Q2 net sales increased 20% to $417.4 million

Q2 EPS increased 13% to $0.51

Updates full year fiscal 2019 outlook

PHILADELPHIA, PA, Aug. 28, 2019 (GLOBE NEWSWIRE) -- Five Below, Inc. (NASDAQ: FIVE) today announced financial results for the second quarter and for the year to date period ended August 3, 2019.

For the second quarter ended August 3, 2019:

  • Net sales increased by 20.0% to $417.4 million from $347.7 million in the second quarter of fiscal 2018; comparable sales increased by 1.4%.
  • The Company opened 44 new stores and ended the quarter with 833 stores in 36 states. This represents an increase in stores of 20.4% from the end of the second quarter of fiscal 2018.
  • Operating income increased by 18.4% to $36.0 million from $30.4 million in the second quarter of fiscal 2018.
  • The effective tax rate was 23.2% versus 20.2% in the second quarter of fiscal 2018.
  • Net income increased by 15.0% to $28.8 million compared to $25.1 million in the second quarter of fiscal 2018.
  • Diluted income per common share was $0.51 compared to $0.45 in the second quarter of fiscal 2018. The benefit from share-based accounting was $0.01 in the second quarter of fiscal 2019 compared to $0.03 in the second quarter of fiscal 2018.
  • The Company repurchased 146,185 shares at a cost of approximately $16.6 million in the second quarter of fiscal 2019.

Joel Anderson, President and CEO of Five Below, stated, “For the second quarter, we delivered total sales growth of 20% and EPS at the high-end of our guidance range. We saw broad-based strength across our worlds, despite a slower start to summer, which impacted sales of our seasonal assortment. Our performance once again was driven by continued strong results from new stores. We opened 44 new stores in 21 states and are on track to finish the year with 150 new stores.”

Mr. Anderson continued, “We are pleased with the start to the third quarter, with a back to school assortment that is resonating with customers. Our merchants continue to deliver even better WOW products, and we remain focused on innovating and elevating our customer experience through the Refresh store format and remodel program, including a new, reimagined front-end experience, as well as the Ten Below test. With respect to our outlook, we are updating our guidance ranges to reflect the fluidity of the current tariff situation and timing of our mitigation efforts.”

For the year to date period ended August 3, 2019:

  • Net sales increased by 21.4% to $782.2 million from $644.1 million in the year to date period of fiscal 2018; comparable sales increased by 2.2%.
  • The Company opened 83 new stores compared to 67 new stores opened in the year to date period of fiscal 2018.
  • Operating income increased by 9.7% to $60.5 million from $55.1 million in the year to date period of fiscal 2018. Operating income for the year to date period ended August 3, 2019 was impacted by unanniversaried tax reform-related investments incurred during the first quarter of 2019, the costs of the new Southeast distribution center, and the new lease accounting standard.
  • The effective tax rate was 14.4% versus 18.1% in the year to date period of fiscal 2018 reflecting the higher benefit from share-based accounting incurred during the year to date period ended August 3, 2019.
  • Net income increased by 16.3% to $54.5 million compared to $46.9 million in the year to date period of fiscal 2018.
  • Diluted income per common share was $0.97 compared to $0.84 in the year to date period of fiscal 2018. The benefit from share-based accounting was $0.12 in the year to date period of fiscal 2019 compared to $0.07 in the year to date period of fiscal 2018.

Third Quarter and Fiscal 2019 Outlook:

The Company expects the following results for the third quarter and full year fiscal 2019. This outlook now includes:

  • The expectation that Section 301 tariffs as currently enacted by the Office of the United States Trade Representative will remain in place on Lists 1, 2 and 3 goods and will increase from 25% to 30% on October 1, 2019, with tariffs on List 4 goods going into effect in two parts with a tariff of 15% on List 4A goods effective September 1, 2019 and on List 4B goods effective December 15, 2019.
  • The effective tax rate in fiscal 2019 is expected to be approximately 22.5%, which excludes any potential future impact from share-based accounting.
  • The diluted weighted average shares outstanding reflects the repurchase of 337,552 shares at a cost of approximately $36.9 million for the fiscal year to date period through August 28, 2019 and does not include any potential future impact from share repurchases.

