SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	FIVE	NASDAQ Global Select Market

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of ~~December~~June 5, ~~2018~~2019 was ~~55,759,834.~~55,960,856.

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

(in thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

Consolidated Statements of Operations

(in thousands, except share and per share data)

See accompanying notes to consolidated financial statements.

Consolidated ~~Statement~~Statements of Shareholders’ Equity

(in thousands, except share data)

Common stock
Additional
paid-in capital
Retained earnings
Total
shareholders’ equity

Shares Amount
Balance, February 3, 2018 55,438,089
$ 554
$ 346,300
$ 111,704
$ 458,558
Cumulative effect of ASC 606 adoption —
—
—
486
486
Share-based compensation expense —
—
9,139
—
9,139
Issuance of unrestricted stock awards 1,696
—
135
—
135
Exercise of options to purchase common stock 143,462
1
4,015
—
4,016
Vesting of restricted stock units and performance-based restricted stock units 287,754
3
—
—
3
Common shares withheld for taxes (111,649 ) (1 ) (7,816 ) —
(7,817 )
Issuance of common stock to employees under employee stock purchase plan 1,633
—
168
—
168
Net income —
—
—
60,383
60,383
Balance, November 3, 2018 55,760,985
$ 557
$ 351,941
$ 172,573
$ 525,071



	Common stock					Additional paid-in capital			Retained earnings		Total shareholders’ equity
	Common stock
	Shares		Amount
Thirteen weeks ended May 4, 2019
Balance, February 2, 2019	55,759,048		$	557		$	352,702		$	261,835	$	615,094
Share-based compensation expense	—		—			2,822			—		2,822
Issuance of unrestricted stock awards	307		—			45			—		45
Exercise of options to purchase common stock	72,365		1			2,246			—		2,247
Vesting of restricted stock units and performance-based restricted stock units	203,429		2			—			—		2
Common shares withheld for taxes	(79,256	)	(1		)	(9,872		)	—		(9,873		)
Net income	—		—			—			25,662		25,662
Balance, May 4, 2019	55,955,893		$	559		$	347,943		$	287,497	$	635,999

Thirteen weeks ended May 5, 2018
Balance, February 3, 2018	55,438,089		$	554		$	346,300		$	111,704	$	458,558
Cumulative effect of ASC 606 adoption	—		—			—			486		486
Share-based compensation expense	—		—			2,692			—		2,692
Issuance of unrestricted stock awards	876		—			62			—		62
Exercise of options to purchase common stock	39,237		—			1,222			—		1,222
Vesting of restricted stock units and performance-based restricted stock units	243,745		2			—			—		2
Common shares withheld for taxes	(101,928	)	(1		)	(6,907		)	—		(6,908		)
Net income	—		—			—			21,804		21,804
Balance, May 5, 2018	55,620,019		$	555		$	343,369		$	133,994	$	477,918

See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows

See accompanying notes to consolidated financial statements.

FIVE BELOW, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as the "Company") is a specialty value retailer offering merchandise targeted at the ~~teen~~tween and ~~pre-teen~~teen demographic. The Company offers an edited assortment of products, priced at $5 and below.

The Company’s edited assortment of products includes select brands and licensed merchandise. The Company believes its merchandise is readily available, and that there are a number of potential vendors that could be utilized, if necessary, under approximately the same terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of vendors.

The Company is incorporated in the Commonwealth of Pennsylvania and, as of ~~November 3, 2018~~May 4, 2019, operated in 3336 states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California, Arkansas, Iowa, Nebraska, and ~~Arkansas.~~Arizona. As of ~~November 3, 2018~~May 4, 2019 and ~~October 28, 2017~~May 5, 2018, the Company operated ~~745~~789 stores and ~~625~~658 stores, respectively, each operating under the name “Five Below” and in August 2016, the Company commenced selling merchandise on the internet, through the Company's fivebelow.com e-commerce website.

The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2019" or "fiscal 2019" refer to the period from February 3, 2019 to February 1, 2020, which is a 52-week fiscal year. References to "fiscal year 2018" or "fiscal 2018" refer to the period from February 4, 2018 to February 2, 2019, which is a 52-week fiscal year. ~~References to "fiscal year 2017" or "fiscal 2017" refer to the period from January 29, 2017 to February 3, 2018, which is a 53-week fiscal year.~~ The fiscal quarters ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ refer to the thirteen ~~weeks ended as of those dates. The year-to-date periods ended November 3, 2018 and October 28, 2017 refer to the thirty-nine~~ weeks ended as of those dates.

The consolidated balance sheets as of ~~November 3,~~May 4, 2019 and May 5, 2018, ~~and October 28, 2017,~~ the consolidated statements of operations for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018, ~~and October 28, 2017,~~ the consolidated ~~statement~~statements of shareholders’ equity for the ~~thirty-nine~~thirteen weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018 and the consolidated statements of cash flows for the ~~thirty-nine~~thirteen weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the aforementioned financial statements include all known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions that impact the financial statements) necessary to present fairly the financial position at the balance sheet dates and the results of operations and cash flows for the periods ended ~~November 3, 2018~~May 4, 2019 and ~~October 28, 2017.~~May 5, 2018. The balance sheet as of February ~~3, 2018,~~2, 2019, presented herein, has been derived from the audited balance sheet included in the Company's Annual Report on Form 10-K for fiscal ~~2017~~2018 as filed with the Securities and Exchange Commission on March ~~22, 2018~~28, 2019 and referred to herein as the “Annual Report,” but does not include all annual disclosures required by U.S. GAAP. These consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended February ~~3, 2018~~2, 2019 and footnotes thereto included in the Annual Report. The consolidated results of operations for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ are not necessarily indicative of the consolidated operating results for the year ending February ~~2, 2019~~1, 2020 or any other period. The Company's business is seasonal and as a result, the Company's net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.

(d) Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ~~The effective date of this pronouncement is for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.~~ On February 4, 2018, the Company adopted the pronouncement using the modified retrospective method by recognizing the cumulative effect of gift card breakage as an adjustment to retained earnings resulting in a $0.5 million increase to retained earnings. ~~The comparative information for the years ended prior to February 4, 2018 were not restated to comply with the pronouncement.~~

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires ~~that lease arrangements~~lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 ~~months result in an entity recognizing an asset and a liability.~~months. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. On February 3, 2019, the Company adopted this pronouncement on a modified retrospective basis and applied the new standard to all leases. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, ~~requires use~~which includes, among other things, the ability to carry forward the existing lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. Adoption of the ~~modified retrospective transition approach. The Company plans to adopt this pronouncement~~new standard had a material impact on the Company's balance sheets resulting in the first quarter of fiscal 2019, coinciding with the pronouncement's effective date. The Company’s ability to adopt this standard depends on various factors including system readiness and completing an analysis of information necessary to quantify the financial statement impact. The Company has established a cross-functional team to implement the pronouncement and the Company is finalizing its implementation of a leasing software solution, its assessment of the practical expedients and policy elections offered by the standard, and changes to the business processes, systems and controls to support the adoption of this standard. While the Company is still evaluating the impact of this new guidance on its consolidated financial statements, it expects it will result in a significant increase in ~~total~~net assets and ~~total~~ liabilities ~~on the Company’s balance sheet given that~~of approximately $618 million, as the Company has a significant number of leases for its stores. Although the standard impacts the treatment of certain initial direct leases costs that were previously capitalizable, it did not materially impact the Company's consolidated statements of operations and had no impact on the Company's cash flows.

The following is a discussion of the Company’s lease policy under the new lease accounting standard:

The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company discounts the lease liability utilizing its estimated incremental borrowing rate, on a collateralized basis over a similar term, that the Company would have incurred to borrow the funds necessary to purchase the leased asset. The operating lease assets also include lease payments made before commencement and exclude lease incentives.

The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years each. For real estate leases, except for renewals that generally take the lease to a ten-year term, the options to renew are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and regularly opens, relocates or closes stores to align with its operating strategy. Generally, except for renewals that generally take the lease to a ten-year term, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease asset and operating lease liability as the exercise of such options is not reasonably certain. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease.

For certain real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease assets and operating lease liabilities.

See Note 3 ‘‘Leases’’ for additional information.

Impact of New Lease Standard on Balance Sheet Line Items

As a result of applying the new lease standard using the modified retrospective method, the following adjustments were made to accounts on the consolidated balance sheet as of February 3, 2019 (in thousands):



	Impact of ASC 842 Adoption
	As Reported February 2, 2019		Adjustments			Adjusted February 3, 2019
Assets
Current assets:
Prepaid expenses and other current assets	60,124		(11,077		)	49,047
Total current assets	642,257		(11,077		)	631,180
Operating lease assets	—		628,924			628,924
	$	952,264	$	617,847		$	1,570,111

Liabilities and Shareholders’ Equity
Current liabilities:
Other accrued expenses	104,201		(8,033		)	96,168
Total current liabilities	253,105		(8,033		)	245,072
Deferred rent and other	84,065		(84,065		)	—
Long-term operating lease liabilities	—		709,945			709,945
Total liabilities	337,170		617,847			955,017
Shareholders’ equity:
Total shareholders’ equity	615,094		—			615,094
	$	952,264	$	617,847		$	1,570,111

In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. During the thirteen weeks ended November 3, 2018, the Company adopted the pronouncement using the prospective transition method and it did not have a significant impact to the Company's financial statements.

(e) Use of Estimates

The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, valuation allowances for inventories, income taxes, ~~and~~ share-based compensation ~~expense.~~expense and the incremental borrowing rate utilized in operating lease liabilities.

(f) Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Inputs, other than Level 1, that are either directly or indirectly observable.

Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market participants would use.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.

