Five Below, Inc. (FIVE): Business Model Canvas [Dec-2025 Updated]

You're looking at the engine driving Five Below, Inc. (FIVE)'s push to dominate the value retail space, and honestly, it's a masterclass in high-volume, low-price execution. As a former analyst, I see their core strength: delivering that extreme value-most items at $5 and below-while rapidly scaling their footprint to over 1,900 locations, projecting net sales between $4.62B and $4.65B for fiscal year 2025. The real question is how they manage the margin, with Cost of Goods Sold (COGS) being their biggest cost, while balancing the impulse buys with their higher-ticket 'Five Beyond' offerings. Dive into the full Business Model Canvas below to see exactly how their key partnerships and aggressive store expansion map to those revenue targets.

Five Below, Inc. (FIVE) - Canvas Business Model: Key Partnerships

The operational scale of Five Below, Inc. (FIVE) relies on a network of external partners to manage sourcing, technology, and physical distribution across its growing footprint.

Global network of ~1,000 product vendors

Five Below, Inc. manages sourcing from a broad base of suppliers to maintain its trend-driven, low-price model. During 2022, the company sourced from approximately 1,000 vendors. Of that total, 60% of purchases came from domestic vendors. To mitigate trade risks, management noted a plan for a reduction in goods sourced from China by about 10 percentage points for the back half of the 2025 period. This is part of a broader strategy that includes vendor negotiations and diversification of sourcing.

Strategic sourcing partners in Asia (e.g., India office)

To drive speed and improve quality in its supply chain, Five Below, Inc. maintains a physical presence in Asia. The company operates an office in India, which supports relationships with suppliers in the region. This office is connected to approximately 50 sourcing factories.

AI-driven inventory and merchandising partner, like Invent.ai

Five Below, Inc. partnered with Invent.ai to overhaul demand forecasting and replenishment across its store base. This AI-driven platform is designed to generate optimal inventory decisions at scale for millions of product-store combinations daily. The implementation across all product categories followed a pilot that spanned three months. As of mid-2025, the company operated over 1,800 U.S. stores.

Commercial real estate developers and landlords

The entire store fleet of Five Below, Inc. is leased from third parties. The company ended the third quarter of fiscal 2025, on November 1, 2025, with 1,907 stores operating across 44 states. The fiscal 2025 plan included opening approximately 150 net new stores. Management believes the long-term opportunity supports a store base of more than 3,500 locations over time.

Third-party logistics (3PL) providers for freight and distribution

While specific 3PL provider names are not publicly detailed, the physical distribution network relies on several key ship centers. These centers handle the flow of goods to the store fleet. The company maintains five known distribution locations as of early 2025:

• Pedricktown, NJ

• Forsyth, GA

• Conroe, TX

• Buckeye, AZ

• Indianapolis, IN

The company's inventory levels, as of the end of Q1 2025, were $702 million.

The following table summarizes key partnership-related operational metrics as of late 2025 data points:

Five Below, Inc. (FIVE) - Canvas Business Model: Key Activities

You're looking at the core engine driving Five Below, Inc.'s growth right now-it's all about speed and scale in a value-focused format. The key activities are tightly linked to getting the right, trendy product in front of the customer quickly and efficiently across an ever-growing physical footprint.

Aggressive new store expansion

The primary activity is opening stores at a rapid clip. Five Below, Inc. is executing on its plan to open approximately 150 net new stores during its 2025 fiscal year, which concludes in February 2026. This aggressive pace is a major catalyst for the business narrative. By the end of the second quarter of fiscal 2025, the company had already opened 87 net new stores year-to-date. This brought the total store count to 1,858 locations across 44 states as of the second quarter end. Management still sees a long runway, believing there is an opportunity for up to 3,500 stores long-term.

Here's a look at the financial scale supporting this expansion as of late 2025 guidance:

The capital required for this growth is significant; gross capital expenditures were guided to be approximately $210 million to $230 million for the full year 2025.

High-speed trend-spotting and merchandising curation

Five Below, Inc. must constantly refresh its assortment to remain the destination for its core demographic. This activity centers on identifying what's trending and getting it onto shelves fast. The focus on 'trend-right product' is key. The success of this curation is reflected in the comparable sales growth figures, which hit 7.1% in the first quarter of fiscal 2025 and accelerated to 12.4% in the second quarter.

The pricing structure supports this high-velocity model:

• Over 80% of products are priced at $5 or below.
• The 'Five Beyond' initiative allows select stores to offer items up to $10+, with customers buying these items spending over twice as much as those buying only $5 items.
• The company rotates about 40% of its merchandise every 30-45 days to ensure freshness.

