Earnings call transcript Q1 2023

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Operator

Good day and welcome to the Five Below First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Christiane Pelz, VP of Investor Relations. Please go ahead.

Christiane Pelz

Thanks, Sarah and good afternoon, everyone. today call. Below's us financial quarter joining conference results for for first Five XXXX Thanks call Joel Chief today's Ken Treasurer. On are Bull, Officer; Chief Chief and Executive Operating Officer; Financial and Anderson, Officer President and

provisions the and management the forward-looking call questions. the certain of statements made the of comments and After will during to actual release safe filings. SEC this forward-looking unknown results you to to to do made are remarks, subject I statements. Such their this and Litigation we risks within statements has cause Securities materially call of The open Reform are any remind as we as forward-looking made and XXXX need made harbor forward-looking the differ of that meaning that formal not are may in statements statements. from Private to date pursuant such constitute could undertake Act uncertainties and of amended. obligation press known to our call and the Those our and both risks today uncertainties described update are

Relations If of fivebelow.com. copy not have Investor press website today's you our obtain do X visiting the of may at by you release, a page

to I now Joel. the will call turn over

Joel Anderson

the persistent periods a fewer lower the XX% and million stimulus time line Thank and our first for We tax in growth a you, first guidance, transaction-driven with to Christiane increase. call. joining and with of thanks, benefits our $XXX XXXX with to approximately comp X.X% quarter achieve of results everyone, to inflation, fueled compared quarter pandemic. government-sponsored earnings challenging continues us for were to sales pleased sales for consumers It be refunds

both retain we and value continue converted comparable extreme more non-converted in transactions trend-right and an being and stores. grow However, our customers attract to retailer,

customers fuel that of rely was the Below is highest is stimulus period indicator destination strong Our a since Five in times. tougher XXXX, the economic transaction increase a the during on and even excluding X.X% pandemic

play that We new to amazing they flexible and to resilient products our reacting against pillars a triple quickly to opening offense, executing retailer continue needs we double our are stores also a growth. customer the strategic with want at achieve bring them while values, WOW model and to

On saw posters popularity of trends and our also a and items world. and movie Super through sold product our tees, Collectibles is broad and our Hello of version items and Candy in our again. emerging and nice in trends, quickly more. candy, procured beverages we style of new Kitty, The including we continued and Mario a Squish, was released see in consumables, variety other and across worlds hit accessories in Anime, snacks beauty April World licenses to It

our that with customers. the we we extreme double and broad-based had the worlds candy of our underpin made at baskets Easter, value our vision. resonated across our For The triple long-term that key our strategic All demonstrate quarter, through X pillars progress of results relevancy great products.

unleashing are the each As a analytics of power to of the are X relevancy drive these pillars data and reminder, customer through we at of looking lens results. and

expansion. store is pillar first The

stores We Investor of We Day. are we across all our the expanding were to anywhere, of openings In XX spring in year XX opened Below stores already these pipeline expect top other legal Two quarter, we busy and With beyond. our original to put the retailers our their from reach XXX estate, and are thankful took our us These real first in stores goal and commitment in a of next balance as said very design, at for several negotiations we to execution, sheet, of result. now a their over strong time seasoned reach acquired focused states. and Five new XX building our positioning exceed our jobs year. achieving time. for and year, teams milestone new while nimble this we and teams openings from great top XXX-store construction and effort this finance bankruptcy, for on leases grand

potential. Moving to our second pillar, store

continue We first and are addition snarky balloons. through the the XXX services ear stores and our new in penetration and a Five average in large of to conversions new as back from the XXX Five are stores of prototype and single-digit to sales the focused grow opportunity Beyond track this growing volume such everywhere. current drive goal of new as approximately convert year Beyond into Beyond baskets on over converted We traffic quarter to piercing Five today. higher Five unit our the helium alone of on as to prototype and These achieve see the store well to the we fun products Beyond

relentless while strategy. trends our pursue product third incorporate we the discussed brand in about global how sourcing our the office is officially Our how to and organization and newness very value. is In first are globe quarter, open We've pillar and a first were Below scouring to merchants merchandise-driven and pleased Five India.

