Five Below Inc.

06/04/2026 | Press release | Distributed by Public on 06/04/2026 13:53

Quarterly Report for Quarter Ending May 2, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new merchandise, and the implementation of our marketing and branding strategies. Forward-looking statements frequently are identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or the negative of these terms or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date of this report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in Part I, Item 1A "Risk Factors" in our Annual Report, as amended by the risk factors included in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q. These factors include without limitation:
•the impacts of inflation and increasing commodity prices;
•failure to successfully implement our growth strategy;
•disruptions in our ability to select, obtain, distribute and market merchandise profitably;
•reliance on merchandise manufactured outside of the United States;
•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;
•the impact of price increases, such as, a reduction in our unit sales, damage to our reputation with our customers, and our becoming less competitive in the marketplace;
•dependence on the volume of traffic to our stores and website;
•inability to successfully build, operate or expand our shipcenters or network capacity;
•disruptions to the global supply chain, increased cost of freight, constraints on shipping capacity to transport inventory or the timely receipt of inventory;
•extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations;
•disruptions in our information technology systems and our inability to maintain and update those systems could adversely affect operations and our customers;
•systemic failure of the banking system in the United States or globally;
•the risks of cyberattacks or other cyber incidents, such as the failure to secure customers' confidential or credit card information, or other private data relating to our crew or our Company, including the costs associated with protection against or remediation of such incidents;
•increased usage of machine learning and other types of artificial intelligence in our business, and challenges with properly managing its use;
•increased operating costs or exposure to fraud or theft due to customer payment-related risks;
•inability to increase sales and improve the efficiencies, costs and effectiveness of our operations;
•dependence on our executive officers, senior management and other key personnel or inability to hire additional qualified personnel;
•inability to successfully manage our inventory balances and inventory shrinkage;
•inability to meet our lease obligations;
•the costs and risks of constructing and owning real property;
•changes in our competitive environment, including increased competition from other retailers and the presence of online retailers;
•the seasonality of our business;
•inability to successfully implement our expansion into online retail;
•natural disasters, adverse weather conditions, pandemic outbreaks, global political events, war, terrorism or civil unrest;
•the impact of changes in tax legislation;
•the impact to our financial performance related to insurance programs;
•inability to protect our brand name, trademarks and other intellectual property rights;
•the impact of product and food safety claims and effects of legislation; and
•restrictions imposed by our indebtedness on our current and future operations.
Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.
Overview
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.
We 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).
On February 20, 2026, the U.S. Supreme Court issued a ruling holding that the International Emergency Economic Powers Act ("IEEPA") does not authorize the President to impose tariffs, creating uncertainty regarding the potential recovery of tariffs previously assessed under that statute. In April, US Customs launched a system to allow importers of record to file IEEPA tariff refunds. The Company has filed claims to seek recovery of such tariffs; however, the availability, timing, and amount of any refunds remain uncertain and depend on further legal, regulatory, and administrative actions.
How We Assess the Performance of Our Business and Non-GAAP Measures
In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, cost of goods sold and gross profit, selling, general and administrative expenses (including depreciation and amortization) and operating income.
Net Sales
Net sales constitute gross sales net of merchandise returns for damaged or defective goods. Net sales consist of sales from comparable stores, non-comparable stores, and e-commerce, which includes shipping and handling revenue. Revenue from the sale of gift cards is deferred and not included in net sales until the gift cards are redeemed to purchase merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer.
Our business is seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.
Comparable Sales
Comparable sales include net sales from stores that have been open for at least 15 full months from their opening date, and e-commerce sales. Comparable stores include the following:
•Stores that have been remodeled while remaining open;
•Stores that have been relocated within the same trade area, to a location that is not significantly different in size, in which the new store opens at about the same time as the old store closes; and
•Stores that have expanded, but are not significantly different in size, within their current locations.
For stores that are relocated or expanded, the following periods are excluded when calculating comparable sales:
•The period beginning when the closing store receives its last merchandise delivery from one of our shipcenters through:
▪the last day of the fiscal year in which the store was relocated or expanded (for stores that increased significantly in size); or
▪the last day of the fiscal month in which the store re-opens (for all other stores); and
•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.
There may be variations in the way in which some of our competitors and other retailers calculate comparable or "same store" sales. As a result, data in this Quarterly Report on Form 10-Q regarding our comparable sales may not be comparable to similar data made available by other retailers. Non-comparable sales are comprised of new store sales, sales for stores not open for a full 15 months, and sales from existing store relocation and expansion projects that were temporarily closed (or not receiving deliveries) and not included in comparable sales.
Measuring the change in fiscal year-over-year comparable sales allows us to evaluate how we are performing. Various factors affect comparable sales, including:
•consumer preferences, buying trends and overall economic trends;
•our ability to identify and respond effectively to customer preferences and trends;
•our ability to provide an assortment of high-quality, trend-right and everyday product offerings that generate new and repeat visits to our stores;
•the customer experience we provide in our stores and online;
•the level of traffic near our locations in the power, community and lifestyle centers in which we operate;
•competition;
•changes in our merchandise mix;
•pricing;
•our ability to source and distribute products efficiently;
•the timing of promotional events and holidays;
•the timing of introduction of new merchandise and customer acceptance of new merchandise;
•our opening of new stores in the vicinity of existing stores;
•the number of items purchased per store visit; and
•weather conditions.
Opening new stores is an important part of our growth strategy. As we continue to pursue our growth strategy, we expect that a significant percentage of our net sales will continue to come from new stores not included in comparable sales. Accordingly, comparable sales are only one measure we use to assess the success of our growth strategy.
