Q3 net sales increased 21% to $377.4 million

Q3 EPS above guidance at $0.18

Raises low end of full year fiscal 2019 outlook

PHILADELPHIA, PA, Dec. 04, 2019 (GLOBE NEWSWIRE) -- Five Below, Inc. (NASDAQ: FIVE) today announced financial results for the third quarter and for the year-to-date period ended November 2, 2019.

For the third quarter ended November 2, 2019:

  • Net sales increased by 20.7% to $377.4 million from $312.8 million in the third quarter of fiscal 2018; comparable sales increased by 2.9%.

  • The Company opened 61 new stores and ended the quarter with 894 stores in 36 states. This represents an increase in stores of 20.0% from the end of the third quarter of fiscal 2018.

  • Operating income was $12.7 million compared to $15.5 million in the third quarter of fiscal 2018. As expected, operating income decreased primarily due to net unmitigated tariff costs and the timing of certain merchandise costs.

  • The effective tax rate was 24.2% compared to 18.6% in the third quarter of fiscal 2018.

  • Net income was $10.2 million compared to $13.5 million in the third quarter of fiscal 2018.

  • Diluted income per common share was $0.18 compared to $0.24 in the third quarter of fiscal 2018. The benefit from share-based accounting was less than a penny in the third quarter of fiscal 2019 compared to $0.02 in the third quarter of fiscal 2018.

  • The Company repurchased 191,367 shares at a cost of approximately $20.3 million in the third quarter of fiscal 2019.

Joel Anderson, President and CEO of Five Below, stated, “We are very pleased with our third quarter performance. Our strong top and bottom line results exceeded our expectations and were driven by continued strength from our new stores as well as broad-based performance across our worlds. We also opened a record 61 stores in diverse markets during the quarter, and have since completed our 150 planned new stores for the year.”

Mr. Anderson continued, “We are ready and excited to deliver a great holiday shopping experience for our customers. We believe our assortment of $1 to $5 items, as well as our new Ten Below Gift Shop section highlighting toys and games, reinforces our position as a go-to destination for holiday stocking stuffers and gifts at unbeatable value. We remain firmly committed to providing extreme value to our customers on fresh, high quality, trend-right products with a fun, differentiated shopping experience.”

For the year-to-date period ended November 2, 2019:

  • Net sales increased by 21.2% to $1,159.6 million from $956.9 million in the year-to-date period of fiscal 2018; comparable sales increased by 2.4%.

  • The Company opened 144 new stores compared to 120 new stores opened in the year-to-date period of fiscal 2018.

  • Operating income was $73.2 million compared to $70.7 million in the year-to-date period of fiscal 2018. As expected, operating income for the year-to-date period ended November 2, 2019 was impacted by net unmitigated tariff costs, 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 16.1% compared to 18.2% 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 November 2, 2019.

  • Net income was $64.7 million compared to $60.4 million in the year-to-date period of fiscal 2018.

  • Diluted income per common share was $1.15 compared to $1.07 in the year-to-date period of fiscal 2018. The benefit from share-based accounting was $0.13 in the year-to-date period of fiscal 2019 compared to $0.08 in the year-to-date period of fiscal 2018.

Fourth Quarter and Fiscal 2019 Outlook:

The Company expects the following results for the fourth 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 at 25% and on List 4A goods at 15%, with List 4B goods at 15%, to become effective December 15, 2019.

  • The effective tax rate in fiscal 2019 is expected to be approximately 22.0%, which excludes any potential future impact from share-based accounting.

  • The diluted weighted average shares outstanding does not include any potential future impact from share repurchases.

For the fourth quarter of fiscal 2019:

  • Net sales are expected to be in the range of $717 million to $732 million based on opening approximately 6 new stores and assuming a 2% to 3% increase in comparable sales.

  • Net income is expected to be in the range of $110.7 million to $115.2 million.

  • Diluted income per common share is expected to be in the range of $1.97 to $2.05 on approximately 56.1 million diluted weighted average shares outstanding.

For the full year of fiscal 2019:

  • Net sales are expected to be in the range of $1.877 billion to $1.892 billion based on opening 150 new stores and assuming an approximate 2.5% increase in comparable sales.

  • Net income is expected to be in the range of $175.4 million to $179.9 million.

  • Diluted income per common share is expected to be in the range of $3.11 to $3.19 on approximately 56.3 million diluted weighted average shares outstanding.

