(d) Recently Issued Accounting Pronouncements

In ~~November~~May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers. The update 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. In August 2015, the FASB issued ASU ~~2015-17, "Income Taxes: Balance Sheet Classification~~2015-14, "Revenue from Contracts with Customers: Deferral of ~~Deferred Taxes.~~the Effective Date." ASU ~~2015-17 simplifies~~2015-14 deferred the ~~presentation~~effective date of ~~deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The updated guidance is effective for interim and annual periods~~ASU 2014-09 to fiscal years beginning after December 15, 2017, and ~~early~~interim periods within those fiscal years. Early adoption is ~~permitted.~~permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In the first six months of fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU 2014-09. The Company ~~elected~~may use either a full retrospective approach or a modified retrospective approach to ~~early~~ adopt ~~this guidance effective in the fourth quarter of fiscal 2015, and~~ASU 2014-09. While the Company ~~retrospectively applied~~is still evaluating this standard, it is not expected that this standard will have a material impact on the ~~change within the~~Company’s consolidated balance sheets. As a result of the retrospective adoption, the Company reclassified the May 2, 2015 consolidated balance sheet resulting in a reduction of $8.7 million in current deferred income tax assets, a reduction of long term deferred income tax liabilities of $0.2 million and an increase in long term deferred income tax assets of $8.5 million.financial statements.

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. While the Company is ~~currently~~still evaluating this standard, given the ~~impact~~significant amount of leases the ~~updated guidance~~Company is party to, the Company expects this standard will have a material impact on the Company's consolidated balance sheets from the recognition of right of use assets and related liabilities but does not expect it to have a material impact on the consolidated statements of operations. The Company plans to adopt this standard in the first quarter of fiscal 2019, coinciding with the standard’s effective date.

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 affects all entities that issue share-based payment awards to their employees. This accounting standards update makes several modifications to the accounting for employee share-based payment transactions, including the requirement that the excess income tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the consolidated statement of operations be recognized as income tax benefit or expense in the consolidated statement of operations rather than as additional paid-in capital in the consolidated balance sheets. The guidance also clarifies the classification of components of share-based awards on the consolidated statement of cash flows such that excess income tax benefits should not be presented separately from other income taxes in the consolidated statement of cash flows and, thus, should be classified as an operating activity rather than a financing activity as they are under the current guidance. ASU 2016-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2016 and ~~disclosures.~~interim periods within those years. The Company adopted this standard prospectively in the first quarter of fiscal 2017. This standard will result in a decrease or increase to the Company's effective tax rate, net income, and earnings per share based upon the requirement to recognize the excess income tax benefits or deficiencies in the consolidated statements of operations and change the Company's earnings per share calculation to exclude excess tax benefits previously assumed under the treasury stock method. No changes were required related to the classification of employee taxes paid for withheld shares in the Company's consolidated statements of cash flows since the Company has historically classified these within financing cash flows.

(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.

(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 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 investments in corporate bonds are level 1 while the short-term investments in certificates of deposits and municipals 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 April 29, 2017, January 28, 2017, and April 30, 2016, ~~January 30, 2016, and May 2, 2015,~~ the Company had cash equivalents of ~~$6.6~~$21.6 million, ~~$22.6~~$36.3 million and ~~$43.9~~$6.6 million, respectively. The Company’s cash equivalents consist of credit and debit card receivables, money market funds, certificates of deposit, and short-term municipal bonds. Fair value for cash equivalents was determined based on Level 1 inputs.

As of April ~~30, 2016~~29, 2017, January 28, 2017, and ~~January~~April 30, 2016, the Company's short-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):


	As of April 30, 2016								As of April 29, 2017
	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	$	36,159	$	—	$	8	$	36,151	$	65,840	$	—	$	49	$	65,791
Certificates of deposit	1,645		—		—		1,645
Municipal bonds	18,046		6		—		18,053		47,935		—		8		47,926
Total	$	55,850	$	6	$	8	$	55,849	$	113,775	$	—	$	57	$	113,717

Long-term:
Corporate bonds									$	3,888	$	—	$	2	$	3,886
Municipal bonds									2,781		7		—		2,788
Total									$	6,669	$	7	$	2	$	6,674


