FIVE - Earnings call transcript Q1 2018

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Operator

Good day. And welcome to the Five Below First Quarter Fiscal 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to of conference Investor like Pelz, to now President Vice Relations. would turn over the Christiane I Please go ahead.

Christiane Pelz

statements release risks to differ quarter conference Thank of could you, Joel Ken SEC today first of Bull, us thanks statements of Those Reform this the Anderson, for their financial Gary. Private undertake are Good need the described call Executive open the Officer comments afternoon, results of for Litigation uncertainties update everyone. President in questions. and any Chief and Five I cause Harbor both Officer; actual call press of to such Financial On Treasurer. today’s and call. you pursuant will And made constitute Chief joining from obligation XXXX Securities the are are results date After the and Below’s provisions call known today and subject to Below’s and we uncertainties are made to the Such that statements. may call unknown to we XXXX statements. during Safe this management forward-looking forward-looking statements and formal remarks, has risks meaning do Five certain remind made that forward-looking made materially to and and not Act forward-looking as The amended. are and our filings. as within

Ken press turn in remarks this more I release fiscal and over was our today’s at a year’s year please now have of the week. will this obtain a review press shift not our shifted housekeeping Relations his call by do Joel. copy will year, quick for fiscal information. note, fivebelow.com. to see Investor website you the you of quarters by release, visiting If XX-week one One page which last may one

Joel Anderson

quarter then will before and discuss and quarter will Ken to the handing first call the to thanks outlook, the earnings for joining it us our everyone review we Thank and highlights open you, I questions. call. of over Christiane, for financials for our our

X.X%. last pleased performance income million, as sales This net very of our accompanied gross stores with was continued and of $XXX our and increased rate to more driven strong earnings are comp that year We and first SG&A favorability delivered a quarter of guidance by and we a $X.XX ranges. per earnings sales million leverage, XX% to share. in doubled by from new outperformance healthy share $XX than both our tax Sales resulting margins, above performance

new During spring in our these opening York; Indiana; XX Pooler, quarter, stores Georgia; made all-time XX of grand states. universal we Carolina Florence, Georgia; and the demonstrating XX Heinzville, opened Middletown, South stores are of top broad located markets Indianapolis, in These in Janesville, appeal Wisconsin; list. Below. stores New diverse Six Five

New less stores on in the All throughout very achieve XX to on industry approximately scale benefits now have for track look productivity, new and year facets to and levels high our approximately of expect our store we XXXX. Year-to-date, the stores year many opened our in openings refreshed of increasing are of end With payback store period than we stores. and planned XXX continue investment. one our average driving organization. comes growth XXX store this with feel leading

average X.X% of driven and by our comp was ticket. Our guidance QX range within

in say, for business, to weather Room, Spring as our products With Seasonal, slime, demonstrating to broad-based we reflected. were be merchandising, simply our relevant and due again quarter, expected, performed Tech, spa it slightly, of to sets our Create our Easter focused to to yes, across teams our popular. broader & the which regards down items assortment easy to mermaid to the newness mid-April the spinner began increasing edited and customers, wet to all cold get awareness those generating squishy, remain on worlds, ramp craze, and continue largely marketing, Style make job of well excellent they do our continue and shift continued an trends eight and the Through brand program our year. to last to just As and and transactions lapping unusually digital them smiley, have. got On our efforts. we to strength during

a Summer TV excited are mix fun. launch We for announce the features broad products of Campaign, to our of which outdoor

and QX test from You and will the years. we of our XXXX first tested approximately a base, XXXX reach season. the last learn we store our of base, increase This TV XX% will in our through recall, continued year, significant three TV XX% store to across QX

making mobile designed investments are and campaigns, markets. promote and to local brand in interest at we social Additionally, awareness many our further media level of a

e-commerce aiding channel the also Our is growing awareness throughout country.

key around Finally, the to circulars year. an print role seasons for important continue us, throughout especially play

and and new distributed summer, Giant Sunday all fun circular featured Tent, Own recent for a perfect the Float, Toys!, most last things Squishy Umbrella Pool for as Your Our was Make Jumbo such Llama products beach. the

investing as store functionality XXX,XXX-square-foot merchandising customers, we on continue the distribution to provides foundation strategic our the to that few open infrastructure, growth to about on to This our support scale year. these capabilities. focus for to which to implementation ability the order square we we system recently U.S.-store support X last continue facility marketing, initiatives, and loyalty namely system support new to significant systems, opportunity, loyal approximately such in three than service flex X,XXX are to and we an to areas to our infrastructure; and and done signed our just people, stores of program on On deployed the to years, in be ahead. a new we excited and With Atlanta, we the other for runway discussed plan the future the to this features and feet. to a addition continue needed that South initially over new next delivers have is long POS million call to our in of more DCs as to building track respect lies are systems, of agreement up flexibility years. build effectively announce the our purchase omni-channel Today, has growth we In

supporting flexibility base and expect provide entirely as additional this new through disciplined we the will growing rapidly our This DC, first This commitment with and throughout for the We Southeast. footprint demonstrates our owning together our grow with our store built to investments. XXXX. DC infrastructure our plan become DCs, the the operational spring in facility specifications of to is building the control us to

