FIVE - Earnings call transcript Q1 2024

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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

afternoon, good and Sarah, everyone. Thanks, us Thanks Quarter Five First for Financial for Results joining XXXX Conference Below's today Call. Officer; and On today's and Operating Officer; and Chief Financial call are Joel Ken Anderson, Bull, Treasurer. President Executive Chief Officer Chief After the to open we call made management questions. their has remarks, will formal Act I need harbor the within Reform comments Securities meaning the safe that you of amended. made may the call Litigation and this to pursuant XXXX statements forward-looking to remind provisions Private constitute and certain as during of are made of

statements are of made and release such press are forward-looking are today call, differ actual subject Such uncertainties and to the the statements do we and from unknown uncertainties results and any as statements. of both our forward-looking risks not statements. materially this cause and our undertake in known Those SEC risks that date update obligation filings. could described forward-looking to to The

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

will to over Joel. turn now the I call

Joel Anderson

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

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

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

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

and version On trends variety and in saw including also our in across Anime, and of popularity and a our broad product Candy world. of snacks our Squish, consumables, in items trends, Hello our Collectibles beverages beauty candy, and World, of we Kitty, worlds style continued accessories

in The more. April procured posters see again. and Mario was sold hit, to emerging nice released It we new movie through other a Super licenses items and is and tees, quickly

value the had The that we our broad-based our customers. worlds Easter, products. of For great resonated and at extreme with candy results our demonstrate baskets relevancy of

quarter, through our strategic across we All vision. underpin long-term key that double our the triple pillars X progress made

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

The first store is pillar expansion.

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

our to pillar, second potential. store Moving

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kenneth Bull

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

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

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

We increased the X,XXX of XX.X% of million X,XXX at stores first XXX an first the for the versus stores Gross XXXX. $XXX.X quarter $XXX.X of quarter the approximately million profit ended in of first end versus quarter with to XXXX. stores, the quarter of XXXX XX% or increase

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

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

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

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

primarily due in accounting versus XX.X% Our rate to XX.X% quarter from for of benefit XXXX. first was higher year. to tax decrease XXXX this quarter This was effective of the first a year last share-based the compared

income year last $X.XX of year. million the diluted of to was a XXXX first benefit million share-based was the versus approximate to $X.XX Earnings income per quarter compared quarter Diluted $XX.X first diluted compared accounting earnings the last per for share $X.XX share first Net for year's $X.XX. of quarter EPS of benefit included $XX.X XXXX. of net an approximately this in

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

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

turn guidance. I'd to our Now to like

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

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

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

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

full Now year. on to the

We margin generate slight previous the of tightening expect with EPS are guidance, we that midpoint midpoint, at would range our consistent this still and we with our the guidance operating expansion.

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

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

to expected billion, X%. to of XX.X%. in billion range of are X% expected to increase the an in to sales to XXXX, the comparable is For of $X.XX sales XX.X% The increase be be $X.X range

to X,XXX over to end We the over approximately growth year unit now stores of stores with plan XX%. and XXX open or new

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

in the year rate of approximately a of tax not full half effective XXXX of assumes rate does year expect the to include million, over a higher of the XX%, a and effective representing We accounting. potential Net impact is XX.X% income share-based range of expected approximately to to rate million growth be future any $XXX XX.X% XXXX. approximately which for XX% tax currently for second $XXX from

to diluted expected share be is future year-over-year XX.X% to Diluted earnings earnings comparative share range XX.X% per be XX.X%. impact share implied per of $X.XX, repurchases. growth not This On in from for $X.XX growth guidance the are basis, implying any a to of does XX-week to to potential include XX%.

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

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

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

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

Operator

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

Simeon Gutman

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

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

Joel Anderson

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

in up showed that clearly, so And transactions.

like Easter Easter as we and with quarter were softening. as far called many goes, the a Look, really post was pleased

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

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

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

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

Operator

Ciccarelli with next Our Scot from comes Truist. question

Scot Ciccarelli

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

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

Joel Anderson

Scot. Thanks,

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

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

ticked has down. it So

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

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

Kenneth Bull

No.

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

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

Operator

Next S&Morgan. Matthew Boss comes from with question

Matthew Boss

on a quarter. nice Congrats

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

Joel Anderson

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

Kenneth Bull

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

Operator

Our with next from question comes David MKM. ROTH Bellinger

David Bellinger

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

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

Joel Anderson

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

Five set wall Beyond, up is to we've that All way David, the can have keep And do we we is back. Beyond. pushing back to continue Five grow

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

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

Operator

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

Unknown Analyst

Cole is for Jack Jeremy. This on

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

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

Joel Anderson

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

Kenneth Bull

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

Joel Anderson

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

Operator

Lasser UBS. Our next from Michael question comes with

Unknown Analyst

is Atul Michael on Lasser. This [indiscernible] for

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

Joel Anderson

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

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

Operator

Guggenheim comes question John Heinbockel with next The Securities. from

John Heinbockel

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

Joel Anderson

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

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

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

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

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

starting even right we've we got back Yes, And we've beginning really a year. And about feel early done. as getting We've seen coming those are far in feel reset from TechWorld this We so fall. primary bigger -- accelerating XXX that's we'll and got of goes. them, then we're that. strong improvement as an probably the some pick the up the the them. not reason But

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

Operator

comes question Wells next from Kelly with Fargo. Edward Our

Edward Kelly

basis. Based I in half. it comparison the implies wanted QX cadence. on seemed I an a little bit it guiding, of how comparison you ask The was upon you're think the the your comp like be to a going to year of back multiyear easier about acceleration

what a the product generally. around thoughts terms we but of I think holiday excited then that. it's that things early, of as about season? you're like expecting holiday, in for from like know just perspective, So about And sort Joel, standpoint, you're and

Joel Anderson

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

Operator

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

Jason Haas

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

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

So harder the [declares] quarter? through get

Kenneth Bull

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

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

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

Joel Anderson

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

Kenneth Bull

from Yes, a perspective. comp

Operator

question Brian comes Oppenheimer. next Nagel with from Our

Brian Nagel

Nice quarter.

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

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

Kenneth Bull

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

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

Operator

with McShane next Goldman comes Kate from question Our Sachs.

Katharine McShane

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

Joel Anderson

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

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

Operator

Our with next question Short Karen from Suisse. Credit comes

Unknown Analyst

Silverstein Dan is on This Karen's team.

Just X really quick ones.

guys frequently? of customer assess the of you more how versus contribution much is First, on I the customers existing leveraging are lot shopping new work strong able on data. from a done growth, have transaction to -- know customers you

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

Joel Anderson

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

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

Kenneth Bull

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

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

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

Operator

Our question comes from next Paul Lejuez.

Kelly Crago

for This Paul. is on Kelly

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

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

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

Joel Anderson

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

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

Kenneth Bull

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

Operator

comes with McManus Steve BNP from Our question Navis. next

Stephen McManus

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

Joel Anderson

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

Operator

Thanks, Steve.

Grom with Chuck from next question Gordon comes Haskett. Our

Charles Grom

Most been answered. of my questions have

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

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

Joel Anderson

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

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

Operator

with from Deutsche Bank. question Krisztina Our next comes Katai

Krisztina Katai

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

Joel Anderson

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

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

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

Operator

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

Joel Anderson

us everybody, you, Thank joining for today.

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

conversions. We will complete over XXX

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

Operator

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

may disconnect. You now

Five Below (FIVE) 1 Jun 232024 Q1 Earnings call transcript