(3)	Line of Credit

The Company has a revolving credit facility (the "Revolving Credit Facility") that allows maximum borrowings of $20.0 million with advances tied to a borrowing base and expires on the earliest to occur of (i) May 16, 2017 or (ii) upon the occurrence of an event of default. The Revolving Credit Facility may be increased to $30.0 million upon certain conditions. The Revolving Credit Facility includes a $5.0 million sub-limit for the issuance of letters of credit. The borrowing base is 90% of eligible credit card receivables plus 90% of the net recovery percentage of eligible inventory less established reserves.

The Revolving Credit Facility provides for interest on borrowings, at the Company's option, at (a) a prime rate plus a margin of (i) 0.75% if excess availability is greater than or equal to 75%, (ii) 1.0% if excess availability is less than 75% but greater than or equal to 33% or (iii) 1.25% if excess availability is less than 33% or (b) a LIBOR-based rate plus a margin of (i)

1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. The Revolving Credit Facility further provides for a letter of credit fee equal to the LIBOR-based rate plus (i) 1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. The Revolving Credit Facility also contains an unused credit facility fee of 0.375% per annum and is subject to a servicing fee of approximately $12.0 thousand per year.

The Revolving Credit Facility includes a covenant which requires the Company to maintain minimum excess collateral availability of no less than the greater of (i) 10% of the then effective maximum credit and (ii) $3.0 million.

The Revolving Credit Facility also includes customary negative and affirmative covenants including, among others, 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) pay dividends or make distributions or other restricted payments; (vi) engage in mergers or consolidations; or (vii) change the Company's business.

Additionally, the Revolving Credit Facility is subject to payment upon the receipt of certain proceeds, including those from the sale of certain assets, and is subject to an increase in the interest rate on borrowings and the letter of credit fee of 2.0% upon an event of default. Amounts under the Revolving Credit Facility may become due upon certain events of default including, among others, failure to comply with the Revolving Credit Facility’s covenants, bankruptcy, default on certain other indebtedness or a change in control.

As of April ~~30, 2016,~~29, 2017, the Company had no borrowings under the Revolving Credit Facility and had approximately $20.0 million available on the line of credit.

All obligations under the Revolving Credit Facility are secured by substantially all of the Company's assets and are guaranteed by the Company's subsidiary. As of April 29, 2017 and April 30, 2016, ~~and May 2, 2015,~~ the Company was in compliance with the covenants applicable to it under the Revolving Credit Facility.

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, 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 the Company, Five Below Merchandising, 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 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, Inc., a wholly-owned subsidiary of the Company, and are secured by substantially all of the assets of the Company and Five Below Merchandising, Inc.


(4)	Commitments and Contingencies

Commitments

Leases

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 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 ~~2031.~~2033.

During the thirteen weeks ended April ~~30, 2016,~~29, 2017, the Company committed to 2638 new store leases with terms of 10 to 15 years that have future minimum lease payments of approximately ~~$49.3~~$69.2 million.

In September 2016, the Company signed a 15-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate the Company’s current and anticipated future growth. The Company expects to initially occupy approximately 110,000 square feet of office space in early 2018 and expects to expand into approximately 20,000 square feet of additional office space by no later than 2023. The lease agreement has future minimum lease payments of approximately $50 million and expires in early 2033 with three successive options to renew for additional term up to approximately fifteen years.

Other contractual commitments

As of April ~~30, 2016,~~29, 2017, the Company has other purchase commitments of approximately $2.6 million consisting of purchase agreements for materials that will be used in the construction of new stores.

Contingencies

Legal Matters

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.


