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 and thirty-nine weeks ended November 2, 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 1, 2025 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 3, 2025 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 November 2, 2024 and October 28, 2023 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended November 2, 2024 and October 28, 2023 refer to the thirty-nine 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 2025" or "fiscal 2025" refer to the period from February 2, 2025 to January 31, 2026, which is a 52-week fiscal 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. The fiscal quarters ended May 3, 2025 and May 4, 2024 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.

Previous wording

•the direct and indirect impact of current and potential tariffs imposed and proposed by the United States on foreign imports, including, without limitation, the tariffs themselves, any counter-measures thereto and any indirect effects on consumer discretionary spending, which could increase the cost to us of certain products, lower our margins, increase our import related expenses, and reduce consumer spending for discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations;

Current wording

•the direct and indirect impact of current and potential tariffs imposed, threatened and proposed by the United States on foreign imports, including, without limitation, the tariffs themselves, any counter-measures thereto and any indirect effects on consumer discretionary spending, which could increase the cost to us of certain products, lower our margins, increase our import related expenses, and reduce consumer spending for discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations;

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 November 2, 2024, we operated 1,749 stores in 44 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 May 3, 2025, we operated 1,826 stores in 44 states.

Previous wording

We also offer our merchandise on the internet, through our fivebelow.com e-commerce website, offering home delivery and the option to buy online and pick up in store. Additionally, we sell merchandise through on-demand third-party delivery services to enable our customers to shop online and receive convenient delivery. All e-commerce sales, which includes shipping and handling revenue, are included in net sales and are included in comparable sales. Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses (including depreciation and amortization).

Current wording

We also offer our merchandise on the internet, through our fivebelow.com e-commerce website and mobile app, offering home delivery and the option to buy online and pick up in store. Additionally, we sell merchandise through on-demand third-party delivery services to enable our customers to shop online and receive convenient delivery. All e-commerce sales, which includes shipping and handling revenue, are included in net sales and are included in comparable sales. Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses (including depreciation and amortization).

Previous wording

How We Assess the Performance of Our Business

Current wording

How We Assess the Performance of Our Business and Non-GAAP Measures

Previous wording

•The period beginning on the first anniversary of the date the store received its last merchandise delivery from one of our shipcenters through the first anniversary of the date the store re-opened.

Current wording

•The period beginning on the first anniversary of the date the store received its last merchandise delivery from one of our shipcenters through the period ending on the first anniversary of the date the store re-opened.

Previous wording

Comparable sales exclude the 53rd week of sales for 53-week fiscal years. In the 52-week fiscal year subsequent to a 53-week fiscal year, we exclude the sales in the non-comparable week from the same-store sales calculation on a restated calendar basis using the National Retail Federation's restated calendar comparing similar weeks.

Current wording

Comparable sales exclude the 53rd week of sales for 53-week fiscal years. In the 52-week fiscal year subsequent to a 53-week fiscal year, we exclude the sales in the non-comparable week from the same-store sales calculation. Due to the 53rd week in fiscal 2023, all comparable sales related to any reporting period during the year ended February 3, 2024 are reported on a restated calendar basis using the National Retail Federation's restated calendar comparing similar weeks.

Previous wording

Due to the 53rd week in fiscal 2023, comparable sales for the thirteen and thirty-nine weeks ended November 2, 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 August 4, 2024 to November 2, 2024 as compared to the thirteen weeks from August 6, 2023 to October 28, 2023 and the thirty-nine weeks from February 4, 2024 to August 3, 2024 as compared to the thirty-nine weeks from February 5, 2023 to October 28, 2023.

Current 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.

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, 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, 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.

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, modifications or forfeitures 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. Variability in performance-based compensation expense related to our business performance may cause SG&A expenses to be higher or lower than comparable periods. 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

Operating income equals gross profit less SG&A expenses. Operating income excludes interest expense or income, other expense or income, and income tax expense or benefit. We use operating income as an indicator of the productivity of our business and our ability to manage SG&A expenses. Operating income percentage measures operating income as a percentage of our net sales.

Current wording

Operating income equals gross profit less SG&A expenses. Operating income excludes interest expense or income, other expense or income, and income tax expense or benefit. We use operating income as an indicator of the productivity of our business and our ability to manage SG&A expenses. Operating margin percentage measures operating income as a percentage of our net sales.

