FIVE BELOW, INC Q4 FY2024 earnings call

• Winnie Park joined as CEO, emphasizing focus on core customer (kids and parents), product curation, value proposition, and marketing. - Ken Bull highlighted Q4 and full-year performance, noting the reset of business midyear, improved operational execution, and store growth. - Kristy Chipman discussed financial results, inventory (ended 2024 with $659.5M inventory), shrink improvement efforts, CapEx spending ($324M gross in 2024), and response to tariffs. - Focus on sharpening customer focus, tightening product assortment, returning to core $1 to $5 price points, and hiring a new Chief Marketing Officer for marketing optimization.

For the full year 2024, sales reached nearly $3.9 billion, with comparable sales decreasing 2.7% and adjusted EPS of $5.04. They opened 228 new stores in 2024, ending the year with 1,771 stores across the US. In the fourth quarter of 2024, sales increased 7.8% to $1.39 billion, with comparable sales down 3.0%. Adjusted gross margin for the fourth quarter was 40.5%, down approximately 60 basis points, and adjusted SG&A was 22.3% of sales, up approximately 110 basis points.

• Full year 2025: Sales expected $4.21B-$4.33B (10.1% midpoint growth), comparable sales flat to +3%, adjusted operating margin ~7.3% (down ~180 basis points, ~100 basis points from tariffs), adjusted EPS $4.10-$4.72. - Q1 2025: Sales expected $905M-$925M (~12.7% growth), ~50 new stores, comparable sales flat to +2%, adjusted operating margin 4.0%, adjusted EPS $0.50-$0.61.

• Tariffs impact on margins, with an estimated ~100-basis-point headwind net of mitigation efforts. - Dynamic nature of tariffs affecting sourcing, pricing, and sales. - Need for sustained shrink rate improvement to avoid adjusting go-forward shrink accrual rate.

Q: Opinion on consumer health and buying habits.

A: Winnie and Kristy said no meaningful difference seen in consumer buying habits currently, and guidance contemplates the challenging macro backdrop.

Q: Tariffs impact projection.

A: Kristy said there's a ~100-basis-point impact from tariffs, including margin and sales impact, via price adjustments, vendor negotiations, and sourcing diversification.

Q: Margin recovery from tariffs.

A: Winnie said price adjustments focused on $5 and below, Kristy said leverage expected with positive shrink and 3% comparable sales growth.

Q: New product and marketing.

A: Winnie discussed new product focus and marketing optimization, Ken on store growth potential.

Q: Five Beyond and shrink.

A: Winnie on Five Beyond flexibility, Kristy on shrink accrual rate vs 2019 levels.

Q: Tariffs and gross margin.

A: Kristy said tariff impact is greater in the back half of the year, with Q1 having the least impact.

Q: Store growth and metrics.

A: Ken on 3,500 store potential, densifying existing markets and expanding into new ones like the Pacific Northwest.

Q: Tariffs and comp guide.

A: Kristy on comp guide range, Winnie on labor model impact on sales and shrink.

Q: Tariffs mitigation and price increase.

A: Kristy on >50% mitigation from tariffs, no specific details on percentage price increase.

Q: Operating margin run rate and SKUs.

A: Kristy on 3% leverage threshold, Winnie on 10-15% SKU adjustments for optimization.

Q: Pricing direction and remodels.

A: Winnie on $5 and below price adjustments, Ken on paused remodels with selective ones this year.

Q: CMO qualifications and customer awareness.

A: Winnie on CMO qualifications for omnichannel and customer awareness, need to increase pre-store customer awareness.

Q: Tariffs and balancing price increases.

A: Winnie on relative price value across product categories to balance price adjustments.