products establishing people a who team went those in very a to value directly who effort ground this to milestone. supported disruptive and Thank by the excited on to have was with to our and and many This you together to customers. factories our distorted even our more this achieve and work market product office. We presence bring at develop above for development amazing overseas huge so are beyond

a Five In our to fun. analytics while We we and continue our offerings and strategy, doing segment reach Below brand successful continuing this, grow used successfully push and customers our marketing data as campaign brand surrounding customer of have traffic On Easter, understand to QX a digital for conducted digital the to evergreen audiences investments. drive in to destination marketing brand. build to and optimize investments go-to more position awareness,

engagement of platforms. social social terms efforts, are Complementing our paid media digital followers our across marketing fans and customer in presence growing

Hayes and to like videos the visits In us, their viewership shared Frankel addition and high creating content influencers post Their TikTok. to Below posting on Bethany and Walker Five about celebrities about engagement. had

a we inventory planning increasing work turns implemented communications forecasting, and already forecasting flow ordering, platform enable on this achieve while vendor analytics, Using focus our transparency management drive asset tool. to is technology that and increases is an the replenishment to profits. of are data and focused pillar both beginning and goal sales continuing strategy. further to as the with end-to-end real-time to to a system of We've and fourth inventory pillar are enhances maximize improving and and leverage Double Triple replenishment visibility. we new a inventory required The improving optimization. scale on The new

which pillar talent pipeline our fifth triple innovation on critical focuses achieve need crew The to the and is that we double.

members strong in next We hundreds our will order support growth. several customers, thousands of of and and to in hire our teams, lead product the serve our crew years ship train our

we As busy first this you quarter. have see, can been

we summary, actualized, accomplishments with see good results have expect pleased perspective In on QX challenging quarter a transaction we are and of backdrop. which first With in in financial increases. operational May the a we our macro a continuation amid to

as of impacted year, of us the of will to tailwinds, accelerating As emerge we we headwinds playbook. the we many look offensive pandemic that are our the believe the era remainder begin to

we life including of We're and an completing store our in marketing chain, new the continuing format. are Five And capitalizing and stores for focused freight opening improving a are Beyond conversions. strong over bring XXX-plus XXXX. new campaign supply costs to XXX We pipeline on stores to build favorability executing new to

detail. our more and Ken? With to that, our outlook Ken I in review will turn financials it over to

Kenneth Bull

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

million the $XXX.X quarter XXXX. first for of quarter first in increased Our $XXX.X from reported XX.X% sales the to of XXXX million

year X.X%, a new quarter be stores end stores compared in or approximately XX total stores, offset comp X,XXX pleased increased of the of XXX a increase ticket with productivity and locations. the an We year with On XX XX quarter our XXXX, of quarter XXXX. increased quarter XX% ended very increase Gross in states rate. increased by X.X% the by comp the Comparable a the $XXX.X transaction first last for annual profit sales approximate across quarter to of of first to the X-year with first XX% versus opened We in the the stores this since sales stores of new XX.X% decline XXXX first basis continue XXXX. X.X%. first the new to million quarter quarter of of compounded million at versus partially X,XXX opened growth an for $XXX.X first by

XX.X% margin the As flat of XXXX. was expected, of quarter first versus gross

increase expenses. versus quarter, in basis last first higher a percentage quarter of costs driven XXXX by a expense primarily certain of planned to for store-related SG&A well increased points as the first and year's XX.X% as sales, marketing approximately XX As

a of XXXX, versus operating margin expected. to quarter $XX.X at $XX.X while in points as profit first XX operating result, X.X% decreased basis As finished approximately million the million

rates. compared our as benefited net was investment in rising Net income million interest income XXXX a other first expense of of the to quarter $X.XX $XXX,XXX from as interest

rate year's the earnings first of income $X.XX year first first diluted quarter versus versus was first million was of quarter XXXX higher diluted XXXX to share net accounting This per $XX.X Our to $XX.X Net Diluted approximately per quarter the included approximate compared $X.XX the due XX.X% in of of last this this benefit share-based compared effective a benefit was $X.XX EPS income for last year decrease was accounting a last primarily the from year. XXXX. of to of benefit tax for of quarter to first quarter $X.XX. for in XXXX. XX.X% an share-based compared year. million the Earnings share

quarter end including first positions. million credit. per-store our decreased and as Average at to first versus X% compared nothing was on last the the inventory at quarter on of $XXX the Inventory ordered inventory year. $XXX last $XXX no end ended debt, in-stock to the million equivalents strategically million with line and basis first quarter of as ensure a of earlier cash cash, investments healthy approximately the outstanding in first we million last year $XXX quarter year We the

