Five Below(FIVE) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales for Q3 2019 increased by 21% to $377 million compared to Q3 2018, exceeding the company's outlook [7][25] - Earnings per share (EPS) for Q3 2019 was $0.18, beating guidance by a penny [7][29] - Comparable sales increased by 2.9%, driven by a 1.9% increase in comp ticket and a 1% increase in comp transactions [26] - Gross profit increased by 16.3% to $118.7 million, while gross margin decreased by approximately 120 basis points to 31.4% due to tariff costs [27] - Net income decreased by 24.6% to $10.2 million compared to $13.5 million in Q3 2018 [29] Business Line Data and Key Metrics Changes - New store performance was strong, with 61 new stores opened in Q3, totaling 144 new stores for the year [8] - The company experienced broad-based performance across its eight worlds, particularly in style, tech, candy, and room [9] Market Data and Key Metrics Changes - The company opened stores in diverse markets across 24 states, indicating a broad appeal [8] - The company is preparing for the holiday season with new product assortments, including a focus on the upcoming Frozen 2 movie [9][18] Company Strategy and Development Direction - The company is focused on executing key strategic initiatives, including marketing, systems, and infrastructure to support future growth [12] - The remodel program is on track, with 50 remodels expected to be completed in 2019, generating positive customer feedback [13] - The company is testing the Ten Below concept, providing merchandise priced above $5, which has received positive customer responses [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the upcoming holiday season, stating they are well-positioned with their product assortment and marketing plan [17][21] - The company raised the low end of its sales guidance for fiscal 2019, expecting sales between $1.877 billion and $1.892 billion [33] - Management acknowledged the impact of the Toys"R"Us closure on traffic and sales but remains optimistic about new product offerings [21][57] Other Important Information - The company ended Q3 with $132 million in cash and no debt, having repurchased approximately 191,000 shares at a cost of $20.3 million during the quarter [30][31] - Inventory at the end of Q3 was $419 million, reflecting a 2.8% increase per store compared to the previous year [31] Q&A Session Summary Question: Impact of price increases on sales margins - Management indicated that the price increase from $5 to $5.55 for tech products had the most significant impact on margins, while the Ten Below Gift Shop was more about offering new products [43][44] Question: Initial uptake from Frozen merchandise - Management noted that the bulk of Frozen sales are expected to occur after the movie's release, and they are on plan for sales [45][46] Question: Strength across business lines - Management confirmed that the strength across different worlds is interrelated, with various trends driving customer traffic [48][49] Question: Elasticity of pricing changes - Management stated that elasticity results were in line with expectations, and any negative impacts were primarily seen in branded products, which were adjusted accordingly [68][69] Question: Store openings and sales trajectory - Management did not provide specific guidance for 2020 but reiterated their commitment to long-term growth targets [70][71]