2 Results

FIVE posted adjusted earnings per share of $1.68, surpassing the Zacks Consensus Estimate of $1.34. The bottom line surged 107.4% from 81 cents in the year-ago quarter. 

Earnings were $3.99 per share compared with 77 cents a year earlier. The adjusted figure excludes tariff refunds and related interest, as well as retention-award expenses, net of tax. Tariff refunds and related interest contributed $2.33 per share to GAAP earnings.

Net sales increased 22.9% year over year to $1,261.5 million from $1,026.8 million. The top line exceeded the Zacks Consensus Estimate of $1,192 million.

Comparable sales (comps) rose 14.1%, marking the fifth consecutive quarter of double-digit growth. Management reported two-year stacked comp growth of 26.5%. The increase was primarily driven by higher transactions and robust traffic, with broad-based gains across customer groups, geographies and product categories.

Trend-focused assortments, licensed merchandise and summer and back-to-school collections supported customer engagement. Management highlighted social and digital marketing, along with improvements in the shopping experience, as drivers of customer acquisition and repeat visits.

Insight Into Margins & Costs of FIVE

Adjusted gross profit grew 30.8% year over year to $449.1 million from $343.3 million. The adjusted gross margin expanded approximately 220 basis points (bps) to 35.6%. Higher merchandise margins, fixed-cost leverage from strong comps and an improved shrink reserve rate supported the increase, partly offset by higher fuel costs.

Adjusted selling, general and administrative (SG&A) expenses, including depreciation and amortization, totaled approximately $336 million, or 26.6% of sales. The expense ratio improved approximately 140 bps year over year as fixed-cost leverage more than offset increased marketing investments and incremental labor costs associated with the timing of physical inventory counts.

Adjusted operating income increased 105.3% to $113.2 million from $55.1 million. The adjusted operating margin expanded approximately 360 bps to 9%. Adjusted net income more than doubled to $93.4 million from $44.8 million.

FIVE Provides Q2 Store Update

Five Below opened 52 net new stores during the quarter and ended the period with 2,022 stores across 46 states, representing 8.8% year-over-year store growth. Management highlighted strong new store productivity and continued opportunities to expand the chain.

The company entered Idaho, its 47th state, in August and plans to enter Puerto Rico in the second half of 2027. It expects approximately 40 net new stores in the fiscal third quarter and continues to target approximately 150 net new stores for fiscal 2026.

Five Below’s Financial Snapshot: Cash & Equity Overview

Five Below ended the quarter with cash and cash equivalents of $561.1 million and short-term investment securities of $626.8 million. Total shareholders’ equity was $2,476.1 million as of Aug. 1, 2026. Management noted that the approximately $1.2 billion cash and investment balance included about $170 million in pretax tariff refunds.

Inventory totaled $941.2 million, up 17.7% year over year. Average inventory dollars per store increased approximately 8%, while units per store were slightly lower. Capital expenditures totaled $110.4 million in the first six months of fiscal 2026.

The company repurchased approximately 311,000 shares for about $60 million during the quarter. On Aug. 29, the board authorized a new $600 million share repurchase program, replacing the remaining capacity under the prior authorization. The new program has no fixed expiration date.

What to Expect from FIVE in the Future?

For the third quarter of fiscal 2026, Five Below expects net sales of $1.21 billion to $1.23 billion, supported by comps growth of 8-10%. Net income is projected at $56 million to $63 million, with EPS of $1.01 to $1.13.

Management expects the third-quarter adjusted operating margin to reach approximately 6% at the midpoint, up 160 bps year over year. Adjusted gross margin is projected to expand about 100 bps, supported by fixed-cost leverage and higher merchandise margins, partly reflecting lower tariff costs. Higher outbound transportation fuel costs and an unfavorable shrink comparison are expected to partially offset these benefits.

For fiscal 2026, management raised its sales outlook to $5.63 billion to $5.71 billion from $5.40 billion to $5.48 billion. Comps are expected to increase 10-12% compared with the prior forecast of 6-8%. Adjusted operating margin is projected to expand approximately 250 bps year over year to 12.5% at the midpoint.

Adjusted net income is expected to range from $546 million to $572 million, up from $482 million to $504 million. Net income is expected to range from $672 million to $698 million, up from $480 million to $502 million. Adjusted EPS is projected at $9.83 to $10.31 compared with the previous range of $8.65 to $9.05.

Gross capital expenditures are expected to total $250 million to $260 million, up from $230 million to $250 million, reflecting investments in new stores, the shopping experience, infrastructure and technology. The outlook incorporates tariff rates currently in place and excludes future tariff refunds and share repurchases. Full-year adjusted earnings also exclude tariff refunds and related interest already recorded, as well as retention awards, net of tax.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 29.64% due to these changes.

VGM Scores

At this time, Five Below has a nice Growth Score of B, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a score of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Five Below has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.