FIVE BELOW INC

Previous wording

You should read the following discussion together with “Selected Financial Data” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for our fiscal year ended February 3, 2024 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen weeks ended May 4, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described below in “Special Note Regarding Forward-Looking Statements” and in Part II, Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Current wording

You should read the following discussion together with “Selected Financial Data” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for our fiscal year ended February 3, 2024 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen and twenty-six weeks ended August 3, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described below in “Special Note Regarding Forward-Looking Statements” and in Part II, Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Previous wording

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2024" or "fiscal 2024" refer to the period from February 4, 2024 to February 1, 2025, which is a 52-week fiscal year. References to "fiscal year 2023" or "fiscal 2023" refer to the period from January 29, 2023 to February 3, 2024, which is a 53-week fiscal year. The fiscal quarters ended May 4, 2024 and April 29, 2023 refer to the thirteen weeks ended as of those dates. Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

Current wording

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2024" or "fiscal 2024" refer to the period from February 4, 2024 to February 1, 2025, which is a 52-week fiscal year. References to "fiscal year 2023" or "fiscal 2023" refer to the period from January 29, 2023 to February 3, 2024, which is a 53-week fiscal year. The fiscal quarters ended August 3, 2024 and July 29, 2023 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended August 3, 2024 and July 29, 2023 refer to the twenty-six weeks ended as of those dates. Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

Previous wording

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiaries as "we," "us," or "our") is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the tween and teen customer. We offer a dynamic, edited assortment of exciting products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. In fiscal 2019, we rolled out new pricing to our full chain, increasing prices on certain products over $5. Most of our products remain at $5 and below. As of May 4, 2024, we operated 1,605 stores in 43 states.

Current wording

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiaries as "we," "us," or "our") is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the tween and teen customer. We offer a dynamic, edited assortment of exciting products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. In fiscal 2019, we rolled out new pricing to our full chain, increasing prices on certain products over $5. Most of our products remain at $5 and below. As of August 3, 2024, we operated 1,667 stores in 43 states.

Previous wording

Due to the 53rd week in fiscal 2023, comparable sales for the thirteen weeks ended May 4, 2024 are reported on a restated calendar basis. Reference to the "restated calendar" is based on using the National Retail Federation's restated calendar comparing similar weeks, which are the thirteen weeks from February 4, 2024 to May 4, 2024 as compared to the thirteen weeks from February 5, 2023 to May 6, 2023.

Current wording

Due to the 53rd week in fiscal 2023, comparable sales for the thirteen and twenty-six weeks ended August 3, 2024 are reported on a restated calendar basis. Reference to the "restated calendar" is based on using the National Retail Federation's restated calendar comparing similar weeks, which are the thirteen weeks from May 5, 2024 to August 3, 2024 as compared to the thirteen weeks from May 7, 2023 to August 5, 2023 and the twenty-six weeks from February 4, 2024 to August 3, 2024 as compared to the twenty-six weeks from February 5, 2023 to August 5, 2023.

Previous wording

The variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase. We regularly analyze the components of gross profit, a non-GAAP financial measure, as well as gross margin as it provides a useful and relevant measure to analyze our financial performance. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns, and a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the store occupancy, distribution and buying components of cost of goods sold could have an adverse impact on our gross profit and results of operations. In addition, current global supply chain disruptions, the cost of freight and constraints on shipping capacity to transport inventory may have an adverse impact on our gross profit and results of operations, as well as our sales. Changes in the mix of our products may also impact our overall cost of goods sold.

Current wording

The variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase. We regularly analyze the components of gross profit, a non-GAAP financial measure, as well as gross margin as it provides a useful and relevant measure to analyze our financial performance. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns, and a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the store occupancy, distribution and buying components of cost of goods sold could have an adverse impact on our gross profit and results of operations. In addition, global supply chain disruptions, the cost of freight and constraints on shipping capacity to transport inventory may have an adverse impact on our gross profit and results of operations, as well as our sales. Changes in the mix of our products may also impact our overall cost of goods sold.

Previous wording

The components of our SG&A expenses may not be comparable to those of other retailers. We expect that our SG&A expenses will increase in future periods due to our continuing store growth. In addition, any increase in future share-based grants or modifications will impact our share-based compensation expense included in SG&A expenses.

Current wording

The components of our SG&A expenses may not be comparable to those of other retailers. We expect that our SG&A expenses will increase in future periods due to our continuing store growth. In addition, any increase in future share-based grants, modifications or forfeitures will impact our share-based compensation expense included in SG&A expenses.

Previous wording

(2)Only includes stores that opened before the beginning of the thirteen weeks ended.

Current wording

(2)Only includes stores that opened before the beginning of the thirteen weeks ended and twenty-six weeks ended.

Previous wording

Net sales increased to $811.9 million in the thirteen weeks ended May 4, 2024 from $726.2 million in the thirteen weeks ended April 29, 2023, an increase of $85.7 million, or 11.8%. The increase was the result of a non-comparable sales increase of$102.4 million, partially offset by a comparable sales decrease of $16.7 million. The increase in non-comparable sales was primarily driven by the number of stores that opened in fiscal 2023 but have not been open for 15 full months and new stores that opened in fiscal 2024.