(5)	Share-Based Compensation

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 shares under the Plan. As of April ~~30, 2016, 3,591,495~~29, 2017, 3,416,569 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 the Plan was as follows:

Options
Outstanding Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term
(in years)
Balance as of January 30, 2016 1,088,674
$ 26.31
7.5
Granted 51,611
39.30

Forfeited (11,250 ) 38.06

Exercised (88,654 ) 12.70

Balance as of April 30, 2016 1,040,381
27.99
7.2
Exercisable as of April 30, 2016 508,272
$ 20.25
6.3



	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Balance at January 28, 2017	866,637		$	29.60	6.7
Forfeited	(12,440	)	36.21
Exercised	(36,398	)	31.94
Balance at April 29, 2017	817,799		29.40		6.4
Exercisable at April 29, 2017	551,115		$	26.43	5.9

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 with the following weighted average assumptions:~~

Thirteen Weeks Ended
April 30, 2016 May 2, 2015
Expected volatility 47.6 % 47.0 %
Risk-free interest rate 1.6 % 1.8 %
Expected life of options 6.4 years
6.4 years
Expected dividend yield — % — %

The Company uses the simplified method to estimate the expected term of the option. The expected volatility incorporates historical and implied volatility of similar entities whose share prices are publicly available. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

~~The per-share weighted average grant-date fair value of~~model. There were no stock options ~~granted for~~issued during the thirteen weeks ended April ~~30, 2016 and May 2, 2015 was $18.89 and $13.67, respectively.~~29, 2017.

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 granted to date have vesting periods ranging from less than one year to five years from the date of grant. PSU's 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 thirteen weeks ended April ~~30, 2016~~29, 2017 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 January 30, 2016	211,682		$	33.47	477,463		$	36.48
Non-vested balance as of January 28, 2017									275,176		$	36.27	504,556		$	36.91
Granted	84,563		39.23		127,160		39.22		126,694		38.10		129,919		38.10
Vested	(645	)	38.71		(77,260	)	38.83		(40,520	)	28.58		(141,003	)	38.15
Forfeited	(5,511	)	32.09		—		—		(13,318	)	46.55		(9,541	)	33.40
Non-vested balance as of April 30, 2016	290,089		$	35.16	527,363		$	36.80
Non-vested balance as of April 29, 2017									348,032		$	37.44	483,931		$	36.94

In connection with the vesting of RSU's and PSU's during the thirteen weeks ended April ~~30, 2016,~~29, 2017, the Company withheld ~~33,940~~19,862 shares with an aggregate value of ~~$1.3~~$0.8 million in satisfaction of minimum tax withholding obligations due upon vesting.

As of April ~~30, 2016,~~29, 2017, there was ~~$27.0~~$22.5 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements (including stock options, restricted stock units and performance-based restricted stock units) granted under the Plan. That cost is expected to be recognized over a weighted average vesting period of ~~2.7~~2.6 years.


(6)	Income Taxes

The following table summarizes the Company’s income tax expense and effective tax rates for the thirteen weeks ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015 (in~~(dollars in thousands):


	Thirteen Weeks Ended						Thirteen Weeks Ended
	April 30, 2016			May 2, 2015			April 29, 2017			April 30, 2016
Income before income taxes	$	10,826		$	7,012		$	13,091		$	10,826
Income tax expense	$	4,068		$	2,734		$	4,700		$	4,068
Effective tax rate	37.6		%	39.0		%	35.9		%	37.6		%

The effective tax rates for the thirteen weeks ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~ 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 weeks ended April ~~30, 2016~~29, 2017 was lower than the thirteen weeks ended ~~May 2, 2015~~April 30, 2016 primarily due to discrete items, which include the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," with respect to the requirement to recognize excess income tax benefits or deficiencies as ~~a result of a change~~income tax benefit or expense in the ~~Company's average state tax rate.~~consolidated statements of 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 or penalties related to income taxes on the Company’s balance sheets as of April ~~30, 2016~~29, 2017, January ~~30, 2016~~28, 2017, or ~~May 2, 2015~~April 30, 2016 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 weeks ended April 29, 2017 or April 30, ~~2016 or May 2, 2015.~~2016.

