FIVE BELOW, INC Q1 FY2025 earnings call

• Strong first quarter performance with sales and comps exceeding guidance, driven by product resonance, value, and store experience.
• Focus on product: Featured trend-right items for Easter, spring break, beauty, and novelty food; strong performance in toys/games collectibles and tech accessories.
• Store experience: Investments in labor and process improvements led to better customer assistance and stocked shelves with desired products.
• Marketing: Focus on social media creator content and end-to-end storytelling to connect with customers.
• Tariff mitigation: Efforts include vendor negotiations, sourcing diversification, value pack product investment, and assortment/pricing adjustments, with a 10% reduction in China sourcing for the back half of the year.

In the first quarter of 2025, total sales increased 19.5% to $970.5 million from $811.9 million in the prior year. Comparable sales rose 7.1% driven by a 6.2% increase in comp transactions and 0.9% comp ticket. Adjusted gross profit was $328.4 million, up 24.6%, with adjusted gross margin at 33.8%. Adjusted SG&A was 27.7% of sales, adjusted operating income was $59.6 million, and adjusted EPS was $0.86. The company opened 55 new stores, ending the quarter with 1,826 stores. Revenue contribution was broad-based across product segments, with strong performance in beauty, novelty food, toys, and collectibles.

• Second quarter 2025: Sales expected $975M-$995M, comps 7%-9%, ~30 net new stores; adjusted net income $28M-$34M, adjusted diluted EPS $0.52-$0.54.
• Full-year 2025: Sales $4.33B-$4.42B, comps 3%-5%; adjusted diluted EPS $4.25-$4.72; operating margin midpoint ~7.3%, impacted by tariff costs and SG&A investments.

• Tariff environment: Uncertainty in global trade with potential impact on margins, requiring mitigation efforts but still posing challenges.
• Macroeconomic factors: Potential impact on consumer spending and sales momentum, though the company is focused on executing strategies to mitigate risks.

Q: How much of the comp cadence is attributable to actions vs other factors?

A: Winnie Park stated actions like product selection, storytelling, value focus, and inventory flow management are driving results, with sequential improvement from Q3 2024 to Q1 2025.

Q: Can you unpack the annual operating margin compression?

A: Ken Bull explained ~150 basis points of operating margin drag from tariffs net of mitigation, with ~60% in gross margin and ~40% in SG&A due to higher incentive comp and labor investments.

Q: How is pricing affected by tariffs and mitigation?

A: Winnie Park mentioned touching ~15% of prices, both up and down, for relative value and simplifying shopping, with 80% of units still at $5 and below.

Q: What about store growth going forward?

A: Winnie Park indicated plans to accelerate store growth, citing white space in markets like the Pacific Northwest and improved store productivity as reasons for increased confidence in expansion.