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Five Below (FIVE) is trading modestly lower today despite handily beating expectations in its Q3 (Oct) report last night. Its EPS upside was the largest in five years, while revenue increased 23.1% yr/yr to $1.04 bln, marking two consecutive quarters of over $1 bln in sales. The company also raised its FY26 guidance for EPS, revenue, and comps to $5.71-5.89, $4.62-4.65 bln, and +9.4-10.1%, respectively, which were above expectations.

• Comp sales increased +14.3%, marking a continued acceleration qtr/qtr (+7.1% in Q1; +12.4% in Q2), driven by a fairly even split between transactions and ticket.
• Notably, the growth was widespread across departments, new and retained customers, and across all household income cohorts, supporting the idea that value remains paramount heading into the holidays.
• The company has been working to align more closely with trends, improve in-stocks, simplify pricing, and offer stronger value across a wider range of price points, efforts that are resonating with its core Gen Alpha, Gen Z, and Millennial customers.
• The raised guidance also reflects expectations for a strong holiday season. Management noted that traffic growth strengthened as the quarter went on and exited the period with traffic growth at the highest month-over-month level it had seen.

Briefing.com Analyst Insight

This was a standout quarter for FIVE, its strongest of the year, with accelerating comps and broad-based customer engagement. The company continues to execute well on trend alignment, marketing effectiveness, and value positioning, all of which are clearly resonating with its core demographics. Management also struck a positive tone on holiday demand, supported by improving traffic trends throughout the quarter and into early Q4. Despite the strength, the muted stock reaction likely reflects its sharp run from April lows, a nice move heading into the report, and the proximity to its 52-week high, which it surpassed before pulling back. Overall, the results reinforce that consumers are still seeking value, and FIVE appears well positioned heading into the holiday season, which is traditionally its biggest quarter of the year.