This agility keeps customers coming back for small, frequent purchases; Q1 2025 saw 6.2% transaction growth.

Efficient global supply chain management and diversification

Managing costs while sourcing globally is a critical activity, especially with ongoing tariff pressures. Five Below, Inc. has actively worked to insulate its margins through geographic diversification. Over the past two years, reliance on Chinese-sourced goods has been reduced by 10 percentage points, shifting procurement to places like India and Vietnam. They established a global sourcing office in India to help move faster and keep costs down.

The operational results of this supply chain focus are measurable:

• Gross margins expanded 140 basis points to 33.8% in Q1 2025, partly due to lean inventory practices.
• Inventory turnover ratios are maintained between 4.8x-5.4x, which is above industry averages.
• The company has 50 sourcing factories in India alone.

This supply chain work is designed to mitigate an estimated 150 basis points of gross margin impact from tariffs in 2025.

In-store experience design and labor optimization

The final key activity involves optimizing the physical store environment to convert traffic into sales. This means simplifying operations so the crew can focus on the customer and stocking. Investments in the store experience, including increasing labor and simplifying processes, are noted as paying off. The goal is better collaboration with store teams and ensuring shelves are stocked so product stories come to life.

However, this investment comes at a cost. Operating margins fell to 3.9% in Q2 2025 from 4.5% in Q2 2024, which was attributed to SG&A investments in these store experience enhancements. The company is balancing this investment with operational efficiency, using AI-driven tools to optimize inventory flow and reduce stockouts. Finance: draft 13-week cash view by Friday.

Five Below, Inc. (FIVE) - Canvas Business Model: Key Resources

You're looking at the core assets Five Below, Inc. (FIVE) relies on to execute its strategy as of late 2025. These aren't just line items on a balance sheet; they're the engine room of their growth.

Extensive U.S. retail store footprint of over 1,900 locations

The physical presence is massive, giving them proximity to the teen and tween customer base. As of the third quarter ended November 1, 2025, Five Below, Inc. operated 1,907 stores across 44 states. That's a 9.0% increase in store count from the end of the third quarter of fiscal 2024. For the full fiscal year 2025, the plan was to open approximately 150 net new stores, targeting a total count of 1,921 stores by year-end. The average store size remains around 9,000 square feet. It's a physical footprint that rivals many established retailers, but with a much younger target demographic.

Proprietary data and analytics for inventory forecasting

Inventory management is definitely a vital business constraint for a high-volume, low-price retailer. To combat stockouts and overstocking, Five Below, Inc. partnered with invent.ai, an AI-decisioning platform. This technology uses proprietary algorithms to generate probabilistic forecasts for millions of product-store combinations daily. The goal is to optimize inventory levels, reduce waste, and ensure the right products are in the right location at the right time. This focus on data helps free up store associates to focus on customer engagement, which is a smart way to drive sales.

• Partnered with invent.ai for demand forecasting and replenishment.
• Algorithms process hundreds of variables for store-by-store forecasts.
• Aims to maximize inventory turns and minimize carrying costs.
• Pilot implementation took just three months across several categories.

Strong balance sheet with capital for $200 million in CapEx

You need liquidity to fund aggressive growth, and Five Below, Inc. has that in place. For the full fiscal year 2025, gross capital expenditures were guided to be approximately $200 million. This funding is expected to come from cash generated from operations, cash on hand, investments, and, if needed, borrowings under their Revolving Credit Facility. The balance sheet strength supports this expansion plan.

Dedicated sourcing infrastructure in Asia

To maintain cost-effectiveness and speed, Five Below, Inc. has built out its international sourcing capabilities. They inaugurated a sourcing office in India to fortify their presence and improve supply chain tracking. This office supports a network of approximately 50 sourcing factories in the region. Back in 2022, the company sourced from about 1,000 vendors, with 60 per cent of procurement coming from domestic sources. Also, no single vendor accounted for more than 5 per cent of the company's total expenditure that year, showing a diversified base. Having teams on the ground helps drive speed and quality, which is crucial for their value proposition.

Finance: draft 13-week cash view by Friday.

Five Below, Inc. (FIVE) - Canvas Business Model: Value Propositions

Extreme value: most items priced at $5 and below

The core value proposition centers on an edited assortment of products where over 80% of items are priced at $5 or below as of Q2 2025. This pricing discipline is a promise to the customer for 'WOW prices'. The effectiveness of this value focus is evidenced by strong financial results, including a 14.3% year-on-year increase in comparable sales for the third quarter ended November 1, 2025.

