A chain of specialty discount stores aimed at tweens and teens, selling toys, fashion accessories, tech gadgets, and candy, with most items priced at five dollars or below. It was founded in 2002 by Tom Vellios and David Schlessinger, former colleagues at the toy retailer Zany Brainy, who opened the first store in Wayne, Pennsylvania. The name points straight at the price tag, and the business was even registered as "Cheap Holdings" before settling on Five Below.
Comparable sales rose 22.7% in Q1 FY2026, the fastest quarterly growth in over three years, as transactions rose 18.5%.
rose 22.7%, the fastest quarterly growth in over three years, reversing a 7.1% gain a year ago. rose 32.5% to $1.29 billion and expanded 3.9 points to 37.2% as store occupancy and distribution costs fell as a percentage of sales. The company now laps its strongest quarter in years, with tariffs on Chinese goods threatening the extreme-value model that drove the recovery.
Key takeaways
rose 22.7% in Q1 FY2026, driven by an 18.5% increase in transactions and a 3.5% increase in average transaction value, accelerating from 14.3% in Q4 FY2025 and reversing a 7.1% gain in Q1 FY2025.
rose 32.5% to $1.29 billion, with $214.0 million from the increase and $101.1 million from new stores.
expanded 3.9 points to 37.2%, primarily because store occupancy and distribution costs fell as a percentage of , and the shrinkage accrual rate declined.
Section summaries
Management's Discussion and Analysis
Q1 FY2026 net sales rose 32.5% to $1.29B, comparable sales jumped 22.7%, and gross margin expanded 380 bps to 37.2%.
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increased 32.5% to $1,285.6M, driven by a 22.7% increase ($214.0M) and a $101.1M non-comparable sales increase from new stores.
more than tripled to $154.2 million, and rose 199.1% to $123.1 million, aided by a lower of 24.3% due to .
SG&A expenses rose 18.8% to $324.4 million and 2.9 points to 25.2% of sales, driven by higher store-related and incentive compensation costs.
reached $190.0 million for the quarter, up 97.0% from $96.5 million a year ago, and the company ended the quarter with $638.9 million in cash and no borrowings on its .
What changed
The 22.7% increase in Q1 FY2026 accelerated from 14.3% in Q4 FY2025 and 7.1% in Q1 FY2025, marking a third consecutive quarter of double-digit growth and the fastest rate in over three years.
of 37.2% expanded from 33.4% in Q1 FY2025 and 33.8% in Q3 FY2025, reaching its highest Q1 level in the reported history, as the occupancy cost flagged in FY2025 continued to build.
The securities class action, previously flagged for a motion-to-dismiss ruling, saw that motion granted in part and denied in part; a class certification hearing is now set for June 5, 2026, and the Special Litigation Committee determined not to pursue derivative claims.
The FY2025 10-K flagged tariffs on Chinese goods as a risk to the extreme-value model; the Q1 FY2026 filing notes no material change in risk factors, leaving that concern unresolved as the company enters its seasonally smaller quarters.
What to watch
Whether growth can sustain a double-digit rate in Q2 FY2026, which laps a 12.4% increase in Q2 FY2025 — a much harder comparison than the 7.1% lapped in Q1.
Whether holds at 37.2% or retreats as the company builds for the back half of the year, particularly given the FY2025 10-K warning that tariffs on Chinese goods raise product costs.
Whether SG&A growth moderates from the 18.8% Q1 rate as the elevated incentive compensation tied to the sales recovery normalizes, or whether the 25.2% expense ratio persists.
The outcome of the June 5, 2026 class certification hearing in the consolidated securities class action, and whether any financial exposure estimate emerges.
growth of 22.7% was fueled by an 18.5% increase in transactions and a 3.5% increase in average transaction value.
expanded 380 to 37.2%, primarily due to lower store occupancy and distribution costs as a percentage of , along with a lower accrual rate.
expenses (including ) grew 18.8% to $324.4M but deleveraged by 290 to 25.2% of , driven by higher store-related and incentive compensation costs.
more than tripled to $154.2M, and rose 199.1% to $123.1M, aided by a lower of 24.3% due to .
The company plans ~$230M-$250M in fiscal 2026 , funded by operations and cash on hand, with no direct borrowings on its $214M available credit line as of quarter-end.
Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk is the primary market risk, with immaterial near-term sensitivity from short-duration investments and variable-rate credit facility exposure.
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The company’s main market risk is interest rate sensitivity, which could affect interest income from investment-grade corporate securities and cash flows.
Due to the short-term nature of the investment portfolio, a 100-basis-point rate change is not expected to materially affect fair market value or operating results.
The carries a variable rate (base rate or plus a margin), exposing the company to interest rate risk if material borrowings occur.
As of May 2, 2026, $214 million was available under the credit line, net of $11 million in outstanding , with no material borrowings indicated.
The company does not use derivatives for speculation or trading but may adopt hedging strategies in the future.
Inflation’s impact on historical results is deemed immaterial, though future effects cannot be assured; mitigation includes vendor sourcing and product mix changes.
Company faces a consolidated securities class action and related derivative suits, all in early-to-mid stages with no loss estimate recorded.
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A consolidated securities class action in the Eastern District of Pennsylvania alleges violations of Sections 10(b) and 20(a) of the Exchange Act regarding public statements; the was granted in part and denied in part, and a hearing is set for June 5, 2026.
The class action complaints cover two proposed investor classes with purchase periods of March 20–July 16, 2024 and December 1, 2022–July 16, 2024, and seek unspecified damages, attorneys’ fees, and expenses.
Six shareholder demand letters led the Board to form a Special Litigation Committee, which completed its investigation on September 10, 2025 and determined not to pursue litigation.
Four derivative suits were subsequently filed in federal and state courts in Pennsylvania, consolidated into one federal action (stayed pending the class action) and one state action (parties agreed to a stay and are seeking court approval).
Management states it does not believe the ultimate resolution of these matters will have a material adverse effect on financial condition or results of operations, and no loss has been recorded as probable and reasonably estimable.
Risk factors that affect our business and financial results are discussed in Part I, Item 1A "Risk Factors" in our Annual Report. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. The risks described in our Annual Repor…
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Risk factors that affect our business and financial results are discussed in Part I, Item 1A "Risk Factors" in our Annual Report. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.