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Investing.com -- Telsey Advisory Group upgraded Five Below to Outperform from Market Perform, citing accelerating business momentum following strong second-quarter results and raised 2025 guidance.
“Five Below’s business inflected in 1H25, and we believe this strong business momentum should continue in 2H25 and ahead,” Telsey Advisory Group said in a note.
The company reported a 2Q25 comparable sales increase of 12.4%, topping FactSet’s consensus estimate of 9.0%, after a 7.1% comp gain in the first quarter. Earnings also exceeded expectations, with EPS of $0.81 versus the $0.62 consensus.
Telsey said the outperformance is being driven by “consumers searching for value in an uncertain and challenging environment,” benefits from the U.S. government’s decision to close the de minimis exemption loophole, and Five Below’s transformation focused on “streamlining and enhancing its assortment and pricing structure.”
The firm highlighted merchandising, pricing, inventory, and marketing as key growth drivers. On merchandising, Telsey noted Five Below’s “renewed focus on better product curation, newness, and value is resonating with consumers,” including licensed products, exclusive collaborations, and a stronger assortment of above-$5 items.
On pricing, the company has implemented a simplified strategy, with most items now priced at $1 to $5. Telsey said this “helped simplify the pricing process, increase average ticket, improve operating efficiency, and boost margins,” while also resonating with customers.
Additional growth drivers include diversified sourcing, improved in-stock levels, and marketing campaigns leveraging content creators. With plans for 150 new stores in 2025, Telsey raised its 12-month price target by $26 to $170, based on a P/E multiple of about 30x on raised 2026 earnings estimates.