Current wording

Net sales increased to$830.1 million in the thirteen weeks ended August 3, 2024 from $759.0 million in the thirteen weeks ended July 29, 2023, an increase of$71.1 million, or 9.4%. Theincrease was the result of a non-comparable sales increase of $113.6 million, partially offset by a comparable sales decrease of$42.5 million. The increase in non-comparable sales was primarily driven by the number of stores that opened in fiscal 2023 but have not been open for 15 full months and new stores that opened in fiscal 2024.

Previous wording

Cost of goods sold increased to $548.3 million in the thirteen weeks ended May 4, 2024 from $491.4 million in the thirteen weeks ended April 29, 2023, an increase of $56.9 million, or 11.6%. The increase in cost of goods sold was primarily the result of increases in the merchandise cost of goods sold resulting from increases in net sales and inventory shrinkage, and store occupancy costs primarily resulting from new store openings.

Current wording

Cost of goods sold increased to$558.3 million in thethirteen weeks ended August 3, 2024 from$494.4 million in the thirteen weeks ended July 29, 2023, an increase of $63.9 million, or 12.9%. The increase in cost of goods sold was primarily the result of increases in the merchandise cost of goods sold resulting from increases in net sales and inventory shrinkage, and store occupancy costs primarily resulting from new store openings.

Previous wording

Gross profit increased to $263.5 million in the thirteen weeks ended May 4, 2024 from $234.8 million in the thirteen weeks ended April 29, 2023, an increase of $28.7 million, or 12.2%. Gross margin increased to 32.5% in the thirteen weeks ended May 4, 2024 from 32.3% in the thirteen weeks ended April 29, 2023, an increase of approximately 20 basis points. The increase in gross margin was primarily the result of a decrease as a percentage of net sales in merchandise cost of goods sold, which includes the impact of higher inventory shrinkage, partially offset by an increase as a percentage of net sales in store occupancy costs.

Current wording

Gross profit increased to$271.8 million in thethirteen weeks ended August 3, 2024 from$264.6 million in thethirteen weeks ended July 29, 2023, anincrease of$7.2 million, or 2.7%. Gross margin decreased to 32.7% in the thirteen weeks ended August 3, 2024 from 34.9% in the thirteen weeks ended July 29, 2023, a decrease of approximately 220 basis points. The decrease in gross margin was primarily the result of decreases as a percentage of net sales in store occupancy costs and in merchandise cost of goods sold, which was primarily driven by the impact of higher inventory shrinkage.

Previous wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $227.4 million in the thirteen weeks ended May 4, 2024 from $192.4 million in the thirteen weeks ended April 29, 2023, an increase of $35.0 million, or 18.2%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) increased approximately 150 basis points to 28.0% in the thirteen weeks ended May 4, 2024 from 26.5% in the thirteen weeks ended April 29, 2023. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of increasesof $27.1 million in store-related expenses primarily to support new store growth and $7.9 million in corporate-related expenses, which includes a non-recurring expense related to a settlement of employment-related litigation.

Current wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $230.3 million in the thirteen weeks ended August 3, 2024 from $206.0 million in the thirteen weeks ended July 29, 2023, an increase of $24.3 million, or 11.8%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) increased approximately 60 basis points to 27.7% in the thirteen weeks ended August 3, 2024 from 27.1% in the thirteen weeks ended July 29, 2023. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increaseof$31.3 million in store-related expenses primarily to support new store growth, partially offset by a decrease of $7.0 million in corporate-related expenses, which includes lower incentive compensation expenses and a non-recurring stock compensation benefit. The decrease in corporate-related expenses was partially offset by the impact of new retention awards.

Previous wording

Income tax expense increased to$9.7 million in the thirteen weeks ended May 4, 2024 from $8.6 million in the thirteen weeks ended April 29, 2023, an increase of $1.1 million or 12.7%. The increase in income tax expense was primarily due to discrete items, which includes the impact of ASU 2016-09, "Improvements to Employee Share-Based Accounting," partially offset by the $4.9 million decrease in pre-tax income.

Current wording

Income tax expense decreased to $11.6 million in the thirteen weeks ended August 3, 2024 from $16.1 million in the thirteen weeks ended July 29, 2023, a decrease of $4.5 million or 28.2%. The decrease in income tax expense was primarily due to the $18.4 million decrease in pre-tax income and non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting.

Previous wording

Our effective tax rate for the thirteen weeks ended May 4, 2024 was 23.5% compared to 18.6% in the thirteen weeks ended April 29, 2023. Our effective tax rate for the thirteen weeks ended May 4, 2024 was higher than the comparable prior year period primarily due to discrete items, which includes the impact of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting."

Current wording

Our effective tax rate for the thirteen weeks ended August 3, 2024 was 25.9% compared to 25.6% in the thirteen weeks ended July 29, 2023. Our effective tax rate for the thirteen weeks ended August 3, 2024 was higher than the comparable prior year period primarily due to discrete items, which includes the impact of share-based accounting, partially offset by non-deductible expenses.