quarter. with current We and the level into our the are the second quality summer be season going and of inventory to positioned well for pleased expect

guidance. Now, to I'd our to turn like

of XX.X% stores comp XXXX, for quarter are sales million to be expected of second For sales are million, X% the expected the are in annual increase open show compounded to the to the a this XX.X%. plan growth an midpoint assuming XX $XXX approximate in of rate since last increase new We X-year in stores period this to year and opened X%. the approximately range quarter year the quarter XXXX. compared as XX quarter second in second of second total sales an guidance, range At $XXX to the XX% of to to net

a the year, the As stores opening annual in of permitting to new landlord delays. cadence first of reminder, our primarily of slower half X/X related and due this was

margin operating year are shift partially the approximately X.X% midpoint points and of expect incentive XXXX by of costs as freight of spend marketing deleverage in this quarter second or at We expenses. X.X% compensation normalized a XX lower more the to basis only offset in

Net $X.XX and approximately XXXX. expected to to taxes share XXXX interest which any earnings second is to are $X.XX expected are from for does impact quarter expected be quarter fiscal second the the the accounting. be in of second $X.XX million diluted per share potential XX% to income per Diluted $X earnings in for not approximately share-based versus include quarter of be

of we year; our we our consistent at margin expansion. full are and tightening expect operating the slight to EPS we that range still guidance guidance midpoint with would with the midpoint, this generate on previous the Now

assumed low grow the comparable in the half teens the in sales increase of of basis, single-digit to for range. expected on first CAGR the second similar to a second year year with the currently are a total the half a Our high half X-year sales still in

year will XXXX week in a to to full approximately XX-week add noted. approximately which and year is in XXrd includes EPS. otherwise unless the Fiscal refer $XX $X.XX guidance sales My million expected on remarks

XXX billion, or $X.XX For expected expected range XXXX, to now year and X%. growth to of X,XXX increase to is to $X.X the the are stores end approximately XX%. XX.X% the be in in increase sales to over over of XX.X%. of of We an X% unit comparable The open range sales to billion plan with stores new be to

offset and in slight compensation by midpoint the lower the the guidance freight certain a interest margin cost year, costs, last of free generation, is higher interest significant put leverage For and year-over-year still by increase year. our income onetime we at in strong With lapping driven cash year. place our are balance full part cash operating management in lower with in strategies this assuming we rates, combined flow healthy net incentive

of approximately This of to XXXX. Diluted a growth earnings future potential per rate impact repurchases. XX%. implied earnings to range share is which to expected is second XX.X% diluted expected the XX.X% tax $X.XX, not currently be from does XX.X%. year effective for expect million, any share the any higher of are approximately XX.X% be income per include implying impact to assumes from approximately $XXX year-over-year for XXXX growth We representing range full a half and not the rate does rate to the effective over in growth basis, On potential XX.X% of of to of to XX-week future a XX% a share-based comparative in Net be million for include of $XXX tax XX% accounting. share year guidance $X.XX to

CapEx, approximately centers of converting the distribution $XXX With in Arizona CapEx, in stores, impact respect in Georgia our XXX systems and tenant spend expansions store reflects new and from over commencing to gross to XXX and total investments over locations, acquired plan the including allowances. opening to infrastructure. This of we bankrupt those retailers, million recently excluding in now

within we quarter summary, the backdrop. macro of In the results delivered difficult outlook our and against first range

key As executional am their again Joel capabilities is This teams I made progress to grateful also our and focus once of operational a extremely strategic important mentioned, and against efforts. we for testament the objectives.

press to release the session. to with over and the refer our the question-and-answer related I details like that, for back would -- please to other to turn results all earnings guidance, and For call operator our Operator?

Operator

Our Instructions] Gutman comes question with first [Operator Simeon from Morgan Stanley.

Simeon Gutman

weakness. -- is retail company across one basket every strain they're that lower or income consumer the to pressure, My follow, guided we question every the on income, extra parts higher some no selling with literally whether landscape

a Joel, of handling some of way a seeing we if in gauge and terms it, an So visits as can your to how customer into we're of customer just the give hump you if sort I'm your steadiness can basket your going if sort quarter, us over curious, of cadence is insight the on expect insight it and of in terms forward.

