Five Below revenue surges 32.5% as squishy dumpling trend drives traffic

Five Below reported Q1 revenue of $1.29 billion, up 32.5% from a year earlier and topping the $1.21 billion consensus estimate, as the teen-focused discount retailer capitalized on the viral squishy dumpling trend and a broader marketing overhaul.

"The results reflect our ability to amplify social media trends through coordinated merchandising and marketing," Chief Executive Officer Winnie Park said in the company's earnings release. "Our continued focus on compelling newness at amazing value and great store execution are at the heart of our operating flywheel."

Adjusted earnings came in at $2.22 per share, beating the $1.77 consensus by $0.45, while net income more than tripled to $123.1 million from $41.1 million. Comparable sales rose 22.7%, the fourth consecutive quarter of double-digit growth, with transactions climbing 19% and average ticket rising 4%. Adjusted gross margin expanded 340 basis points to 37.2%, and adjusted operating margin widened about 600 basis points to 12%.

Shares fell 12.6% in after-hours trading to $194.87, erasing a 1.1% gain from the regular session, as investors focused on management's cautious outlook for the second half. The company guided Q2 sales of $1.18 billion to $1.2 billion, implying growth of about 16%, with comparable sales growth of 7% to 9% — a sharp deceleration from Q1's 22.7%. For the full year, Five Below raised its sales forecast to $5.4 billion to $5.48 billion, up from $5.2 billion to $5.3 billion, and lifted adjusted EPS guidance to $8.65 to $9.05 from $7.74 to $8.25.

The squishy dumpling toy, which had been in Five Below's assortment for roughly five years before exploding on social media this spring, became a cultural phenomenon. Park said the company amplified the trend through social listening, active engagement and building out a broader squishy assortment. The company held a dedicated in-store event in mid-May that Chief Financial Officer Dan Sullivan described as a "cultural zeitgeist," though he cautioned it was a one-day event with intentionally constrained supply that should not be viewed as a meaningful catalyst for the quarter's comparable sales.

The viral product drew in customers with smaller baskets, contributing to the gap between 19% transaction growth and 4% ticket growth. Park said the company is now applying the same playbook — creator content, AI-generated marketing materials, connected TV advertising and social listening across TikTok, Instagram and YouTube — to identify the next trend.

Management cited several headwinds for the second half: cycling 15% comparable sales growth from the prior year, fully lapped pricing actions, and pressure on Five Below's core customer base from rising fuel costs, persistent inflation and a softening labor market. Sullivan said the company has not yet seen data showing a trade-down shift in consumer behavior but acknowledged the environment warrants caution. The outlook also assumes tariff rates revert to levels in place at the start of the fiscal year after a 150-day reduction period ends in late July.

Five Below added 49 net new stores in the quarter, ending at 1,970 locations across 46 states, and expects about 150 net new stores for the full year. Sullivan said newer store classes from 2025 and 2026 are outperforming earlier vintages, reflecting a more selective approach to site selection.

The guidance raise signals management expects the operating overhaul to sustain momentum even as the macro environment softens. Investors will watch the Q2 earnings call in late August for updates on consumer spending trends and tariff developments.

This article is for informational purposes only and does not constitute investment advice.