July 26, 2026  ·  Complaint filed July 8, 2026  ·  paed, No. 2:26-cv-04760

Newman News, By David Brunk

Read the filing

Bordenave v. Anderson Alleges Five Below Insiders Sold Shares While Concealing Operational Failures

Share Repurchases at Allegedly Inflated Prices Targeted

A shareholder derivative complaint filed July 8 in the United States District Court for the Eastern District of Pennsylvania alleges that Five Below, Inc. directors and officers caused the company to repurchase 771,366 shares at artificially inflated prices while concealing operational failures. The filing, brought by shareholders Gabriel Bordenave and Joel S. Fleming on behalf of Five Below, targets $120 million in share repurchases executed during fiscal years 2023 and 2024. Specifically, the complaint cites aggregate repurchase expenditures of $80.0 million for 504,369 shares in fiscal year 2023 at an average price of $158.63 per share, and $40.0 million for 266,997 shares in fiscal year 2024 at an average price of $149.79 per share (Compl. ¶144). The complaint asserts that these repurchases constituted corporate waste and a breach of fiduciary duty by all Individual Defendants (Compl. ¶153).

The filing cites internal reports from former employees, which allegedly described widespread deficiencies in merchandising execution, inventory allocation, and product availability, as evidence that defendants were aware of the company’s operational failures at the time of the repurchases. The complaint alleges that these repurchases were executed while Five Below's stock traded at prices artificially inflated by the Individual Defendants' false and misleading statements (Compl. ¶148). The complaint further alleges that Five Below suffered approximately $120 million in damages from these inflated stock repurchases (Compl. ¶154). The complaint describes the repurchase of "770,000+ shares" at artificially inflated prices as a central element of the corporate waste claim (Compl. ¶13).

Insider Selling Defendants Allegedly Sold Shares for $28.1 Million While Possessing Nonpublic Information

The complaint names 11 individual defendants—including former CEO Joel Anderson, Interim CEO and CFO Kenneth Bull, and Executive Chairman Thomas Vellios—who collectively sold shares of Five Below stock between December 2022 and March 2024. The filing alleges that these sales were executed while the defendants possessed material nonpublic information about the company’s operational failures, including deficiencies in merchandising, inventory management, and trend-right execution. The complaint identifies Anderson, Bull, Vellios, Kathleen Barclay, Catherine Buggeln, and Ronald Sargent as the "Insider Selling Defendants" and asserts claims for unjust enrichment and breach of fiduciary duty through insider trading and misappropriation against them (Compl. ¶¶2, 8).

The complaint provides a detailed breakdown of the sales, noting that the Insider Selling Defendants sold a total of 144,430 shares for approximately $28.1 million during the Relevant Period (Compl. ¶156). The total proceeds from these stock sales amounted to $28,105,707 (Compl. ¶157). Specifically, Joel Anderson sold shares generating total proceeds of $7,532,106, including $1,855,700 on December 2, 2022, $476,877 on March 9, 2023, $209,394 on March 16, 2023, $2,989,597 on April 11, 2023, $375,425 on March 7, 2024, $336,314 on March 9, 2024, and $1,288,799 on March 21, 2024. The complaint alleges that Anderson generated over $7.5 million in proceeds from stock sales during the Relevant Period (Compl. ¶26). Thomas Vellios sold shares generating total proceeds of $15,334,277, including $9,093,052 on December 2, 2022, $4,383,000 on April 11, 2023, and $1,858,225 on January 23, 2024, with the complaint alleging that Vellios generated over $15.3 million in proceeds from stock sales during the Relevant Period (Compl. ¶157). Other Insider Selling Defendants included Kenneth Bull ($1,547,113 in proceeds, including $1,276,800 on December 2, 2022), who received compensation of $1,788,729 in fiscal 2022, $4,185,840 in fiscal 2023, and $6,294,557 in fiscal 2024. Kathleen Barclay ($1,126,935 in proceeds, including $620,985 on December 2, 2022 and $505,950 on March 30, 2023), who received compensation of $269,942 in fiscal 2022, $269,845 in fiscal 2023, and $285,945 in fiscal 2024, with the complaint alleging that Barclay generated over $1.1 million in proceeds from stock sales during the Relevant Period (Compl. ¶157). Catherine Buggeln (exceeding $491,000 in proceeds during the Relevant Period, including $491,240 on December 2, 2022), and Ronald Sargent ($2,074,036 in proceeds, including $1,017,000 on April 4, 2023 and $1,057,036 on June 7, 2023), who received compensation of $249,942 in fiscal 2022, $249,845 in fiscal 2023, and $262,945 in fiscal 2024, with the complaint alleging that Sargent generated over $2 million in proceeds from stock sales during the Relevant Period (Compl. ¶157). The filing alleges that these insider sales constituted a breach of fiduciary duty, as the defendants avoided the risk of lower stock prices by selling before the company’s corrective disclosures (Compl. ¶159).

