Jim Cramer on Five Below, Inc. (FIVE): “It’s the Guidance I’m Worried About”

We recently published a list of Jim Cramer’s Game Plan: 9 Stocks in Focus. In this article, we are going to take a look at where Five Below, Inc. (NASDAQ:FIVE) stands against other stocks that Jim Cramer discusses.

As Five Below, Inc. (NASDAQ:FIVE) is set to report its first quarter earnings on June 4, Cramer said:

“Same as Wednesday, when you hear from Dollar Tree and Five Below. Hey man, these are so-called last resort retailers where you go when you have any trouble stretching your budget. They’re masters at finding low-price merchandise, but with the tariffs on China, previously low-cost merchandise, they gotta scramble to find the equivalent from countries that at this point might have more leverage than you’d expect. I mean, they never expected all these orders.

I think all three chains will have good quarters because they were able to bring in a lot of merchandise before the tariffs hit. It’s the guidance I’m worried about because the tariff regime means that either they need to raise prices substantially or accept a much lower level of profitability. Their stocks could be terrible. I wish they could be as adept as Costco, which reported this outstanding number.

But then Costco focuses on a relatively small number of items that it buys in extreme bulk, and it can always swap this stuff out if its suppliers get too greedy. Nobody else has that capability. My hope is that the dollar stores can raise prices once and then keep them there until they find cheaper sources. That might be tough, though, when the White House seems to want everything made here and anything made here will be more expensive than made there.”

A family happily shopping for everyday items in a specialty retail store.

Five Below (NASDAQ:FIVE) is a value retailer that sells a wide range of low-cost products, including clothing, beauty items, home decor, electronic accessories, toys, games, fitness gear, crafts, school supplies, party goods, snacks, and seasonal merchandise. Giverny Capital Asset Management, LLC stated the following regarding Five Below, Inc. (NASDAQ:FIVE) in its Q1 2025 investor letter:

“We also exited Five Below, Inc. (NASDAQ:FIVE), our lamented value retailer. Five Below has one of the better retail store models I have ever seen. Unfortunately, prior management decided to move away from a successful value proposition where all merchandise in the store was priced below $5, and to introduce higher-priced items. I wasn’t skeptical enough of this move. Customers walk into Five Below expecting to find fun and interesting low-priced items, not $20 roll-aboard suitcases. On a simple level, when you sell trendy $2 and $3 items to kids, there is not much competition. When you start selling $15 and $20 items to adults, you find yourself competing with Walmart and Target. That’s a harder game to play.

Five Below was also hurt by shoplifting losses after some cities stopped policing petty crime. CEO Joel Anderson left abruptly last summer and I waited to see who would replace him. Unfortunately, the new CEO previously led two retailers that ended up in bankruptcy shortly after her departure. In our research, she did not garner strong reviews from former colleagues. On top of this, it was clear to us that Five Below would be hurt by plans to heavily tax Chinese-made imports. We did not foresee the extreme level of tariffs that were announced, but we did suspect China would be hit hard. We exited at a terrible price but not as terrible as the current price: about $86 vs. recent quotes in the mid-$60s.”

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Disclosure: None. This article is originally published at Insider Monkey.