Previous wording

As a result of the foregoing, net income decreased to$31.5 million in the thirteen weeks ended May 4, 2024 from $37.5 million in the thirteen weeks ended April 29, 2023, a decrease of $6.0 million or 16.0%.

Current wording

As a result of the foregoing, net income decreased to $33.0 million in thethirteen weeks ended August 3, 2024 from $46.8 million in the thirteen weeks ended July 29, 2023, a decrease of $13.8 million or 29.5%.

Previous wording

Comparable sales decreased 2.3%. This decrease resulted from a decrease of approximately 2.8% in the number of transactions, partially offset by an increase of approximately 0.5% in theaverage dollar value of transactions.

Current wording

Comparable sales decreased 4.1%. This decrease resulted from a decrease of approximately 4.2% in the number of transactions, partially offset by an increase of approximately 0.1% in theaverage dollar value of transactions.

Previous wording

Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. We plan to make cash capital expenditures of approximately $345 million to $355 million in fiscal 2024, which exclude the impact of tenant allowances, and which we expect to fund from cash generated from operations, cash on hand, investments and, as needed, borrowings under our Revolving Credit Facility. We expect to incur approximately $170 million of our cash capital expenditure budget in fiscal 2024 to construct and open approximately 230 new stores, with the remainder projected to be spent on our store relocations and remodels, distribution facilities, which includes the expansion of two facilities, and our corporate infrastructure.

Current wording

Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. We plan to make cash capital expenditures of approximately $335 million to $345 million in fiscal 2024, which exclude the impact of tenant allowances, and which we expect to fund from cash generated from operations, cash on hand, investments and, as needed, borrowings under our Revolving Credit Facility. We expect to incur approximately $170 million of our cash capital expenditure budget in fiscal 2024 to construct and open approximately 230 new stores, with the remainder projected to be spent on our store relocations and remodels, our shipcenters, which includes the expansion of two shipcenters, and our corporate infrastructure.

Previous wording

On November 27, 2023, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through November 27, 2026. During the thirteen weeks ended May 4, 2024, we repurchased 182,327 shares at an aggregate cost of approximately $30.0 million, or average price of $164.56 per share.

Current wording

On November 27, 2023, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through November 27, 2026. During the twenty-six weeks ended August 3, 2024, we repurchased 266,997 shares at an aggregate cost of approximately $40.0 million, or average price of $149.79 per share.

Previous wording

Since approval of the share repurchase program in March 2018, we have purchased approximately 1.8 million shares for an aggregate cost of approximately $260 million. There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any repurchases. The share repurchase program may be modified or discontinued at any time.

Current wording

Since approval of the share repurchase program in March 2018, we have purchased approximately 1.9 million shares for an aggregate cost of approximately $270 million. There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any repurchases. The share repurchase program may be modified or discontinued at any time.

Previous wording

Net cash provided by operating activities for the thirteen weeks ended May 4, 2024 was $26.4 million, a decrease of $58.9 million compared to the thirteen weeks ended April 29, 2023. The decrease was primarily due to changes in working capital, partially offset by an increase in operating cash flows from store performance.

Current wording

Net cash provided by operating activities for the twenty-six weeks ended August 3, 2024 was $97.7 million, a decrease of $71.6 million compared to the twenty-six weeks ended July 29, 2023. The decrease was primarily due to changes in working capital, increases in income taxes paid and a decrease in operating cash flows from store performance.

Previous wording

Net cash used in investing activities for the thirteen weeks ended May 4, 2024 was$73.1 million, an increase of $6.6 million compared to the thirteen weeks ended April 29, 2023. The increase was primarily due to an increase in capital expenditures, partially offset by an increase in net sales, maturities, and redemptions of investment securities. The increase in capital expenditures was primarily for our new store construction, our shipcenters, and our corporate infrastructure.

Current wording

Net cash used in investing activities for the twenty-six weeks ended August 3, 2024 was $22.0 million, a decrease of $129.4 million compared to the twenty-six weeks ended July 29, 2023. The decrease was primarily due to an increase in net sales, maturities, and redemptions of investment securities, partially offset by an increase in capital expenditures.

Previous wording

Net cash used in financing activities for the thirteen weeks ended May 4, 2024 was$36.8 million, an increase of $21.0 million compared to the thirteen weeks ended April 29, 2023. The increase was primarily due to an increase in the repurchase and retirement of common stock, partially offset by a decrease in common shares withheld for taxes.

Current wording

Net cash used in financing activities for the twenty-six weeks ended August 3, 2024 was $46.4 million, an increase of $30.7 million compared to the twenty-six weeks ended July 29, 2023. The increase was primarily due to an increase in the repurchase and retirement of common stock, partially offset by a decrease in common shares withheld for taxes.

Previous wording

From February 4, 2024 to May 4, 2024, we have entered into 66 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $139.2 million.

Current wording

From February 4, 2024 to August 3, 2024, we have entered into 114 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $224.3 million.