Former Employees Reported Widespread Operational Failures to Senior Management, Complaint Alleges

The complaint alleges that Five Below’s operational failures were systemic deficiencies that were widely reported to senior management, including defendants Joel Anderson and Kenneth Bull. The filing cites accounts from former employees who allegedly described persistent problems with merchandising execution, inventory allocation, and product availability during the relevant period. According to the complaint, these systems "were not ancillary business functions. They constituted the operational infrastructure upon which Five Below’s trend-right strategy... depended" (Compl. ¶126).

According to the complaint, one former employee reported that Five Below stores lacked sufficient quantities of sought-after products, such as Squishmallows and Hello Kitty merchandise, leading to lost sales and customer frustration. The filing alleges that Anderson visited affected stores (Compl. ¶56). Another former employee reportedly described stores with partially empty shelves, where merchandise was rearranged to conceal inventory shortages, and noted difficulties in obtaining desirable products (Compl. ¶57). Others allegedly reported operational strain caused by aggressive growth initiatives, staffing shortages, and fulfillment challenges, which they claimed were exacerbated by the company’s rapid expansion. The complaint notes that Five Below planned to open over 200 new stores in 2023 and convert 400 stores to the Five Beyond prototype (Compl. ¶72). During the fiscal third quarter of 2023, the company opened 74 new stores and reported that 50% of its comparable store base was in the Five Beyond format (Compl. ¶77).

The complaint further alleges that another former employee reported receiving excessive quantities of slow-moving merchandise while stores lacked in-demand products, resulting in inventory imbalances (Compl. ¶59). Additional accounts reportedly informed management about operational and inventory issues, while others expressed concerns about store cannibalization resulting from the company’s expansion strategy (Compl. ¶60). The filing asserts that these accounts corroborate the existence of widespread deficiencies in Five Below’s ability to ensure that trend-right merchandise reached its stores, which the complaint describes as the "core of Five Below’s business model" (Compl. ¶61). The complaint alleges that the relevant issue was "not Five Below's ability to identify trends in the abstract, but rather its ability to stock trend-right, in-demand merchandise in its stores" (Compl. ¶130).

The complaint alleges that defendants Anderson and Bull were aware of these operational difficulties but publicly attributed the company’s poor performance to external factors, such as "shrink" (theft) and macroeconomic conditions. For example, the complaint quotes Anderson stating on Fox Business on November 30, 2022, "Theft is real, its impacting all retailers" and "this is a real societal problem and we’ve got to learn together with the politicians to figure this out" (Compl. ¶78). The complaint further alleges that Anderson attributed the company’s fourth-quarter earnings shortfall to shrink, stating it was "100% shrink related" and not due to merchandising or operational deficiencies (Compl. ¶79). The complaint notes that shrink increased by 30 basis points in 2022 compared to 2021 (Compl. ¶70). The complaint also highlights that former Director Bernard Kim received compensation of $218,283 in fiscal 2022, $249,845 in fiscal 2023, and $262,945 in fiscal 2024, while former Director Catherine Buggeln received compensation of $269,942 in fiscal 2022, $269,845 in fiscal 2023, and $285,945 in fiscal 2024. Winnie Park, who was appointed CEO in December 2024, received compensation of $1,204,010 in fiscal 2024 (Compl. ¶26).

