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Five Below (FIVE +8%) is getting a high-five from investors after reporting Q1 (Apr) results last night. The value retailer had already guided for Q1 for May 2, so not a lot of mystery there. The results were a bit better than the guidance.

• We knew that all eyes were going to be on the Q2 (Jul) and FY26 guidance. Given the tariff situation and Dollar Tree's (DLTR) weak profitability guidance yesterday, we had concerns for Five Below's Q2 guidance, in particular. However, FIVE guided Q2 revs above analyst expectations and the mid-point of EPS guidance was better than expected.
• Let's start with Q1 same store comps, which came in at a robust +7.1% vs +6.7% prior guidance. FIVE said it made great strides on sourcing amazing product for Easter, spring break, trend-right beauty, novelty food and candy as well as relevant cultural zeitgeist moments like Minecraft. FIVE saw broad-based outperformance across the majority of its worlds. Shelves were stocked with spring break must-haves, including boogie boards, beach towels and a new assortment of on-trend totes.
• What was even more reassuring was the robust comp guidance. For Q2, FIVE expects comps in the +7-9% range and it raised full year comp guidance to +3-5% from +0-3%. In fairness, FIVE is lapping a pretty easy -5.7% comp in Q2 of last year, but this was still welcome news. The better comp performance can be traced, at least in part, to an improved store experience, including increasing labor. Its crew is now better able to assist customers while also ensuring shelves are stocked.
• Also, FIVE made it a priority to maintain in-stock positions in key areas like tech. FIVE wants to be the go-to place for affordable items, like cables, chargers, phone cases and Bluetooth audio.
• Regarding tariffs, FIVE has been moving swiftly on mitigation plans, which include vendor negotiations, diversification of sourcing, new value pack products, as well as assortment and pricing adjustments with a focus on reducing the number of price points. FIVE has been sourcing new product in different countries and expanding its vendor base. Its efforts have already resulted in a reduction in goods sourced from China by about 10 percentage points for the back half of the year.

Our sense is that investors shared our concerns heading into this report, especially after Dollar Tree's weak Q2 profitability outlook yesterday. Granted, the companies have different merchandise, but they both focus on value. FIVE seems to be handling tariffs better than we expected. And what also made us nervous is that FIVE has a high degree of discretionary merchandise, which tends to get squeezed in tough economic times. Taken together, investors have to be pleased with the Q1 results and especially the Q2 guidance, including robust comps.