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Five Below, Inc. Announces Fourth Quarter and Fiscal 2017 Financial Results

Mar 21, 2018

Reports fourth quarter sales growth of 30% to $504.8 million; diluted EPS increase of 34% to $1.21

Reports fiscal 2017 sales growth of 28%; diluted EPS increase of 42% to $1.84

Provides first quarter and full year fiscal 2018 guidance

Announces first ever share repurchase authorization for $100MM

PHILADELPHIA, PA, March 21, 2018 (GLOBE NEWSWIRE) -- Five Below, Inc. (NASDAQ:FIVE) today announced financial results for the fourth quarter and full year of fiscal 2017 ended February 3, 2018, both of which contained one additional week ("53rd week") versus the comparable prior periods.

For the fourth quarter endedFebruary 3, 2018:

  • Net sales increased 30.1% to $504.8 million from $388.1 million in the fourth quarter of fiscal 2016. Excluding the impact of the 53rd week in fiscal 2017, net sales increased 26.0%; comparable sales increased 5.9% on a thirteen week basis.
  • Net sales in the 53rd week were $15.7 million and represented approximately $0.03 cents in diluted earnings per share. 
  • Operating income increased 31.2% to $103.5 million from $78.9 million in the fourth quarter of fiscal 2016.
  • The Company ended the quarter with 625 stores in 32 states. This represents an increase of 19.7% from the end of the fourth quarter of fiscal 2016.
  • Net income was $67.4 million, an increase of 35.3% compared to $49.8 million in the fourth quarter of fiscal 2016.
  • Diluted income per common share was $1.21, an increase of 34.4% compared to $0.90 in the fourth quarter of fiscal 2016. Diluted income per common share included a $0.03 benefit in the fourth quarter of fiscal 2017 due to the adoption of a new accounting standard in fiscal 2017 for employee share-based payments.

For the fiscal year ended February 3, 2018:

  • Net sales increased 27.8% to $1,278.2 million compared to $1,000.4 million in fiscal 2016. Excluding the impact of the 53rd week in fiscal 2017, net sales increased 26.2%; comparable sales increased 6.5% on a fifty-two week basis.
  • Net sales in the 53rd week were $15.7 million and represented approximately $0.03 cents in diluted earnings per share. 
  • Operating income increased 38.1% to $157.4 million compared to $114.0 million in fiscal 2016.
  • The Company opened 103 net new stores compared to 85 net new stores opened in fiscal 2016.
  • Net income was $102.5 million, an increase of 42.6% compared to $71.8 million in fiscal 2016.
  • Diluted income per common share was $1.84, an increase of 41.5% compared to $1.30 per share in fiscal 2016. Diluted income per common share included a $0.05 benefit in fiscal 2017 due to accounting for employee share-based payments.

Joel Anderson, President and CEO, stated, “We are extremely pleased with our strong fourth quarter results, which capped an incredible year for Five Below, delivering outperformance on both the top and bottom line. For the year, sales grew 28%, we achieved a record operating margin of 12.3%, and net income grew over 40%. Our solid financial and operational performance continues to reinforce the universal appeal of Five Below and the strength, consistency and flexibility of our model. Given the strength of our balance sheet, free cash flow generation and year-end cash and investments position, we are announcing our first ever share repurchase authorization for $100 million dollars.”

Mr. Anderson added, “We are excited to begin 2018 with momentum and are in a position of strength to execute against our key strategic priorities. With a portion of the recent tax reform benefits, we are accelerating important investments focused on our associates, systems and infrastructure, further solidifying the foundation to support our future growth. The majority of the benefit from tax reform will flow through to our shareholders. We remain confident in our 2,500 plus store potential and ability to achieve 20% top line growth with 20% plus bottom line growth through 2020."

First Quarter and Fiscal 2018 Outlook:
For the first quarter of fiscal 2018, net sales are expected to be in the range of $290 million to $294 million based on opening approximately 30 new stores and assuming a 3% to 4% increase in comparable sales. Net income is expected to be in the range of $17.4 million to $18.8 million, with a diluted income per common share range of $0.31 to $0.34 on approximately 55.9 million estimated diluted weighted average shares outstanding.

For the full year of fiscal 2018, net sales are expected to be in the range of $1.495 billion to $1.510 billion based on opening approximately 125 new stores and assuming a 1% to 2% increase in comparable sales. Net income is expected to be in the range of $132.7 million to $136.3 million, with a diluted income per common share range of $2.36 to $2.42 on approximately 56.2 million estimated diluted weighted average shares outstanding.

As a result of the Tax Cuts and Jobs Act legislation, the effective tax rate in fiscal 2018 is expected to be approximately 24.5%.

Share Repurchase Program:
The Company also announced that its board of directors has approved a stock repurchase program for up to $100 million of its common shares through March 31, 2021. The number of common shares actually repurchased, and the timing and price of repurchases, will depend upon market conditions, Securities and Exchange Commission requirements, and other factors. Shares may be repurchased from time to time on the open market, in privately negotiated transactions, or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.