The Company’s financial instruments consist primarily of cash equivalents, short-term and long-term investment securities, accounts payable, and borrowings, if any, under a line of credit. The Company believes that: (1) the carrying value of cash equivalents and accounts payable are representative of their respective fair value due to the short-term nature of these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit approximates fair value because the line of credit’s interest rates vary with market interest rates. Under the fair value hierarchy, the fair market values of the short-term and long-term investments in corporate bonds are level 1 while the short-term and long-term investments in municipal bonds are level 2. The fair market values of level 2 instruments are determined by management with the assistance of a third party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities.

As of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018, ~~February 3, 2018, and October 28, 2017,~~ the Company had cash equivalents of ~~$84.9~~$188.0 million, ~~$91.2~~$215.7 million and ~~$16.7~~$60.4 million, respectively. The Company’s cash equivalents consist of credit and debit card receivables, money market funds, and corporate bonds, which mature in less than 90 days. Fair value for cash equivalents was determined based on level 1 inputs.

As of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018, ~~February 3, 2018, and October 28, 2017,~~ the Company's short-term and long-term investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):

Short-term investment securities as of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018 ~~February 3, 2018, and October 28, 2017~~ all mature in one year or less. Long-term investment securities as of ~~February 3,~~May 5, 2018 ~~and October 28, 2017~~ all mature after one year but in less than three years.

(g) Prepaid Expenses and Other Current Assets

Prepaid expenses as of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018 ~~February 3, 2018, and October 28, 2017~~ were ~~$32.1~~$16.7 million, ~~$17.8~~$26.1 million, and ~~$18.1~~$19.8 million, respectively. Other current assets as of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018 ~~February 3, 2018, and October 28, 2017~~ were ~~$27.4~~$30.5 million, ~~$27.6~~$34.0 million, and ~~$23.8~~$17.6 million, respectively.

(h) Other Accrued Expenses

Other accrued expenses include accrued capital expenditures of ~~$12.9~~$21.5 million, ~~$5.0~~$54.2 million, and ~~$15.1~~$8.2 million as of ~~November 3,~~May 4, 2019, February 2, 2019, and May 5, 2018, ~~February 3, 2018, and October 28, 2017,~~ respectively.


(2)	Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers. The Company adopted the standard during the thirteen weeks ended May 5, 2018 using the modified retrospective method by recognizing the cumulative effect as an adjustment to retained earnings.

Revenue Transactions

Revenue from store operations are recognized at the point of sale when control of the product is transferred to the customer at such time. Internet sales, through the Company's fivebelow.com e-commerce website, are recognized when the consumer receives the product as control transfers upon delivery. Returns subsequent to the period end are immaterial; accordingly, no reserve has been recorded. Gift card sales to customers are initially recorded as liabilities and recognized as sales upon redemption for merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer in net sales.

The transaction price for the Company’s sales are based on the item’s stated price. To the extent that the Company charges customers for shipping and handling on e-commerce sales, the Company records such amounts in net sales. Shipping and handling costs, which include fulfillment and shipping costs related to the Company's e-commerce operations, are included in costs of goods sold. The Company has chosen the pronouncement's policy election which allows it to exclude all sales taxes from net sales in the accompanying consolidated statements of operations.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by groups of products: leisure, fashion and home, and party and snack (in thousands):


	Thirteen Weeks Ended				Thirteen Weeks Ended				Thirteen Weeks Ended				Thirteen Weeks Ended
	November 3, 2018				October 28, 2017				May 4, 2019				May 5, 2018
	Amount		Percentage of Net Sales		Amount		Percentage of Net Sales		Amount		Percentage of Net Sales		Amount		Percentage of Net Sales
Leisure	$	161,634	51.7	%	$	132,227	51.4	%	$	178,310	48.9	%	$	144,721	48.8	%
Fashion and home	97,107		31.0	%	81,372		31.6	%	109,850		30.1	%	91,608		30.9	%
Party and snack	54,082		17.3	%	43,576		17.0	%	76,602		21.0	%	59,993		20.3	%
Total	$	312,823	100.0	%	$	257,175	100.0	%	$	364,762	100.0	%	$	296,322	100.0	%

Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended
November 3, 2018 October 28, 2017
Amount Percentage of Net Sales Amount Percentage of Net Sales
Leisure $ 493,650
51.6 % $ 398,033
51.4 %
Fashion and home 288,944
30.2 % 232,435
30.1 %
Party and snack 174,285
18.2 % 142,908
18.5 %
Total $ 956,879
100.0 % $ 773,376
100.0 %

Financial Statement Impact of Adopting ASU 2014-09

All of the Company's revenue is recognized from contracts with customers and, therefore, is subject to ASU 2014-09. The Company adopted ASU 2014-09 using a modified retrospective approach during the thirteen weeks ended May 5, 2018 and recognized the cumulative effect as an adjustment by increasing retained earnings by $0.5 million and income taxes payable by $0.1 million, and reducing accrued expenses by $0.7 million and deferred tax asset by $0.1 million. The cumulative adjustment was related to the recognition of gift card breakage. ~~The adoption of ASU 2014-09 had an immaterial impact on the Company’s financial statements for the thirty-nine weeks ended November 3, 2018.~~

The Company leases property and equipment under non-cancelable operating leases. Certain retail store lease agreements provide for contingent rental payments if the store’s net sales exceed stated levels (percentage rents) and/or contain escalation clauses, which provide for increases in base rental payments for increases in future operating costs. Many of the Company’s leases provide for one or more renewal options for periods of five years. The Company’s operating lease agreements, including assumed renewals, which are generally those that take the lease to a ten-year term, expire through fiscal 2033.

During the thirteen weeks ended May 4, 2019, the Company committed to 39 new store leases with terms of 10 to 15 years that have future minimum lease payments of approximately $69.1 million.

All of the Company's leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the consolidated balance sheets. As of May 4, 2019, the weighted average remaining lease term for the Company's operating leases is 7.8 years, and the weighted average discount rate is 7.6%. For the thirteen weeks ended May 4, 2019, cash paid amounts included in the measurement of operating lease liabilities of $29.2 million was reflected in cash flows from operating activities in the consolidated statements of cash flows.

The following table is a summary of the Company's components for net lease costs for the thirteen weeks ended May 4, 2019 (in thousands):



	Thirteen Weeks Ended
	May 4, 2019
Lease Cost
Operating lease cost	$	33,099
Variable lease cost	9,290
Net lease cost*	$	42,389

* Excludes short-term lease cost which is immaterial

The following table summarizes the maturity of lease liabilities under operating leases as of May 4, 2019 (in thousands):



	Operating Leases
Maturity of Lease Liabilities
2019	$	107,620
2020	141,780
2021	135,771
2022	125,933
2023	115,689
After 2023	370,841
Total lease payments	997,634
Less: imputed interest	252,893
Present value of lease liabilities	$	744,741

Basic income per common share amounts are calculated using the weighted average number of common shares outstanding for the period. Diluted income per common share amounts are calculated using the weighted average number of common shares outstanding for the period and include the dilutive impact of exercised stock options as well as assumed lapse of restrictions on restricted stock awards and shares currently available for purchase under the Company's Employee Stock Purchase Plan, using the treasury stock method. Performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted average shares until the performance conditions are met.

The following table reconciles net income and the weighted average common shares outstanding used in the computations of basic and diluted income per common share (in thousands, except for share and per share data):

Thirteen Weeks Ended Thirty-Nine Weeks Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Numerator:
Net income $ 13,516
$ 9,879
$ 60,383
$ 35,074
Denominator:
Weighted average common shares outstanding - basic 55,742,854
55,215,850
55,731,098
55,148,316
Dilutive impact of options, restricted stock units and employee stock purchase plan 485,451
392,185
454,207
345,136
Weighted average common shares outstanding - diluted 56,228,305
55,608,035
56,185,305
55,493,452
Per common share:
Basic income per common share $ 0.24
$ 0.18
$ 1.08
$ 0.64
Diluted income per common share $ 0.24
$ 0.18
$ 1.07
$ 0.63

The effects of the assumed exercise of restricted stock units for 1,322 and 1,971 shares of common stock for the thirteen weeks ended and thirty-nine weeks ended November 3, 2018, respectively, were excluded from the calculation of diluted net income per share as their impact would have been anti-dilutive.

The effects of the assumed exercise of stock options for 88,825 shares of common stock for the thirty-nine weeks ended October 28, 2017 were excluded from the calculation of diluted net income per share as their impact would have been anti-dilutive.

The effects of the assumed exercise of restricted stock units of 17,762 shares of common stock for the thirty-nine weeks ended October 28, 2017 were excluded from the calculation of diluted net income per share as their impact would have been anti-dilutive.

~~The aforementioned excluded shares do not reflect the impact of any incremental repurchases under the treasury stock method.~~



	Thirteen Weeks Ended
	May 4, 2019		May 5, 2018
Numerator:
Net income	$	25,662	$	21,804
Denominator:
Weighted average common shares outstanding - basic	55,899,324		55,586,037
Dilutive impact of options, restricted stock units and employee stock purchase plan	369,262		415,902
Weighted average common shares outstanding - diluted	56,268,586		56,001,939
Per common share:
Basic income per common share	$	0.46	$	0.39
Diluted income per common share	$	0.46	$	0.39

On May 10, 2017, the Company entered into a Fourth Amended and Restated Loan and Security Agreement (the “Amended Loan and Security Agreement”), among the Company, 1616 Holdings, Inc. (formerly known as Five Below Merchandising, Inc.), a wholly-owned subsidiary of the Company, and Wells Fargo Bank, National Association. The Amended Loan and Security Agreement amends and restates the Third Amended and Restated Loan and Security Agreement, dated June 12, 2013, among the Company, ~~Five Below Merchandising,~~1616 Holdings, Inc. and Wells Fargo Bank, National Association, which governed the Revolving Credit Facility.