'Five Beyond' items (>$5) offering value on higher-ticket goods

Five Below, Inc. offers select items priced beyond the traditional $5 threshold, referred to as 'Five Beyond' offerings. The expansion of product offerings beyond the traditional $5 price point has been a key driver of performance, contributing to a 23.1% year-on-year net sales increase in Q3 CY2025, reaching $1.038 billion.

Constant flow of new, trendy, and impulse-buy products

The strategy emphasizes delivering trend-right merchandise with consistent newness. This focus on 'newness' and curated assortments drives high velocity and customer affinity. The company is executing on a plan to accelerate new product introductions to support continued sales growth.

Fun, treasure-hunt, and engaging in-store shopping experience

The company aims to combine value with a fun shopping experience, which fosters customer affinity and repeat visits. This experiential focus is a key differentiator. New store models show a leading payback period of approximately one year, suggesting high productivity tied to the in-store draw. The company ended Q3 2025 with 1,907 locations, up 9.0% from the prior year's third quarter end.

The following table summarizes key performance metrics supporting the value proposition as of late 2025:

The company's strategy involves disciplined expense management alongside these growth drivers. For the year-to-date period ended November 1, 2025, Net Sales increased by 22.1% to $3.04 billion.

• Q1 2025 Comparable Sales Increase: 7.1%.
• Q2 2025 Revenue Growth: 23.7% year-over-year to $1.0268 billion.
• Q3 CY2025 Adjusted Diluted EPS: $0.68.
• FY 2024 Net Sales: $3.88 billion.

Five Below, Inc. (FIVE) - Canvas Business Model: Customer Relationships

You're looking at how Five Below, Inc. (FIVE) connects with its shoppers as of late 2025. The core of this relationship is built on high-frequency, value-driven interaction, which is evident in their recent financial performance.

Highly transactional, low-touch retail model

The model is fundamentally built on driving high foot traffic and transaction volume, which is working exceptionally well. For the thirteen weeks ended November 1, 2025, Five Below, Inc. reported net sales of $1.04 billion, a 23.1% increase year-over-year. The engine behind this was a strong 14.3% rise in comparable sales for that quarter. This growth was perfectly balanced, driven by equal gains in both comparable transactions and ticket size. The company ended the third quarter of fiscal 2025 with 1,907 stores, marking a 9% year-over-year increase in its physical footprint. This high-volume approach means customer interactions are quick, focused on discovery, and designed to maximize the basket size in a low-friction environment.

Here are the key performance indicators reflecting this transactional focus:

• Net Sales (Q3 CY2025): $1.04 billion
• Comparable Sales Growth (Q3 CY2025): 14.3%
• Total Stores (Q3 CY2025 end): 1,907 locations
• Inventory value (Q3 CY2025 end): approximately $1.1 billion

High-engagement digital marketing, especially on social media

To drive that high transaction volume, Five Below, Inc. has significantly shifted its marketing spend toward digital channels to connect with its core Gen Z and Gen Alpha shoppers. Management explicitly cited the success of creator-produced campaigns and interactive digital challenges as key traffic drivers. This strategy involves reallocating spending from older advertising methods to social media and influencer-driven content, which resulted in increased store traffic. This digital push supports the physical store experience by creating buzz around new product assortments.

The effectiveness of this marketing realignment is reflected in the improved financial results:

Planned launch of a customer loyalty program in 2025

While the company has emphasized a strong customer-centric strategy, which is the foundation for any loyalty effort, specific financial data or confirmed launch metrics for a formal loyalty program in fiscal 2025 were not detailed in the latest reports. The focus, instead, has been on ensuring customer receptivity to a broader price architecture. The CEO noted that value is now packed into $7, $10, and $15-plus items integrated throughout the store, which customers have responded well to. This strategy of delivering value across multiple price points is designed to encourage repeat visits and increase basket size, serving a similar function to a loyalty reward system by driving sustained engagement.

In-store crew focused on a fun, welcoming environment

The in-store experience is a critical touchpoint, and Five Below, Inc. has made investments to support the crew in delivering that fun, welcoming environment. Management noted that investments in labor and collaboration with store teams led to better in-stock levels and improved on-shelf product stories, which directly contributed to a better in-store experience. The CEO expressed gratitude for the crew's passion and grit in working cross-functionally in service of the customer, referred to as their boss. Furthermore, operational efficiency improvements, such as leveraging AI for inventory management, are intended to make the store easier for the crew to manage and, consequently, easier for customers to shop. The company opened 49 net new stores in Q3 alone, with new market entries like the Pacific Northwest setting all-time grand opening records, showing the in-store activation is drawing thousands of customers on opening day.