For the third quarter of fiscal 2019:

  • Net sales are expected to be in the range of $369 million to $374 million based on opening 55 new stores and assuming a 2% to 3% increase in comparable sales.
  • Net income is expected to be in the range of $7.6 million to $9.8 million.
  • Diluted income per common share is expected to be in the range of $0.14 to $0.17 on approximately 56.2 million diluted weighted average shares outstanding.

For the full year of fiscal 2019:

  • Net sales are expected to be in the range of $1.872 billion to $1.892 billion based on opening 150 new stores and assuming an approximate 3% increase in comparable sales.
  • Net income is expected to be in the range of $173.4 million to $179.9 million.
  • Diluted income per common share is expected to be in the range of $3.08 to $3.19 on approximately 56.4 million diluted weighted average shares outstanding.

Conference Call Information:

A conference call to discuss the second quarter fiscal 2019 financial results is scheduled for today, August 28, 2019, at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 412-902-6753 approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.fivebelow.com in the investor relations section of the website.

A taped replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online and by dialing 412-317-0088. The pin number to access the telephone replay is 10134111. The replay will be available for approximately two weeks after the call.

Forward-Looking Statements:

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect management's current views and estimates regarding the Company's industry, business strategy, goals and expectations concerning its market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. Investors can identify these statements by the fact that they use words such as "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "future" and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks related to the Company's strategy and expansion plans, risks related to the inability to successfully implement our expansion into online retail, risks related to our ability to select, obtain, distribute and market merchandise profitably, risks related to our reliance on merchandise manufactured outside of the United States, risks related to any legal proceedings that we may become subject to, the availability of suitable new store locations and the dependence on the volume of traffic to our stores, risks related to the Company's continued retention of its executive officers, senior management and other key personnel, risks related to changes in consumer preferences and economic conditions, risks related to increased operating costs, including wage rates, risks related to extreme weather, risks related to leasing, owning or building distribution centers, risks related to our ability to successfully manage inventory balance and inventory shrinkage, quality or safety concerns about the Company's merchandise, increased competition from other retailers including online retailers, risks related to the seasonality of our business, risks related to cyber security, risks related to our ability to protect our brand name and other intellectual property, risks related to customers' payment methods, risks related to domestic and foreign trade restrictions including duties and tariffs affecting our domestic and foreign suppliers and increasing our costs, including, among others, the direct and indirect impact of recent and potential tariffs imposed and proposed by the United States on foreign imports, risks associated with the restrictions imposed by our indebtedness on our current and future operations, the impact of changes in tax legislation and accounting standards and risks associated with leasing substantial amounts of space. For further details and a discussion of these risks and uncertainties, see the Company's periodic reports, including the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed with or furnished to the Securities and Exchange Commission and available at www.sec.gov. If one or more of these risks or uncertainties materialize, or if any of the Company's assumptions prove incorrect, the Company's actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this news release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Five Below:

Five Below is a leading high-growth value retailer offering trend-right, high-quality products loved by tweens, teens and beyond. We know life is way better when you’re free to “let go & have fun” in an amazing experience filled with unlimited possibilities. We make it easy to say YES! to the newest, coolest stuff across awesome Five Below worlds: Style, Room, Sports, Tech, Create, Party, Candy and Now. Founded in 2002 and headquartered in Philadelphia, Pennsylvania, Five Below today has over 800 stores in 36 states. For more information, please visit www.fivebelow.com and a store!

