8-K: Five Below Reports Q4 and Fiscal Year 2024 Results; Announces 2025 Outlook

Five Below's Q4 2024 net sales increased by 7.8% excluding the 53rd week of fiscal 2023, with a comparable sales decrease of 3.0%.

Summary

• Five Below announced its financial results for the fourth quarter and full year of fiscal 2024, which ended on February 1, 2025.
• For Q4, net sales increased by 4.0% to $1.39 billion, or 7.8% excluding the impact of the 53rd week in fiscal 2023, while comparable sales decreased by 3.0%.
• The company opened 22 net new stores, bringing the total to 1,771 stores across 44 states, a 14.7% increase in store count year-over-year.
• Operating income for Q4 was $246.8 million, compared to $268.4 million in the prior year.
• Adjusted operating income decreased by 1.5% excluding the 53rd week impact.
• GAAP diluted EPS was $3.39 for Q4, while adjusted diluted EPS was $3.48, a decrease of 0.6% excluding the 53rd week.
• For the full fiscal year 2024, net sales increased by 8.9% to $3.88 billion, or 10.4% excluding the 53rd week, with a comparable sales decrease of 2.7%.
• The company opened 227 net new stores during the year.
• Operating income for the year was $323.8 million, compared to $385.6 million in the prior year.
• Adjusted operating income decreased by 4.8% excluding the 53rd week impact.
• GAAP diluted EPS was $4.60 for the full year, while adjusted diluted EPS was $5.04, a decrease of 4.2% excluding the 53rd week.
• The company repurchased approximately 267,000 shares at a cost of approximately $40.0 million in fiscal 2024.
• For the first quarter of fiscal 2025, the company expects net sales to be in the range of $905 million to $925 million, based on opening approximately 50 new stores and assuming an approximate flat to 2% increase in comparable sales.
• Net income for Q1 2025 is expected to be in the range of $25 million to $31 million, with adjusted net income between $28 million and $34 million.
• Diluted income per common share for Q1 2025 is expected to be in the range of $0.44 to $0.55, with adjusted diluted income per common share between $0.50 and $0.61.
• For the full year of fiscal 2025, net sales are expected to be in the range of $4.21 billion to $4.33 billion, based on opening approximately 150 new stores and assuming an approximate flat to 3% increase in comparable sales.
• Net income for fiscal 2025 is expected to be in the range of $216 million to $250 million, with adjusted net income between $227 million and $261 million.
• Diluted income per common share for fiscal 2025 is expected to be in the range of $3.90 to $4.52, with adjusted diluted income per common share between $4.10 and $4.72.
• Gross capital expenditures are expected to be approximately $210 million to $230 million in fiscal 2025.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company is growing its store count and overall sales, comparable sales are down, and earnings are lower than the previous year. The outlook for 2025 suggests continued growth, but at a potentially slower pace.

Positives

• Net sales increased by 7.8% for Q4 and 10.4% for fiscal 2024, excluding the 53rd week of fiscal 2023.
• The company opened 227 net new stores in fiscal 2024, expanding its footprint.
• The company expects to open approximately 150 new stores in fiscal year 2025.
• The company repurchased approximately 267,000 shares at a cost of approximately $40.0 million in fiscal 2024.

Negatives

• Comparable sales decreased by 3.0% in Q4 and 2.7% for the full fiscal year 2024.
• Operating income decreased in both Q4 and the full year compared to the prior year.
• GAAP and adjusted diluted EPS decreased in both Q4 and the full year compared to the prior year.
• The company is forecasting flat to 3% increase in comparable sales for fiscal year 2025.

