• Revenue: $843.7 million, a 14.6% increase from the previous year.
• Comparable Sales: Increased by 0.6%.
• Adjusted EPS: $0.42, compared to $0.26 last year.
• New Stores Opened: 82 new stores in the third quarter, totaling 1,749 stores.
• Gross Margin: Increased by approximately 290 basis points to 33.2%.
• SG&A Expenses: Increased approximately 180 basis points to 29.9% of sales.
• Operating Income: $27.6 million with an operating margin of 3.3%.
• Net Income: $23.3 million, up from $14.6 million last year.
• Cash and Investments: $216.6 million with no debt.
• Inventory: $818 million, with a 9% decrease in average inventory per store.
• Fourth Quarter Sales Guidance: Expected increase of 5% to 7% with a comp decline of -5% to -3%.
• Full Year Sales Guidance: Expected increase of 9% to 10% with a comp decline of approximately 3%.
• Capital Expenditures: Approximately $340 million planned for growth CapEx.

• Warning! GuruFocus has detected 1 Warning Sign with FIVE.

Release Date: December 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Five Below Inc (NASDAQ:FIVE) reported a 15% increase in sales for the third quarter, reaching $844 million, which exceeded their guidance.
• The company opened a record 82 new stores during the third quarter, marking an 18% growth in store count compared to the previous year.
• Five Below Inc (NASDAQ:FIVE) saw improved sales across a broader range of categories, particularly in tech, seasonal, style, and candy worlds.
• The introduction of newness and trend-right products, especially in beauty, Halloween, tech, and games and toys categories, contributed to sales outperformance.
• The company has implemented a renewed focus on product and value, aiming to be the 'YES! store' for kids and parents, which has shown early positive results.

Negative Points

• Despite the positive sales growth, comparable sales only increased by 0.6%, indicating challenges in driving consistent comp growth.
• Five Below Inc (NASDAQ:FIVE) faces a compressed holiday season with five fewer shopping days between Thanksgiving and Christmas, which is expected to impact fourth-quarter results.
• The company is dealing with potential tariff impacts, which could affect pricing and sourcing strategies in the future.
• There is a need for SKU rationalization and productivity improvements, which will take time to implement and may affect short-term performance.
• Increased SG&A expenses, driven by higher store payroll and fixed cost deleverage, have impacted operating margins.

Q & A Highlights

Q: Ken, how do you plan to recapture extreme value in product allocation and SKU assortment? A: Kenneth Bull, Interim CEO and COO, emphasized focusing on trend-right, high-quality, extreme value products targeting kids. They plan to rationalize SKUs and improve SKU productivity, expecting a meaningful reduction in SKUs by next year. The emphasis will remain on $1 to $3 price points, which are crucial for their target demographic.

Q: Can you discuss the benefits of having everyone back in the office and your plans for store growth? A: Kenneth Bull noted that having teams back in the office has improved collaboration and innovation, particularly in merchandising and planning. For store growth, they plan to open 150 to 180 stores next year, likely at the lower end due to site selectivity and landlord delays.

Q: What were the missed opportunities in Q4, and how did the compressed season impact your results? A: Kenneth Bull acknowledged that while they were pleased with the team's efforts, there are always opportunities for improvement. They used the 2019 compressed season as a guide, which had a 500 basis point comp differential between Q3 and Q4.

Q: How did the actions taken by Five Below contribute to the improvement from Q2 to Q3, and how do you plan to handle potential tariffs? A: Kenneth Bull attributed the improvement to capitalizing on increased traffic, introducing newness, and enhancing operational execution. For tariffs, they plan to leverage vendor partnerships, sourcing strategies, and potentially adjust pricing, with price increases being a last resort.

Q: How did labor investments impact performance, and what are your plans for future labor investments? A: Kenneth Bull stated that labor investments improved store service levels and in-stock positions. They increased average store hours by about 5% in Q3 and plan to continue investing in labor to enhance store experience.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.