The Amended Loan and Security Agreement includes a revolving line of credit in the amount of up to $20.0 million (the “Amended Revolving Credit Facility”). Pursuant to the Amended Loan and Security Agreement, advances under the Amended Revolving Credit Facility are no longer tied to a borrowing base; however, the Company is required to maintain eligible inventory at all times in an amount equal to at least $100.0 million. The Amended Revolving Credit Facility expires on the earliest to occur of (i) May 10, 2022 or (ii) an event of default. The Amended Revolving Credit Facility may be increased to up to $50.0 million, subject to certain conditions. The Amended Revolving Credit Facility also includes a $20.0 million sub-limit for the issuance of letters of credit.

The Amended Loan and Security Agreement reduces the interest rate payable on borrowings to be, at the Company’s option, a per annum rate equal to (a) a prime rate or (b) a LIBOR-based rate plus a margin of 1.00%. Letter of credit fees are equal to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Loan and Security Agreement are subject to an increase of 2.00% per annum upon an event of default.

The Amended Loan and Security Agreement removes restrictions on the Company’s ability to pay or make dividends and ~~distribute~~distributions or repurchase its stock, but the Amended Loan and Security Agreement continues to include other customary negative and affirmative covenants including, among other things, limitations on the Company’s ability to (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) engage in mergers or consolidations; or (vi) change its business.

The Amended Loan and Security Agreement also removes the provisions that required the Company to make prepayments on outstanding Amended Revolving Credit Facility balances upon the receipt of certain proceeds, including those from the sale of certain assets. Amounts under the Amended Revolving Credit Facility may become due upon certain events of default including, among other things, the Company’s failure to comply with the Amended Revolving Credit Facility’s covenants, bankruptcy, default on certain other indebtedness or a change in control.

Under the Amended Loan and Security Agreement, all obligations under the Amended Revolving Credit Facility continue to be guaranteed by ~~Five Below Merchandising,~~1616 Holdings, Inc.~~, a wholly-owned subsidiary of the Company,~~ and are secured by substantially all of the assets of the Company and ~~Five Below Merchandising,~~1616 Holdings, Inc.

As of ~~November 3, 2018,~~May 4, 2019, the Company had no borrowings under the Amended Revolving Credit Facility and had approximately $20.0 million available on the line of credit.

All obligations under the Amended Revolving Credit Facility are secured by substantially all of the Company's assets and are guaranteed by the Company's subsidiary. As of ~~November 3,~~May 4, 2019 and May 5, 2018, ~~and October 28, 2017,~~ the Company was in compliance with the covenants applicable to it under the Amended Revolving Credit Facility.

The Company leases property and equipment under non-cancelable operating leases. Certain retail store lease agreements provide for contingent rental payments if the store’s net sales exceed stated levels (percentage rents) and/or contain escalation clauses, which provide for increases in base rental payments for increases in future operating costs. Many of the Company’s leases provide for one or more renewal options for periods of five years. The Company’s operating lease agreements, including assumed extensions, which are generally those that take the lease to a ten-year term, expire through fiscal 2033.

~~During the thirteen weeks ended November 3, 2018, the Company committed to 35 new store leases with terms of 10 to 15 years that have future minimum lease payments of approximately $61.2 million.~~

Other contractual commitments

As of ~~November 3, 2018,~~May 4, 2019, the Company has other purchase commitments of approximately ~~$7.5~~$4.9 million consisting of purchase agreements for materials that will be used in the construction of new stores.

In ~~June 2018,~~March 2019, we completed the ~~Company signed a~~ purchase ~~agreement for land and building construction for~~of an ~~approximate~~approximately 700,000 square foot build-to-suit distribution center ~~located~~ in Forsyth, Georgia for approximately $42 million for land and building, to support ~~the Company's~~our anticipated growth. ~~The Company expects to occupy the space in early 2019.~~

From time to time, the Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcome of such actions will not have a material adverse effect on the Company’s financial condition or results of operations.

Equity Incentive Plan

Pursuant to the Company's 2002 Equity Incentive Plan (the “Plan”), the Company’s board of directors may grant stock options, restricted shares, and restricted stock units to officers, directors, key employees and professional service providers. The Plan, as amended, allows for the issuance of up to a total of ~~7,600,000~~7.6 million shares under the Plan. As of ~~November 3, 2018, 3,228,399~~May 4, 2019, approximately 3.3 million stock options, restricted shares, or restricted stock units were available for grant.

Common Stock Options

All stock options have a term not greater than ten years. Stock options vest and become exercisable in whole or in part, in accordance with vesting conditions set by the ~~compensation committee of the~~ Company’s board of directors. Options granted to date generally vest over four years from the date of grant.

Stock option activity ~~under~~during the ~~Plan~~thirteen weeks ended May 4, 2019 was as follows:

Options
Outstanding Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term
(in years)
Balance as of February 3, 2018 519,485
$ 29.53
5.9
Forfeited (71 ) 4.95

Exercised (143,462 ) 27.98

Balance as of November 3, 2018 375,952
30.13
5.3
Exercisable as of November 3, 2018 321,932
$ 29.62
5.1



	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Balance as of February 2, 2019	374,257		$	30.23	5.1
Forfeited	(200	)	39.70
Exercised	(72,365	)	31.09
Balance as of May 4, 2019	301,692		30.02		4.7
Exercisable as of May 4, 2019	282,885		$	29.49	4.6

The fair value of each option award granted to employees, including outside directors, is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options granted during the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018.~~May 4, 2019.

Restricted Stock Units and Performance-Based Restricted Stock Units

All restricted stock units ("RSU") and performance-based restricted stock units ("PSU") vest in accordance with vesting conditions set by the compensation committee of the Company’s board of directors. ~~RSU's~~RSUs granted to date have vesting periods ranging from less than one year to five years from the date of grant. ~~PSU's~~PSUs granted to date have vesting periods ranging from one year to five years from the date of grant, including grants that have a cumulative three year performance period, subject to satisfaction of the applicable performance goals established for the respective grant. The Company periodically assesses the probability of achievement of the performance criteria and adjusts the amount of compensation expense accordingly. Compensation is recognized over the vesting period and adjusted for the probability of achievement of the performance criteria.

RSU and PSU activity during the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was as follows:


	Restricted Stock Units				Performance-Based Restricted Stock Units				Restricted Stock Units				Performance-Based Restricted Stock Units
	Number		Weighted-Average Grant Date Fair Value		Number		Weighted-Average Grant Date Fair Value		Number		Weighted-Average Grant Date Fair Value		Number		Weighted-Average Grant Date Fair Value
Non-vested balance as of February 3, 2018	309,554		$	38.48	495,659		$	37.43
Non-vested balance as of February 2, 2019									292,888		$	53.52	416,200		$	47.38
Granted	111,123		76.35		121,333		69.59		70,179		116.95		83,363		116.94
Vested	(90,218	)	38.68		(197,534	)	35.69		(86,292	)	36.56		(117,137	)	39.21
Forfeited	(23,496	)	43.07		(3,258	)	69.03		(4,401	)	57.45		(14,535	)	34.40
Non-vested balance as of November 3, 2018	306,963		$	51.78	416,200		$	47.38
Non-vested balance as of May 4, 2019									272,374		$	75.17	367,891		$	66.25

In connection with the vesting of ~~RSU's~~RSUs and ~~PSU's~~PSUs during the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018,~~May 4, 2019, the Company withheld ~~111,649~~79,256 shares with an aggregate value of ~~$7.8~~$9.9 million in satisfaction of minimum tax withholding obligations due upon vesting.

As of ~~November 3, 2018,~~May 4, 2019, there was ~~$18.5~~$27.7 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements (including stock options, ~~restricted stock units~~RSUs and ~~performance-based restricted stock units)~~PSUs) granted under the Plan. The cost is expected to be recognized over a weighted average vesting period of ~~2.4~~2.7 years.


~~(7)~~(8)	Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted. The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 35% to 21%, for tax years beginning after December 31, 2017. The TCJA also provides for acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including additional limitations on deductibility of executive compensation and employee meal benefits.

In fiscal 2017, the Company recorded a net $0.5 million benefit that represents what the Company believes is the impact of the TCJA. As the benefit is based on currently available information and interpretations, which are continuing to evolve, the benefit should be considered provisional. The Company will continue to analyze additional information and guidance related to the TCJA as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The final impacts may differ from the recorded amounts in fiscal 2017, and the Company will continue to refine such amounts within the measurement period provided by Staff Accounting Bulletin No. 118.

The following table summarizes the Company’s income tax expense and effective tax rates for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ (dollars in thousands):


	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017			May 4, 2019			May 5, 2018
Income before income taxes	$	16,606		$	15,147		$	73,796		$	54,798		$	26,156		$	25,785
Income tax expense	$	3,090		$	5,268		$	13,413		$	19,724		$	494		$	3,981
Effective tax rate	18.6		%	34.8		%	18.2		%	36.0		%	1.9		%	15.4		%

The effective tax rates for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented. The effective tax rate for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3, 2018~~May 4, 2019 was lower than such rate for the thirteen ~~and thirty-nine~~ weeks ended ~~October 28, 2017~~May 5, 2018 primarily ~~due to the impact of tax reform as a result of the TCJA and~~ due to discrete items, which ~~include~~primarily represent the ~~recognition~~impact of ~~net excess income tax benefits related to~~ ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," with respect to the requirement to recognize excess income tax benefits or deficiencies as income tax benefit or expense in the consolidated statements of ~~operations.~~operations rather than as additional paid-in capital in the consolidated balance sheets.