craze our words our made high few we this are transaction about a comp cycling teams year to QX know, as from Now, we our in you the outlook. prepare reflected the QX, am spinner QX. have a due led I efforts to stores very of have and very for proud last

a executing to to start, We right the cool quarter several In provide boards, the to we winter quality, added merchandise summary, we shorts and fun with innovate strong over firmly performance. our we awesome our store runway long support customers are key focused to from with turn and at let help priorities ready spring, that, boogie in-store is Below. marketing, and many Ken? ahead value against lies simply on remain to that as trend first our Five Ken. for off and of beach products have to it With the experience. for year have are will stores growth flip-flops, them edited all towels high our very are After The a and I our incredible set chairs go $X below. them continue coordinated, initiatives summer lineup, increased and and long pleased of and to

Ken Bull

quarter and I review will and then outlook first with remarks for afternoon, our quarter good the Joel, results everyone. full Thank, year. my discuss begin our and of a second

results, Before more color on provide due to I I this our calendar shift XXrd week. fiscal year’s review XXXX will

year a fiscal in annual quarterly week be later ended to quarter similar the stated the using calendar will compares first and which regards comparable With weeks. quarter sales, basis first restated one we As release, press calendar, versus on results NRF’s our this our XXXX. reported of

continue While last it is was is to year-over-year impact initial shift that it important of not guidance, affect gave With material. the said, will year this as full when comparisons, any the that impact of our our impact note this our to quarterly in on shift calendar we guidance call. contemplated is QX

Now I in will more results review our first detail. quarter

Xth ended $XXX.X of XXX or a shift during as I XXXX. volume first stores from the we million, new just the lower week-ended XXXX the ended of to XX.X% to the volume in XXXX. the XXX quarter million opened opened gained quarter $X an The compared the first XX calendar the stores stores, versus reviewed February We quarter quarter XX were at quarter million first of increase impact added lost May up in in of sales We Xrd. approximately reported sales, higher and end stores with of XXX Our first quarter week the of XX% XXXX. a $XXX.X of

year. beginning quarter start first average by comp also As which decrease XXXX. to mentioned, driven generated of Comparable driven of XXXX another by of an for Joel transactions, a quarter ticket, stores comp was primarily sales our in very new spinner of by increase was the in The the and for cold trend X.X% increased quarter comp unseasonably first strong the with the last slight increase the spring performance.

year-over-year mentioned year impacted with increased leverage to on on gross out. our quarter XXXX. both last points fixed Gross approximately leverage and we costs comp, in first we entry overall basis reported million increased XX.X% incentive earnings the to from this well versus $XX.X our we quarter our substantial call, operating XX.X%. X.X% saw last into $XX.X expected California, and driven play SG&A. absorbed of first As as initial cost as margin and This by higher million of compensation associated was expansion when margin I in Gross profit XXX the by which margin

in the XXX of of income XXXX. increased of the quarter from XXXX. to XXXX of from million decreased sales, percentage As of points Operating for first sales, X.X% $XX.X $XX.X or sales first first quarter a million basis quarter XX.X% in XX.X% to X.X% of approximately SG&A or XX.X% the

the rate first for XXXX quarter XXXX. compared was of tax first of in to XX.X% the XX.X%, quarter effective Our

was no share an the per accounting or $X.X lower practice included in million of Net stock-based by XXX.X% not million and $XX.X debt. million included of Tax for $X.XX. diluted favorably at as share first year. in is first at last $X.XX rates guidance tax last was income impacted $XXX Reform, compensation, or Our million $XXX from million, a inventory of the quarter end year. The last $X.XX compared per $XXX.X our our the We accounting which to year. earnings ended to was compensation cash, XXXX share was per diluted end first per end the Inventory impact of guidance. quarter of Average was the which diluted quarter increase six-tenths first and from the of stock-based investments quarter was as rate our with quarter in higher the approximately the equivalents increased of the first cash in the percent versus to and at of store

Now, to our to I would like turn guidance.

stock-based reminder, share a include not does guidance repurchases. any compensation As accounting from impact or our

any, with our report results. actual We if impact, will quarterly the

QX X, XX XXXX, over second XXXX. in quarter new million, are as includes between to the and to to second sales ending of of stores new increase expected assumption XX% of sales August XX $XXX be XXXX. the the This quarter an compared stores, million XX% $XXX For opening net

X.X% XXXX, assuming we QX the operating versus QX We comp in timing on about begin lower see comp of approximate XXXX investments, to deleverage to in Reform operating QX. basis XXX from the Accordingly, results margin we in expect comp XXXX. sales fixed are QX. points million in regards expenses the in $X.X for and With related Tax expect QX deleverage ramp flat the to which

QX and basis to of XX% point income future we out share not the to be in are XXXX. XX% over to fiscal be increase QX points, to Net expect approximately XXXX. in points over XXXX earnings to operating the continue While Diluted $XX on that margins comment we I per of expected to respectively. million increase quarter $XX.X quarters, QX want by an do delever to basis to $X.XX, XXXX and is XXX of expected for XXX $X.XX of QX range to XX% QX million, an for second XX% typically