Cost of Goods Sold and Gross Profit
Gross profit is equal to our net sales less our cost of goods sold. Gross margin is gross profit as a percentage of our net sales. Cost of goods sold reflects the direct costs of purchased merchandise and inbound freight and tariffs, as well as shipping and handling costs, store occupancy, distribution and buying expenses. Shipping and handling costs include internal fulfillment and shipping costs related to our e-commerce operations. Store occupancy costs include rent, common area maintenance, utilities and property taxes for all store locations. Distribution costs include costs for receiving, processing, warehousing and shipping of merchandise from our shipcenters and between store locations. Buying costs include compensation expense and other costs for our internal buying organization, including our merchandising and product development team and our planning and allocation group. These costs are significant and can be expected to continue to increase as our Company grows.
The components of our cost of goods sold may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers. As a result, data in this Quarterly Report on Form 10-Q regarding our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.
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.
Selling, General and Administrative Expenses (including Depreciation and Amortization)
Selling, general and administrative (including depreciation and amortization), or SG&A, expenses are composed of payroll and other compensation, marketing and advertising expense, depreciation and amortization expense and other selling and administrative expenses. SG&A expenses as a percentage of net sales are usually higher in lower sales volume quarters and lower in higher sales volume quarters.
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 awards, modifications or forfeitures will impact our share-based compensation expense included in SG&A expenses.
Operating Income
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 measures operating income as a percentage of our net sales.
Results of Consolidated Operations
The following tables summarize key components of our results of consolidated operations for the periods indicated, both in dollars and as a percentage of our net sales.
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
(in millions, except percentages and total stores)
Consolidated Statements of Operations Data (1):
Net sales $ 1,285.6 $ 970.5
Cost of goods sold (exclusive of items shown separately below) 807.0 646.6
Selling, general and administrative expenses 273.3 226.5
Depreciation and amortization 51.1 46.6
Operating income 154.2 50.8
Interest income and other income, net 8.3 5.6
Income before income taxes 162.5 56.5
Income tax expense 39.4 15.3
Net income $ 123.1 $ 41.1
Percentage of Net Sales (1):
Net sales 100.0 % 100.0 %
Cost of goods sold (exclusive of items shown separately below) 62.8 66.6
Selling, general and administrative expenses 21.3 23.3
Depreciation and amortization 4.0 4.8
Operating income 12.0 5.2
Interest income and other income, net 0.6 0.6
Income before income taxes 12.6 5.8
Income tax expense 3.1 1.6
Net income 9.6 % 4.2 %
Operational Data:
Total stores at end of period 1,970 1,826
Comparable sales increase 22.7 % 7.1 %
Average net sales per store (2)
$ 0.7 $ 0.5
Gross margin (3)
37.2 % 33.4 %
(1)Components may not add to total due to rounding.
(2)Only includes stores that opened before the beginning of the thirteen weeks ended.
(3)Gross margin is equal to our net sales less our cost of goods sold as a percentage of our net sales.
Thirteen Weeks Ended May 2, 2026 Compared to the Thirteen Weeks Ended May 3, 2025
Net Sales
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.
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.
Cost of Goods Sold and Gross Profit
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.
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.
Selling, General and Administrative Expenses (including Depreciation and Amortization)
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.
Income Tax Expense
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.
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.
Net Income
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%.
Liquidity and Capital Resources
Overview
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.
Our primary working capital requirements are for the purchase of store inventory and payment of payroll, rent, other store operating costs and distribution costs. Our working capital requirements fluctuate during the year, rising in the third and fourth fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak, year-end holiday shopping season in the fourth fiscal quarter. Fluctuations in working capital are also driven by the timing of new store openings.
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.
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.
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.
Based on our growth plans, we believe that our cash position, which includes our cash equivalents and short-term investments, net cash provided by operating activities and availability under our Revolving Credit Facility, which expires in September 2027, will be adequate to finance our planned capital expenditures, authorized share repurchases and working capital requirements over the next 12 months and for the foreseeable future thereafter. If cash flows from operations and borrowings under our Revolving Credit Facility are not sufficient or available to meet our requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders.
Cash Flows
A summary of our cash flows from operating, investing and financing activities is presented in the following table (in millions):
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
Net cash provided by operating activities $ 227.2 $ 132.7
Net cash used in investing activities (303.1) (35.7)
Net cash used in financing activities (9.0) (1.3)
Net (decrease) increase during period in cash and cash equivalents (1)
$ (84.8) $ 95.7
(1) Components may not add to total due to rounding.
Cash Provided by Operating Activities
Net cash provided by operating activities for the thirteen 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.
Cash Used in Investing Activities
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.
Cash Used in Financing Activities
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.
Line of Credit
See "Note 5 - Line of Credit" to the unaudited consolidated financial statements included in "Part I. Financial Information, Item 1. Consolidated Financial Statements" of this Form 10-Q, for a detailed description of the Company's line of credit.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. Our critical accounting policies and estimates are discussed in the Annual Report.
Contractual Obligations
Except as set forth below, there have been no material changes to our contractual obligations as disclosed in the Annual Report, other than those which occur in the ordinary course of business.
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.
Off-Balance Sheet Arrangements
For the thirteen weeks ended May 2, 2026, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources.
Recently Issued Accounting Pronouncements
See "Note 1 - Summary of Significant Accounting Policies" to the unaudited consolidated financial statements included in "Part I. Financial Information, Item 1. Consolidated Financial Statements" of this Form 10-Q, for a detailed description of recently issued accounting pronouncements.
Five Below Inc. published this content on June 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on June 04, 2026 at 19:53 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]