Five Below(FIVE) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Five Below, Inc. as of August 3, 2024, including Balance Sheets, Statements of Operations, Shareholders' Equity, and Cash Flows, showing increased assets but decreased profitability Unaudited Consolidated Balance Sheets Total assets increased to $4.01 billion as of August 3, 2024, driven by property, equipment, and operating lease assets, while total liabilities rose to $2.41 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Aug 3, 2024 | Feb 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $209,039 | $179,749 | $334,544 | | Inventories | $639,881 | $584,627 | $543,621 | | Total current assets | $1,118,639 | $1,203,542 | $1,111,926 | | Property and equipment, net | $1,246,880 | $1,134,312 | $1,013,686 | | Operating lease assets | $1,627,483 | $1,509,416 | $1,407,474 | | Total Assets | $4,013,144 | $3,872,037 | $3,549,408 | | Liabilities & Equity | | | | | Total current liabilities | $685,205 | $715,926 | $649,468 | | Long-term operating lease liabilities | $1,642,055 | $1,497,586 | $1,394,698 | | Total Liabilities | $2,405,403 | $2,287,081 | $2,109,262 | | Total Shareholders' Equity | $1,607,741 | $1,584,956 | $1,440,146 | Unaudited Consolidated Statements of Operations Net sales increased 9.4% to $830.1 million for the thirteen weeks ended August 3, 2024, but operating income and net income declined significantly due to higher costs Consolidated Statements of Operations (in thousands, except per share data) | Metric | Thirteen Weeks Ended Aug 3, 2024 | Thirteen Weeks Ended July 29, 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $830,069 | $758,981 | +9.4% | | Operating income | $41,509 | $58,594 | -29.2% | | Net income | $33,000 | $46,835 | -29.5% | | Diluted income per common share | $0.60 | $0.84 | -28.6% | | Metric | Twenty-Six Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended July 29, 2023 | YoY Change | | Net sales | $1,641,932 | $1,485,228 | +10.6% | | Operating income | $77,659 | $101,006 | -23.1% | | Net income | $64,467 | $84,313 | -23.5% | | Diluted income per common share | $1.17 | $1.51 | -22.5% | Unaudited Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $1.61 billion as of August 3, 2024, driven by net income, partially offset by share repurchases - Shareholders' equity grew to $1,607.7 million at August 3, 2024, up from $1,585.0 million at February 3, 2024[10] - During the twenty-six weeks ended August 3, 2024, the company recorded net income of $64.5 million and repurchased and retired common stock for $40.2 million[10][14] Unaudited Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased to $97.7 million for the twenty-six weeks ended August 3, 2024, with cash used in investing and financing activities, ending with $209.0 million in cash Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Twenty-Six Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended July 29, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $97,694 | $169,268 | | Net cash used in investing activities | ($22,022) | ($151,391) | | Net cash used in financing activities | ($46,382) | ($15,657) | | Net increase in cash and cash equivalents | $29,290 | $2,220 | | Cash and cash equivalents at end of period | $209,039 | $334,544 | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, revenue recognition, lease obligations, and legal contingencies, including the operation of 1,667 stores and a new class action lawsuit filed on August 1, 2024 - The company operated 1,667 stores as of August 3, 2024, compared to 1,407 stores as of July 29, 2023[16] - Revenue is disaggregated into three main categories: Leisure (45.2% of Q2 sales), Fashion and home (30.0%), and Snack and seasonal (24.8%)[30] - A putative class action lawsuit was filed against the company and a former senior officer on August 1, 2024, alleging violations of securities laws, which the company intends to defend vigorously[43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 9.4% increase in Q2 net sales driven by new store openings, offset by a 5.7% decrease in comparable sales and a 220 basis point decline in gross margin due to higher inventory shrinkage and occupancy costs, with planned capital expenditures of $335-$345 million for fiscal 2024 Results of Consolidated Operations Net sales rose 9.4% to $830.1 million for the thirteen weeks ended August 3, 2024, driven by new store openings, but comparable sales fell 5.7% and net income dropped 29.5% due to higher inventory shrinkage and deleveraged occupancy costs Q2 Performance vs. Prior Year (Thirteen Weeks) | Metric | Q2 FY2024 | Q2 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $830.1M | $759.0M | +9.4% | | Comparable Sales | (5.7)% | +2.7% | -840 bps | | Gross Margin | 32.7% | 34.9% | -220 bps | | Operating Income | $41.5M | $58.6M | -29.2% | | Net Income | $33.0M | $46.8M | -29.5% | - The 5.7% decrease in Q2 comparable sales was driven by a 5.4% decrease in the number of transactions and a 0.3% decrease in the average dollar value of transactions[71] - The decrease in Q2 gross margin was primarily due to higher inventory shrinkage and deleverage on store occupancy costs[73] Liquidity and Capital Resources The company maintains a solid liquidity position with $209.0 million in cash and $225 million available under its revolving credit facility, planning $335-$345 million in capital expenditures for fiscal 2024, primarily for new stores, and repurchased $40.0 million in shares during the first half of 2024 - The company plans cash capital expenditures of approximately $335 million to $345 million in fiscal 2024, with about $170 million allocated to opening 230 new stores[82] - During the twenty-six weeks ended August 3, 2024, the company repurchased 266,997 shares for approximately $40.0 million under its share repurchase program[84] - As of August 3, 2024, the company had no borrowings and approximately $225 million available under its Revolving Credit Facility[82] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on investment securities and its variable-rate Revolving Credit Facility, with no material impact from a 100 basis point change expected, and historical inflation effects deemed immaterial - The principal market risk is interest rate sensitivity on investment securities and the variable-rate Revolving Credit Facility[95] - As of August 3, 2024, there were no borrowings under the Revolving Credit Facility, which has $225 million available[95] - Management believes the effects of inflation on historical results have been immaterial but acknowledges that future results could be impacted[96] Item 4. Controls and Procedures As of August 3, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period[97] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[98] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company faces various legal proceedings, including a putative class action lawsuit filed on August 1, 2024, alleging securities law violations, which the company intends to vigorously defend - A putative class action lawsuit was filed on August 1, 2024, against the company and a former senior officer on behalf of investors who purchased securities between March 20, 2024, and July 16, 2024[101] - The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and the company intends to vigorously defend against the action[101] Item 1A. Risk Factors There have been no material changes in the company's risk factors from those previously disclosed in its Annual Report on Form 10-K - No material changes to risk factors have occurred since the last Annual Report[103] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, including the repurchase of 266,997 shares for approximately $40.0 million during the twenty-six weeks ended August 3, 2024, with $60.0 million remaining available under the program Share Repurchase Activity (Thirteen Weeks Ended Aug 3, 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Value Remaining ($) | | :--- | :--- | :--- | :--- | | May 5 - June 1, 2024 | 0 | N/A | $69,996,967 | | June 2 - July 6, 2024 | 84,670 | $117.99 | $60,006,492 | | July 7 - Aug 3, 2024 | 0 | N/A | $60,006,492 | - For the twenty-six weeks ended August 3, 2024, the company repurchased 266,997 shares at an aggregate cost of approximately $40.0 million, or an average price of $149.79 per share[104] Item 3. Defaults Upon Senior Securities Not applicable Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information During the thirteen weeks ended August 3, 2024, none of the Company's directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading plans - No directors or Section 16 officers adopted or terminated a Rule 10b5-1 trading plan during the quarter[104] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files