XX% billion of For increase. to XX-week the for raising on to the XXXX, year full increase XX% by the $X,XXX a in are our to remains to guidance a $X,XXX Comp year X% full $X an a we over range sales of comparable of billion, be range million basis. guidance in XXXX X%

approximately We continue in XX% an increase open We store XXXX stores, to our XXX. first open the XXXX. normalized accounting. the XX% XX% an half and compared XX.X% fiscal XXX first stores approximately ending approximately rate to of year, of expect which quarterly with tax compared year, end approximately approximately XXX of XXXX effective the to includes tax now to of of as to of our stores stock-based XX.X%, expect the excluding in for the expect of now a We half of compensation impact count rate

now compared on XX-week range XX-week is projected with to growth the range our to over to million to new and remainder the total new reflecting outlook distribution $XXX spent is we of to XXXX center, or our $X.XX expected be to income existing to $X.XX $XXX.X million $X.XX expected in to corporate and to to stores, With of over a the basis, XXXX, XX% XXXX store now XX% increased of a to Southeast opening of net has on guidance infrastructure. of of Diluted in spend our in basis. on $XXX.X Our be approximately XXX prior approximately XX% respect CapEx, EPS growth million be base gross plan $X.XX. range XX% in or

back to to details Joel it refer release. before up For the that, call our provide all results like open related would and our with please other earnings comments for some over turn to closing press guidance I to Joel? questions. we And to

Joel Anderson

is Thanks, off year as The strong illustrate. QX Ken. to start results a our

customer sourcing with than Our ever, cohesively organization. marketing our our merchandise, scale hiring teams in stores, keep back. and elevate most the are our which factor working We the opening in network new on coming combination customers the reach, technology. new distribution experience expanding is harder focused wow amazing All more remain and associates, resulting that improvements increasing the the growing our areas best installing drive and across to

high opportunities XX% lie We of on our the through strategy previously are bottomline topline ahead and value growth for Five uniquely to achieve with as retailer XXXX. that a Below positioned articulated plus capitalize growth XX% growth

our build summer. the our teams in potential for only working out of to longer success footprint term, consistent hard the that, Below our for closing, distribution the our all conviction back the I’d plus Looking and go-to-destination preparing in turn for In we with Five store Operator? thank be to out so as X,XXX over to Below and for grows. continued With expand like call store operator network, our to I’d all like Five things questions.

Operator

with [Operator Frommer Instructions] Our first go question Credit Suisse. Judah comes Please ahead. from

Judah Frommer

and help some with with new productivity was Thanks really first quarter to there, internal quarter. new like high congrats calculation I guys. The but markets you help? do help does question gauge you store taking it Hi, in for look us sounds on because continue able well, unusually could kind the us be of housekeeping hoping item. the the to just Would the your maybe shift. would calendar of a

Joel Anderson

Sure. Judah, store on you about opening XXX%. – average calculating probably if new you are and release, a an our to it you press reported productivity coming based results know up in using of our store

it of remarks, openings store that the adjust the would of new discussed the north for and and during the XXX%. we prepared quarter benefit you If look productivity still at our shift that the you if timing be in of calendar

Judah Frommer

labor the or make as rolling what needs as to reassess Tax wage terms pressures anything even million. some do store you’d you a be in you there’s talking are gears to in changed feel labor reinvestment changing both are comfortable investment that to with you you maybe that of then Has related bit, maybe what new DCs, there or And helpful. out the environment causes say the about Reform investment little going That’s the $X.X wage you Okay. well? are or

Ken Bull

I Yeah. will that. take Thanks.

nothing’s the For year, changed.

get think, future, we all but any we to And we ‘XX competitive our as we watch a to if look in we our call accurately at in. and continue markets, we market We changes remain I compete wages. into here wages the need will think every and take in we foreseeable made we where go year beginning sit we make with adjustments, at and as for need announced the reflect to ‘XX,

Judah Frommer

Thanks. Great.

Operator

The next question Boss comes Please Matthew from ahead. JPMorgan. with go

Matthew Boss

a quarter. Thanks. nice I my n congrats add will o

Joel Anderson

Thanks, Matt. Appreciate it.

Ken Bull

Thank you.

Matthew Boss

called terms you three to, which five past is years, calling craze maybe have of over is the right the that you can I counting more diversifying out trends performance outside the talk of think, guess out calls, actually worlds, that close a team across front? box, couple. you strength, couple in continue I opportunities than momentum and the last see if the of so am double on about how Joel, I to the

Joel Anderson

Thanks, you and laid started will that. ago, Yeah. bit know back just following kind a Matt. us, everybody, we and if trends for go quarters and reiterate quite several detail of out I just of I we recently

that a merchant that we said, the they areas. three on the job be as you third updated on trend on all worlds it’s the trends relevant different what trends, call, relevant. trends, are this accurately highlighting I what worlds And buckets. And are team’s out, and is job gives that a of call staying flexibility trends. have really in last you there a think have doing you that eight great eight different outstanding We And but in across has being the great play Michael different and We as worlds, them then I a team seeing really called five leads done merchandising really relevant. entire craze lot us relevancy really license done of to the factor team and that’s think, out and job

Matthew Boss

some a as could growth, Great. maybe open annual any think larger governors stores about follow then in think we you the I given the thinking scale some number such gives team And kind picture investments an of you made, guess, opportunity touch the that of maybe going on confidence regarding we your build up high-teens the just can or Ken that hires foundational or maybe unit growth and we some just George hires of as basis the see on the the annual forward? as you I about what as Hill year of forward the have on guess, you think for so about pace, a and investments.