The Company had no material accrual for uncertain tax positions or interest and/or penalties related to income taxes on the Company’s balance sheets as of ~~November 3,~~May 4, 2019, February 2, 2019, or May 5, 2018, ~~February 3, 2018, or October 28, 2017~~ and has not recognized any material uncertain tax positions or interest and/or penalties related to income taxes in the consolidated statements of operations for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3, 2018~~May 4, 2019 or ~~October 28, 2017.~~May 5, 2018.

The Company files a federal income tax return as well as state tax returns. The Company’s U.S. federal income tax returns for the fiscal years ended January 31, 2015 and thereafter remain subject to examination by the U.S. Internal Revenue Service. State returns are filed in various state jurisdictions, as appropriate, with varying statutes of limitation and remain subject to examination for varying periods up to three to four years depending on the state.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with “Selected Financial Data,” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for our fiscal year ended February ~~3, 2018~~2, 2019 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen ~~and thirty-nine~~ weeks ended ~~November 3, 2018~~May 4, 2019 included in Part I, Item I of this Quarterly Report on Form 10-Q. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described below in “Special Note Regarding Forward-Looking Statements” and in Part II, Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2019" or "fiscal 2019" refer to the period from February 3, 2019 to February 1, 2020, which is a 52-week fiscal year. References to "fiscal year 2018" or "fiscal 2018" refer to the period from February 4, 2018 to February 2, 2019, which is a 52-week fiscal year. ~~References to "fiscal year 2017" or "fiscal 2017" refer to the period from January 29, 2017 to February 3, 2018, which is a 53-week fiscal year.~~ The fiscal quarters ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ refer to the thirteen ~~weeks ended as of those dates. The year-to-date periods ended November 3, 2018 and October 28, 2017 refer to the thirty-nine~~ weeks ended as of those dates. Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new merchandise, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.

The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date of this report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in Part I, Item 1A “Risk Factors” in our Annual Report, as amended by the risk factors included in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q. These factors include without limitation:

failure to successfully implement our growth strategy;

disruptions in our ability to select, obtain, distribute and market merchandise profitably;

reliance on merchandise manufactured outside of the United States;

~~dependence on a volume of traffic to our stores;~~

~~inability to attract and retain qualified employees;~~

~~inability to successfully build, operate or expand our distribution centers or network capacity;~~

~~disruptions to our distribution network or the timely receipt of inventory;~~

~~extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations;~~

~~failure to secure customers’ confidential or credit card information, or other private data relating to our employees or our company;~~

~~increased operating costs or exposure to fraud or theft due to customer payment-related risks;~~

~~inability to increase sales and improve the efficiencies, costs and effectiveness of our operations;~~

~~dependence on our executive officers, senior management and other key personnel or inability to hire additional qualified personnel;~~

~~inability to successfully manage our inventory balances and inventory shrinkage;~~

~~inability to meet our lease obligations;~~

~~changes in our competitive environment, including increased competition from other retailers and the presence of online retailers;~~

~~increasing costs due to inflation, increased operating costs, wage rate increases or energy prices;~~

~~the seasonality of our business;~~

~~inability to successfully implement our expansion into online retail;~~

~~disruptions to our information technology systems in the ordinary course, including data breaches by online attackers, or as a result of system upgrades;~~

~~the impact of damage, breaches or interruptions to our technology systems;~~

~~failure to maintain adequate internal controls;~~

~~complications with the design or implementation of the new enterprise resource system;~~

~~natural disasters, adverse weather conditions, pandemic outbreaks, global political events, war and terrorism;~~

~~the impact of changes in tax legislation;~~

~~current economic conditions and other economic factors;~~

~~the impact of governmental laws and regulations;~~

the direct and indirect impact of recent and potential tariffs imposed and proposed by the United States on foreign imports, including, without limitation, the tariffs themselves, any counter-measures thereto and any indirect effects on consumer discretionary spending, which could increase the cost to us of certain products, lower our margins, increase our import related expenses, and reduce consumer spending for discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations;

the impact of price increases, such as, a reduction in our unit sales, damage to our reputation with our customers, and our becoming less competitive in the marketplace;

dependence on the volume of traffic to our stores and website;

inability to attract and retain qualified employees;

inability to successfully build, operate or expand our distribution centers or network capacity;

disruptions to our distribution network or the timely receipt of inventory;

extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations;

the risks of cyberattacks or other cyber incidents, such as the failure to secure customers' confidential or credit card information, or other private data relating to our employees or our company, including the costs associated with protection against or remediation of such incidents;

increased operating costs or exposure to fraud or theft due to customer payment-related risks;

inability to increase sales and improve the efficiencies, costs and effectiveness of our operations;

dependence on our executive officers, senior management and other key personnel or inability to hire additional qualified personnel;

inability to successfully manage our inventory balances and inventory shrinkage;

inability to meet our lease obligations;

the costs and risks of constructing and owning real property;

changes in our competitive environment, including increased competition from other retailers and the presence of online retailers;

increasing costs due to inflation, increased operating costs, wage rate increases or energy prices;

the seasonality of our business;

inability to successfully implement our expansion into online retail;

disruptions to our information technology systems in the ordinary course or as a result of system upgrades;

the impact of damage or interruptions to our technology systems;

failure to maintain adequate internal controls;

complications with the design or implementation of the new enterprise resource system;

natural disasters, adverse weather conditions, pandemic outbreaks, global political events, war and terrorism;

the impact of changes in tax legislation;

current economic conditions and other economic factors;

the impact of governmental laws and regulations;

the impact of changes in accounting standards;

the impact to our financial performance related to insurance programs;

the costs and consequences of legal proceedings;

inability to protect our brand name, trademarks and other intellectual property rights;

the costs and liabilities associated with infringement of third party intellectual property rights;

the impact of product and food safety claims and effects of legislation;

inability to obtain additional financing, if needed;

restrictions imposed by our indebtedness on our current and future operations; and

regulations related to conflict minerals.

Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Overview

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as "we," "us," or "our") is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the ~~teen~~tween and ~~pre-teen~~teen customer. We offer a dynamic, edited assortment of exciting products, priced at $5 and below, including select brands and licensed merchandise across our category worlds. As of ~~November 3, 2018,~~May 4, 2019, we operated ~~745~~789 stores in 3336 states.

In August 2016, we commenced selling merchandise on the internet, through our fivebelow.com e-commerce website. We launched our e-commerce operation as an additional channel to service our customers. All e-commerce sales, which includes shipping and handling revenue, are included in net sales and beginning with the third fiscal quarter of 2016, are included in comparable sales. Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses.

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted. The TCJA includes a numbers of changes to existing U.S. tax laws that impact us, most notably a reduction of the U.S. corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. We will continue to analyze additional information and guidance related to the TCJA as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. See discussion below under "Income Tax Expense" for further information about the tax benefits and expenses that we recognized this year. In fiscal 2018 and future years, we may invest a portion of any savings generated by the TCJA into expenses that could significantly increase and impact the comparability between periods of Cost of Goods Sold and Gross Profit, Selling, General and Administrative Expenses and Operating Income.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, cost of goods sold and gross profit, selling, general and administrative expenses and operating income.

Net Sales

Net sales constitute gross sales net of merchandise returns for damaged or defective goods. Net sales consist of sales from comparable stores, non-comparable stores, and e-commerce, which includes shipping and handling revenue. Revenue from the sale of gift cards is deferred and not included in net sales until the gift cards are redeemed to purchase merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer.

Our business is seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.

Comparable Sales

Comparable sales include net sales from stores that have been open for at least 15 full months from their opening date, and e-commerce sales. Comparable stores include the following:

Stores that have been remodeled while remaining open;

Stores that have been relocated within the same trade area, to a location that is not significantly different in size, in which the new store opens at about the same time as the old store closes; and

Stores that have expanded, but are not significantly different in size, within their current locations.

For stores that are relocated or expanded, the following periods are excluded when calculating comparable sales:

The period beginning when the closing store receives its last merchandise delivery from one of our distribution centers through:


▪	the last day of the fiscal year in which the store was relocated or expanded (for stores that increased significantly in size); or


▪	the last day of the fiscal month in which the store re-opens (for all other stores); and

The period beginning on the first anniversary of the date the store received its last merchandise delivery from one of our distribution centers through the first anniversary of the date the store re-opened.

Comparable sales exclude the 53rd week of sales for 53-week fiscal years. In the 52-week fiscal year subsequent to a 53-week fiscal year, we exclude the sales in the non-comparable week from the same-store sales calculation.

Due to the 53rd week in fiscal 2017, all comparable sales ~~for~~related to any reporting period during the ~~thirteen and thirty-nine weeks~~year ended ~~November 3, 2018~~February 2, 2019 are reported on a restated calendar ~~basis. Reference to the "restated calendar” is based on~~basis using the National Retail Federation's restated calendar comparing similar weeks, which are the thirteen weeks from August 5, 2018 to November 3, 2018 as compared to the thirteen weeks from August 6, 2017 to November 4, 2017 and the thirty-nine weeks from February 4, 2018 to November 3, 2018 as compared to the thirty-nine weeks from February 5, 2017 to November 4, 2017.weeks.

There may be variations in the way in which some of our competitors and other retailers calculate comparable or “same store” sales. As a result, data in this Quarterly Report on Form 10-Q regarding our comparable sales may not be comparable to similar data made available by other retailers. Non-comparable sales are comprised of new store sales, sales for stores not open for a full 15 months, and sales from existing store relocation and expansion projects that were temporarily closed (or not receiving deliveries) and not included in comparable sales.

