Five Below (FIVE) , famous for pricing most of its products at $5 or less, recently revealed that it faced an unexpected dip in sales during the 2024 holiday season, one of the most critical times of the year in retail.
The company’s fourth-quarter earnings report for 2024 revealed that despite opening 22 new stores during the quarter, its comparable sales decreased by 3% year-over-year.
Five Below’s operating income, which is the company’s profit after expenses, also shrunk by roughly 8%, compared to the same quarter in 2023.
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During an earnings call on March 19, Five Below Chief Financial Officer Kristy Chipman said that the decrease in comparable sales was due to “the impact of five fewer holiday shopping days between Thanksgiving and Christmas.”
Five Below weighs controversial option to minimize impact of tariffs
Five Below also warned investors during the call that it is bracing for the impact of President Donald Trump’s tariffs.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price increases.
The $5 bins at Five Below.
Shutterstock
On March 4, Trump increased his previous 10% tariff on all goods imported from China to 20% and imposed 25% tariffs on all goods imported from Mexico and Canada.
“We’ve navigated tariffs before,” said Chipman during the call. “However, the breadth and magnitude of the recently announced tariffs are significant given that approximately 60% of our total cost of goods are imported from China, either directly or through our domestic vendors. This situation is dynamic.”
Chipman also said that Five Below is taking several initiatives to mitigate the negative impact of tariffs, which include “selective price adjustments.”
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“These initiatives include vendor collaboration, selective price adjustments, primarily within our $1 to $5 price points, diversification of sourcing, and increasing our focus on product newness,” said Chipman.
Five Below CEO Winnie Park also emphasized during the call that the company is carefully considering where and how it adjusts its prices.
“We’ve been very, very careful and surgical about where we are looking at price adjustments both up and down,” said Park. “And again, what we want to do is simplify the price position so that the customer begins to see more of those whole price points. It becomes much easier to shop and much easier for our stores to operate.”
The company also warned that it will start to see some impact from tariffs during the second quarter of this year.
Five Below unveils plan to attract back customers
In the meantime, Five Below is focused on evolving its brand in an effort to win back customers. Its strategy involves focusing more on its core customer; kids.
“All our vision is to be the destination for kids, from elementary through high school and beyond, as well as for mom and dad,” said Park. “By focusing on the kid first, we have a unique opportunity to build a relationship with our customer from a young age and be their go-to resource as they grow and become parents themselves.”
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For the full year of 2025, Five Below expects its comparable sales to increase by 3% year-over-year. It also expects to open 150 new stores and generate a net income between $216 million and $250 million.
“Our guidance reflects as best as we can currently estimate the recently announced tariffs and our mitigation strategies,” said Park. “We’re leveraging our scale and strong relationships with our suppliers, as well as taking a strategic approach to price adjustments.”
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