Joel Anderson

the tough strong indicates it's their multiple a of Five balance seen we've us, say I like of indication that it and quarter are say such their new out question. don't for their customer, figure could Simeon that our Yes. great they but over our times, spending rebalance know a that customers I I transaction-led have when would again probably to sheet, times for patterns and part Below routines. becomes that

And goes, were in as transactions. pleased post as with and softening. Look, the called a Easter Easter like was far clearly, showed we that up really quarter so many

reason month, Halloween of it to -- So where customer We more end seen Mother's with saw up the to like happen. happened certainly with at that I last really We've get seeing the That events. get things they year the no the wouldn't we're then back with buys there's Day. softer, think see normal of trends closer pre-pandemic with the the Easter. the trend of We month pick end that, the cycle and the in to beginning sales month. continue that

we're So the trend of value, all saw Look, closer back last year. and that extreme customers many, kind their we trends right, of getting to many cut to out believe that, last got we're years following that we're that we kids. are we've really place

in times. really so bode strong times And as should that as well tough all well in

of we've the And soft here. the an but of peak us. seen quarter are end the headwinds So think I behind definitely was on that it improvement

Operator

Truist. question Our Scot from comes Ciccarelli with next

Scot Ciccarelli

question is, quarters guess my for in several I average had we've ticket Ciccarelli. declines now. Scot

at the Beyond, the would the given in given guess shift ticket Five Just question average into to expect I growth is, what current territory point you environment? positive

Joel Anderson

Scot. Thanks,

ticket. declines it's seen they've in to And think I extreme we small. You've post-pandemic, but increases pretty saw everybody, been important remind

they pre-pandemic declines, still there's increases. double-digit while they much been than higher so And some and are were

down. So ticked it has

time, for where they trips. think I being is very I a their really think But proving out discerning positivity customer that is to the on the in is at put same sign play basket. that's Beyond Five in what

more visit up else don't come So Ken, transactions. in to add? know, another X Five shows reason reason. Below, that I anything We're to there's just

Kenneth Bull

No.

on, you it about driving Beyond, think Early talked and in seeing I Five hit Scot. still we're really It's we've on the this an increase it. transactions.

may transaction ticket. customer somewhat comes in we're change That seeing I in least think versus it's the see they but side we're of when early the increase because the still gate, in that. of at out newness on this that store the and the

Operator

Next Morgan from J.P. with question comes Matthew Boss [ph].

Matthew Boss

nice on Congrats quarter. a

So world elaborate of store material drivers behind X broad-based stores speak the productivity, performance and performance on Ken, the best years, the some the acceleration you on then, with in just improvement the transaction could that expand made conversion? new across you seeing decisions you new and And Joel, builds that could in and to you're around just count? the of the

Joel Anderson

by X worlds offering. our really shopped fact of the was were But only Yes. out positive. it across the tech worlds Look, world consumables. snack, that's Really quarter. Matt, HPA the the you pretty version really marketplace. the positive, those where beverages, much performance that all strong, think I that's running were I negative led shows mean, of our But leaders and of the extremely of comps [ph] X really our our the out candy, entire X is X customer

Kenneth Bull

out math guidance, we And this some seen store move do at quarters which we to you continue the kind to look stores, if through XX-plus as our as [ph] move actually year. around we see. forward quarter the store happy expect you of that called performance a productivity back back Yes. couple productivity, XX% And do records again, Matt, that, then, spring that get of to we're opening to XX, hitting if on We've right. for recent Joel you're in that productivity performance. grand the to

Operator

David Our question ROTH MKM. with comes next from Bellinger

David Bellinger

those XX like those looks a little sizes have you acquired, most to excess it your more And feet. looks typical leases maybe furnishings footage no square the of than are like from recently in store retailer picked look square On operation. in box up XX,XXX them home you of longer of a

maybe but a or for wider and of is around space just some additional maybe there testing product Five format store Beyond? So any slightly larger including selection a thought not

Joel Anderson

when picked David. footage. morning. whether it's was original that we Thanks, tell Yes. slowly I All only do The X,XXX you us. prototype I plenty which foot the immaterial is here we XX,XXX, majority grown way were difference to continue can square Tuesday to got have from square up Beyond, is we Five up have I X,XXX would What innovate got grow stores mean is we feet. was close the Below it Five the a to continue prototype. to our there back extra keep X,XXX to little it's Five to about XX,XXX. And And pushing and set Then XX,XXX, out We've now create that square an the Beyond. with David, of we've we've wall back. prototype

milestones our rituals of. by think they up limited we only can up that and build it's classification are so out a growing merchants And with coming

