Five Below Reports 9.4% Revenue Growth, Net Income Decline in Q2 2024

Five Below, Inc. reported its financial results for the second quarter and year-to-date periods ending August 3, 2024, showing notable changes in revenue and profitability compared to the previous fiscal year. The company achieved net sales of $830.1 million for the thirteen weeks ended August 3, 2024, marking a 9.4% increase from $759.0 million in the same period last year. Year-to-date net sales reached $1.64 billion, up 10.6% from $1.49 billion in the prior year.

Despite the increase in sales, net income for the second quarter decreased to $33.0 million, down 29.5% from $46.8 million in the prior year. For the year-to-date period, net income was $64.5 million, a decline of 23.5% from $84.3 million. The basic income per share for the second quarter was $0.60, down from $0.84 in the previous year, while year-to-date basic income per share fell to $1.17 from $1.51.

The increase in net sales was driven by a rise in non-comparable sales, which contributed $113.6 million, although this was offset by a comparable sales decrease of $42.5 million, attributed to a 5.7% decline in transactions. The cost of goods sold for the second quarter rose to $558.3 million, up 12.9% from $494.4 million, leading to a gross profit of $271.8 million, a modest increase of 2.7%. However, the gross margin decreased to 32.7% from 34.9% in the prior year.

Selling, general, and administrative (SG&A) expenses increased significantly, reaching $230.3 million, up 11.8% from $206.0 million. This rise in expenses contributed to a decrease in operating income, which fell to $41.5 million from $58.6 million in the previous year.

As of August 3, 2024, Five Below operated 1,667 stores across 43 states, an increase from 1,407 stores a year earlier. The company committed to 48 new store leases during the quarter, with future minimum lease payments totaling approximately $85.1 million. The company also maintained a strong liquidity position, with cash and cash equivalents of $209.0 million, although this was a decrease from $334.5 million a year prior.

In terms of strategic developments, Five Below has initiated a new share repurchase program, allowing for the repurchase of up to $100 million of common stock through November 27, 2026. During the first half of fiscal 2024, the company repurchased 266,997 shares at an average cost of $149.79 per share.

Additionally, Five Below is facing a putative class action lawsuit filed on August 1, 2024, alleging violations of the Securities Exchange Act of 1934, which the company intends to vigorously contest. The potential impact of this legal action remains uncertain.