The retail world has been a minefield over the past few years—stores closing left and right, profits tanking, and once-iconic brands disappearing into the abyss. But against all odds, one retailer has been throwing a middle finger to the chaos and thriving: Five Below. The Philly-born discount haven has become a retail success story, where everything mostly costs $5 or less. It’s the place where you can find everything from a whoopee cushion for some lighthearted pranks to a basketball for your next pickup game.

Since Five Below went public in 2012, they’ve been on a major growth streak. Back then, they were pulling in around $418 million in sales—fast forward to 2023, and they’re now raking in a massive $3.5 billion. And they’re not done yet. Their big goal? Triple their store count to 3,500 and double both sales and earnings per share by 2025. Just last year, they opened an impressive 220 new stores—that’s twice the 104 they opened in 2017.

While Five Below thrived in the years after the pandemic, 2024 didn't start so hot. Their stock took a brutal 63% dive in the first half of the year. Part of the drop came from CEO Joel Anderson stepping down after a decade at the helm, but the bigger issue was that they lost sight of their core mission—delivering a fun, budget-friendly shopping experience. As a result, customers weren’t getting that same thrill of finding great deals, and it showed in their numbers.

Ken Bull, their interim CEO put it bluntly: “We just kind of lost our way a little bit.” When your sales rise 9.4% to $830 million but your comparable store sales fall 5.7%, it's a sign that not everything's cool in tween paradise. Customers were showing up, but leaving empty-handed—like when you go to a party and find out it's just a Tupperware presentation.

But here’s the thing: While Big Lots was filing for bankruptcy and Dollar Tree was suffering its worst stock day in two decades, Five Below was busy soul-searching. The strategy? Strip it down, simplify, and refocus. They’ve cutting back on their assortment, zeroing in on the core $5-and-under items, and streamlining store operations to bring back the fun, the thrill, and the "wow" factor. 

Five Below’s been dealing with a sneaky little problem they call "shrink"—which is just a fancy way of saying theft. Let’s be honest, self-checkout has turned into a bit of a free-for-all, and Five Below’s seen this issue explode over the past year. Turns out, not everyone pays for every item they bag up (shocking, right?). But Five Below isn’t just sitting around. They’ve reduced their self-checkouts by 75% and increased security in their high-risk stores. 

Five Below might have lost its way temporarily, but they’re not ready to throw in the towel. Instead, they hit the reset button, dropping a cool $225 million in 2024 alone to open nearly 100 brand-new stores and give a fresh makeover to 700 more. And it looks like the investment is paying off. Their stock, which had taken a serious hit earlier this year, has bounced back with a 19% jump in just one month. Looks like the fresh start they’re banking on is already working wonders.

Compared to other retail stocks, Five Below’s valuation is looking pretty solid. Their current P/E ratio is around 27, which is lower than competitors like Dollar Tree, which sits at 30, and far better than struggling retailers like Big Lots, whose stock is in the single digits. And despite the expansion frenzy, Five Below’s balance sheet is strong. They’ve kept their debt manageable at under $200 million, which means they’ve got plenty of room to keep scaling up without getting in over their heads.

Wall Street analysts, including heavy hitters like JP Morgan and UBS, are feeling bullish on Five Below. Both firms have given the stock a “buy” rating, pointing to its aggressive growth strategy and knack for attracting younger shoppers who love affordable, quirky products. JP Morgan specifically called out their ambitious expansion plans, while UBS highlighted the potential for over 15% annual earnings growth. With price targets 20-30% higher than where the stock currently sits, analysts are betting Five Below’s momentum is far from over.

With all that said, If you’re looking for a retail stock that’s committed to growth but knows when to dial it back, it might just be time to put Five Below in your basket. After all, who doesn’t love a good comeback story? I mean, where else are you gonna pick up that skittles scented body spray for just $5.

But, but, but…

While Five Below’s execs are scrambling to put the fun back in "cheap" and figure out how to stop customers from walking out with more stolen goods than paid ones, our Stocks.News alert on Wednesday absolutely crushed it with a +162.08% gain in under 24 hours. Yep, you read that right. While Five Below is busy trying to decide if they should invest in more security cameras or bring back some actual $5 items, our premium members are practically rolling in cash. And guess what? That’s our fifth triple-digit winner in a row. We’re basically on a hot streak that would make Vegas jealous.

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Stocks.News holds positions in Dollar Tree, Five Below, and Big Lots.