Measuring the change in fiscal year-over-year comparable sales allows us to evaluate how our store base is performing. Various factors affect comparable sales, including:

consumer preferences, buying trends and overall economic trends;

our ability to identify and respond effectively to customer preferences and trends;

our ability to provide an assortment of high-quality, trend-right and everyday product offerings that generate new and repeat visits to our stores;

the customer experience we provide in our stores and online;

the level of traffic near our locations in the power, community and lifestyle centers in which we operate;

competition;

changes in our merchandise mix;

pricing;

our ability to source and distribute products efficiently;

the timing of promotional events and holidays;

the timing of introduction of new merchandise and customer acceptance of new merchandise;

our opening of new stores in the vicinity of existing stores;

the number of items purchased per store visit; and

weather conditions.

Opening new stores is an important part of our growth strategy. As we continue to pursue our growth strategy, we expect that a significant percentage of our net sales will continue to come from new stores not included in comparable sales. Accordingly, comparable sales is only one measure we use to assess the success of our growth strategy.

Cost of Goods Sold and Gross Profit

Gross profit is equal to our net sales less our cost of goods sold. Gross margin is gross profit as a percentage of our net sales. Cost of goods sold reflects the direct costs of purchased merchandise and inbound freight, as well as shipping and handling costs, store occupancy, distribution and buying expenses. Shipping and handling costs include both internal and third-party fulfillment and shipping costs related to our e-commerce operations. Store occupancy costs include rent, common area maintenance, utilities and property taxes for all store locations. Distribution costs include costs for receiving, processing, warehousing and shipping of merchandise to or from our distribution centers and between store locations. Buying costs include compensation expense and other costs for our internal buying organization, including our merchandising and product development team and our planning and allocation group. These costs are significant and can be expected to continue to increase as our company grows.

The components of our cost of goods sold may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers. As a result, data in this Quarterly Report on Form 10-Q regarding our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.

The variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase. We regularly analyze the components of gross profit as well as gross margin. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns, and a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the store occupancy, distribution and buying components of cost of goods sold could have an adverse impact on our gross profit and results of operations. Changes in the mix of our products may also impact our overall cost of goods sold.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses are composed of payroll and other compensation, marketing and advertising expense, depreciation and amortization expense and other selling and administrative expenses. SG&A expenses as a percentage of net sales are usually higher in lower sales volume quarters and lower in higher sales volume quarters.

The components of our SG&A expenses may not be comparable to those of other retailers. We expect that our SG&A expenses will increase in future periods due to our continuing store growth. In addition, any increase in future share-based grants or modifications will increase our share-based compensation expense included in SG&A expenses.

Operating Income

Operating income equals gross profit less SG&A expenses. Operating income excludes interest expense or income, and income tax expense or benefit. We use operating income as an indicator of the productivity of our business and our ability to manage SG&A expenses. Operating income percentage measures operating income as a percentage of our net sales.

Results of Consolidated Operations

The following tables summarize key components of our results of consolidated operations for the periods indicated, both in dollars and as a percentage of our net sales.


	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017			May 4, 2019			May 5, 2018
	(in millions, except percentages and total stores)
Consolidated Statements of Operations Data ⁽¹⁾:
Net sales	$	312.8		$	257.2		$	956.9		$	773.4		$	364.8		$	296.3
Cost of goods sold	210.7			173.5			635.8			517.5			244.8			199.1
Gross profit	102.1			83.6			321.1			255.9			120.0			97.2
Selling, general and administrative expenses	86.5			68.8			250.4			202.0			95.5			72.5
Operating income	15.5			14.8			70.7			53.9			24.5			24.7
Interest income, net	1.1			0.3			3.1			0.9			1.7			1.1
Income before income taxes	16.6			15.1			73.8			54.8			26.2			25.8
Income tax expense	3.1			5.3			13.4			19.7			0.5			4.0
Net income	$	13.5		$	9.9		$	60.4		$	35.1		$	25.7		$	21.8
Percentage of Net Sales ⁽¹⁾:
Net sales	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Cost of goods sold	67.4			67.5			66.4			66.9			67.1			67.2
Gross profit	32.6			32.5			33.6			33.1			32.9			32.8
Selling, general and administrative expenses	27.7			26.8			26.2			26.1			26.2			24.5
Operating income	5.0			5.8			7.4			7.0			6.7			8.3
Interest income, net	0.3			0.1			0.3			0.1			0.5			0.4
Income before income taxes	5.3			5.9			7.7			7.1			7.2			8.7
Income tax expense	1.0			2.0			1.4			2.6			0.1			1.3
Net income	4.3		%	3.8		%	6.3		%	4.5		%	7.0		%	7.4		%
Operational Data:
Total stores at end of period	745			625			745			625			789			658
Comparable sales growth	4.8		%	8.5		%	3.6		%	6.9		%	3.1		%	3.2		%
Average net sales per store ⁽²⁾	$	0.4		$	0.4		$	1.4		$	1.3		$	0.5		$	0.5

Thirteen Weeks Ended ~~November 3, 2018~~May 4, 2019 Compared to the Thirteen Weeks Ended ~~October 28, 2017~~May 5, 2018

Net sales increased to ~~$312.8~~$364.8 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$257.2~~$296.3 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of ~~$55.6~~$68.5 million, or ~~21.6%~~23.1%. The increase was the result of a non-comparable sales increase of ~~$47.5~~$59.7 million and a comparable sales increase of ~~$8.1~~$8.8 million. The increase in non-comparable sales was primarily driven by ~~new stores that opened in fiscal 2018 and~~ the number of stores that opened in fiscal ~~2017~~2018 but have not been open for 15 full ~~months.~~months and new stores that opened in fiscal 2019. We plan to open ~~approximately 125~~145 to 150 net new stores in fiscal ~~2018.~~2019.

Comparable sales ~~based on the restated calendar,~~ increased ~~4.8%~~3.1%. This increase resulted from an increase of approximately ~~2.8%~~1.6% in the average dollar value of transactions and an increase of approximately ~~2.0%~~1.5% in the number of transactions.

Cost of Goods Sold and Gross Profit

Cost of goods sold increased to ~~$210.7~~$244.8 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$173.5~~$199.1 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of ~~$37.2~~$45.7 million, or ~~21.4%~~23.0%. The increase in cost of goods sold was primarily the result of an increase in the merchandise cost of goods resulting from the increase in net sales. Also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings.

Gross profit increased to ~~$102.1~~$120.0 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$83.6~~$97.2 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of ~~$18.5~~$22.8 million, or ~~22.1%~~23.4%. Gross margin increased to ~~32.6%~~32.9% for the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~32.5%~~32.8% in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of approximately 10 basis points. The increase in gross margin was primarily the result of a decrease as a percentage of net sales in store occupancy ~~costs.~~costs; partially offset by an increase as a percentage of net sales in distribution costs, which included start-up costs related to our new Southeast distribution center.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to ~~$86.5~~$95.5 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$68.8~~$72.5 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of ~~$17.7~~$23.0 million, or ~~25.8%~~31.7%. As a percentage of net sales, selling, general and administrative expenses increased approximately 90170 basis points to ~~27.7%~~26.2% in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 compared to ~~26.8%~~24.5% in the thirteen weeks ended ~~October 28, 2017.~~May 5, 2018. The increase in selling, general and administrative expenses was primarily the result of increases of ~~$14.0~~$17.6 million in store-related expenses to support new store growth, tax reinvestments, and ~~$3.7~~the impact of the adoption of the new lease accounting standard and $5.4 million of corporate-related expenses.

Income tax expense decreased to ~~$3.1~~$0.5 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$5.3~~$4.0 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, a decrease of ~~$2.2~~$3.5 million, or ~~41.3%~~87.6%. The decrease in income tax expense was primarily ~~the result of the impact of tax reform as a result of the TCJA and~~ due to discrete items, which ~~include~~primarily represent the ~~recognition~~impact of ~~net excess income tax benefits related to~~ ASU 2016-09, "Improvements to Employee Share-Based Payment ~~Accounting."~~Accounting" with respect to the requirement to recognize excess income tax benefits or deficiencies as income tax benefit or expense in the consolidated statements of operations rather than as additional paid-in capital in the consolidated balance sheets. These decreases were partially offset by a ~~$1.5~~$0.4 million increase in pre-tax income.

Our effective tax rate for the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was ~~18.6%~~1.9% compared to ~~34.8%~~15.4% in the thirteen weeks ended ~~October 28, 2017.~~May 5, 2018. Our effective tax rate for the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was lower than the comparable period primarily due to ~~the impact of tax reform as a result of the TCJA and~~ discrete items, which include the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting."

As a result of the foregoing, net income increased to ~~$13.5~~$25.7 million in the thirteen weeks ended ~~November 3, 2018~~May 4, 2019 from ~~$9.9~~$21.8 million in the thirteen weeks ended ~~October 28, 2017,~~May 5, 2018, an increase of ~~$3.6~~$3.9 million or ~~36.8%~~17.7%.

~~Thirty-Nine Weeks Ended November 3, 2018 Compared to the Thirty-Nine Weeks Ended October 28, 2017~~

Net sales increased to $956.9 million in the thirty-nine weeks ended November 3, 2018 from $773.4 million in the thirty-nine weeks ended October 28, 2017, an increase of $183.5 million, or 23.7%. The increase was the result of a non-comparable sales increase of $151.7 million and a comparable sales increase of $31.8 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2018 and the number of stores that opened in fiscal 2017 but have not been open for 15 full months. We plan to open approximately 125 net new stores in fiscal 2018.

Comparable sales, based on the restated calendar, increased 3.6%. This increase resulted from an increase of approximately 3.3% in the average dollar value of transactions and an increase of approximately 0.3% in the number of transactions.