Ken Bull

Thanks, I back take will over to of kick Matt. Sure. a Joel. that piece and it

as the included couple we As growth, as plan continue ability were out obviously, XX% the was, saw that which we first the look of about we our the us growth of over we records grand look and quarter in from that up driver -- of opening of growth last to opened call confident have that through back see us. we of kind laid we we key the new for that XXXX, out forward, on some stores. open game stores and the said years, and feel up all-time for to really you called this Joel the records unit topline

again, So, stores. continue open more we to up

performance. maintain open these as our up that continue seen prior We positively, performance classes, you we very positive in have stores to really and from

XXXX deliver path. things be to we of that about and be Joel that have that confident to just So here talk to resources our mission place in kick in that to back we do continue that to on about we appropriate carried the support out put to that. continue some have to feel those have ability able I able through we to it will

Joel Anderson

Yeah.

continues exactly give stores. called really demonstrate six us of think universally why appealing to that’s the follow those out It I diverse confidence us and that how is. all brand to we just you

slowing of belief are, the of this has our did George that And our any at will expansion then, organization year he point, like much got stronger is He And growth, bringing when obviously, are the are store retailer. growth on merchandising down as really of get factors the limiting year think, been example and is he out Michael haven’t years growth. distribution on and continue a the so another reached growth and people, in little like year people, go-go type somebody you spend centers is you example. bit Matt, two when other our I we infrastructure time came through really of a a on a gets ago to in and the is high a great to stronger we systems, company great certainly and of three piece and delivering like other lot we called higher a year, into from a us retailers, into next team volume He areas experience. three

George has what welcome Matt. he to addition done team. great we the Thanks, and a has been So

Ken Bull

Matt. Thanks,

Matthew Boss

Okay.

Operator

Wells The Please next from Fargo. go question ahead. comes with Edward Kelly

Edward Kelly

well us at you in QX as basis. how that stack around doing to three-year at how Hi, the quarter lap. terms that Good are you to If seeing you in you QX, possible wondering guys. of of color I second be us where as are comps could could your that’s confidence spinners just are and opened afternoon I and give a correctly, about well. QX an to you we Can I in about improvement and negative came ask comparison currently, the lapping if guiding bit had are of QX door just nice probably as color on want think you you obviously maybe could don’t flat. it’s I sort some know there the start think, was give like comps. and just you two-year against remember I I little least a quarter moment? comp Joel,

Joel Anderson

We it like May. the lapping Yeah. obviously are right the have right we in made we progress Clearly, middle in of now.

that customers our many spinner new an of of really we confidence, our done the year those to on a that combination the marketing experience quarters we times us the bought data spinners saw XX% what’s us that Ed and as think to were that on last we I giving thing shared a all and Five Below the number about of we that trends, some showed love have studies, important talked have we to a of of shoulders store introduced to got those get continues relevant to it’s team better, then has then Five example and a customers, trend and so the And I of it new Below. our was and was merchants product the customers, keep it. lot to captured customers marketing continue bring think,

been all So us confidence performance comp was broad a to and and categories. you with with share all we are What excited to that earlier it’s do has really pleased that that based about through we here of of talking that our get towards I backing the today. a we merchandising positive are Matt QX given that as

Edward Kelly

it time? program what do guess, this you the think business a just have something about follow the be customer to more as to talked are loyalty far coming this how from having POS a think though, you important you over and how And allow about now would I longer I quick could I up But guess. could be to loyalty Great. ask standpoint. that new in out want you a you rolled actually year, from bit term, a little system

Joel Anderson

It’s early what too even focus means. honestly speculate haven’t Matt on take system to next the first steps. think, that we POS in is [ph], place getting I we those it before started,

stock get right. to And to took expand same efforts. out see we disciplined years from have point. foundation do, TV what this is that’s the of with will product test the in a had we as fundamentals as let’s we to enhance are only the the things to atmosphere we coupled it’s you makes the heart delivering it’s the loyalty we not great company it what will of believe and cake, made foundation. We we add you value future and got loyalty that wow way I is going of and that’s loyalty and everything when and great as do customers. a true with approach not just continue have was we so Same we the we experience, at marketing several store done programs have lose will, But in in it’s are Below on we just continue then the that until with Five many other something it the our and is digital to pretty that, things But the but us like icing the on

Edward Kelly

Thanks, Understood. Yes. guys.

Joel Anderson

Thanks, Ed.

Ken Bull

Thanks, Ed.

Operator

with The from next Guggenheim question John Securities. go Please ahead. comes Heinbockel

John Heinbockel

Yes.

toward So, -- want thought What’s and couple next they the infrastructure will with facilities, the the the here push X,XXX? development the over to in degree I years. to -- guys, start the and automated of which your of how ultimately process many the terms is cost of stores are these support in

Joel Anderson

add on and do any costs can take Yeah. that if Ken to we want color that you I too. will

Ken Bull

Sure.