Previous wording

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

Current wording

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

Previous wording

Net sales increased to$843.7 million in the thirteen weeks ended November 2, 2024 from $736.4 million in the thirteen weeks ended October 28, 2023, an increase of $107.3 million, or 14.6%. The increase was the result of a non-comparable sales increase of $103.4 million and a comparable sales increase of $3.9 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2024 and the number of stores that opened in fiscal 2023 but have not been open for 15 full months.

Current wording

Net sales increased to $970.5 million in the thirteen weeks ended May 3, 2025 from $811.9 million in the thirteen weeks ended May 4, 2024, an increase of $158.6 million, or 19.5%. The increase was the result of a non-comparable sales increase of $103.3 million and a comparable sales increase of $55.3 million. The increase in non-comparable sales was primarily driven by the number of stores that opened in fiscal 2024 but have not been open for 15 full months and new stores that opened in fiscal 2025.

Previous wording

Comparable sales decreased 2.6%. This decrease resulted from a decrease of approximately 3.0% in the number of transactions, partially offset by an increase of approximately 0.4% in the average dollar value of transactions.

Current wording

Comparable sales increased 7.1%. This increase resulted from increases of approximately 6.2% in the number of transactions and approximately 0.9% in the average dollar value of transactions.

Previous wording

Cost of goods sold increased to$585.7 million in thethirteen weeks ended November 2, 2024 from$513.6 million in the thirteen weeks ended October 28, 2023, an increase of $72.1 million, or 14.0%. The increase in cost of goods sold was primarily the result of an increase in merchandise cost of goods sold resulting from an increase in net sales and included the impact of a non-recurring inventory write-off. Also contributing to the increase in costs of goods sold was an increase in store occupancy costs primarily resulting from new store openings.

Current wording

Cost of goods sold increased to$646.6 million in thethirteen weeks ended May 3, 2025 from$548.3 million in the thirteen weeks ended May 4, 2024, an increase of $98.3 million, or 17.9%. The increase in cost of goods sold was primarily the result of an increase in merchandise cost of goods sold resulting from an increase in net sales. Also contributing to the increase in costs of goods sold was an increase in store occupancy costs resulting from new store openings.

Previous wording

Gross profit increased to$258.0 million in thethirteen weeks ended November 2, 2024 from$222.8 million in thethirteen weeks ended October 28, 2023, anincrease of$35.2 million, or 15.8%. Gross margin increased to 30.6% in the thirteen weeks ended November 2, 2024 from 30.3% in the thirteen weeks ended October 28, 2023, an increase of approximately 30 basis points. The increase in gross margin was primarily the result of a decrease as a percentage of net sales in distribution costs and merchandise cost of goods sold, which included lapping higher inventory shrinkage and the impact of a non-recurring inventory write-off. This decrease was partially offset by an increase as a percentage of net sales in store occupancy costs.

Current wording

Gross profit increased to$323.9 million in thethirteen weeks ended May 3, 2025 from$263.5 million in thethirteen weeks ended May 4, 2024, anincrease of$60.4 million, or 22.9%. Gross margin increased to 33.4% in the thirteen weeks ended May 3, 2025 from 32.5% in the thirteen weeks ended May 4, 2024, an increase of approximately 90 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.

Previous wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $258.6 million in the thirteen weeks ended November 2, 2024 from $206.7 million in the thirteen weeks ended October 28, 2023, an increase of $51.9 million, or 25.1%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) increased approximately 260 basis points to 30.7% in the thirteen weeks ended November 2, 2024 from 28.1% in the thirteen weeks ended October 28, 2023. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increaseof$40.5 million in store-related expenses primarily to support new store growth. Also contributing to the increase in selling, general and administrative expenses (including depreciation and amortization) was an increase of $11.4 million in corporate-related expenses, which included the impact of retention awards and cost-optimization initiatives.

Current wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $273.1 million in the thirteen weeks ended May 3, 2025 from $227.4 million in the thirteen weeks ended May 4, 2024, an increase of $45.7 million, or 20.1%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) increased approximately 10 basis points to 28.1% in the thirteen weeks ended May 3, 2025 from 28.0% in the thirteen weeks ended May 4, 2024. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increase of $37.1 million in store-related expenses primarily to support new and existing stores. Also contributing to the increase in selling, general and administrative expenses (including depreciation and amortization) was an increase of $8.6 million in corporate-related expenses, which included the impact of retention awards.