~~Cost of Goods Sold and Gross Profit~~

Cost of goods sold increased to $635.8 million in the thirty-nine weeks ended November 3, 2018 from $517.5 million in the thirty-nine weeks ended October 28, 2017, an increase of $118.3 million, or 22.9%. The increase in cost of goods sold was primarily the result of an increase in the merchandise cost of goods resulting from the increase in net sales. Also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings.

Gross profit increased to $321.1 million in the thirty-nine weeks ended November 3, 2018 from $255.9 million in the thirty-nine weeks ended October 28, 2017, an increase of $65.2 million, or 25.5%. Gross margin increased to 33.6% for the thirty-nine weeks ended November 3, 2018 from 33.1% in the thirty-nine weeks ended October 28, 2017, an increase of approximately 50 basis points. The increase in gross margin was primarily the result of a decrease as a percentage of net sales in store occupancy costs.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increased to $250.4 million in the thirty-nine weeks ended November 3, 2018 from $202.0 million in the thirty-nine weeks ended October 28, 2017, an increase of $48.4 million, or 23.9%. As a percentage of net sales, selling, general and administrative expenses increased approximately 10 basis points to 26.2% in the thirty-nine weeks ended November 3, 2018 compared to 26.1% in the thirty-nine weeks ended October 28, 2017. The increase in selling, general and administrative expenses was primarily the result of increases of $39.2 million in store-related expenses to support new store growth and $9.2 million of corporate-related expenses.

~~Income Tax Expense~~

Income tax expense decreased to $13.4 million in the thirty-nine weeks ended November 3, 2018 from $19.7 million in the thirty-nine weeks ended October 28, 2017, a decrease of $6.3 million, or 32.0%. The decrease in income tax expense was primarily the result of the impact of tax reform as a result of the TCJA and due to discrete items, which include the recognition of net excess income tax benefits related to ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." These decreases were partially offset by a $19.0 million increase in pre-tax income.

Our effective tax rate for the thirty-nine weeks ended November 3, 2018 was 18.2% compared to 36.0% in the thirty-nine weeks ended October 28, 2017. Our effective tax rate for the thirty-nine weeks ended November 3, 2018 was lower than the comparable period primarily due to the impact of tax reform as a result of the TCJA and discrete items, which include the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting."

As a result of the foregoing, net income increased to $60.4 million in the thirty-nine weeks ended November 3, 2018 from $35.1 million in the thirty-nine weeks ended October 28, 2017, an increase of $25.3 million or 72.2%.

Liquidity and Capital Resources

Our primary source of liquidity is cash flows from operations. Our primary cash needs are for capital expenditures and working capital.

Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. We plan to make cash capital expenditures of approximately ~~$130~~$205 million in fiscal ~~2018,~~2019, which exclude the impact of tenant allowances, and which we expect to fund from cash generated from operations. We expect to incur approximately ~~$38~~$50 million of our cash capital expenditure budget in fiscal ~~2018~~2019 to construct and open ~~approximately 125 net~~145 to 150 new stores, with the remainder projected to be spent on our distribution facilities ~~including the new distribution center in Georgia,~~(existing and new), existing stores, and our corporate infrastructure.

Our primary working capital requirements are for the purchase of store inventory and payment of payroll, rent, other store operating costs and distribution costs. Our working capital requirements fluctuate during the year, rising in the third and fourth fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak, year-end holiday shopping season in the fourth fiscal quarter. Fluctuations in working capital are also driven by the timing of new store openings.

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on hand, net cash provided by operating activities and borrowings under our Amended Revolving Credit Facility. When we have used our Amended Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. To the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. We did not have any direct borrowings under our Amended Revolving Credit Facility during the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018.~~May 4, 2019. As of ~~November 3, 2018,~~May 4, 2019, we had approximately $20.0 million available on the line of credit.

On March 20, 2018, our board of directors approved a share repurchase program authorizing the repurchase of up to $100 million of our common stock through March 31, 2021, on the open market, in privately negotiated transactions, or otherwise. In December 2018, we purchased 21,810 shares under this program at an aggregate cost of approximately $2.0 million. There can be no assurances that any ~~such~~additional repurchases will be completed, or as to the timing or amount of any repurchases. The share repurchase program may be modified or discontinued at any time. For the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018,~~May 4, 2019, we did not execute any repurchases.

Based on our growth plans, we believe that our cash position, which includes our cash equivalents and short-term investments, net cash provided by operating activities and availability under our Amended Revolving Credit Facility will be adequate to finance our planned capital expenditures, authorized share repurchases and working capital requirements over the next 12 months and for the foreseeable future thereafter. If cash flows from operations and borrowings under our Amended Revolving Credit Facility are not sufficient or available to meet our requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders.

A summary of our cash flows from operating, investing and financing activities is presented in the following table (in millions):

Net decrease during period in cash and cash equivalents ⁽¹⁾

⁽¹⁾ Components may not add to total due to rounding.

Cash Provided by Operating Activities

Net cash provided by operating activities for the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was ~~$1.6~~$20.8 million, a decrease of ~~$15.4~~$12.2 million compared to the ~~thirty-nine~~thirteen weeks ended ~~October 28, 2017.~~May 5, 2018. The decrease was primarily due to changes in working capital partially offset by an increase in operating cash flows from store performance.

Cash Used in Investing Activities

Net cash used in investing activities for the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was ~~$7.4~~$44.2 million, a decrease of ~~$33.7~~$11.4 million compared to the ~~thirty-nine~~thirteen weeks ended ~~October 28, 2017.~~May 5, 2018. The decrease was primarily due to an increase in net sales, maturities, and redemptions of investment securities partially offset by an increase in capital expenditures. The increase in capital expenditures was primarily for our distribution facilities, our new store construction, ~~our distribution facilities,~~ and our corporate infrastructure.

Cash ~~(Used in) Provided by~~Used in Financing Activities

Net cash used in financing activities for the ~~thirty-nine~~thirteen weeks ended ~~November 3, 2018~~May 4, 2019 was ~~$3.6~~$7.6 million, an increase of ~~$6.5~~$1.9 million compared to the ~~thirty-nine~~thirteen weeks ended ~~October 28, 2017.~~May 5, 2018. The increase was primarily the result of an increase in the common shares withheld for ~~taxes.~~taxes partially offset by an increase in the proceeds from the exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units.

On May 10, 2017, we entered into a Fourth Amended and Restated Loan and Security Agreement (the “Amended Loan and Security Agreement”), among Five Below Inc., 1616 Holdings, Inc. (formerly known as Five Below Merchandising, Inc.) and Wells Fargo Bank, National Association. The Amended Loan and Security Agreement amends and restates the Third

Amended and Restated Loan and Security Agreement, dated June 12, 2013, among Five Below Inc., ~~Five Below Merchandising,~~1616 Holdings, Inc. and Wells Fargo Bank, National Association, which governed the Revolving Credit Facility.

The Amended Loan and Security Agreement includes a revolving line of credit in the amount of up to $20.0 million (the “Amended Revolving Credit Facility”). Pursuant to the Amended Loan and Security Agreement, advances under the Amended Revolving Credit Facility are no longer tied to a borrowing base; however, we are required to maintain eligible inventory at all times in an amount equal to at least $100.0 million. The Amended Revolving Credit Facility expires on the earliest to occur of (i) May 10, 2022 or (ii) an event of default. The Amended Revolving Credit Facility may be increased to up to $50.0 million, subject to certain conditions. The Amended Revolving Credit Facility also includes a $20.0 million sub-limit for the issuance of letters of credit.

The Amended Loan and Security Agreement reduces the interest rate payable on borrowings to be, at our option, a per annum rate equal to (a) a prime rate or (b) a LIBOR-based rate plus a margin of 1.00%. Letter of credit fees are equal to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Loan and Security Agreement are subject to an increase of 2.00% per annum upon an event of default.

The Amended Loan and Security Agreement removes restrictions related to our ability to pay or make dividends and ~~distribute~~distributions or repurchase our stock, but the Amended Loan and Security Agreement continues to include other customary negative and affirmative covenants including, among other things, limitations on our ability to (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) engage in mergers or consolidations; or (vi) change our business.

The Amended Loan and Security Agreement also removes the provisions that required us to make prepayments on outstanding Amended Revolving Credit Facility balances upon the receipt of certain proceeds, including those from the sale of certain assets. Amounts under the Amended Revolving Credit Facility may become due upon certain events of default including, among other things, our failure to comply with the Amended Revolving Credit Facility’s covenants, bankruptcy, default on certain other indebtedness or a change in control.

Under the Amended Loan and Security Agreement, all obligations under the Amended Revolving Credit Facility continue to be guaranteed by our subsidiary and are secured by substantially all of our and our subsidiary's assets.

As of ~~November 3, 2018,~~May 4, 2019, we had approximately $20.0 million available on the line of credit.

All obligations under the Amended Revolving Credit Facility are secured by substantially all of our assets and are guaranteed by our subsidiary. As of ~~November 3,~~May 4, 2019 and May 5, 2018, ~~and October 28, 2017,~~ we were in compliance with the covenants applicable to us under the Amended Revolving Credit Facility.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. Our critical accounting policies and estimates are discussed in the Annual Report.

Effective February 3, 2019, we adopted ASU 2016-02, “Leases" (Topic 842). We ~~believe~~are required to recognize an operating lease asset and an operating lease liability for all of our leases (other than leases that ~~there~~meet the definition of a short-term lease). The liability is equal to the present value of lease payments using an estimated incremental borrowing rate, on a collateralized basis over a similar term, that we would have ~~been no significant changes~~incurred to ~~our critical~~borrow the funds necessary to purchase the leased asset. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting ~~policies during~~standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the ~~thirty-nine weeks ended November 3, 2018.~~prior accounting standard). See the Recently Issued Accounting Pronouncements Recently section of Note 1 ‘‘Summary of Significant Accounting Policies’’ to the consolidated financial statements for a detailed discussion of the adoption of this new lease standard.

