Five Below Inc ((FIVE)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Five Below Inc. presented a mixed bag of results, highlighting both achievements and challenges. While the company celebrated significant growth in store openings and total sales, it faced setbacks with declining comparable sales and earnings per share. The impact of tariffs on margins posed a notable challenge, yet improvements in inventory management and a robust cash position offered positive notes. Overall, the sentiment was balanced, with successes tempered by ongoing hurdles.
Record Store Openings
Five Below achieved a milestone by opening a record 228 new stores in 2024, bringing the total to 1,771 stores across the United States. This expansion represents a 14.7% increase over the previous year, underscoring the company’s aggressive growth strategy and commitment to widening its market presence.
Sales Growth
The fiscal year 2024 saw Five Below’s total sales rise by 10.4%, reaching approximately $3.88 billion, up from $3.51 billion the previous year. This growth highlights the company’s ability to drive revenue despite a challenging retail environment.
Improved Inventory Management
Five Below reported a 2% decrease in average inventory per store, alongside improved shrink rates across nearly all store cohorts. These enhancements in inventory management reflect the company’s focus on operational efficiency and cost control.
Strong Cash Position
The company ended the year with a strong cash position, holding approximately $529 million in cash, cash equivalents, and short-term investment securities, and no debt. This financial stability provides a solid foundation for future investments and growth initiatives.
Comparable Sales Decline
Despite overall sales growth, comparable sales decreased by 2.7%, driven entirely by a drop in comp transactions. This decline indicates challenges in maintaining customer traffic and transaction volumes.
Negative Impact of Tariffs
Tariffs are expected to significantly impact margins, with a net margin headwind anticipated for 2025. This challenge is projected to affect operating margins by about 100 basis points, highlighting the external pressures on the company’s profitability.
Earnings Per Share Decline
Adjusted diluted earnings per share for fiscal 2024 fell to $5.04, down from $5.26 the previous year. This decline reflects the financial pressures faced by the company, including increased costs and margin challenges.
SG&A Expense Increase
The company’s adjusted SG&A expenses rose by 140 basis points to 26.4% of sales, driven by fixed cost deleverage and investments in store hours and wages. This increase underscores the company’s commitment to enhancing customer experience, albeit at a higher cost.
Forward-Looking Guidance
Looking ahead to fiscal 2025, Five Below anticipates total sales to range between $4.21 billion and $4.33 billion, marking a 10.1% increase at the midpoint. Comparable sales are expected to be flat to a 3% increase. However, adjusted operating margins are projected to decrease by 180 basis points, with tariffs contributing significantly to this decline. The company plans to open approximately 150 new stores and is actively working to mitigate tariff impacts through vendor collaboration and selective price adjustments.
In summary, Five Below’s earnings call reflected a balanced sentiment with notable achievements in store expansion and sales growth, countered by challenges such as declining comparable sales and the impact of tariffs on margins. The company’s forward-looking guidance suggests a focus on strategic growth and operational improvements, despite the anticipated financial pressures.