Joel Anderson

our operation five to country no John, there’s we will strategy those to should and there’s backing growth there to you What on can distribution is continue our what our from first the what our no so and and out the expand need -- concerns off focused that it, and strategy are -- that. What base on support away be. right the across we to get we is now our we store foremost, store immediate outstretched is nodes side, have are and that’s network infrastructure probably on, take

John Heinbockel

Yeah.

Joel Anderson

And that’s the is. main focus what really

answer the a you build are Over explained can one sense the the XXX,XXX to that I service, Alternatively never that of terms touch time today, of at that’s to to another if on can of we might feet. the decide they that fungible just a going really we expand stores -- and square that that. Southeast build take may DC size million. the In in number the call in

the ultimately a bigger smaller, lot built expand, to by potential ultimate will But it’s these thousand that which we we of a next footprint their a initially but by the it will play of stores really between there’s get what out and in having end grow size. John. right of build stores and a three out cover as we build flexibility, that of network to them gives and we what safe So will little certainly to really ways lot those say three different us we out now building north up with each well

Ken Bull

called and facility Sure. I building have million the also our the center this built decision centers, then big cost a this we distribution this in that being whether the out overall to cost road. home head in store the or costs locations, flexibility part made building the and from gives year was going perspective, $XXX build And that’s sense have by cost combination that the all for of just to agree office. we to perspective, for incremental big typical handling driven us push control, historically are an our and and distribution a John, being be and our From leased point they increase sortation us material equipment, is obviously conveyor to of It of facility. Joel’s that really year-over-year, then, assets, specifications put to the CapEx give the the and total down us

this what’s this and sense at look forward the the that will for at decision to there. it move build we again, DC we put determine that location. us made will we in So, place future right But as point

John Heinbockel

seeing -- before. you vendors have product benefit scale, not from the secondly, -- scale. just about procurement of availability yet then are talking but more talked that and And right. have might had you might not I about Joel, All you am What

that have of on sort a are and yet seeing we geometrically hit sort You Michael, that tipping or point to you still topic? increase of here

Joel Anderson

Yeah.

and expand grow it in seeing many clearly are ways. We

We are as direct-to-retail, DTRs some example. our called, an have of as first-ever launched they

new R We taking as vendors several to have transition place. been introduced is Toys the Us

And so we continue that will I think John. see grow, to

John Heinbockel

Yeah.

Joel Anderson

of I if certainly of exponentially no to don’t kind know signs right right the and down. it’s up word, slowing is but and the

and We have are we are network with seeing ones. really the pleased currently new vendor as

John Heinbockel

you. Thank Okay.

Joel Anderson

John. Thanks,

You bet.

Ken Bull

Thanks, John.

Operator

question The [Operator with Stanley. Sinisi Please Vincent Instructions] go next comes ahead. Morgan from

Vincent Sinisi

my Thanks Good for Hey, question the over evening. there. congrats continued guys. on taking execution and

Joel Anderson

Vinnie. Thanks,

Ken Bull

Vinnie. Thanks,

Vincent Sinisi

see things that the to kind have some most as store XQ like about to the marketing you further gaining wanted traction, coverage I Absolutely. campaign, of had. that you nice said, ask

anything dense basic percent question well shift about near-term think term. kind this are could campaign kind will term it you XQ it or of as seeing concentrated ones one you this then kind what as going basically a of less the of all you your is you meaningful share newer some in the Thanks longer-term from and more testing itself two I the is, the one, and sort of specifically, to markets longer So a XQ seemingly of be of the year? be see of weightedness you guess And with do point first, of part lot. that of parts, my longer might and But, further dense at more year?

Joel Anderson

Thanks, Yeah. Vinnie.

have last see the we fourth three been I of year. It our markets. up clearly, very As actually and XX% the a it densification our confidence and Taking in significant further our have existing strategy years. it, we TV methodical is what ramp from QX. We estate year. the real increase lot of about a This is last nothing’s show strategically we learned should you talk about But changed. from to

it the it ROI, spend, easier our lot more to a easier perspective entering we it state. teams notice densify one examples makes we will an to firmly year it we have and make new this Those start are to as advertising the densify we only S are the discipline in makes example, sure sense. California focused the are it And sales for our markets. about spend, for making marketing staying Southern A a we then California. distribution certainly You operators, all makes from as of the

it on So our remains is denser markets. focused strategically largely

our newer We bringing into not are That’s plan. markets. TV not the

In it of don’t terms from Having QX continues strongest and we not harder moat we deliver teams QX, product that to gets that the our out all destination continued we quarter. as to amazing season continue welcome truly summer are said second be only increase is at harder going is better to longer get I it. away it’s is look the replicated. destination. a QX, us. We for actually think to we of important what QX piece, and strengthen be around it word that, get The and in to the are that concept we as better shy always as

Thanks, stronger going gets be make But biggest us as always it will quarter. our to profitable. have I our base It think important. away it’s goes bigger only but the don’t more I as QX being Vinnie. to the just QX think easier gets quarters most other be

Vincent Sinisi

Thank luck. guys. Good you,

Joel Anderson

You bet.