Contractual Obligations

Except as set forth below, there have been no material changes to our contractual obligations as disclosed in the Annual Report, other than those which occur in the ordinary course of business.

From February 2, 2019 to May 4, ~~2018 to November 3, 2018,~~2019, we have entered into ~~118~~39 new fully executed retail leases with terms of 10 to 15 years and other lease modifications that have future minimum lease payments of approximately ~~$225.3~~$69.1 million.

In ~~June 2018,~~March 2019, we ~~signed a~~completed the purchase ~~agreement for land and building construction for~~of an ~~approximate~~approximately 700,000 square foot build-to-suit distribution center ~~located~~ in Forsyth, Georgia for approximately $42 million, for land and building, to support our anticipated growth. ~~We expect to occupy the space in early 2019.~~

Off-Balance Sheet Arrangements

For the quarterly period ended~~November 3, 2018~~, May 4, 2019, except for operating leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements

~~In May 2014,~~See "Note 1 - Summary of Significant Accounting Policies" to the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The effective date of this pronouncement is for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. On February 4, 2018, we adopted the pronouncement using the modified retrospective method by recognizing the cumulative effect of gift card breakage as an adjustment to retained earnings resulting in a $0.5 million increase to retained earnings. The comparative information for the years ended prior to February 4, 2018 were not restated to comply with the pronouncement.

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires that lease arrangements longer than 12 months result in an entity recognizing an asset and a liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The standard requires use of the modified retrospective transition approach. We plan to adopt this pronouncement in the first quarter of fiscal 2019, coinciding with the pronouncement’s effective date. Our ability to adopt this standard depends on various factors including system readiness and completing an analysis of information necessary to quantify the financial statement impact. We have established a cross-functional team to implement the pronouncement and we are finalizing our implementation of a leasing software solution, our assessment of the practical expedients and policy elections offered by the standard, and changes to our business processes, systems and controls to support the adoption of this standard. While we are still evaluating the impact of this new guidance on ourunaudited consolidated financial statements ~~we expect it will result~~included in ~~a significant increase in total assets and total liabilities on our balance sheet given that we have a significant number of leases for our stores.~~

In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date"Part I. Financial Information, Item 1. Consolidated Financial Statements" of this ~~pronouncement is~~Form 10-Q, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. During the thirteen weeks ended November 3, 2018, we adopted the pronouncement using the prospective transition method and it did not have a ~~significant impact to our financial statements.~~detailed description of recently issued accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our principal market risk relates to interest rate sensitivity, which is the risk that future changes in interest rates will reduce our net income or net assets. We have short-term investment securities that are interest-bearing securities and if there are changes in interest rates, those changes would affect the interest income we earn on these investments and, therefore, impact our cash flows and results of operations. However, due to the short term nature of our investment portfolio, we do not believe an immediate 100 basis point increase or decrease in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

We also have an Amended Revolving Credit Facility which includes a revolving line of credit, which bears interest at a variable rate. Because our Amended Revolving Credit Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates.

As of ~~November 3, 2018,~~May 4, 2019, we had approximately $20.0 million available on the line of credit. The Amended Revolving Credit Facility reduces the interest rate payable on borrowings to be, at our option, a per annum rate equal to (a) a prime rate or (b) a LIBOR-based rate plus a margin of 1.00%. Letter of credit fees are equal to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Revolving Credit Facility are subject to an increase of 2.00% per annum upon an event of default. We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation in the future.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q pursuant to Rule 13a-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q are effective at a reasonable assurance level in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all errors and all fraud. While our disclosure controls and procedures are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

~~There~~During the thirteen weeks ended May 4, 2019, related to the adoption of ASU 2016-02, "Leases" (Topic 842), we performed a comprehensive analysis of the new standard, implemented a new system to calculate our lease operating assets and liabilities, and implemented new processes and new controls related to the adoption and ongoing accounting and related financial statement reporting of the new standard.

Other than the foregoing, there were no changes to our internal control over financial reporting during the thirteen weeks ended ~~November 3, 2018~~May 4, 2019, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to various proceedings, lawsuits, disputes, and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, and employment actions, including class action lawsuits. The plaintiffs in some actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance. We cannot predict with assurance the outcome of actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement or resolution. If a potential loss arising from these lawsuits, claims and pending actions is probable and reasonably estimable, we record the estimated liability based on circumstances and assumptions existing at the time. Although the outcome of these and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

Risk factors that affect our business and financial results are discussed in Part I, Item 1A "Risk Factors” in our Annual ~~Report and in Part II, Item 1A “Risk Factors” in our Form 10-Q for the quarter ended August 4, 2018 (“2~~^nd ~~Quarter 10-Q”). There have been no material changes in our~~Report. The following risk factors ~~from those~~represent updates and additions to the risk factors previously disclosed in Part I, Item 1A "Risk Factors,” in our Annual ~~Report and 2~~^nd ~~Quarter 10-Q.~~Report. You should carefully consider the risks described below and in our Annual Report, ~~and 2~~^nd ~~Quarter 10-Q,~~ which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report ~~and 2~~^nd ~~Quarter 10-Q~~ are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

We are currently evaluating price increases in an effort to mitigate current or future cost increases. Any resultant price increases could reduce our unit sales, damage our reputation with our customers as an extreme value retailer, and cause us to become less competitive in the marketplace, each of which could have a material adverse effect on our business, financial condition and results of future operations.

We, like many retailers, are and may in the future be subject to increasing operational costs, including escalating product costs, the imposition of tariffs on imported goods, and higher wage and benefits costs in response to legislative requirements and competitive pressures. We are currently evaluating our product pricing to determine if price increases (including beyond $5 per item) may mitigate some or all of the risks of such operational cost increases. We can offer no assurances that price increases will be accepted by our customers, or that price increases will be sufficient to offset the impact of future cost increases. In addition, any increase in our prices may cause our unit sales to decline, and could undermine our positioning as an extreme value retailer making us less attractive to our customers and less competitive in the marketplace. Accordingly, such factors could have a material adverse effect on our business, financial condition and results of future operations.

Our reliance on merchandise manufactured outside of the United States subjects us to legal, regulatory, political and economic risks. In particular, tariffs imposed and proposed by the U.S. government could increase the cost to us of certain products, lower our margins, increase our import related expenses, cause us to increase our prices to consumers, and reduce consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.

A significant majority of our merchandise is manufactured outside the United States, and changes in the prices and flow of these goods for any reason could have an adverse impact on our operations. The United States and other countries have occasionally proposed and enacted protectionist trade policies, which may result in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise. In particular, the United States has recently imposed increased tariffs on certain imports from China. On July 6, 2018, and again on August 23, 2018, the United States government imposed a 25% tariff on a variety of imports from China. On September 24, 2018, a 10% tariff was imposed on additional products from China, which increased to 25% on May 10, 2019. President Trump has indicated further that 25% tariffs may soon be imposed on a list of thousands of categories of products imported from China.

The increased tariffs as well as any newly imposed tariffs on items imported from China or elsewhere would likely result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions: increase our prices (including beyond $5 per item), purchase products produced in countries with no or lower tariffs or away from domestic vendors who source from China or other tariff impacted countries, or alter or cease offering certain products. Any increase in pricing, alteration of products or reduced product offering could reduce the competitiveness of our products. Furthermore, any retaliatory counter-measures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses. Additionally, even if the products we import are not directly impacted by additional tariffs, the imposition of such additional tariffs on goods imported into the United States could cause increased prices for consumer goods in general, which could have a negative impact on consumer spending for discretionary items reducing demand for our products. These direct and indirect impacts of increased tariffs or trade restrictions implemented by the United States, both individually and cumulatively, could have a material adverse effect on our business, financial condition and results of future operations.

It has also been suggested that the United States may materially modify or withdraw from some of its existing trade agreements. Any of these or other measures, if ultimately enacted, or events relating to the manufacturers of our merchandise and the countries in which they are located, some or all of which are beyond our control, can adversely affect our ability to access suitable merchandise on acceptable terms, negatively impact our operations, increase costs and lower our margins. Such events or circumstances include, but are not limited to:

political and economic instability;

the financial instability and labor problems of the manufacturers of our merchandise;

the availability and cost of raw materials;

merchandise quality or safety issues;

changes in currency exchange rates;

the regulatory environment in the countries in which the manufacturers of our merchandise are located;

work stoppages or other employee rights issues;

inflation or deflation; and

transportation availability, costs and disruptions.

Moreover, negative press or reports about products manufactured outside the United States may sway public opinion, and thus customer confidence, away from the products sold in our stores. These and other factors affecting the manufacturers of our merchandise who are located outside of the United States and our access to our products could affect our financial performance adversely.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits



No.		Description

~~3.1~~10.28†		Amended and Restated Bylaws of Five Below Inc., effective October 2, 2018 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).

~~10.1†~~		~~Form of Award Agreement~~Compensation Policy for ~~Restricted Stock Units (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).~~

~~10.2†~~		Form of Award Agreement for Performance-Based Restricted Stock Units (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).Non-Employee Directors

31.1		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended ~~November 3, 2018,~~May 4, 2019, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of ~~November 3, 2018,~~May 4, 2019, February ~~3, 2018~~2, 2019 and ~~October 28, 2017;~~May 5, 2018; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended May 4, 2019 and ~~Thirty-Nine Weeks Ended November 3, 2018 and October 28, 2017;~~May 5, 2018; (iii) the Unaudited Consolidated ~~Statement~~Statements of Shareholders’ Equity for the ~~Thirty-Nine~~Thirteen Weeks Ended ~~November 3,~~May 4, 2019 and May 5, 2018; (iv) the Unaudited Consolidated Statements of Cash Flows for the ~~Thirty-Nine~~Thirteen Weeks Ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~ and (v) the Notes to Unaudited Consolidated Financial Statements, tagged in detail.



