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 January 31, 2026 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 2, 2026 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 January 31, 2026 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 1, 2026 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 2026" or "fiscal 2026" refer to the period from February 1, 2026 to January 30, 2027, which is a 52-week fiscal 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. The fiscal quarters ended May 2, 2026, and May 3, 2025 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 2026" or "fiscal 2026" refer to the period from February 1, 2026 to January 30, 2027, which is a 52-week fiscal 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. The fiscal quarters ended August 1, 2026 and August 2, 2025 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended August 1, 2026 and August 2, 2025 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 leading growth retailer offering trend-right, extreme value, high-quality products loved by the kid and the kid in all of us. We offer an edited assortment of products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. As of May 2, 2026, we operated 1,970 stores in 46 states.

Current wording

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiaries as "we," "us," or "our") is a leading growth retailer offering trend-right, extreme value, high-quality products loved by the kid and the kid in all of us. We offer an edited assortment of products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. As of August 1, 2026, we operated 2,022 stores in 46 states.

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. Our gross profit and results of operations could be adversely affected by our inability to achieve acceptable initial markup levels, an increased reliance on markdowns, elevated inventory shrinkage, or insufficient sales leverage over the store occupancy, distribution, and buying components of cost of goods sold. 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. Our gross profit and results of operations could be adversely affected by our inability to achieve acceptable initial markup levels, an increased reliance on markdowns, elevated inventory shrinkage, or insufficient sales leverage over the store occupancy, distribution, and buying components of cost of goods sold. 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

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

Current wording

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

Previous wording

(3)Gross margin is equal to our net sales less our cost of goods sold as a percentage of our net sales.

Current wording

(4)Gross margin is equal to our net sales less our cost of goods sold as a percentage of our net sales.

Previous wording

Net sales increased to $1,285.6 million in the thirteen weeks ended May 2, 2026 from $970.5 million in the thirteen weeks ended May 3, 2025, an increase of $315.1 million, or 32.5%. The increase was the result of a comparable sales increase of $214.0 million and a non-comparable sales increase of $101.1 million. The increase in non-comparable sales was primarily driven by the number of stores that opened in fiscal 2025 but have not been open for 15 full months and new stores that opened in fiscal 2026.

Current wording

Net sales increased to $1,261.5 million in the thirteen weeks ended August 1, 2026 from $1,026.8 million in the thirteen weeks ended August 2, 2025, an increase of $234.7 million, or 22.9%. The increase was the result of a comparable sales increase of $140.1 million and a non-comparable sales increase of $94.6 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2026 and the number of stores that opened in fiscal 2025 but have not been open for 15 full months.

Previous wording

Comparable sales increased 22.7%. This increase resulted from increases of approximately 18.5% in the number of transactions and approximately 3.5% in the average dollar value of transactions.

Current wording

Comparable sales increased 14.1%. This increase resulted from increases of approximately 13.6% in the number of transactions and approximately 0.4% in the average dollar value of transactions.

Previous wording

Income tax expense increased to $39.4 million in the thirteen weeks ended May 2, 2026 from $15.3 million in the thirteen weeks ended May 3, 2025, an increase of $24.1 million or 157.0%. The increase in income tax expense was primarily due to the $106.0 million increase in pre-tax income, partially offset by discrete items, which includes the impact of share-based accounting.

Current wording

Income tax expense increased to $69.4 million in the thirteen weeks ended August 1, 2026 from $15.1 million in the thirteen weeks ended August 2, 2025, an increase of $54.3 million, or 358.1%. The increase in income tax expense was primarily due to the $232.9 million increase in pre-tax income, 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 2, 2026 was 24.3% compared to 27.2% in the thirteen weeks ended May 3, 2025. Our effective tax rate for the thirteen weeks ended May 2, 2026 was lower than the comparable prior year period primarily due to discrete items, which includes the impact of share-based accounting.

Current wording

Our effective tax rate for the thirteen weeks ended August 1, 2026 was 23.9% compared to 26.2% in the thirteen weeks ended August 2, 2025. Our effective tax rate for the thirteen weeks ended August 1, 2026 was lower 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 increased to $123.1 million in the thirteen weeks ended May 2, 2026 from $41.1 million in the thirteen weeks ended May 3, 2025, an increase of $82.0 million or 199.1%.

Current wording

As a result of the foregoing, net income increased to $221.4 million in the thirteen weeks ended August 1, 2026 from $42.8 million in the thirteen weeks ended August 2, 2025, an increase of $178.6 million, or 417.7%.

Previous wording

Cost of goods sold increased to $807.0 million in the thirteen weeks ended May 2, 2026 from $646.6 million in the thirteen weeks ended May 3, 2025, an increase of $160.4 million, or 24.8%. The increase in cost of goods sold was primarily the result of increases in merchandise cost of goods sold resulting from an increase in net sales and store occupancy costs resulting from new store openings.

Current wording

Cost of goods sold increased to $1,456.0 million in the twenty-six weeks ended August 1, 2026 from $1,331.1 million in the twenty-six weeks ended August 2, 2025, an increase of $124.9 million, or 9.4%. 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, partially offset by the impact of IEEPA tariff refunds. Also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings.