 
 
FIVE BELOW, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands)
 
  August 3, 2019 February 2, 2019 August 4, 2018
Assets      
Current assets:      
Cash and cash equivalents $178,800  $251,748  $133,256 
Short-term investment securities 90,325  85,412  131,441 
Inventories 272,689  243,636  228,109 
Prepaid income taxes 10,853  1,337  7,358 
Prepaid expenses and other current assets 52,436  60,124  50,210 
Total current assets 605,103  642,257  550,374 
Property and equipment, net 337,193  301,297  214,923 
Operating lease assets 709,325     
Deferred income taxes 2,924  6,126  3,949 
Long-term investment securities 1,043    1,404 
Other assets 3,830  2,584  1,687 
  $1,659,418  $952,264  $772,337 
       
Liabilities and Shareholders’ Equity      
Current liabilities:      
Line of credit $  $  $ 
Accounts payable 108,667  103,692  103,891 
Income taxes payable 593  20,626  407 
Accrued salaries and wages 14,218  24,586  13,509 
Other accrued expenses 83,876  104,201  66,933 
Operating lease liabilities 98,507     
Total current liabilities 305,861  253,105  184,740 
Deferred rent and other   84,065  79,639 
Long-term operating lease liabilities 701,621     
Total liabilities 1,007,482  337,170  264,379 
Shareholders’ equity:      
Common stock 558  557  557 
Additional paid-in capital 335,050  352,702  348,344 
Retained earnings 316,328  261,835  159,057 
Total shareholders’ equity 651,936  615,094  507,958 
  $1,659,418  $952,264  $772,337 


 

    
FIVE BELOW, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
    
 Thirteen Weeks Ended Twenty-Six Weeks Ended
 August 3, 2019 August 4, 2018 August 3, 2019 August 4, 2018
Net sales$417,400  $347,734  $782,162  $644,056 
Cost of goods sold271,229  225,982  516,006  425,066 
Gross profit146,171  121,752  266,156  218,990 
Selling, general and administrative expenses110,142  91,330  205,658  163,862 
Operating income36,029  30,422  60,498  55,128 
Interest income, net1,512  983  3,199  2,062 
Income before income taxes37,541  31,405  63,697  57,190 
Income tax expense8,710  6,342  9,204  10,323 
Net income$28,831  $25,063  $54,493  $46,867 
Basic income per common share$0.52  $0.45  $0.97  $0.84 
Diluted income per common share$0.51  $0.45  $0.97  $0.84 
Weighted average shares outstanding:       
Basic shares55,950,733  55,730,621  55,930,313  55,671,729 
Diluted shares56,294,109  56,191,984  56,286,632  56,110,361 


   
FIVE BELOW, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
   
  Twenty-Six Weeks Ended
  August 3, 2019 August 4, 2018
Operating activities:    
Net income $54,493  $46,867 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 25,459  19,367 
Share-based compensation expense 5,986  6,157 
Deferred income tax expense 3,202  2,727 
Other non-cash expenses (58) 43 
Changes in operating assets and liabilities:    
Inventories (29,053) (41,072)
Prepaid income taxes (9,516) (5,094)
Prepaid expenses and other assets 6,442  (4,844)
Accounts payable 6,502  35,424 
Income taxes payable (20,033) (24,868)
Accrued salaries and wages (10,368) (9,397)
Deferred rent (92,382) 7,013 
Operating leases 90,803   
Other accrued expenses 15,567  12,066 
Net cash provided by operating activities 47,044  44,389 
Investing activities:    
Purchases of investment securities (95,753) (59,569)
Sales, maturities, and redemptions of investment securities 89,797  86,384 
Capital expenditures (100,139) (46,522)
Net cash used in investing activities (106,095) (19,707)
Financing activities:    
Net proceeds from issuance of common stock 195  168 
Repurchase and retirement of common stock (6,878)  
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units 2,934  3,367 
Common shares withheld for taxes (10,148) (7,630)
Net cash used in financing activities (13,897) (4,095)
Net (decrease) increase in cash and cash equivalents (72,948) 20,587 
Cash and cash equivalents at beginning of period 251,748  112,669 
Cash and cash equivalents at end of period $178,800  $133,256