Specialty value retailer Five Below (FIVE) wants to expand its footprint while its competitors are backing off. The retailer intends to open 150 new stores in the current financial year. Recently, Five Below upped the ante in its first quarter and now expects to open 55 new stores compared to a prior guidance of 50. The unusual move comes when many of its competitors are scaling back in fear of a looming recession. While the aggressive expansion opens up opportunities for Five Below, it also comes with its risks, making me cautiously optimistic and neutral on FIVE stock.
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Bold Growth Strategy Amid Industry Pullbacks
To set the scene, global growth is expected to slow to 2.3% in 2025. Notably, this is below the 2.5% threshold often associated with a recession. As a result, many retailers are understandably scaling back.
For instance, Dollar General (DG) announced plans to close 141 locations in the first quarter. Similarly, Dollar Tree (DLTR) closed over 100 stores in the same quarter alone. Dollar Tree divested its Family Dollar brand for just $1 billion in March, a fraction of the $8.5 billion it paid to acquire the chain in 2015. Lastly, Big Lots filed for Chapter 11 bankruptcy in late 2024 and identified 150 store closings. In this light, Five Below’s counter-recession strategy is pretty unusual.
Strong Financial Foundation Supports Expansion
While it may be unusual, it is not reckless. Its expansion plans are backed by solid financial performance. Five Below just raised its fiscal first quarter net sales guidance from $905 million to $967 million. Last fiscal year, Five Below grew net sales by 10% to $3.88 billion.

For some context, Dollar General’s $40.6 billion in net sales in fiscal year 2024 represented 5% year-over-year growth. Five Below also has a solid balance sheet to support growth. As for fiscal year 2025, net sales are expected to fall between $4.21 billion and $4.33 billion.
Five Below’s Path to 3,500 Stores
FIVE’s expansion plans are a part of a broader long-term vision. The company believes there is an opportunity for 3,5000 stores, nearly double its current count. If you think these plans sound radical, they pale compared to their previous “triple-double vision,” which projected the company tripling its store count by 2030 and doubling its EPS by 2025.

Five Below later came to its senses and admitted the plan was too aggressive. Granted, the triple-double vision didn’t foresee the inflationary environment that would soon follow. Either way, macroeconomic headwinds rock the boat. While Five Below is convinced of its ability to head North, such optimism also exposes the company to risk.
Discretionary Spending, Tariff, and Recession Fears
Remember that Five Below sells many discretionary products, such as toys, tech accessories, and room decor. A recession would lead to decreased consumer spending, and non-essential items are ordinarily the first to take the hit. Newer stores could be particularly vulnerable as they haven’t had the opportunity to become established or profitable.
Lastly, as the company sources many of its products from China, Five Below is also vulnerable to tariffs, which could reduce profit margins and its value proposition should these costs be handed to the consumer.
Is Five Below a Good Stock to Buy?
According to Wall Street, FIVE earns a Moderate Buy rating based on six Buy, 12 Hold, and one Sell rating in the past three months. FIVE’s average price target of $95.06 implies a ~16% upside potential over the next twelve months.

Wall Street is mixed on Five Below’s prospects despite a sparkling start to 2025 and ambitious expansion goals. Earlier this month, KeyBanc analyst Bradley Thomas reiterated a Hold rating on FIVE. The analyst expressed caution despite the company’s strong first-quarter performance, noting external risks like Five Below’s tariff vulnerability and “uncertainty surrounding operating margins.”
Bank of America analyst Lorraine Hutchinson rates FIVE a Sell with a price target of $78. This analyst, too, expressed caution over the company’s reliance on sourcing from China in light of tariff impacts. She believes these external pressures limit Five Below’s potential for earnings growth.
Five Below’s Bold Expansion Creates Risk and Opportunity
While Five Below’s expansion plans are supported by strong financials and a healthy balance sheet, the timing raises concerns. Wall Street’s doubts about its ability to navigate potential tariffs are valid, and expanding during uncertain times could amplify pressure on earnings if those risks materialize.
That said, the strategy is a bold bet on the strength of its value proposition and business model — and it could pay off if its products continue to appeal to budget-conscious consumers, particularly if competitors pull back.
Either way, Five Below offers an interesting case study in retail strategy amid economic uncertainty. For now, though, I prefer to watch from the sidelines, so I remain neutral on FIVE.
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