Telsey analysts downgraded Five Below (NASDAQ:FIVE) from Outperform to Market Perform and reduced the price target to $95 from $102, citing challenges related to the company’s ongoing strategic transition and leadership changes.
Five Below is navigating a significant overhaul of its business model, creating uncertainty about its near- to medium-term performance. The retailer is still in search of a permanent CEO after promoting Ken Bull to Interim CEO in July 2024, following the departure of former CEO Joel Anderson to Petco. Additionally, the company named Andy Kunselman to replace retiring Chief Merchant Michael Romanko, effective November 17.
On the real estate front, the company has slowed new store openings, planning 150-180 openings in 2025 compared to approximately 230 in 2024. This shift represents unit growth of 8.5%-10.0%, a drop from the mid-teens pace in 2024, with plans for 2026 and beyond remaining unclear. Analysts suggest keeping store growth in the high-single to low-single digits would be a prudent strategy.
In terms of merchandising, Five Below is working to reestablish its value proposition, particularly for its core teen and tween demographic. The company faced challenges in maintaining product quality as it moved beyond its $5 price point to counteract previous tariffs, which diluted its value perception. To address this, Five Below is focusing on $1-$5 items, streamlining price points for simpler execution, and enhancing product value. These merchandising changes are expected to show more significant results in the second half of 2025, although ongoing uncertainty around tariffs could impact outcomes beyond 2025.