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 February 1, 2014 and thereafter remain subject to examination by the U.S. Internal Revenue ~~Service (“IRS”).~~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 3three to 4four 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 January ~~30, 2016~~28, 2017 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen weeks endedApril ~~30, 2016~~29, 2017 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 2017" or "fiscal 2017" refer to the period from January 29, 2017 to February 3, 2018 and consists of a 53-week fiscal year. References to "fiscal year 2016" or "fiscal 2016" refer to the period from January 31, 2016 to January 28, 2017 and consists of a 52-week fiscal year. References to "fiscal year 2015" or "fiscal 2015" refer to the period from February 1, 2015 to January 30, 2016 and consists of a 52-week fiscal year. References to “fiscal year 2014” or “fiscal 2014” refer to the period from February 2, 2014 to January 31, 2015 and consists of a 52-week fiscal year. The fiscal quarters ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~ refer to the thirteen 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;

•~~increased competition from online retailers due~~reliance on merchandise manufactured outside of the United States;

•dependence on a volume of traffic to our ~~lack of online sales;~~stores;

~~extreme weather conditions in the areas in which our stores are located could negatively affect our business~~•inability to attract and ~~results of operations;~~retain qualified employees;

•inability to successfully expand our distribution 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;

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

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

•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;

•~~dependence on the success of shopping centers in which our stores are located;~~

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

•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 to online retail;

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

•failure to maintain adequate internal controls;

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

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

•current economic conditions and other economic factors;

•the impact of governmental laws and regulations;

•the costs and consequences of legal proceedings;

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

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

•inability to obtain additional financing, if needed; ~~and~~

•restrictions imposed by our indebtedness on our current and future ~~operations.~~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 is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the teen and pre-teen customer. We offer a dynamic, edited assortment of exciting products, all priced at $5 and below, including select brands and licensed merchandise across our category worlds. As of April ~~30,~~29, 2017, we operated 553 stores in 32 states.

In August 2016, we ~~operated 458 stores~~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 ~~28 states.~~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.

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 ~~store~~ 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 ~~non-comparable stores.~~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.

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 ~~Store~~ Sales

Comparable ~~store~~ sales include net sales from stores that have been open for at least 15 full months from their opening ~~date.~~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 ~~store~~ 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.

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 ~~store~~ sales may not be comparable to similar data made available by other retailers. Non-comparable ~~store~~ 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 ~~store~~ sales.

Measuring the change in fiscal year-over-year comparable ~~store~~ sales allows us to evaluate how our store base is performing. Various factors affect comparable ~~store~~ 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;~~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 ~~store~~ sales. Accordingly, comparable ~~store~~ 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 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 ~~costs~~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.~~&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						Thirteen Weeks Ended
	April 30, 2016			May 2, 2015			April 29, 2017			April 30, 2016
	(in millions, except total stores)						(in millions, except percentages and total stores)
Consolidated Statements of Operations Data ⁽¹⁾:
Net sales	$	192.7		$	153.7		$	232.9		$	192.7
Cost of goods sold	132.4			106.6			159.1			132.4
Gross profit	60.3			47.2			73.8			60.3
Selling, general and administrative expenses	49.5			40.1			61.0			49.5
Operating income	10.8			7.0			12.8			10.8
Interest income (expense), net	0.1			—
Interest income, net							0.3			0.1
Income before income taxes	10.8			7.0			13.1			10.8
Income tax expense	4.1			2.7			4.7			4.1
Net income	$	6.8		$	4.3		$	8.4		$	6.8
Percentage of Net Sales ⁽¹⁾:
Net sales	100.0		%	100.0		%	100.0		%	100.0		%
Cost of goods sold	68.7		%	69.3		%	68.3			68.7
Gross profit	31.3		%	30.7		%	31.7			31.3
Selling, general and administrative expenses	25.7		%	26.1		%	26.2			25.7
Operating income	5.6		%	4.6		%	5.5			5.6
Interest income (expense), net	—		%	—		%
Interest income, net							0.1			—
Income before income taxes	5.6		%	4.6		%	5.6			5.6
Income tax expense	2.1		%	1.8		%	2.0			2.1
Net income	3.5		%	2.8		%	3.6		%	3.5		%
Operational Data:
Total stores at end of period	458			385			553			458
Comparable stores sales growth	4.9		%	1.7		%
Comparable sales growth							2.6		%	4.9		%
Average net sales per store ⁽²⁾	$	0.4		$	0.4		$	0.4		$	0.4