Court in Related Securities Class Action Found Plausible Allegations of Misleading Statements

The derivative complaint relies heavily on a ruling issued in a related securities class action, In re Five Below, Inc. Securities Litigation, in which the court denied in part a motion to dismiss on August 25, 2025. The filing cites the court’s summary of the allegations, which described the company as having filled its stores with unpopular items instead of trending ones due to operational failures. The complaint asserts that these findings demonstrate that the defendants were aware of the company’s operational deficiencies but failed to disclose them to investors, instead attributing poor performance to external factors like shrink and retail theft (Compl. ¶10). The court in the securities class action held that the plaintiffs had plausibly alleged that Five Below’s representations about its merchandising discipline were "materially false and misleading" and that the company had stocked stale merchandise while failing to maintain adequate inventory controls (Compl. ¶5). The court further held that "the relevant issue was not Five Below's ability to identify trends in the abstract, but rather its ability to stock trend-right, in-demand merchandise in its stores" (Compl. ¶130).

The complaint also alleges that the defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 by making false and misleading statements in proxy statements (Compl. ¶18). Additionally, the complaint asserts that all Individual Defendants violated Five Below’s Code of Business Conduct and Ethics by permitting or causing materially false and misleading disclosures, failing to maintain accurate books and records, and overriding internal controls (Compl. ¶7). The Code of Ethics required Five Below’s public disclosures to be "full, fair, accurate, timely and understandable" and prohibited directors and officers from concealing material facts or misleading investors (Compl. ¶216). The complaint alleges that the Individual Defendants violated these obligations by permitting or causing materially false and misleading statements about the company’s merchandising strategy and the causes of its performance declines (Compl. ¶225). The complaint further alleges that the Individual Defendants failed to maintain mission-critical merchandising and inventory infrastructure, stating, "These systems were not ancillary business functions. They constituted the operational infrastructure upon which Five Below’s trend-right strategy... depended" (Compl. ¶126). The complaint also notes that the Code of Ethics prohibited the creation or maintenance of false or misleading records and required accurate accounting practices (Compl. ¶221).

Special Litigation Committee Recommended No Action on Shareholder Demands

The complaint alleges that Five Below’s board of directors formed a Special Litigation Committee (SLC) to investigate the shareholder demands but ultimately recommended that the company take no action in response. The committee completed its investigation on September 10, 2025, and issued a report concluding that litigation would not be in the company’s best interests. The board adopted the committee’s recommendation, which the complaint quotes as stating that the SLC "determined that it would not be in the Company’s 'best interests to pursue litigation or take other steps in response to the demand letters'" (Compl. ¶140). The derivative complaint challenges the validity of this decision under Pennsylvania law, alleging that the board’s refusal of the litigation demand was not a valid exercise of business judgment (Compl. ¶17).

The complaint asserts that all Individual Defendants are liable as control persons under Section 20(a) of the Exchange Act for the company’s violations of Section 10(b) and Rule 10b-5 (Compl. ¶12).

Audit and Compensation Committees Allegedly Failed in Oversight Duties

The complaint separately alleges breaches of fiduciary duty by members of Five Below’s Audit Committee and Compensation Committee for their alleged failures in oversight. The Audit Committee members—Richard Markee, Dinesh Lathi, Zuhairah Washington, Mimi Vaughn, and Karen Bowman—are accused of failing to ensure the integrity of the company’s financial reporting, disclosure controls, and legal compliance (Compl. ¶5). The complaint asserts that the Audit Committee was responsible for reviewing Five Below’s financial statements and SEC filings before their public release but failed to ensure that these disclosures were accurate (Compl. ¶192). The complaint further alleges that the Audit Committee members failed to ensure appropriate reporting and control systems for merchandising, inventory, and disclosures, stating that they "failed to ensure that Five Below maintained appropriate systems of reporting and control with respect to its merchandising, inventory, and disclosure practices" (Compl. ¶199). The complaint describes the Audit Committee’s oversight failure as a breach of fiduciary duty, alleging that the committee members "failed to remain informed concerning Five Below's merchandising strategy, inventory practices, operational initiatives, disclosure practices, and the risks facing the Company" (Compl. ¶183).