Previous wording

Gross profit increased to $478.6 million in the thirteen weeks ended May 2, 2026 from $323.9 million in the thirteen weeks ended May 3, 2025, an increase of $154.7 million, or 47.8%. Gross margin increased to 37.2% in the thirteen weeks ended May 2, 2026 from 33.4% in the thirteen weeks ended May 3, 2025, an increase of approximately 380 basis points. The increase in gross margin was primarily the result of decreases as a percentage of net sales in store occupancy costs and distribution costs. Also contributing to the increase in gross margin were the decreases as a percentage of net sales in merchandise costs of goods sold, which includes the impact of a lower inventory shrinkage accrual rate, and lapping the impact of non-recurring cost-optimization initiatives.

Current wording

Gross profit increased to $1,091.1 million in the twenty-six weeks ended August 1, 2026 from $666.3 million in the twenty-six weeks ended August 2, 2025, an increase of $424.8 million, or 63.8%. Gross margin increased to 42.8% in the twenty-six weeks ended August 1, 2026 from 33.4% in the twenty-six weeks ended August 2, 2025, an increase of approximately 940 basis points. The increase in gross margin was primarily the result of a decrease as a percentage of net sales in merchandise costs of goods sold, which includes the impact of IEEPA tariff refunds and a lower inventory shrinkage accrual rate. Also contributing to the increase in gross margin was the decrease as a percentage of net sales in store occupancy costs.

Previous wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $324.4 million in the thirteen weeks ended May 2, 2026 from $273.1 million in the thirteen weeks ended May 3, 2025, an increase of $51.3 million, or 18.8%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) decreased approximately 290 basis points to 25.2% in the thirteen weeks ended May 2, 2026 from 28.1% in the thirteen weeks ended May 3, 2025. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increase of $42.6 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 $8.7 million in corporate-related expenses primarily due to higher incentive compensation, partially offset by the impact of retention awards.

Current wording

Selling, general and administrative expenses (including depreciation and amortization) increased to $661.5 million in the twenty-six weeks ended August 1, 2026 from $563.1 million in the twenty-six weeks ended August 2, 2025, an increase of $98.4 million, or 17.5%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) decreased approximately 220 basis points to 26.0% in the twenty-six weeks ended August 1, 2026 from 28.2% in the twenty-six weeks ended August 2, 2025. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increase of $84.2 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 $14.2 million in corporate-related expenses, which includes higher incentive compensation, partially offset by the impact of retention awards.

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 $230 million to $250 million in fiscal 2026, 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 $100 million of our cash capital expenditure budget in fiscal 2026 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 including expansions.

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 $250 million to $260 million in fiscal 2026, 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 $100 million of our cash capital expenditure budget in fiscal 2026 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 including expansions.

Previous wording

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on-hand, net cash provided by operating activities and borrowings under our Revolving Credit Facility, which expires in September 2027, as needed, and we expect that funding to continue. When we have used our Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. To the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. As of May 2, 2026, we did not have any direct borrowings under our Revolving Credit Facility and had approximately $214 million available on the line of credit, net of$11 million in outstanding letters of credit.

Current wording

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on-hand, net cash provided by operating activities and borrowings under our Revolving Credit Facility, which expires in September 2027, as needed, and we expect that funding to continue. When we have used our Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. To the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. As of August 1, 2026, we did not have any direct borrowings under our Revolving Credit Facility and had approximately $225 million available on the line of credit.

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. 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 2, 2026. 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 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. No shares were repurchased under this program during fiscal 2025. During the thirteen weeks ended August 1, 2026, we repurchased 310,501 shares at an aggregate cost of approximately $60.0 million, or an average price of $193.24 per share.

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.

Current wording

Since approval of the share repurchase program in March 2018, we have purchased approximately 2.2 million shares for an aggregate cost of approximately $332 million.

Previous wording

Net cash provided by operating activities for thethirteen weeks ended May 2, 2026 was $227.2 million, an increase of $94.5 million compared to the thirteen weeks ended May 3, 2025. The increase was primarily due to an increase in operating cash flows from store performance, partially offset by changes in working capital.

Current wording

Net cash provided by operating activities for thetwenty-six weeks ended August 1, 2026 was $442.7 million, anincrease of $217.0 million compared to the twenty-six weeks ended August 2, 2025. The increase was primarily due to an increase in operating cash flows from store performance and the impact of IEEPA tariff refunds, partially offset by an increase in income taxes paid and changes in working capital.

Previous wording

Net cash used in investing activities for the thirteen weeks ended May 2, 2026 was $303.1 million, an increase of $267.4 million compared to the thirteen weeks ended May 3, 2025. The increase was primarily due to an increase in net purchases of investment securities and other investments.

Current wording

Net cash used in investing activities for the twenty-six weeks ended August 1, 2026 was $528.7 million, an increase of $537.5 million compared to the twenty-six weeks ended August 2, 2025. The increase was primarily due to increases in net purchases of investment securities and other investments and capital expenditures.

Previous wording

Net cash used in financing activities for the thirteen weeks ended May 2, 2026 was $9.0 million, an increase of $7.7 million compared to the thirteen weeks ended May 3, 2025. The increase was primarily due to an increase in common shares withheld for taxes.

Current wording

Net cash used in financing activities for the twenty-six weeks ended August 1, 2026 was $76.6 million, an increase of $73.2 million compared to the twenty-six weeks ended August 2, 2025. The increase was primarily due to increases in the repurchase and retirement of common stock and in common shares withheld for taxes.

Previous wording

From February 1, 2026 to May 2, 2026, we have entered into 48 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $83.3 million.

Current wording

From February 1, 2026 to August 1, 2026, we have entered into 75 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $135.0 million.