Ken Bull

Thanks.

Operator

Loop Please with from comes Capital Markets. ahead. question Chukumba go next Anthony The

Anthony Chukumba

Good for my questions. afternoon thanks and taking

quick the it there’s doesn’t, of and bought who cold might have to in just lot impacted QX talked April? of summer weather QX QX in extent. QX benefit obviously, maybe sales a that I you about the So think in that March well, it outdoor retails not out question, not going you other product and had But, like it doing shift I and and in ahead your some do word that guess, people seems from weather same a into QX, unseasonably given might the

Joel Anderson

of lot and results last the us, our had first for speculation QX a together, at think QX you a the trends up of we you year. I there. really it’s heck a quarters That’s half two look the at of year when in you against put for from look guide tough some honestly and And

it. south store spinner move that so-called successful customers I less as not the weather piece whole west, is acquired think less continues throughout we And last there’s let’s new important what’s we of more forget, been, on and year those Anthony, our monetizing impact how base have that in trend. to and

have are That’s our pleased will bigger take in been stores happens, we happens at shift five we but go have shifts. of would in our kind called the performance. what comps, mostly seen we hadn’t of we a would QX how much think, that and business. totality higher to if if that weather years a continue happened have overall really weather look So with kind and always we back you April of it. piece But northeast slightly it I ago Clearly, look out in at you it

Anthony Chukumba

up Thank enough. the you. Fair work. Keep good

Joel Anderson

Thanks, Anthony.

Operator

with next ahead. Please Jefferies. comes go Binder from Dan The question

Dan Binder

remodel was potentially just brand was on you and certainly if more bit how last the progressing, today? could on new of of am that ramping maybe awareness like topic the the performance you moving both I ago year? about next since that’s And little updated where us, you helping you comment marketing. on wondering can or do years Thanks. stores. three feel plan two give that is just then and for think how a years good reference is curious us sort It where you older if of seems up I that

Joel Anderson

what Dan, XX Yes. remodel and are and put piece, to remodel place on still then we this give XXXX plan plan XXXX. learning use in take the for is, to is year formal to on stores remodel track program a or the our from

year the teams But getting the we done not tell down will operating to respectable you we a great closing the not year. five work with that ones pleased is shouldn’t the or on gotten it I that you have recall, job have but results. a down really stores, can last door. out with this did what bringing We If ROI. I What say pleased cost initial and the pleased to weren’t have about were with initial we with the

as early We outline remodel to them end you still is. awareness last should formalized later call the are head, in I pull about numbers ICR we of goes, top off will latest think, year you deck Ken, our but But we to up expect plan kind at rest the far are is one have we to on of up track us XXXX. ready safe the our and what And for your And can I QX, up brand here updated it. the to the if of finish of time as in say for then the last the don’t you QX XX… year, know be and

Ken Bull

XX percentage points.

Joel Anderson

Yeah.

Ken Bull

time From did we the last it.

years ago… it was think a I couple

Joel Anderson

Right. And that’s…

Ken Bull

… two years.

Joel Anderson

been where years. have That’s least we in open markets two at

Ken Bull

Yeah.

Joel Anderson

we We results right yet. back one. are May haven’t and gotten in the been just results just now those We market we in have with that so have yet don’t for

have have are we it latest and move well on are and on ones the we continues to with as ones that’s pleased got awareness. right the results we and really good website. up the So the news our posted to And there

Dan Binder

Thank Great. you.

Joel Anderson

Thanks, Dan.

Ken Bull

Dan. Thanks,

Operator

from Kelly with comes Crago question next Buckingham. The ahead. Please go

Kelly Crago

if similar more guidance. Should the end should at what picking in because the to up productive look we bit assume two? more the is you And week and back-to-school new it of trending are comp entering another now just question are quarter. XQ, they my your XQ first typical so, quarter, saw you that for $X question productivity is as XQ meaningful congrats in model and really store to adjust Thanks million talk about to year second your California little relative you back step what in guidance after out quarter guys. the a on there base. open productivity a down Hi, looks to How the and store relative the you good my related taking new store, are Could a benefit? pretty sales like store embedded it embedding is even in first sales stores

Joel Anderson

the full Kelly, year. Yeah. into to of go don’t two we space, But you, a California month, -- months so too so about early in this got go we stores still stores think comp just August we three tell number to I till they XXth opening they months on or remind California July have until are or that.

in we are staying over of stores strategically with There’s state is sign been not California. to time hundreds focused our California. Southern for We a with no California will be very pleased very the largest state It are be though and that us. successful going

Diego to Ken talk want San but this county that year We and is California going. the will will only you enter new pleased enter NSPs? that’s we County about how about with are

Ken Bull

distortion store expect the do on QX the what to timing, from shift in is the opening you is On productivity to are right, shift XX%. at new are based a looking -- QX. new benefit assume new you reported but implied store benefit take similar there will the in still productivity. We if Kelly calendar on calendar saw north you store And similar year-over-year we that plus store Yeah. if just of some our you from guidance, in productivity consideration the

Kelly Crago

Thanks. Okay.