Pembroke an of to down are current great in But the focused years of we years. is prototype last prototype. massive built Florida. you next on time, in But one not to over say of of keep that the all really that [ph] a point few we've as conversions more the there's down the we these opportunity pet couple road, shared think I with example, it's growing this in to

Operator

question Capital with from next Our Hamblin Jeremy Group. Craig-Hallum comes

Unidentified Analyst

for This is [ph] on Jack Cole Jeremy.

the to guys across you question, widely from year-over-year GMs also saw first similar your retail heard flat you So pressure expected. we've but shrinkage as

so, just terms comments you And of from any in on So quantify it could you in quarter? the guys bps? just saw shrink if any impacts

Joel Anderson

at on exclusion else an shrink. Yes. no Look, something that and doing I policy had trued our the year example. we know, shrink? it. retail. quarter our on fourth accruing as are changed impact year definitely don't We're impacted higher rates shrink on return last an is things and up our that's part this anything to Ken, it mitigate to We We've

Kenneth Bull

that we're different measures preventative this we're Jack, mentioned, of -- we the the what I end anything a on point, last we when focusing has inventories. our that physical as we we materially at came lot guidance with I of been out quarter. mentioned, not did of year provided higher saw No, think, included around Joel we're that And the rate shrink. in Joel year than for at last experiencing as mean

Joel Anderson

year's guidance It's at rate. a all this higher baked into

Operator

Michael next comes Lasser question from Our UBS. with

Unidentified Analyst

Atul is [ph] on Lasser. This for Michael

you a is Five macro a still backdrop? getting moderates We any that have Five here question on lift Beyond And the the risk from mid-single-digit Beyond. the there from remodels? Are lift given

Joel Anderson

been that and the and has recently stores lift continue the That consistent stores in we're in converted first seeing we converted. have that that just

throughout. But So that and has in customer continued seeing lift that see digit we're continues we extreme forecast value immediately mid-single Beyond expect. the what and be Five they're we the and to -- it that's loves almost

Operator

comes question Securities. from next John with Heinbockel Guggenheim The

John Heinbockel

meaning world back year the can year? that on that do Joel, more called million Beyond feel this things. you one, thoughts category? then the than further Number Five And tech move you about accelerate territory the and it you that how of in X that into the it conversions, next $XXX quick acceleration out, because secondly, and positive current can ability us your reset now accelerate

Joel Anderson

Technically, accelerate question. conversions. we could Great John. Yes,

team are I people same do our that the also tell conversions the new does our However, would you, stores. that

purposeful we so conversions. this that And it loaded our was front-end year

new back-end stores our loaded tell, this are year. As you can

about that a back mean, half is half the on the for focus opening new half is X/X, here the to half. so this QX It's really by X/X to to up and back of end wrap us. I stores. planning back be team record conversions going front really And

XXX we're got and reason we've the feel in probably them accelerating really We done. strong the not the about primary a those the starting getting are then -- pick year. them. back And feel of right we'll we so up But that's beginning

as yes, far some from an even got early bigger we've And TechWorld as coming seen this that. reset fall. goes; improvement We've

rumors And you'll lot a there's us. see with positive think improvements think for of and we happening half be I all-important some get I quarter. out QX into second of fourth really It Apple the the certainly, release. changes as and the will the

Operator

Our next question from Edward Wells comes with Kelly Fargo.

Edward Kelly

ask thoughts to generally; about cadence. wanted so guiding, then, The it's comparison think around of expecting QX the and you're And like seemed perspective season? that. multiyear a half; comparison back in holiday terms about excited product like the comp as easier know implies from the things you of your it we I you're a early standpoint, Joel, but that like basis. Based sort I just holiday, it about you're what acceleration of of upon was for on bit I going be little a to year the in an think how

Joel Anderson

half what very is look think that in we acceleration, sales first take comp. can forecasted that -- to on second excited we back half. of some a appreciate is about. I'm similar excited got more ready the that think really Ed, line to really this I stacks. this if the time, X-year but the to chasing, very we're closer the for for little on about something things geo is with on think And X-year not keep the you at QX we're half we're in I line; midpoint comp, year, where came dead really And comp in the we to it at of I the the out at about total CAGR, That's the half point at that you've pretty the we you And things we're want trends of QX. talk point then, back seeing look

