Five Below, Inc. Q3 FY2025 earnings call

• New leaders: Dan Sullivan (CFO) and Michelle Israel (Chief Merchandising Officer) joined in early October. - Q3 results exceeded expectations: net sales grew 23%, comparable sales up over 14%, adjusted diluted EPS grew 62% to $0.68. - Core pillars of customer-centric strategy: focus on the kid customer, connected customer journey (digital to in-store), and coordinated cross-functional execution. - Marketing changes: shifted spend to social media, used creator-produced content, renewed creative for unified brand look. - Store improvements: better collaboration, customer feedback, simplified operations, labor investment to stock shelves and bring product stories to life.

In Q3, net sales increased 23% to over $1 billion, underpinned by a strong comparable sales increase of over 14%, with growth led equally by comparable transactions and tickets. Adjusted gross profit increased 26% to $352 million (33.9% rate of sale), an increase of approximately 70 basis points compared to Q3 last year. Adjusted SG&A expenses totaled $307 million in Q3, 29.5% of sales, a 40 basis point decrease year over year. Store growth was strong at 9%, with 49 net new stores added, ending the quarter with over 1,900 stores.

• Fourth quarter: total sales expected $1.58-$1.61 billion (14.7% growth midpoint), comparable sales 6-8% growth. Adjusted operating margin midpoint 15.8%. - Full year: sales expected $4.62-$4.65 billion, comparable sales 9.4-10.1% growth. Adjusted diluted EPS midpoint $5.8, 15% growth. Capital expenditures excluding tenant allowances expected ~$200 million for 150 net new stores and system/infrastructure investments.

• Tariffs: unmitigated tariffs partially offset gross margin accretion. - Shrink: ongoing challenge despite initial mitigation efforts from August counts. - Competitive environment: potential shifts that could impact performance.

Q: Chuck Grom with Gordon Haskett asks about sales per store and opportunities to drive higher sales.

A: Winnie Park responds about customer focus, marketing driving traffic, and expansion of value definition beyond $5.

Q: Matthew Boss with JPMorgan inquires about monthly comp progression and start to fourth quarter.

A: Dan Sullivan states monthly comp growth was consistent, and start to holiday season is in line with expectations.

Q: Edward Kelly with Wells Fargo asks about trends and lapping results next year.

A: Winnie Park discusses customer focus, marketing flywheel, and expansion of value above $5.

Q: Michael Lasser with UBS asks about comp scenarios next year and tariff impact.

A: Dan Sullivan mentions growth orientation and tariff headwinds in first half of next year.

Q: Lauren on Simeon with Morgan Stanley asks about traffic vs ticket and new vs returning customers.

A: Winnie Park says growth was equal between transactions and ticket, with new and returning customers contributing.

Q: Kate McShane with Goldman Sachs asks about licensing and exclusivity.

A: Winnie Park talks about collaborative licensing approach and bringing full assortments.

Q: John Heinbockel with Guggenheim asks about product priorities and vendors.

A: Winnie Park discusses leaning into lifestyle trends and new vendor relationships.

Q: Zhihan Ma with Bernstein asks about Q4 trends and new store openings.

A: Dan Sullivan says guide is thoughtful, and new store pace depends on great execution.

Q: Scott Ciccarelli with Truist asks about marketing changes and 4Q comp cadence.

A: Winnie Park details marketing redirect to social, and Dan Sullivan says 4Q performance is in line with guide.

Q: Spencer Hanis with Wolfe Research asks about traffic acceleration and price elasticity.

A: Winnie Park talks about social media and content driving traffic, Dan Sullivan says no material change in consumer response.

Q: Paul Lejuez with Citi asks about above $5 products, non-comping departments, and 4Q traffic vs ticket.

A: Dan Sullivan and Winnie Park discuss above $5 growth, intentional non-comping departments, and 4Q ticket-led growth.

Q: Michael Montani with Evercore ISI asks about shrink and SG&A leverage.

A: Dan Sullivan talks about shrink improvement and 4Q margin dynamics.

Q: Jeremy Hamblin with Craig Hallum Capital Group asks about gross margins and tariff implications.

A: Dan Sullivan discusses gross margin improvement and tariff headwinds in Q4.

Q: Anthony Chukumba with Loop Capital Markets asks about ticket growth and price adjustments.

A: Winnie Park explains ticket growth from strategic pricing and mix shift to above $5 items.

Q: Joe Feldman with Telsey Advisory Group asks about merchandise mix and Michelle Israel's feedback.

A: Winnie Park talks about ongoing focus on trends and Michelle's early impact.

Q: David Bellinger with Mizuho asks about branded items and competitive edge.

A: Winnie Park discusses branded items and value discipline vs competitors.

Q: Seth Sigman with Barclays asks about seasonal vs everyday business and comp deceleration.

A: Dan Sullivan clarifies traffic acceleration in Q3 vs 4Q guide, Winnie Park talks about everyday business driving results.

Q: Brian Nagel with Oppenheimer asks about tariffs and competitive environment.

A: Dan Sullivan says tariffs are reflected in trends, Winnie Park talks about competitive edge from focus on kids.