Cash Provided by Financing Activities

Net cash provided by financing activities for the thirteen weeks ended April ~~30, 2016~~29, 2017 was ~~$0.2~~$0.4 million, ~~a decrease~~an increase of ~~$0.5~~$0.2 million compared to the thirteen weeks ended ~~May 2, 2015.~~April 30, 2016. The ~~decrease~~increase was primarily the result of ~~an increase~~decreases in the common shares withheld for taxes ~~partially offset by an increase in~~and excess tax benefits related to exercises of stock options and the ~~proceeds from the exercise~~vesting of ~~options.~~restricted stock units and performance-based restricted stock units.

Line of Credit

The Company has a ~~Revolving~~revolving credit facility (the "Revolving Credit ~~Facility~~Facility") that allows maximum borrowings of $20.0 million with advances tied to a borrowing base and expires on the earliest to occur of (i) May 16, 2017 or (ii) upon the occurrence of an event of default. The Revolving Credit Facility may be increased to $30.0 million upon certain conditions. The Revolving Credit Facility includes a $5.0 million sub limit for the issuance of letters of credit. The borrowing base is 90% of eligible credit card receivables plus 90% of the net recovery percentage of eligible inventory less established reserves.

The Revolving Credit Facility provides for interest on borrowings, at our option, at (a) a prime rate plus a margin of (i) 0.75% if excess availability is greater than or equal to 75%, (ii) 1.0% if excess availability is less than 75% but greater than or equal to 33% or (iii) 1.25% if excess availability is less than 33% or (b) a LIBOR-based rate plus a margin of (i) 1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. The Revolving Credit Facility further provides for a letter of credit fee equal to the LIBOR-based rate plus (i) 1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. The Revolving Credit Facility also contains an unused credit facility fee of 0.375% per annum and is subject to a servicing fee of approximately $12.0 thousand per year.

The Revolving Credit Facility includes a covenant which requires us to maintain minimum excess collateral availability of no less than the greater of (i) 10% of the then effective maximum credit and (ii) $3.0 million.

The Revolving Credit Facility also includes customary negative and affirmative covenants including, among others, limitations on our ability to (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) pay dividends or make distributions or other restricted payments; (vi) engage in mergers or consolidations; or (vii) change our business.

As of April ~~30, 2016,~~29, 2017, we ~~had no borrowings under the Revolving Credit Facility and~~ had approximately $20.0 million available on the line of credit.

All obligations under the Revolving Credit Facility are secured by substantially all of our assets and are guaranteed by ~~the Company's~~our subsidiary. As of April 29, 2017 and April 30, 2016, ~~and May 2, 2015,~~ we were in compliance with the covenants applicable to us under the Revolving Credit Facility.

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., 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, 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 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.

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. We believe that there have been no significant changes to our critical accounting policies during the thirteen weeks ended
April ~~30, 2016.~~29, 2017.

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 January ~~30, 2016~~29, 2017 to April ~~30, 2016,~~29, 2017, we have entered into 2638 new fully executed retail leases with ~~an average term~~terms of 10 to 15 years and other lease modifications that have future minimum lease payments of approximately ~~$49.3~~$69.2 million.

In September 2016, we signed a 15-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate our current and anticipated future growth. We expect to initially occupy approximately 110,000 square feet of office space in early 2018 and expect to expand into approximately 20,000 square feet of additional office space by no later than 2023. The lease agreement has future minimum lease payments of approximately $50 million and expires in early 2033 with three successive options to renew for additional term up to approximately fifteen years.

Off-Balance Sheet Arrangements

For the quarterly period ended April ~~30, 2016~~29, 2017, 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 ~~November~~May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers. The update 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. In August 2015, the FASB issued ASU ~~2015-17, "Income Taxes: Balance Sheet Classification~~2015-14, "Revenue from Contract with Customers: Deferral of ~~Deferred Taxes.~~the Effective Date." ASU ~~2015-17 simplifies~~2015-14 deferred the ~~presentation~~effective date of ~~deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The updated guidance is effective for interim and annual periods~~ASU 2014-09 to fiscal years beginning after December 15, 2017, and ~~early~~interim periods within those fiscal years. Early adoption is ~~permitted. We elected to early adopt this guidance effective in~~permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In the ~~fourth quarter~~first six months of fiscal ~~2015, and we retrospectively applied~~2016, the ~~change within~~FASB issued guidance clarifying the interpretation of certain principles of ASU 2014-09. We may use either a full retrospective approach or a modified retrospective approach to adopt ASU 2014-09. We are currently evaluating the impact of the updated guidance on our consolidated ~~balance sheets.~~financial statements.