Operator

from Our Bank America. Jason comes Haas next with of question

Jason Haas

look Can the versus as then X% what you you X% May about to for us move XQ? remind just gave through the you to is like can talk running comp that guide compares how you date XQ. And

was softer last I of year. think one May the months

declares through So, quarter? harder [ph] get the

Kenneth Bull

don't are But prepare I or you we to we there's we expectations and Normally, current last then anomalies anything, see we for that forward business where the we changes tell quarter, Jason. Thanks, activity. year. Sure. or intra-quarter guidance any provide our when consider if anniversaries in from can look

in relatively what to line in X% So to with of that terms we're guiding X%.

through the changes in and relatively of quarter, the a terms we're kind moved business last possibly that on You of we the year But of was for as in slight the things based now what the were thinking it mentioned customer last year going that's some QX. consistent, inflation. kind guidance deceleration the on around of

Joel Anderson

But pretty QX with much line all each year in X X a quarters perspective. relatively -- last were all months from in other comp

Kenneth Bull

comp from a Yes, perspective.

Operator

with Nagel Our next Brian from comes question Oppenheimer.

Brian Nagel

quarter. Nice

guidance down X -- the Just the to be comp you guess, by as I the, top end point. guidance, of not nitpicking but annual the look at you did take

new that? Is it more year the the mechanical? So something something of now back expectation seeing behind what's half you're some in is

Kenneth Bull

right the X% X I if down. half of in X first out of comp just was previous performance, comp. the when imply that Yes, digits. reflects mentioned we really guidance, moved end high look guidance year. expected comps the a then Brian, That year prepared we of look And low the to second you remarks, of brought in a sort half the comp a the our to you single as range full to at X% And my

the we're around end some half some would the of assume remarks deterioration those earlier And that acceleration tailwinds his things we somewhat prepared high on low say slight increased in would environment our marketing on end some to about in and mentioned and the that talked for consumer call in effective first had that. similar of more then doing, like assume the year, conversions Joel that second type what the macro

Operator

from question Sachs. next comes Goldman Kate Our with McShane

Kate McShane

the have extent higher-end down shopping any our quarter? first what can, of a quantify he A or But in to to that Five just is trade the already. if been way questions consumer maybe wonder any Below we answered had lot more you there

Joel Anderson

were I'll something. is one. Yes, seen all questions Kate. question or I answer that significant was honestly, to ask instead. that were you And I on the anything doing how answered, the we haven't since trade-down But thought going No,

We they're on is still the I our lower-end us. board. seeing see their increases still dollars continue discretionary transaction spending are to customer more But across significant -- core us. our And but of yet downside. more customer think spending trade nothing anything, if But with dependent really with on us it's the like probably we

Operator

from comes Karen question next Our with Short Credit Suisse.

Unidentified Analyst

team. [ph] This Karen's is Dan Silverstein on

the first, X strong customers data. shopping have the ones; guys assess how on from is done work really I you existing transaction able new lot versus on customer more frequently? growth. leveraging quick to Just you of a contribution know customers much Are of

comments of in So then can behavior consumer just versus speak what you quickly, get freight. some your And you're the be XQ? Just lapping qualitatively XQ to planning to really margins terms to would on any timing helpful. help with of for

Joel Anderson

customers often. Look, on customers the it coming Ken, the new form We're you Dan about existing in seeing transaction side of It's and in and both. margins. then, more actually talk both can

take us new more as that's it. both existing customers well nice visiting our an you often. as see customers do Ken, to want really to So improvement in

Kenneth Bull

leverage, just kind And margin with Dan, yes, I'll start my of on prepared in remarks. the operating

second we just XX On operating leverage. expect deleverage. so about year, the the basis guiding a point margin to full slight We're quarter

into with the cost double SG&A, in these going going the and going leverage margin margin in some the you operating you of to numbers And SG&A deleverage XXX more QX when year will quarter. see there, from going looking be we're gross we're than leverage of bit little the margin QX. points. than slightly QX leverage that other is operating for So basis things at get just on, XXX leverage operating what again, benefit get going to see in And the quarter is the to gross and less be to around basis probably that QX, back third probably a the when now, that be leverage margin deleverage we're probably of into points excess freight of half

Operator

Our next comes from question Paul Lejuez.