Previous wording

Income tax expense decreased to $21.8 million in the thirty-nine weeks ended November 2, 2024 from $29.6 million in the thirty-nine weeks ended October 28, 2023, a decrease of $7.8 million or 26.6%. The decrease in income tax expense was primarily due to the $40.6 million decrease in pre-tax income and non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting.

Current wording

Income tax expense increased to $15.3 million in the thirteen weeks ended May 3, 2025 from $9.7 million in the thirteen weeks ended May 4, 2024, an increase of $5.6 million or 58.6%. The increase in income tax expense was primarily due to the $15.4 million increase in pre-tax income and discrete items, which includes the impact of share-based accounting.

Previous wording

Our effective tax rate for the thirteen weeks ended November 2, 2024 was 23.4% compared to 25.4% in the thirteen weeks ended October 28, 2023. Our effective tax rate for the thirteen weeks ended November 2, 2024 was lower than the comparable prior year period primarily due to non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting.

Current wording

Our effective tax rate for the thirteen weeks ended May 3, 2025 was 27.2% compared to 23.5% in the thirteen weeks ended May 4, 2024. Our effective tax rate for the thirteen weeks ended May 3, 2025 was higher than the comparable prior year period primarily due to discrete items, which includes the impact of share-based accounting.

Previous wording

As a result of the foregoing, net income decreased to $1.7 million in thethirteen weeks ended November 2, 2024 from $14.6 million in the thirteen weeks ended October 28, 2023, a decrease of $12.9 million or 88.4%.

Current wording

As a result of the foregoing, net income increased to $41.1 million in thethirteen weeks ended May 3, 2025 from $31.5 million in the thirteen weeks ended May 4, 2024, an increase of $9.6 million or 30.8%.

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 $340 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 227 net 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.

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 $210 million to $230 million in fiscal 2025, 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 $120 million of our cash capital expenditure budget in fiscal 2025 to construct and open approximately 150 net new stores, with the remainder projected to be spent on our store relocations and remodels, corporate infrastructure and shipcenter facilities.

Previous 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.

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. In fiscal 2024, we purchased 266,997 shares at an aggregate cost of approximately $40.0 million, or an average price of $149.79 per share. There were no repurchases during the thirteen weeks ended May 3, 2025. 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 thirty-nine weeks ended November 2, 2024 was $67.1 million, a decrease of $24.8 million compared to the thirty-nine weeks ended October 28, 2023. The decrease was primarily due to increases in income taxes paid, a decrease in operating cash flows from store performance and changes in working capital.

Current wording

Net cash provided by operating activities for the thirteen weeks ended May 3, 2025 was $132.7 million, an increase of $106.3 million compared to the thirteen weeks ended May 4, 2024. The increase was primarily due to changes in working capital and an increase in operating cash flows from store performance.

Previous wording

Net cash used in investing activities for the thirty-nine weeks ended November 2, 2024 was $30.7 million, a decrease of $134.4 million compared to the thirty-nine weeks ended October 28, 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.

Current wording

Net cash used in investing activities for the thirteen weeks ended May 3, 2025 was $35.7 million, a decrease of $37.4 million compared to the thirteen weeks ended May 4, 2024. The decrease was primarily due to a decrease in capital expenditures, partially offset by an increase in net purchases of investment securities and other investments.

Previous wording

Net cash used in financing activities for the thirty-nine weeks ended November 2, 2024 was $46.5 million, a decrease of $49.7 million compared to the thirty-nine weeks ended October 28, 2023. The decrease was primarily due to decreases in the repurchase and retirement of common stock and in common shares withheld for taxes.

Current wording

Net cash used in financing activities for the thirteen weeks ended May 3, 2025 was $1.3 million, a decrease of $35.5 million compared to the thirteen weeks ended May 4, 2024. The decrease was primarily due to a decrease in the repurchase and retirement of common stock.

Previous wording

From February 4, 2024 to November 2, 2024, we have entered into 152 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $239.9 million.

Current wording

From February 2, 2025 to May 3, 2025, we have entered into 34 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $65.7 million.