Conference Call Information:

A conference call to discuss the third quarter fiscal 2019 financial results is scheduled for today, December 4, 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 10136712. 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 related to our product pricing strategy, 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. With most items priced at $5 or below, and some extreme value items priced up to just $10, 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 900 stores in 36 states. For more information, please visit www.fivebelow.com and a store!

FIVE BELOW, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands)

  November 2, 2019 February 2, 2019 November 3, 2018
Assets      
Current assets:      
Cash and cash equivalents $77,496  $251,748  $103,262 
Short-term investment securities 54,072  85,412  85,029 
Inventories 419,340  243,636  339,898 
Prepaid income taxes 16,396  1,337  11,443 
Prepaid expenses and other current assets 58,666  60,124  59,500 
Total current assets 625,970  642,257  599,132 
Property and equipment, net 400,129  301,297  245,631 
Operating lease assets 794,350     
Deferred income taxes 2,283  6,126  3,243 
Other assets 11,019  2,584  1,730 
  $1,833,751  $952,264  $849,736 
       
Liabilities and Shareholders’ Equity      
Current liabilities:      
Line of credit $  $  $ 
Accounts payable 188,061  103,692  155,986 
Income taxes payable 831  20,626  281 
Accrued salaries and wages 11,773  24,586  11,139 
Other accrued expenses 91,304  104,201  72,019 
Operating lease liabilities 105,834     
Total current liabilities 397,803  253,105  239,425 
Deferred rent and other 1,250  84,065  85,240 
Long-term operating lease liabilities 789,307     
Total liabilities 1,188,360  337,170  324,665 
Shareholders’ equity:      
Common stock 556  557  557 
Additional paid-in capital 318,318  352,702  351,941 
Retained earnings 326,517  261,835  172,573 
Total shareholders’ equity 645,391  615,094  525,071 
  $1,833,751  $952,264  $849,736 
             

FIVE BELOW, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)

 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 November 2,
2019
 November 3,
2018
 November 2,
2019
 November 3,
2018
Net sales$377,438  $312,823  $1,159,600  $956,879 
Cost of goods sold258,756  210,733  774,762  635,799 
Gross profit118,682  102,090  384,838  321,080 
Selling, general and administrative expenses105,997  86,542  311,655  250,404 
Operating income12,685  15,548  73,183  70,676 
Interest income and other, net753  1,058  3,952  3,120 
Income before income taxes13,438  16,606  77,135  73,796 
Income tax expense3,249  3,090  12,453  13,413 
Net income$10,189  $13,516  $64,682  $60,383 
Basic income per common share$0.18  $0.24  $1.16  $1.08 
Diluted income per common share$0.18  $0.24  $1.15  $1.07 
Weighted average shares outstanding:       
Basic shares55,672,796  55,742,854  55,855,526  55,731,098 
Diluted shares56,019,736  56,228,305  56,208,718  56,185,305 
            

FIVE BELOW, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

  Thirty-Nine Weeks Ended
  November 2, 2019 November 3, 2018
Operating activities:    
Net income $64,682  $60,383 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 39,894  30,267 
Share-based compensation expense 9,446  9,297 
Deferred income tax expense 3,843  3,433 
Other non-cash expenses 75  43 
Changes in operating assets and liabilities:    
Inventories (175,704) (152,861)
Prepaid income taxes (15,059) (9,179)
Prepaid expenses and other assets 326  (14,175)
Accounts payable 78,372  79,036 
Income taxes payable (19,795) (24,994)
Accrued salaries and wages (12,813) (11,767)
Deferred rent (92,382) 12,785 
Operating leases 102,042   
Other accrued expenses 18,928  19,351 
Net cash provided by operating activities 1,855  1,619 
Investing activities:    
Purchases of investment securities and other investments (103,055) (91,375)
Sales, maturities, and redemptions of investment securities 127,093  166,006 
Capital expenditures (156,350) (82,027)
Net cash used in investing activities (132,312) (7,396)
Financing activities:    
Net proceeds from issuance of common stock 195  168 
Repurchase and retirement of common stock (36,885)  
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units 3,186  4,019 
Common shares withheld for taxes (10,291) (7,817)
Net cash used in financing activities (43,795) (3,630)
Net decrease in cash and cash equivalents (174,252) (9,407)
Cash and cash equivalents at beginning of period 251,748  112,669 
Cash and cash equivalents at end of period $77,496  $103,262