*	Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.
†	Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		FIVE BELOW, INC.

Date: ~~December~~June 6, ~~2018~~2019		/s/ Joel D. Anderson
		Joel D. Anderson
		President and Chief Executive Officer (Principal Executive Officer)

Date: ~~December~~June 6, ~~2018~~2019		/s/ Kenneth R. Bull
		Kenneth R. Bull
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

~~EXHIBIT INDEX~~



~~No.~~		~~Description~~

~~3.1~~		Amended and Restated Bylaws of Five Below Inc., effective October 2, 2018 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).

~~10.1†~~		~~Form of Award Agreement for Restricted Stock Units (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).~~

~~10.2†~~		Form of Award Agreement for Performance-Based Restricted Stock Units (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2018).

~~31.1~~		~~Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101*		The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended November 3, 2018, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of November 3, 2018, February 3, 2018 and October 28, 2017; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended and Thirty-Nine Weeks Ended November 3, 2018 and October 28, 2017; (iii) the Unaudited Consolidated Statement of Shareholders’ Equity for the Thirty-Nine Weeks Ended November 3, 2018; (iv) the Unaudited Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended November 3, 2018 and October 28, 2017 and (v) the Notes to Unaudited Consolidated Financial Statements, tagged in detail.



*	Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.
†	~~Management contract or compensatory plan or arrangement~~

3031



Pennsylvania		75-3000378
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

701 Market Street, Suite 300
Philadelphia, PA		19106
(Address of Principal Executive Offices)		(Zip Code)



INDEX

PART I - FINANCIAL INFORMATION		Page
Item 1.	Consolidated Financial Statements (unaudited)	4
	Unaudited Consolidated Balance Sheets as of ~~November 3,~~May 4, 2019, February 2, 2019 and May 5, 2018 ~~February 3, 2018 and October 28, 2017~~	4
	Unaudited Consolidated Statements of Operations for the Thirteen ~~and Thirty-Nine~~ Weeks Ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~	5
	Unaudited Consolidated ~~Statement~~Statements of Shareholders' Equity for the ~~Thirty-Nine~~Thirteen Weeks Ended ~~November 3,~~May 4, 2019 and May 5, 2018	6
	Unaudited Consolidated Statements of Cash Flows for the ~~Thirty-Nine~~Thirteen Weeks Ended ~~November 3,~~May 4, 2019 and May 5, 2018 ~~and October 28, 2017~~	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1416
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2425
Item 4.	Controls and Procedures	25

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	2627
Item 1A.	Risk Factors	2728
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2729
Item 3.	Defaults Upon Senior Securities	2729
Item 4.	Mine Safety Disclosures	2729
Item 5.	Other Information	2729
Item 6.	Exhibits	2830


	November 3, 2018		February 3, 2018		October 28, 2017		May 4, 2019		February 2, 2019		May 5, 2018
Assets
Current assets:
Cash and cash equivalents	$	103,262	$	112,669	$	54,917	$	220,778	$	251,748	$	84,399
Short-term investment securities	85,029		131,958		56,678		67,875		85,412		189,804
Inventories	339,898		187,037		271,685		268,437		243,636		215,376
Prepaid income taxes	11,443		2,264		4,891		1,517		1,337		2,168
Prepaid expenses and other current assets	59,500		45,434		41,894		47,167		60,124		37,378
Total current assets	599,132		479,362		430,065		605,774		642,257		529,125
Property and equipment, net of accumulated depreciation and amortization of $157,575, $127,679 and $123,248, respectively.	245,631		180,349		177,903
Property and equipment, net of accumulated depreciation and amortization of $177,885, $168,588, and $136,983, respectively.							319,221		301,297		195,885
Operating lease assets							659,155		—		—
Deferred income taxes	3,243		6,676		10,512		4,796		6,126		5,455
Long-term investment securities	—		27,702		23,177		—		—		2,930
Other assets	1,730		1,619		1,659		3,330		2,584		1,645
	$	849,736	$	695,708	$	643,316	$	1,592,276	$	952,264	$	735,040

Liabilities and Shareholders’ Equity
Current liabilities:
Line of credit	$	—	$	—	$	—	$	—	$	—	$	—
Accounts payable	155,986		73,033		124,187		112,460		103,692		95,081
Income taxes payable	281		25,275		55		19,263		20,626		28,146
Accrued salaries and wages	11,139		22,906		14,770		7,397		24,586		5,936
Other accrued expenses	72,019		43,246		55,154		72,416		104,201		51,500
Operating lease liabilities							109,339		—		—
Total current liabilities	239,425		164,460		194,166		320,875		253,105		180,663
Deferred rent and other	85,240		72,690		67,839		—		84,065		76,459
Long-term operating lease liabilities							635,402		—		—
Total liabilities	324,665		237,150		262,005		956,277		337,170		257,122
Commitments and contingencies (note 5)
Commitments and contingencies (note 6)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,760,985, 55,438,089 and 55,235,031 shares, respectively.	557		554		552
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,955,893, 55,759,048, and 55,620,019 shares, respectively.							559		557		555
Additional paid-in capital	351,941		346,300		336,432		347,943		352,702		343,369
Retained earnings	172,573		111,704		44,327		287,497		261,835		133,994
Total shareholders’ equity	525,071		458,558		381,311		635,999		615,094		477,918
	$	849,736	$	695,708	$	643,316	$	1,592,276	$	952,264	$	735,040


	Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	November 3, 2018			October 28, 2017			May 4, 2019			May 5, 2018
Operating activities:
Net income	$	60,383		$	35,074		$	25,662		$	21,804
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	30,267			24,193			11,861			9,304
Share-based compensation expense	9,297			11,977			2,878			2,762
Deferred income tax expense	3,433			527			1,330			1,221
Other non-cash expenses	43			67			(5		)	7
Changes in operating assets and liabilities:
Inventories	(152,861		)	(117,237		)	(24,801		)	(28,339		)
Prepaid income taxes	(9,179		)	(3,339		)	(180		)	96
Prepaid expenses and other assets	(14,175		)	(12,865		)	12,212			8,031
Accounts payable	79,036			69,933			8,021			24,237
Income taxes payable	(24,994		)	(23,884		)	(1,363		)	2,871
Accrued salaries and wages	(11,767		)	3,976			(17,189		)	(16,970		)
Deferred rent	12,785			12,799			(92,329		)	3,390
Operating leases							85,586			—
Other accrued expenses	19,351			15,806			9,147			4,587
Net cash provided by operating activities	1,619			17,027			20,830			33,001
Investing activities:
Purchases of investment securities	(91,375		)	(124,406		)	(36,739		)	(49,251		)
Sales, maturities, and redemptions of investment securities	166,006			132,855			54,276			16,177
Capital expenditures	(82,027		)	(49,518		)	(61,713		)	(22,513		)
Net cash used in investing activities	(7,396		)	(41,069		)	(44,176		)	(55,587		)
Financing activities:
Net proceeds from issuance of common stock	168			135
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units	4,019			3,799			2,249			1,224
Common shares withheld for taxes	(7,817		)	(1,063		)	(9,873		)	(6,908		)
Net cash (used in) provided by financing activities	(3,630		)	2,871
Net cash used in financing activities							(7,624		)	(5,684		)
Net decrease in cash and cash equivalents	(9,407		)	(21,171		)	(30,970		)	(28,270		)
Cash and cash equivalents at beginning of period	112,669			76,088			251,748			112,669
Cash and cash equivalents at end of period	$	103,262		$	54,917		$	220,778		$	84,399

Supplemental disclosures of cash flow information:
Non-cash investing activities
Increase in accrued purchases of property and equipment	$	11,813		$	11,266
(Decrease) increase in accrued purchases of property and equipment							$	(31,931	)	$	1,026


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	As of November 3, 2018								As of May 4, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Short-term:
Corporate bonds	$	82,710	$	—	$	194	$	82,516	$	65,451	$	—	$	23	$	65,428
Municipal bonds	2,319		—		7		2,312		2,424		—		1		2,423
Total	$	85,029	$	—	$	201	$	84,828	$	67,875	$	—	$	24	$	67,851


	As of February 3, 2018								As of February 2, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Short-term:
Corporate bonds	$	117,373	$	—	$	177	$	117,196	$	83,128	$	—	$	63	$	83,065
Municipal bonds	14,585		—		—		14,585		2,284		—		2		2,282
Total	$	131,958	$	—	$	177	$	131,781	$	85,412	$	—	$	65	$	85,347

Long-term:
Corporate bonds	$	25,465	$	—	$	170	$	25,295
Municipal bonds	2,237		—		2		2,235
Total	$	27,702	$	—	$	172	$	27,530


	As of October 28, 2017								As of May 5, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Short-term:
Corporate bonds	$	50,778	$	—	$	46	$	50,732	$	177,966	$	—	$	505	$	177,461
Municipal bonds	5,900		—		—		5,900		11,838		—		11		11,827
Total	$	56,678	$	—	$	46	$	56,632	$	189,804	$	—	$	516	$	189,288

Long-term:
Corporate bonds	$	23,177	$	—	$	98	$	23,079	$	856	$	—	$	6	$	850
Municipal bonds									2,074		—		8		2,066
Total	$	23,177	$	—	$	98	$	23,079	$	2,930	$	—	$	14	$	2,916


⁽²⁾	Only includes stores open during the full thirteen ~~and thirty-nine~~ weeks ended.


(b)	Fiscal Year


(3)	Leases


~~(5)~~(6)	Commitments and Contingencies

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company