Telsey Downgrades Five Below (FIVE) to Market Perform

Telsey analyst Joseph Feldman downgraded Five Below (NASDAQ: FIVE) from Outperform to Market Perform with a price target of $95.00 (from $102.00).

The analyst comments "Downgrading FIVE to Market Perform from Outperform: Five Below is undergoing a major strategic transition across its business model, which combined with changes in leadership and potential pressure related to tariffs, clouds our visibility on the near- to medium-term performance. The company is still searching for a permanent CEO after promoting Ken Bull to Interim CEO on July 16 when former CEO Joel Anderson left the company to join Petco (WOOF, Not Rated) as its CEO. Furthermore, the company promoted SVP of General Merchandise Andy Kunselman to replace retiring Chief Merchant Michael Romanko, effective November 17, 2024. On the real estate side, Five Below already slowed new store openings to 150-180 in 2025 from ~230 in 2024, equating to unit growth of 8.5%-10.0% vs. mid-teens in 2024, with plans unclear beyond 2025. We believe keeping store growth in the HSD-LSD range in 2026 and beyond would be prudent. In terms of merchandising, Five Below is starting on a journey to recapture its value proposition. The company dealt with the last round of tariffs by breaking the $5 price point and gradually increasing prices since then, while quality did not always keep pace, thereby eroding value. Five Below is working to regain its core teen/tween customers by evaluating merchandising categories, SKU counts, and prices. The company is increasing its emphasis on $1-$5 items, reducing the number of price points to simplify execution, and adding more value to products. We expect the impact of new merchandising to be more visible in 2H25. The uncertainty related to tariffs is likely to cloud the outcome in 2025+. Concerning the Five Beyond format, we expect the company to revisit the layout and assortment to increase value and relevancy with consumers. Operationally, the company is shifting to an associate-monitored self-checkout process rather than associates assisting with checkout when needed. Many of these initiatives are steps in the right direction and make sense, but these changes could result in disruption over the next few quarters."

For an analyst ratings summary and ratings history on Five Below click here. For more ratings news on Five Below click here.

Shares of Five Below closed at $86.92 yesterday.

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