The death of retail doesn’t seem so final

Five Below (FIVE) beat out expectations on both its top-line and bottom-line estimates in its first quarter. We here at Wide Moat Research see this as continuing proof that consumers do still like going to physical stores to some degree.

Perhaps it’s not the same as it once was. (In fact, it definitely isn’t what it once was.) However, the death of brick-and-mortar retail has been much exaggerated nonetheless.

Net income at the “fun stuff” discount retailer came in at $123.1 million, with earnings per share (EPS) of $2.21. That’s a significant hike over the $41.1 million, or $0.75 per share, it reported in Q1-25. And it’s also a notable difference from the $1.70 per share analysts had expected.

Net sales, meanwhile, rose 32.5% to $1.28 billion. Comparable sales were up 22.7%. And adjusted diluted income per common share was $2.22 compared to $0.86 from last year.

This is all despite the company’s decision to offer items that are markedly above the $5 maximum its name promises. If anything, customers love those pricier products enough that Five Below is going to make them a permanent part of its stores.

Part of the quarter’s massive growth comes from the fact that it opened up 49 net new stores. This brings its total count to 1,970 across 46 states. And it plans to open up another 50 in the upcoming months, with a full-year plan for 150.

“We are thrilled with our outstanding first-quarter performance, which is a testament to the team’s execution of our customer-centric strategy,” CEO Winnie Park said in the company’s earnings statement. She added that Five Below’s “continued focus on compelling newness at amazing value and great store execution are at the heart of our operating flywheel.”

We all know now that e-commerce giant Amazon (AMZN) claimed the top sales spot last year for the world’s largest company. So online retail is clearly a prominent and dominant force.

But every year that goes by seems to prove more and more that the world is nonetheless big enough for both kinds of shopping: in-person and otherwise.

Washington State enacted a 9.9% tax this year on households earning more than $1 million per year. Signed into law on March 30 by Governor Bob Ferguson, the new law is also completely supported by Seattle Mayor Katie Wilson, if her recent interview with Fox 13 Seattle is any indication.

When co-anchor Hana Kim asked her whether the new regulation could send richer residents elsewhere, Wilson laughed. “Claims of a large exodus of rich people due to our statewide millionaire tax are overblown,” she said. “I do believe that.”

As she went on to say, she and her administration have been working hard the last five months “to build bridges with the business community.” And judging by their responses to that outreach, “the narrative [being] spun around [the new tax] is very, very out of step with the reality” of the situation.

That’s her take. However, former Starbucks (SBUX) CEO Howard Schultz announced back in March – just as the legislation was looking likely – that he was leaving for Florida. And Zillow co-founder Rich Barton announced just the other day that he’s starting a new life in Nevada.

In the latter case, Barton distinctly did not blame the higher taxes, writing instead on X, “Officially a Las Vegas resident. Kids are launched, empty nest achieved, and we’re excited to start this chapter.”

Even so, the timing is truly suspicious given that he’s spent decades living in Seattle. And it’s more than reasonable to wonder how many more such exoduses will happen in the weeks, months, and years ahead.

Then again, since Wide Moat Research strives to be honest in all of its investment assessments, let’s also acknowledge that Manhattan office landlords are seeing a surge of successful signings despite its deep-blue governance at the city and state levels alike.

The reason? It appears that artificial intelligence (AI) is putting this New York City hub back on the map, legislative rules and regulations or not.

Commercial real estate services (CRE) firm Cushman & Wakefield released a report showing how AI firms alone leased about 1 million square feet of office space in Manhattan during the first quarter. That was more than they leased there in all of 2025.

As the firm writes:

That, in turn, is causing quite the uptick in AI-related business that apparently just cannot do without corporate offices.

Meanwhile, San Francisco and Silicon Valley – two other distinctive Democrat-run cities – are seeing similar surges due to the artificial intelligence movement. So don’t discount everything “blue” out there.

Just understand that those areas do face issues other parts of the country don’t, which are affecting and still could affect them negatively from here.

Happy SWAN investing!

Brad Thomas
Editor, The Wide Moat Daily

Do you know there’s more to investing than SpaceX?

Moreover, they’re well-priced companies with real profits and long histories of sustainability to boot. Those are qualities that, with all due respect to Elon Musk, SpaceX simply cannot claim.

Join Nick Ward and me in this week’s Wide Moat Show as we explore the consumer discretionary sector instead – particularly seven stocks that are trading at stunningly low valuations.

Catch the full episode right here.