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. ~~We are currently evaluating the impact~~The standard requires use of the ~~updated guidance~~modified retrospective transition approach. While we are still evaluating this standard, given the significant amount of leases that we are party to, we expect this standard will have a material impact on our consolidated balance sheets from the recognition of right to use assets and related liabilities but do not expect it to have a material impact on our consolidated statements of operations. We plan to adopt this standard in the first quarter of fiscal 2019, coinciding with the standard’s effective date.

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 affects all entities that issue share-based payment awards to their employees. This accounting standards update makes several modifications to the accounting for employee share-based payment transactions, including the requirement that the excess income tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the consolidated statement of operations be recognized as income tax benefit or expense in the consolidated statement of operations rather than as additional paid-in capital in the consolidated balance sheet. The guidance also clarifies the classification of components of share-based awards on the consolidated statement of cash flows such that excess income tax benefits should not be presented separately from other income taxes in the consolidated statement of cash flows and, thus, should be classified as an operating activity rather than a financing activity as they are under the current guidance. ASU 2016-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2016 and ~~disclosures.~~interim periods within those years. We adopted this standard prospectively in the first quarter of fiscal 2017. This standard will result in a decrease or increase to our effective tax rate, net income, and earnings per share based upon the requirement to recognize the excess income tax benefits or deficiencies in the consolidated statements of operations and change our earnings per share calculation to exclude excess tax benefits previously assumed under the treasury stock method. No changes were required related to the classification of employee taxes paid for withheld shares in our consolidated statements of cash flows since we have historically classified these within financing cash flows.

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 a Revolving Credit Facility which includes a revolving line of credit with advances tied to a borrowing base, which bears interest at a variable rate. Because our Revolving Credit Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates.

As of April ~~30, 2016, we~~29, 2017, the Company had ~~no borrowings outstanding under~~approximately $20.0 million available on the ~~Revolving Credit Facility.~~line of credit. The Revolving Credit Facility provides for interest on borrowings, at the Company's option, at (a) a prime rate plus a margin of (i) 0.75% if excess availability is greater than or equal to 75%, (ii) 1.0% if excess availability is less than 75% but greater than or equal to 33% or (iii) 1.25% if excess availability is less than 33% or (b) a LIBOR-based rate plus a margin of (i) 1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. The Revolving Credit Facility further provides for a letter of credit fee equal to the LIBOR-based rate plus (i) 1.75% if excess availability is greater than or equal to 75%, (ii) 2.00% if excess availability is less than 75% but greater than or equal to 33% or (iii) 2.25% if excess availability is less than 33%. 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 were no changes to our internal control over financial reporting during the thirteen weeks ended April ~~30, 2016~~29, 2017 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,”~~“Risk Factors” in our Annual Report. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report 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.

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

10.1		~~Amendment to~~ Employment Letter, dated ~~March 11, 2016,~~April 6, 2017, by and between ~~Eric M. Specter~~George S. Hill and Five Below, Inc.

10.2		Five Below, Inc. Executive Severance Plan.

10.3		Fourth Amended and Restated Loan and Security Agreement, dated May 10, 2017, among the Company, Five Below Merchandising, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~March 17, 2016)~~May 11, 2017).

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 April ~~30, 2016,~~29, 2017, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of April 29, 2017, January 28, 2017 and April 30, ~~2016, January 30, 2016 and May 2, 2015;~~2016; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended April 29, 2017 and April 30, ~~2016 and May 2, 2015;~~2016; (iii) the Unaudited Consolidated Statement of Shareholders’ Equity for the Thirteen Weeks Ended April ~~30, 2016;~~29, 2017; (iv) the Unaudited Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~ 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.