Joel Anderson

stores, We have several late in Kelly, opening the…

Ken Bull

quarter. the in Late

Joel Anderson

different are the seeing what so Late QX, in might there. be you it

Ken Bull

Yeah.

Kelly Crago

Thank Great. you. right. All Okay.

Joel Anderson

You’re welcome.

Ken Bull

Kelly Thanks,

Operator

The Grom Please from Chuck go next question comes Gordon with Haskett. ahead.

Chuck Grom

Hey.

Joel Anderson

Chuck. Hi,

Chuck Grom

you you picture, curious think customer be How’s as for of XX% revisited buyers half November new of to Five On front, quarter. around to again long-term customers am I think in the year Five those awareness stores think million last I as going? had said study acquisition I guys you what And the believe said today. Thanks. X I the And were last first if outlook that continues at summer. to is it volume, spinner which store brand shopped you bigger guess, I Below. your grow, then in the Below

Joel Anderson

Yeah.

We haven’t ago, several since today. customer study Ed, updated recall questions will We if that about was one Kelly, loyalty I you have and asking don’t then think, programs.

there’s loyalty those to back sign it’s that slowing have the second ongoing, from the customers. we demonstrates to lot studies when part us get continue card guide no hard have piece track really a of and see data So to was that We implied to so you don’t What a Chuck? QX, do back of that, down. come customers it of comp and a for flattish obviously,

Chuck Grom

think… you Just in do what terms of and awareness brand

Joel Anderson

Yeah. Oh!

I think…

Chuck Grom

volume… …

Joel Anderson

Yeah.

think. I

Chuck Grom

… you of a are little north volumes were X.X bit at million X. now

Joel Anderson

Yeah.

Chuck Grom

on look I historically average essence thinking volume could Below I maturation the you kind curve, Five multiple you of but you in have And I what am do no there am [inaudible] out be? think years -- potentially think one. is just guess

Joel Anderson

that shared stores we have at we is could And at the that already looking that in the I hope year open. scenario doing. think, we I from build X,XXX models and earlier this another would that for really stores you all and speculate is, these reason we to increase this are I X,XXX and It’s say with hard Yeah. I more Chuck. point, what implied to it, mean,

We stamping are lot down of on growth higher. to go potential stores a the

X necessarily about So share X.X to million. X just market million from our ultimately be about will stores all to strategy and million not our taking or

we starting higher different store speculate of lot look early will a a now, there’s but think, average to be right on to ways volume. I time, over be So much it would too at this

I that it focus on important market would think, we share. more be

Chuck Grom

you. Okay. Great. Thank

Joel Anderson

Thanks, Chuck.

Operator

go next comes Deutsche from with Please question The ahead. Paul Bank. Trussell

Paul Trussell

comps have even to just quarter, the that not the touch rate range. believe we of the would range end the at I Good up first on of being wanted back tax were to if you despite right, still related to stock-based provided, the high lower earnings we out, at the ended afternoon. I compensation. very the end high

kind margin year made if to Just takes been has of mind there in any to since the relates other the forward performance there know are puts started? in wanted to and we and XQ as should any margin process adjustments whether keep thought going

Ken Bull

expansion with meaningful those guidance we QX to from mentioned, as -- as pretty into had expected pretty operating based We was to really noted. performance, margin an you we our on Paul. Thanks, the QX, see and areas right. expectations line in due that it much finished And going I Sure. it

the leverage had we X.X% expenses and in that on XXXX. So incentive-based year. also lapping the entry some we costs last the We California some the have got, onetime comp around of then benefit some had recorded QX of and also compensation was

the for out, implies move outlook remarks points really prepared and QX, nothing XXX a and QX basis QX. lower forward. in XXX we delever combination we margin as in of So investments kicking my on guidance operating QX to then I larger another our as also and And have tax basis it expectations and really comps XXX then that changes basis And started the again mentioned in points. in then deleverage point the about lay that’s our about

Paul Trussell

elaborate? Got Could very initiatives. in-store just adding you quickly, mentioned it. That’s Joel, And just helpful. several you

Joel Anderson

stores lot the and has we a thing better come see welcoming While in Wait our should Win on George our a being we experience the up a come have demos do program Since the weekend let Memorial with doing customers, sidewalk called different stores to job customer onboard, fun. loves our start interactions just There’s Day Thanks, at friendly, and and we of Paul. customers, is, over and and are store go in paints, much to the drive Weekend. chalk and had our continues floats an what you just You Inflate on that

Paul Trussell

Thank you.

Ken Bull

Paul. Thank you,

Operator

The comes RBC from go Ciccarelli ahead. with next question Capital Markets. Scot Please

Scot Ciccarelli

Hey, Scot It’s Ciccarelli. guys.

I it was… So, think,

Ken Bull

Yeah.

Scot Ciccarelli

Ken, hi.

So all-time this highs quarter. in terms of openings grand

and existing have format, is it new that would the what So, occurring question markets the is with us did to, would as if related you help estate, great? real been to you what better I it see that, in can new markets attribute it you the be is records that view guess, about, store recognition people would you these brand name asking is or it

Joel Anderson

XX the the Yeah. existing were we the Is year first right… markets. of stores the Of that quarter, in in opened this XX

Ken Bull

one Correct. Only new Yeah. market.