Conference Call Information:
A conference call to discuss the fourth quarter and full year fiscal 2017 financial results is scheduled for today, March 21, 2018, at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 412-902-6510 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 10117405. The replay will be available until April 4, 2018.

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, 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 trade restrictions, 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 because everything is just $5 and below 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 approximately 650 stores in 32 states. For more information, please visit www.fivebelow.com and a store!

Investor Contact:
Five Below, Inc.
Christiane Pelz
Vice President, Investor Relations
215-207-2658
Christiane.Pelz@fivebelow.com


FIVE BELOW, INC.
 
Consolidated Balance Sheets
(Unaudited)
(in thousands)
 
    February 3, 2018   January 28, 2017
Assets        
Current assets:        
Cash and cash equivalents   $ 112,669     $ 76,088  
Short-term investment securities   131,958     77,791  
Inventories   187,037     154,448  
Prepaid income taxes   2,264     1,552  
Prepaid expenses and other current assets   45,434     29,910  
Total current assets   479,362     339,789  
Property and equipment, net   180,349     138,376  
Deferred income taxes   6,676     11,039  
Long-term investment securities   27,702     10,514  
Other assets   1,619     818  
    $ 695,708     $ 500,536  
         
Liabilities and Shareholders’ Equity        
Current liabilities:        
Line of credit   $     $  
Accounts payable   73,033     51,178  
Income taxes payable   25,275     23,939  
Accrued salaries and wages   22,906     10,794  
Other accrued expenses   43,246     30,652  
Total current liabilities   164,460     116,563  
Deferred rent and other   72,690     52,568  
Total liabilities   237,150     169,131  
Shareholders’ equity:        
Common stock   554     549  
Additional paid-in capital   346,300     321,603  
Retained earnings   111,704     9,253  
Total shareholders’ equity   458,558     331,405  
    $ 695,708     $ 500,536  



FIVE BELOW, INC.
 
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
 
    Fourteen weeks ended   Thirteen weeks ended   Fifty-three weeks ended   Fifty-two weeks ended
    February 3, 2018   January 28, 2017   February 3, 2018   January 28, 2017
Net sales   $ 504,832     $ 388,090     $ 1,278,208     $ 1,000,410  
Cost of goods sold   297,342     228,673     814,795     643,373  
Gross profit   207,490     159,417     463,413     357,037  
Selling, general and administrative expenses   103,995     80,552     306,022     243,075  
Operating income   103,495     78,865     157,391     113,962  
Interest income, net   556     88     1,458     299  
Income before income taxes   104,051     78,953     158,849     114,261  
Income tax expense   36,674     29,165     56,398     42,421  
Net income   $ 67,377     $ 49,788     $ 102,451     $ 71,840  
Basic income per common share   $ 1.22     $ 0.91     $ 1.86     $ 1.31  
Diluted income per common share   $ 1.21     $ 0.90     $ 1.84     $ 1.30  
Weighted average shares outstanding:                
Basic shares   55,348,495     54,889,718     55,208,246     54,845,708  
Diluted shares   55,725,959     55,157,603     55,561,472     55,128,870  



FIVE BELOW, INC.
 
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
    Fifty-three weeks ended   Fifty-two weeks ended
    February 3, 2018   January 28, 2017
Operating activities:        
Net income   $ 102,451     $ 71,840  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   33,241     26,631  
Share-based compensation expense   16,373     11,953  
Deferred income tax expense (benefit)   4,363     (2,532 )
Other non-cash expenses   138     109  
Changes in operating assets and liabilities:        
Inventories   (32,589 )   (6,079 )
Prepaid income taxes   (1,277 )   (211 )
Prepaid expenses and other assets   (16,366 )   (14,875 )
Accounts payable   19,809     (5,451 )
Income taxes payable   1,902     11,997  
Accrued salaries and wages   12,112     3,133  
Deferred rent   15,886     7,855  
Other accrued expenses   11,338     2,252  
Net cash provided by operating activities   167,381     106,622  
Investing activities:        
Purchases of investment securities   (234,856 )   (119,746 )
Sales, maturities, and redemptions of investment securities   163,501     77,776  
Capital expenditures   (67,795 )   (44,794 )
Net cash used in investing activities   (139,150 )   (86,764 )
Financing activities:        
Net proceeds from issuance of common stock   251     208  
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units   9,603     3,290  
Common shares withheld for taxes   (1,504 )   (1,904 )
Excess tax benefit related to exercises of stock options and vesting of restricted and performance-based restricted stock units       1,555  
Net cash provided by financing activities   8,350     3,149  
Net increase in cash and cash equivalents   36,581     23,007  
Cash and cash equivalents at beginning of year   76,088     53,081  
Cash and cash equivalents at end of year   $ 112,669     $ 76,088  

 

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Source: Five Below, Inc.