The Compensation Committee members—Kathleen Barclay, Ronald Sargent, Zuhairah Washington, and Mimi Vaughn—are accused of approving executive compensation tied to misrepresented financial metrics (Compl. ¶6). The complaint alleges that the Compensation Committee permitted executives to receive compensation they would not have earned if the company’s true operational condition had been disclosed (Compl. ¶211). For example, Joel Anderson received total compensation of $7,026,551 in fiscal 2022, $10,185,352 in fiscal 2023, and $8,104,417 in fiscal 2024, while Kenneth Bull received $1,788,729 in fiscal 2022, $4,185,840 in fiscal 2023, and $6,294,557 in fiscal 2024. Thomas Vellios, who generated over $15.3 million in proceeds from stock sales during the Relevant Period, received compensation of $500,194 in fiscal 2022, $498,455 in fiscal 2023, and $5,645,557 in fiscal 2024 (Compl. ¶26). The complaint alleges that these compensation packages were approved while the company’s performance was allegedly inflated by false and misleading statements about its operational condition. The complaint further alleges that the Compensation Committee members failed to exercise proper oversight in approving executive compensation, stating that they "approved substantial compensation and equity awards to Five Below’s executives while the Company’s reported financial performance was allegedly inflated by the Individual Defendants’ materially false and misleading statements" (Compl. ¶209). The complaint also notes that the Compensation Committee members breached their fiduciary duties by approving compensation packages tied to misrepresented metrics, which the complaint describes as a failure to safeguard the company’s assets and prevent corporate waste.

Financial Performance Declined Amid Operational Failures

The complaint details the company’s declining financial performance during the Relevant Period, which it attributes to the alleged operational failures. For example, Five Below reported a 14.6% decline in operating income from $42.4 million in the first quarter of 2023 to $36.2 million in the first quarter of 2024, and a 16% decline in net income from $37.5 million to $31.5 million during the same period (Compl. ¶76). Diluted income per common share also declined by 15%, from $0.67 in Q1 2023 to $0.57 in Q1 2024. On June 5, 2024, Five Below reaffirmed its second-quarter diluted earnings per share guidance of $0.57 to $0.69, but on July 16, 2024, the company disclosed revised guidance of $0.53 to $0.56, representing a decline of up to 19% from the prior guidance (Compl. ¶100).

The company’s stock price reflected these declines, dropping from $132.79 per share on June 5, 2024, to $118.72 per share on June 6, 2024, erasing approximately $774 million in market capitalization (Compl. ¶7). The stock price fell further from $102.07 per share on July 16, 2024, to $75.75 per share on July 18, 2024, resulting in a market capitalization loss of approximately $1.4 billion (Compl. ¶8). Analyst firms, including JP Morgan, Guggenheim, Barclays, and William Blair, downgraded Five Below’s stock following these disclosures, with price target reductions ranging from 20% to 29%. JP Morgan reduced its price target from $122 to $87, while Guggenheim reduced its target from $165 to $125 (Compl. ¶107). Deutsche Bank reported that Five Below management attributed top-line challenges to "self-inflicted" issues, including "less-than-exciting product assortment" and "suboptimal pricing" (Compl. ¶105).

On August 28, 2024, Five Below announced its second-quarter 2024 financial results, reporting a 5.7% year-over-year decline in comparable sales. The company’s stock price had traded in a range of $176 to $219 per share during the period when the Insider Selling Defendants executed their sales (Compl. ¶157). The complaint alleges that these sales occurred while the stock price was artificially inflated due to the defendants' false and misleading statements about the company’s operational condition. The complaint further alleges that the defendants' actions caused the company to repurchase shares at inflated prices, resulting in corporate waste and economic harm to Five Below (Compl. ¶152). The complaint also notes that Wells Fargo revised its price target from $180 to $145, representing a drop of approximately 20%, following the company’s disclosures (Compl. ¶100).

The allegations in the complaint are unproven, and no defendant has yet responded to the claims.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.