Joel Anderson

market. New

Ken Bull

Yeah.

Joel Anderson

two And in market. there was stores that

So in Scot, existing the was large of markets. it, piece

So that’s overall part of our densification.

in different high they in or not dense markets I think were United States you what those the we they New how spread New for hometown throughout Jersey. called like markets sharing widely concentrated six out is York and out our how were and

shows the just you So really universal that appeal.

see of customers the just in In of everything like is progress and continue new working, the it? stronger it, what’s format combination really area. is said. brand. the refreshed for driving brighter a that store getting Awareness you to The is It’s we terms

universally transparent we think the share all and it’s and be I how appealing with of been. new success combination important a those was So things you that it store has

Scot Ciccarelli

Great. Thanks, guys.

Joel Anderson

Thanks, Scot.

Ken Bull

Scot. Thanks,

Operator

with question go UBS. Please next from ahead. comes Lasser The Michael

Michael Lasser

a Thanks evening. for lot my question. Good taking

the from rata from in the calendar your comp about we XXX from basis is to as you in that what’s you it to that, stack about two shift that’s So, acceleration from years to point part comp for suggestion of might fidget that implies from that correct? two shift? guiding trend? comp Ken, stack points your last of the calendar B, And, shift range benefit that less and really have So, be A, your from a got going in that pro maybe basis assume is drive spinners existing million XQ? $X the we like acceleration as if slightly your you think XQ portion in And that looks are of XQ. a then stores, years that Should year contribution XXX

Ken Bull

Thanks, Michael.

lot You there. that question in had a

Michael Lasser

A lot, on but lot there’s going a comp. your in

Ken Bull

I Yeah. No. understand. No.

QX, in the that’s that’s the in QX, out we in those QX to But, impact here. But on a the at try to basis looking it a we a right. driven will calendar to I on first, noted see reverse mention quarters that in we quarter but a is we take weeks overall seasonality. in want heard on about it QX, total -- shift, also full I expect will and time immaterial, the by in by and quarters you, year basis sales, year that negative around it just at is regards talked impacts -- and benefit a piece and We those of are call going benefit as with saw that to full to coming our you

sales comp the restated noted calculation on We our based is that also NRF calendar.

So -- line there weeks we comps. up reporting we are our is similar when

basis if and our sales But year way, comparable a calendar in detriment comps. the that comp our this, link has a Again, report like from perspective, the the So the best comps. is in at benefit the guidance. a you see we look it we what place of it’s again that would included and by overall is normally way to maybe all sounded It to that’s probably on been feel trying that’s we to shifts calendar taking were a shift comps. total

for we So have given QX. it to you

in embedded that we the are it’s providing all So you. numbers to

Michael Lasser

implied is the XXX acceleration two-year And spinner? then basis the point stack that fidget

Ken Bull

there. lot a Michael, Well, takes and in there’s puts of

look plus take basis points comp people in it’s a put sales an themselves, you said spinners spinner you through transaction, to transactions, year You of lot number, how at a take we harder that, attributed at got the that always of to XXX because to at lot was on look XXX spinner the and look exact you you the a much it we transaction. basis quarter numbers number X piece whole only of last and do when the points put

that So that. of there’s and puts into takes go a lot

piece to done. of and we into as five beyond. the importantly, stay. the relevant into store it the it go here, to broad-based better are eight just is think as five really a year, that worlds, make annual comp. the you but QX is how and out really, mean, four be is merchandise experience. that, where spinners, above calling really slightly come different a shows called you and it’s X.X a continue has What I to bodes when here, and way at and to that, it’s a a out operators feeling flattish leading at And it guide we I great three business of at And team into worlds. the the QX QX doing how to and well are for having QX what healthy good look look marketing continue you we comp I last about really, then it most with comp we see you the

Michael Lasser

$X $X one last million. clarify by by annual XQ there’s just million, beat $X an guidance high you of your sales incremental you million, point, can raised the so And you your end guidance

You reiterated the same comp growth.

you the producing stores So some was originally than new the due upside or sales than you thought? all earlier had stores opening thought more previously were to

Ken Bull

Yeah.

think new I the really heard. store you It’s productivity.

overall performance are with the pleased very guidance for is and QX, are we our guidance out the end said that, obviously positive the beat coming of guide QX. and that right, you we implied to from QX As sales from in annual really high coming increase

Michael Lasser

Yeah.

Joel Anderson

with wrap and concept. people stores here, overall next really new positively the the Five we planned you quarter is of try five to and great what have of show to going understand the Michael, are the lot impact This Below. a I they but We a make on have years think, power

Joel Anderson

joining going in to expect have everyone you I great want we to I thank us the that, today. Have close. to With a for see to are summer. stores.

we Below. there, get you Thanks and in year fun QX Thanks, enjoy and our have see the Five and go call. in let will in Just later everybody.

Operator

Thank The you conference attending now concluded. has presentation. today’s for

disconnect. now may You

Five Below (FIVE) 6 Jun 182018 Q1 Earnings call transcript