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Why Five Below Stock Lost 12% in May

By Demitri Kalogeropoulos – Updated Jun 10, 2019 at 8:46AM

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The Wall Street darling got caught up in trade war fears last month.

What happened

Youth-focused retailer Five Below (FIVE 0.48%) underperformed a weak market last month as the stock fell 12% compared to a 7% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The drop didn't knock shareholders from their positive returns, though, as the stock remains higher by 25% so far in 2019 -- compared to a 15% boost in the broader market.

A child plays with fidget spinners.

Image source: Getty Images.

So what

Along with the broader market drawdown, Five Below's shares were pressured last month by worries that the retailer might report sluggish sales growth in its fiscal first-quarter report. The profit picture is being clouded by rising tariffs on Chinese imports, too.

Now what

Five Below's actual results, released in early June, surpassed the outlook that CEO Joel Anderson and his team had issued. Executives affirmed their outlook for year on the basis of that strong start. However, rising costs are forcing the company to raise prices on some products, including some targeted hikes to above $5. Management said in a conference call with investors that these increases shouldn't harm the growth outlook. But investors won't know for sure how well these boosts are being received by young shoppers until the chain posts its next few quarterly reports.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.

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