Five Below, Inc. (FIVE) - Canvas Business Model: Channels

The distribution of merchandise for Five Below, Inc. (FIVE) relies on a focused, multi-faceted approach, prioritizing physical presence while integrating digital capabilities.

Primary: Physical retail stores in high-traffic centers

The core channel remains the physical retail store, which is the primary point of transaction and brand experience. Five Below, Inc. ended fiscal 2024 with 1,771 store locations across 44 states. The average store size is approximately 9,000 square feet. As of the third quarter of fiscal 2025, which ended November 1, 2025, the company operated 1,907 stores in 44 states. The company opened 49 net new stores in that third quarter alone. Year-to-date through November 1, 2025, Five Below, Inc. had opened 136 net new stores. The long-term strategic goal is to grow the store base to more than 3,500 locations over time, aiming to triple the count by 2030. The retailer has a significant concentration in Texas with 175 stores and California with 144 stores.

The physical channel expansion metrics are detailed below:

Secondary: E-commerce platform

Five Below, Inc. offers merchandise online through its fivebelow.com e-commerce website and mobile app. This platform supports home delivery directly to the customer. Furthermore, the company utilizes on-demand third-party delivery services to provide convenient delivery options for online orders.

The e-commerce offering includes:

• The fivebelow.com website access.
• A dedicated mobile app for iOS and Android.
• Home delivery fulfillment.
• Third-party on-demand delivery services.

Omnichannel: Buy Online, Pick Up In-Store (BOPIS) at all locations

The omnichannel strategy is anchored by the Buy Online, Pick Up In-Store (BOPIS) service, which is available at all physical locations. This allows customers to order items digitally and collect them in person, merging online selection with immediate gratification. The service is accessible through the retailer's website or its mobile application. The BOPIS option extends to merchandise within the Five Beyond section, which features items priced above the standard $5 threshold.

The service supports:

Five Below, Inc. (FIVE) - Canvas Business Model: Customer Segments

The primary audience Five Below, Inc. targets is explicitly defined as the tween and teen demographic, often referred to as Gen Alpha and Gen Z shoppers, along with Millennials, who are drawn to trend-right merchandise. This core segment is highly responsive to the brand's value proposition, evidenced by the robust comparable sales increase of 14.3% reported for the third quarter ended November 1, 2025. The company's strategy centers on connecting with these younger shoppers through compelling marketing, including creator-led content, which drives store traffic.

The secondary segment includes parents and adults, often described as the kid in all of us, who accompany the core demographic or shop for themselves and their households. This group is essential for driving the overall transaction volume. The company's aggressive physical expansion supports servicing this broader base across new geographies. As of the end of the third quarter of fiscal 2025, Five Below, Inc. operated 1,907 stores across 44 states. Management is guiding for a total of approximately 150 net new store openings for the full Fiscal 2025, aiming to reach a total store count of about 1,921 locations.

Value-seeking consumers across all income levels are attracted by the retailer's price-focused offer, which resonates strongly in the current economic climate. The company's focus on value is a key driver, with net sales for the year to date period ending November 1, 2025, reaching $3.04 billion, up 22.1% year-over-year. The pricing architecture is key: the majority of non-candy items are priced at $5 and below, while the 'Five Beyond' concept introduces items priced at $6 and higher. Historically, 28% of the customer base reported making over $100,000 annually.

Impulse buyers are drawn in by the treasure hunt-style shopping experience and the constant influx of novelty and trend-right merchandise. This segment is highly engaged with seasonal moments, such as back-to-school, which significantly drove business in the third quarter. The appeal is supported by the edited assortment across eight distinct product worlds:

• Style
• Room
• Sports
• Tech
• Create
• Party
• Candy
• New & Now

The success in driving traffic is reflected in the Q2 fiscal 2025 results, where customer transactions increased by 8.7%, paired with a 3.4% increase in ticket sizes. Finance: draft 13-week cash view by Friday.

Five Below, Inc. (FIVE) - Canvas Business Model: Cost Structure

You're looking at the core expenses that drive the Five Below, Inc. (FIVE) machine as of late 2025. The cost structure is heavily weighted toward getting product onto shelves and keeping the physical stores running, which makes sense for a high-volume, low-price retailer.