Unidentified Analyst

Paul. for on [ph] Kelly is This

business licensing the to first just the that that on want you're they on hear seeing category Just first improved. ask

Just kind levels? that's excited? a business maybe guidance. down just I curious to can pre-COVID pipeline back back then what the versus or follow-up on peak is today you circle half for you as just And how coming big the even And of got -- is that

Just curious we any there's in just XQ comp Or in as well? plugging in sort X%-ish difference XQ? to of if the fourth that quarter

Joel Anderson

Kelly, I comment license, on the X think -- been really the nonexistent Look, years. for it's

but licenses. It's still because that's of wasn't It the to, pretty very really movies a some still Super nonexistent us nice But Mario -- was didn't since on have much it business. been impact it them. that think, And I material of surprised take it just COVID. does small. has trend advantage of they this give us example hope going And the of half? some out movies an on coming as back into to appear, we'll It's turn back year are the that's Ken, another

Kenneth Bull

we're from margin looks a both see than And perspective, seeing on again, assuming comp the looking we're back the it the to the And QX, now, And single-digit both comp expect slightly low -- QX more now it -- for the QX way achieving from Kelly, would in on Yes. you're leverage perspective, the QX. is an at of a and operating positive we QX. and if modeling, really half, those QX at looking leverage like in we're it's way quarters. then both

Operator

from next Our with BNP comes Steve Navis. question McManus

Steve McManus

through noting? consumables recognize the working any P&L So we on gross Five margins, that's impacts is Below mix is that but unique worth there of version shift

Joel Anderson

don't we a it area it's do, And points chase it's mean, We've area now always this not point a and one or and trends down. up. think see year like tick we worth over that. But X,XXX shift I here, you it's not go anything a there. material continues another -- shift a and significant up so point seen noting. moving material that go to I basis it's like But something so for

Operator

Thanks, Steve.

with Our Haskett. next question comes from Gordon Chuck Grom

Chuck Grom

questions been my of Most have answered.

will Joel one. and I how first the second bigger just So do my guess And be would be I guess, you picture.

a what point program? we that some observations at while. what so on tokenization have And to I talking do you've far. a just about guys learned You been for take guess maybe loyalty

Joel Anderson

starting Chuck. of mood implemented to tokenizations a lighten Thanks, at to No, now firmly bit. little Just the loyalty. we look, point the think are I trying explore

that as just think and start keep for changes we'll shifts 'XX we've loyalty look probably more pipeline. and Some at chain the of now and in product put the has program, as to called step, been logical looking been one have you reasons. as business and Chuck, start because we and X next mix with supply it's some then I just of we to we're that base for that of 'XX, all hold That's busy to laid place. But that. the just certainly updated so that a is at teams see putting offense the really groundwork place to got COVID all back our I the then -- several is years, got on and it out got to and to continue you dealing inflation put we in been not playing But normalization on as in and

Operator

Our Katai Krisztina Deutsche comes from next with Bank. question

Krisztina Katai

best. a that now the the do more HVA and to particularly Just environment you're point candy merchandise traffic. price Are on follow-up snacks But doing strength I how seeing opportunity further you weaker a to a quick that know picked the either you I doing potentially view work? differently, anything of you're in analytical wise? guess, performed, some lot capitalize data you consumer

Joel Anderson

focused $X something really range. more the Look, the value is beginning Krisztina. is now Thanks, and probably we're the been that's $X consistent Yes. since thing really specifically one and even to delivering in

now, And all buck. think the stores resonating that XX-foot in really walk I a wall. customers. there's our a It's is with You

and lot about resonating take and now Beyond $X talk and $X Five in these stores the core extreme got larger $X, its Thanks, well XX-foot our the not snack wall And point so the really we the value majority Below $X, it's that a the customer $X. look And on but only we a really with the at And we a the is in that product. price is Krisztina. but with growth have calls, customer. that's resonating all while at at priced behind now, candy certainly, is opportunity Five WOW right product

Operator

question-and-answer to closing over conference remarks. This I like would back our any to session. the for concludes Joel turn Anderson

Joel Anderson

you, today. everybody, for Thank joining us

reiterating are close new reiterate, what stores just XXX-plus my remarks. I truly me prepared by year. We said in we offensive to Let playbook going closing earlier are this I'll accelerating our open

over complete will XXX We conversions.

very summer strong We strong. stores are a XXXX. all And and for today make for your both and Below growth have night. Thanks our Five as new Ken We a sure visit have will hope heard supply I and much our at from of chain. a improved you an all you and have great I, fun. on great capitalize pipeline you've already summer prospects stores

Operator

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

disconnect. now may You

Five Below (FIVE) 1 Jun 232023 Q1 Earnings call transcript