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: June ~~3, 2016~~2, 2017		/s/ Joel D. Anderson
		Joel D. Anderson
		President and Chief Executive Officer (Principal Executive Officer)

Date: June ~~3, 2016~~2, 2017		/s/ Kenneth R. Bull
		Kenneth R. Bull
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX



No.		Description

10.1		Employment Letter, dated April 6, 2017, by and between George S. Hill and Five Below, Inc.

10.2		Five Below, Inc. Executive Severance Plan.

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 April ~~30, 2016,~~29, 2017, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of April 29, 2017, January 28, 2017 and April 30, ~~2016, January 30, 2016 and May 2, 2015;~~2016; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended April 29, 2017 and April 30, ~~2016 and May 2, 2015;~~2016; (iii) the Unaudited Consolidated Statement of Shareholders’ Equity for the Thirteen Weeks Ended April ~~30, 2016;~~29, 2017; (iv) the Unaudited Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~ 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.

2630



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

1818 Market Street, Suite 2000
Philadelphia, PA		19103
(Address of Principal Executive Offices)		(Zip Code)



INDEX

PART I - FINANCIAL INFORMATION		Page
Item 1.	Consolidated Financial Statements (unaudited)	34
	Unaudited Consolidated Balance Sheets as of April 29, 2017, January 28, 2017 and April 30, 2016 ~~January 30, 2016 and May 2, 2015~~	34
	Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~	4
	Unaudited Consolidated Statement of Shareholders' Equity for the Thirteen Weeks Ended April ~~30, 2016~~29, 2017	56
	Unaudited Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016 ~~and May 2, 2015~~	67
	Notes to Unaudited Consolidated Financial Statements	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1316
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2124
Item 4.	Controls and Procedures	2125

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	2226
Item 1A.	Risk Factors	2327
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2327
Item 3.	Defaults Upon Senior Securities	2327
Item 4.	Mine Safety Disclosures	2327
Item 5.	Other Information	2327
Item 6.	Exhibits	2428


	April 30, 2016			January 30, 2016			May 2, 2015			April 29, 2017		January 28, 2017		April 30, 2016
Assets
Current assets:
Cash and cash equivalents	$	25,774		$	53,081		$	52,391		$	65,237	$	76,088	$	25,774
Short-term investment securities	55,851			46,335			—			113,775		77,791		55,851
Inventories	156,300			148,370			119,820			180,002		154,448		156,300
Prepaid income taxes	4,411			1,341			6,941			1,243		1,552		4,411
Prepaid expenses and other current assets	21,620			15,618			16,736			29,328		29,910		21,620
Total current assets	263,956			264,745			195,888			389,585		339,789		263,956
Property and equipment, net of accumulated depreciation and amortization of $80,522, $74,395 and $63,573, respectively.	123,765			119,784			98,134
Property and equipment, net of accumulated depreciation and amortization of $106,950, $100,200 and $80,522 respectively.										148,561		138,376		123,765
Deferred income taxes	8,720			8,507			8,533			10,486		11,039		8,720
Long-term investment securities										6,669		10,514		—
Other assets	278			258			293			1,628		818		278
	$	396,719		$	393,294		$	302,848		$	556,929	$	500,536	$	396,719

Liabilities and Shareholders’ Equity
Current liabilities:
Line of credit	$	—		$	—		$	—		$	—	$	—	$	—
Accounts payable	57,784			58,225			42,146			77,987		51,178		57,784
Income taxes payable	802			11,942			253			27,653		23,939		802
Accrued salaries and wages	5,672			7,661			4,590			7,650		10,794		5,672
Other accrued expenses	28,777			24,368			30,463			41,690		30,652		28,777
Total current liabilities	93,035			102,196			77,452			154,980		116,563		93,035
Deferred rent and other	49,367			46,617			43,659			57,763		52,568		49,367
Total liabilities	142,402			148,813			121,111			212,743		169,131		142,402
Commitments and contingencies (note 4)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 54,724,935, 54,590,641 and 54,478,408 shares, respectively.	547			546			545
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,104,131, 54,904,954 and 54,724,935 shares, respectively.										551		549		547
Additional paid-in capital	309,599			306,522			297,181			325,991		321,603		309,599
Accumulated deficit	(55,829		)	(62,587		)	(115,989		)
Retained earnings (accumulated deficit)										17,644		9,253		(55,829		)
Total shareholders’ equity	254,317			244,481			181,737			344,186		331,405		254,317
	$	396,719		$	393,294		$	302,848		$	556,929	$	500,536	$	396,719


