On September 3, Mad Money host Jim Cramer was bullish on Five Below, Inc. (NASDAQ:FIVE) after the retailer delivered a strong fiscal second quarter and raised its full-year outlook, only to see its shares reverse an early rally. The stock climbed more than 5% Thursday morning before closing at $239.96, down 1.3%. Cramer called the reversal “a mistake,” as he said that investors were overlooking the strength of the earnings report because of concerns about oil prices and the consumer.
Five Below Beats Estimates and Raises Fiscal 2026 Outlook
Five Below, Inc.’s second-quarter net sales rose 22.9% year over year to $1.26 billion, while comparable sales increased 14.1%. Adjusted diluted EPS jumped to $1.68 from $0.81, beating the consensus estimates. Management raised fiscal 2026 revenue guidance to $5.63 billion-$5.71 billion from $5.40 billion-$5.48 billion and adjusted diluted EPS guidance to $9.83-$10.31 from $8.65-$9.05. Comparable-sales guidance increased to 10%-12% from 6%-8%.
Five Below Faces Slowing Comparable Sales and Tariff Risks
The concern is that the company’s exceptional growth is beginning to normalize. Comparable sales rose 22.7% in the first quarter before slowing to 14.1% in the second. Five Below, Inc. management’s third-quarter outlook calls for another step down to 8%-10%. Even with the full-year target raised to 10%-12%, the trajectory leaves investors increasingly dependent on the company continuing to beat conservative forecasts. Furthermore, the earnings comparison is worth noting because the company benefited from tariff refunds. It recorded a $163.6 million reduction in cost of goods sold from IEEPA tariff refunds during the first half of fiscal 2026, plus $5.9 million of related interest income. Management’s updated outlook does not assume additional tariff refunds.
The sharp increase in earnings was largely tied to the tariff refund, although underlying earnings also improved substantially. Five Below also remains exposed to changes in import costs, while higher fuel prices could pressure discretionary spending among its core customers. Lastly, valuation leaves another potential pressure point. Five Below trades at a forward P/E of 25.19. Loop Capital downgraded Five Below to Hold from Buy on August 25 while maintaining a $250 price target, citing valuation concerns.
Why Cramer is Bullish on Five Below
Cramer said that the slower comparable-sales growth is being viewed without enough context. He said, “Most retailers would have killed for 14%” and mentioned that Five Below, Inc. produced 14.1% growth while lapping a 12.4% increase in the year-ago quarter. In his view, that is evidence of continued strength rather than a meaningful deterioration in demand. He also pointed to execution under CEO Winnie Park, who took over at the end of 2024. Cramer said the company has become better at identifying trends, making merchandise bets and marketing products to its young customer base. Five Below has also been changing store layouts, including distributing higher-priced products throughout the store instead of concentrating them in one area.
Cramer emphasized Park’s track record of beating comparable-sales expectations, saying Five Below has done so in all six quarters since she became CEO. The company opened 52 net new stores in the second quarter, bringing its total to 2,022. The valuation argument is important to his call. Cramer said Five Below was trading at roughly 27.5 times fiscal-year earnings before the report and then was trading at less than 24 times after it.
Five Below Hedge Fund Holdings and Short Interest
As per Insider Monkey’s tracking of more than 1,000 hedge funds, 63 hedge funds held FIVE in the second quarter, down from 69 in the prior quarter. Short interest is modest as it stood at roughly 3.1% of the public float. For Cramer, the market is putting too much weight on the slowdown in comparable sales and too little on Five Below, Inc.’s ability to outperform expectations. He said, “I think that Five Below is a buy, buy, buy.”
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