Risks

• The company faces risks related to disruption to the global supply chain.
• The company faces risks related to its strategy and expansion plans.
• The company faces risks related to its ability to attract, retain, and integrate qualified executive talent.
• The company faces risks related to disruptions in its information technology systems and its ability to maintain and upgrade those systems.
• The company faces risks related to the inability to successfully implement its online retail operations.
• The company faces risks related to cyberattacks or other cyber incidents.
• The company faces risks related to increased usage of machine learning and other types of artificial intelligence in its business, and challenges with properly managing its use.
• The company faces risks related to its ability to select, obtain, distribute and market merchandise profitably.
• The company faces risks related to its reliance on merchandise manufactured outside of the United States.
• The company faces risks related to the availability of suitable new store locations and the dependence on the volume of traffic to our stores.
• The company faces risks related to changes in consumer preferences and economic conditions.
• The company faces risks related to increased operating costs, including wage rates.
• The company faces risks related to inflation and increasing commodity prices.
• The company faces risks related to potential recessions and systematic failure of the banking system in the United States or globally.
• The company faces risks related to extreme weather, pandemic outbreaks, global political events, war, terrorism or civil unrest (including any resulting store closures, damage, or loss of inventory).
• The company faces risks related to leasing, owning or building distribution centers.
• The company faces risks related to its ability to successfully manage inventory balance and inventory shrinkage.
• The company faces risks related to quality or safety concerns about the Company's merchandise.
• The company faces risks related to increased competition from other retailers including online retailers.
• The company faces risks related to the seasonality of our business.
• The company faces risks related to our ability to protect our brand name and other intellectual property.
• The company faces risks related to customers' payment methods.
• The company faces 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 current and potential tariffs imposed, threatened and proposed by the United States on foreign imports.
• The company faces risks associated with the restrictions imposed by our indebtedness on our current and future operations.
• The company faces the impact of changes in tax legislation and accounting standards and risks associated with leasing substantial amounts of space.

Future Outlook

The company expects net sales of $4.21 billion to $4.33 billion for fiscal year 2025, based on opening approximately 150 new stores and assuming an approximate flat to 3% increase in comparable sales. Diluted income per common share is expected to be in the range of $3.90 to $4.52.

Management Comments

• Ken Bull, COO, said We were pleased to end the year with fourth quarter sales and EPS above our outlook.
• Winnie Park, CEO, said, It has been a busy three months at Five Below.
• Winnie Park, CEO, said, We are executing our key strategies around product, value and store experience, and doing so with a sharpened focus on our core customer the kid and the kid in all of us.
• Winnie Park, CEO, said, Our focus on affordability and value is not just a strategy; its a promise to our customers that Five Below is a place where they can find joy and excitement at WOW prices.

Industry Context

Five Below operates in the discount retail sector, competing with other value-focused retailers. The company's growth strategy relies heavily on store expansion and maintaining a compelling product assortment at attractive price points. The results reflect the challenges of maintaining growth in a competitive environment, particularly with respect to comparable sales.

Comparison to Industry Standards

• Comparable retailers like Dollar General and Dollar Tree have also been focusing on store expansion and managing supply chain pressures.
• Five Below's comparable sales decline of 3.0% in Q4 is a key metric to compare against its peers; some peers have reported positive comp sales growth, indicating potential market share shifts.
• The planned capital expenditures of $210 million to $230 million for fiscal 2025 reflect a significant investment in new stores and infrastructure, which is consistent with the company's growth strategy.

Stakeholder Impact

• Shareholders may be concerned about the decrease in comparable sales and earnings.
• Employees may be affected by the company's cost-optimization initiatives.
• Customers will continue to benefit from the company's focus on value and affordability.
• Suppliers may be impacted by the company's efforts to manage costs and inventory.

Next Steps

• The company plans to open approximately 50 new stores in the first quarter of fiscal 2025.
• The company plans to open approximately 150 new stores in fiscal year 2025.
• The company will continue to execute its key strategies around product, value, and store experience.

Key Dates

Keywords

Financial Results, Net Sales, Comparable Sales, Store Expansion, Fiscal Year 2024, Fiscal Year 2025, Earnings Per Share, Five Below