	Thirteen Weeks Ended					Thirteen Weeks Ended
	April 30, 2016		May 2, 2015			April 29, 2017		April 30, 2016
Net sales	$	192,715	$	153,727		$	232,881	$	192,715
Cost of goods sold	132,448		106,566			159,095		132,448
Gross profit	60,267		47,161			73,786		60,267
Selling, general and administrative expenses	49,515		40,140			61,004		49,515
Operating income	10,752		7,021			12,782		10,752
Interest income (expense), net	74		(9		)
Interest income, net						309		74
Income before income taxes	10,826		7,012			13,091		10,826
Income tax expense	4,068		2,734			4,700		4,068
Net income	$	6,758	$	4,278		$	8,391	$	6,758
Basic income per common share	$	0.12	$	0.08		$	0.15	$	0.12
Diluted income per common share	$	0.12	$	0.08		$	0.15	$	0.12
Weighted average shares outstanding:
Basic shares	54,681,646		54,448,634			55,030,682		54,681,646
Diluted shares	54,964,890		54,717,146			55,304,742		54,964,890


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



	Common stock				Additional paid-in capital			Accumulated deficit			Total shareholders’ equity
	Common stock
	Shares		Amount
Balance, January 30, 2016	54,590,641		$	546	$	306,522		$	(62,587	)	$	244,481
Share-based compensation expense	—		—		2,813			—			2,813
Issuance of unrestricted stock awards	1,676		—		70			—			70
Exercise of options to purchase common stock	88,654		1		1,126			—			1,127
Vesting of restricted and performance-based stock units	77,904		—		—			—			—
Common shares withheld for taxes	(33,940	)	—		(1,299		)	—			(1,299		)
Excess tax benefit related to exercises of stock options	—		—		367			—			367
Net income	—		—		—			6,758			6,758
Balance, April 30, 2016	54,724,935		$	547	$	309,599		$	(55,829	)	$	254,317



	Common stock				Additional paid-in capital			Retained earnings		Total shareholders’ equity
	Common stock
	Shares		Amount
Balance, January 28, 2017	54,904,954		$	549	$	321,603		$	9,253	$	331,405
Share-based compensation expense	—		—		3,960			—		3,960
Issuance of unrestricted stock awards	1,118		—		55			—		55
Exercise of options to purchase common stock	36,398		—		1,139			—		1,139
Vesting of restricted stock units and performance-based restricted stock units	181,523		2		—			—		2
Common shares withheld for taxes	(19,862	)	—		(766		)	—		(766		)
Net income	—		—		—			8,391		8,391
Balance, April 29, 2017	55,104,131		$	551	$	325,991		$	17,644	$	344,186



	As of January 28, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Short-term:
Corporate bonds	$	45,558	$	—	$	98	$	45,460
Municipal bonds	32,233		—		14		32,219
Total	$	77,791	$	—	$	112	$	77,679

Long-term:
Corporate bonds	$	6,265	$	—	$	11	$	6,254
Municipal bonds	4,249		8		—		4,257
Total	$	10,514	$	8	$	11	$	10,511


	As of January 30, 2016								As of April 30, 2016
	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	$	37,127	$	—	$	29	$	37,098	$	36,159	$	—	$	8	$	36,151
Certificates of deposit	6,916		6		—		6,923		1,645		—		—		1,645
Municipal bonds	2,291		—		—		$	2,291	18,046		6		—		18,053
Total	$	46,335	$	6	$	29	$	46,312	$	55,850	$	6	$	8	$	55,849


⁽²⁾	Only includes stores open during the full thirteen weeks ended.


(b)	Fiscal Year


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

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company