Cost of Goods Sold (COGS) as the Largest Component

The cost of the merchandise itself, plus associated logistics, is definitely the biggest line item you'll see. This is the engine room of the cost structure. While you mentioned a 35.06% gross margin, the most recently reported figure for Q1 Fiscal 2025 showed an adjusted gross margin of 33.8% of net sales. This margin calculation is critical because it dictates how much is left over to cover all other operating costs.

Looking at the year-to-date figures leading up to the second quarter of Fiscal 2025, the Cost of Goods Sold (exclusive of certain items) was $1,331,092 thousand (or about $1.331 billion) against Net Sales of $1,997.4 million. That means, roughly, for every dollar in sales, about 66.6 cents went directly to the cost of the product and its initial journey to the distribution center.

The components baked into COGS are significant cost drivers:

• Inbound freight and tariffs.
• Shipping and handling costs for e-commerce.
• Store occupancy costs, which include rent, common area maintenance, utilities, and property taxes.
• Distribution and buying expenses.

Store Operating Costs: Rent, Utilities, and Labor

Store operating costs are the next major bucket, primarily falling under Selling, General, and Administrative (SG&A) expenses, though some elements like rent are in COGS. You can see the pressure here; management has been vocal about countering rising labor and rent costs. For the first quarter of Fiscal 2025, the adjusted SG&A expenses ran at 27.7% of sales. This percentage captures the day-to-day running of the 1,800+ store fleet.

Here's a snapshot of the scale of general operating expenses based on the second quarter of Fiscal 2025 data:

The key is that SG&A, which includes labor and other overhead, must be covered by the gross profit remaining after COGS. Honestly, managing labor efficiency in stores is defintely a constant focus.

Capital Investment for Expansion (CapEx)

The aggressive store expansion plan requires substantial upfront cash, which is the capital expenditure (CapEx) component. For the full year of Fiscal 2025, the company has guided gross capital expenditures to be approximately $210 million. This figure aligns closely with the $200 million estimate mentioned in earlier guidance. This investment funds the build-outs for the planned approximately 150 net new stores for the year, which are crucial for top-line growth.

Logistics and Distribution Costs, Including Tariff Mitigation

Logistics costs are embedded in COGS, covering the movement of goods from suppliers to distribution centers and then to stores. You're right to call out tariff mitigation; management has been actively working to offset these external pressures. The company confirmed it is navigating significant tariff headwinds. Actions taken include vendor collaboration, price adjustments, and diversifying sourcing to keep the impact from tariffs from eroding margins further. The ability to maintain margin guidance despite these costs shows their mitigation strategies are having some effect.

Here's a summary of the key financial anchors for the cost side of the business in 2025:

Finance: draft 13-week cash view by Friday.

Five Below, Inc. (FIVE) - Canvas Business Model: Revenue Streams

You're looking at how Five Below, Inc. brings in the cash flow, and honestly, it's pretty straightforward, built on a high-volume, low-price model that's clearly working, given their latest guidance. The core of the business is still the treasure hunt experience centered around the initial price point.

Primary: Sales of merchandise priced at $5 and below

This is the bedrock of Five Below, Inc.'s revenue generation. The entire brand identity is tied to this value proposition, which helps drive the foot traffic you need for a successful retail operation. You see this reflected in their comparable sales growth, which was a solid 14.3% jump in the third quarter ended November 1, 2025. This core segment is what keeps the younger demographic coming back, often driven by impulse buys and trend-right items.

Growth Driver: Sales from 'Five Beyond' items (>$5)

This is where the company is actively trying to increase the average ticket size, which is smart. The 'Five Beyond' concept, featuring items priced at $6 or higher, is a key growth lever. What this estimate hides is the exact percentage contribution, but we know the behavior: customers who purchase a 'Five Beyond' item spend over twice as much as those who only buy items at the traditional price points. The strategy involves expanding this concept across the store fleet; they plan to open approximately 150 net new stores for the full fiscal year 2025, many of which will incorporate this higher-priced assortment.

Here's a quick look at the latest full-year revenue expectations you should keep in mind:

The momentum is definitely there; for the year-to-date period ending November 1, 2025, net sales were already up 22.1% to $3.04 billion. That's a strong foundation heading into the holiday quarter.

Ancillary services like helium balloons or ear piercing in select stores

While not the main event, these smaller revenue sources add to the overall top line and, perhaps more importantly, enhance the in-store experience. You can expect to see revenue generated from:

• Sales of helium balloons for celebrations.
• Fees from ear piercing services offered in select locations.
• Other minor, in-store service fees.

These services help drive store traffic and customer affinity, which is a defintely valuable, even if the dollar amount is small compared to merchandise sales.