Dollar Tree and Five Below Industry Analysis PowerPoint Slides

You will conduct a critical comparative analysis of the industry and companies that I analyzed in the documents attached and make a PowerPoint slide on each topic given below.

Industry: Discount Stores

Companies Analyzed: Dollar Tree and Five Below

PowerPoint Slide Topics on both companies are listed below:

1) Countries in which the companies Operates

2) Business Strategy

3) Assessment of competitive environment (Porter’s Five Forces)

4) Market Share

5) Critique of capital structure and long-term solvency

6) Evaluation of operating performance

7) Investment recommendation – Assume you have $30,000 to invest. Make a recommendation as to whether you would invest in one or both of your companies. Justify your recommendation with information from your analyses.

8) Reference List

You may use the background information from the case analysis and financial statements provided, but you will need to supplement it with additional information gathered through your research into each company’s annual report and other sources. Information presented on your slides should be synthesized from the research I have attached (not copied from an outside source) and presented in your own words.

The financial analysis section must focus on key ratios and your interpretation of these ratios. Analyze the ratios at all of the following levels: (1) for each company over time, (2) comparing your companies to each other, (3) comparing each of your companies to industry averages. Incorporate the industry/company information into your interpretation of the ratios.

Compute financial ratios directly in the Excel files attached from EDGAR. Make sure you are using 10-K financial statements.

***Please attach speaker notes for each slide on a separate document.***

FS Case FA23, – 1 Financial Statement Case Analysis
Learning Objectives
This case is intended to:
 increase your understanding of financial statements.
 enhance your ability to apply the concepts we have covered to actual company
financial statements.
 broaden your critical thinking skills by considering your analysis within an industry
context.
 provide you with experience navigating the benefits and challenges of working in a
team environment to achieve a common outcome.
Assignment Guidelines
 The is a Group/Team assignment.
 Complete the case analysis using the industry and companies that have been
approved for your team.
 Submit one case analysis per team.
 The submission must include one Word and two Excel files (three files in total), as
explained below.
 A Peer Evaluations Form must be completed as part of the case. However, these
evaluations are an individual (not a group) assignment and will be submitted through a
separate Canvas assignment link.
Assignment Requirements
 Use the EDGAR database to download the most recent 10-K report and the Excel
version of the 10-K financial statements.
o Use the 10-K report to respond to the relevant questions below. Do not submit the
10-K report.
o Use the Excel financial statements to complete the relevant questions below. Both
Excel files will be submitted with the assignment.
o Submit the full set of financial statements for both companies. Do not delete any
of the sheets in the Excel files.
o Save each Excel file separately using filename: Team#_CompanyName.
FS Case FA23, – 2  Respond to the items below for both companies. Insert your responses below each
question.
o You are expected to provide complete responses, written in full sentences, for
every question.
o Prepare a cover page with each team member’s name and the names of your
companies.
o Include a summary page that describes each team member’s contribution to the
case analysis.
o Save this Word file as Team#_FSCase.
Financial Statement Case Analysis
FS Case FA23, – 3 –
Discount Store Industry
Companies: Dollar Tree and Five Below
Team 6
Ryan Murphy, Turrell Tonge, and Arsal Choudhry
First Company: Dollar Tree
Company and Industry Description and Competitive Analysis
FS Case FA23, – 4 1. Provide the company name and ticker symbol. What is the date of the most recent fiscal
year?
The industry we have chosen is Discount Stores and the first company we have chosen
from that industry is Dollar Tree. The ticker symbol is DLTR. The date of the most recent
fiscal year is January 28th, 2023.
2. In the 10-K report, review the Management Discussion & Analysis and other information
about the company. Briefly describe the nature of the company’s business operations,
primary products and services, and in what other countries they operate.
Dollar tree seems to be making a lot of new developments and making new initiatives. Back
in September 2021, they announced a $1.25 price point which means most of their $1
merchandise is now $1.25. They have also invested in new products while also modifying
the existing ones to provide greater value for the customer. They have also implemented
Instacart, which is an online delivery service, in 7,800 stores. Dollar Tree also has
implemented the Dollar Tree Plus initiative, which introduces products priced at the $3 and
$5 price points, in 2,500 stores. Its primary products and services are discounted retail
merchandise such as household goods, cleaning supplies, snacks, groceries, office
materials, party supplies, etc. Dollar Tree operates in the United States and Canada as well.
3. Briefly describe the industry in which your companies operate and the competitive
landscape of the industry. Porter’s Five Forces might be helpful here. After doing your
research on the internet, use your own words when responding to this question. Provide
references with links.
Our first company, Dollar tree, operates in the Discount Stores industry. The discount store
industry is unique because it provides value to customers through low prices. According to
marketresearch.com, Discount stores are similar to department stores when you compare
the size and the layout. However, they differ because discount stores provide similar
products at much lower costs. Discount stores sell a variety of different goods such as
clothes and shoes, accessories, household goods, electronics, toys and games, groceries,
cleaning supplies, and beauty products. These discount stores are generally aimed to
garner the support of low-income and middle-income families/customers. This is an industry
that is very prominent and growing at a great pace. It is keeping up with the times especially
since COVID came about. According to marmonretailsolutions.com, Discount stores started
to innovate new ways to how customers can shop. There are now click and collect options
for purchasing online as well as home delivery through apps like Instacart. This industry is
now keeping up with the digital age that we are in. In terms of the competition landscape of
the industry, according to marketresearchreports.com, discount stores tend to compete with
the likes of department stores, outlets, online retailers, drug stores, supercenters, etc. Most
of the competition comes from within the industry as well. The biggest names are Walmart,
Dollar tree, Dollar general, and more. It’s important for those that are already in the industry
to constantly focus on offering quality products and offering great prices because there are
always new threats/entrants coming. So, it is important for everyone to be innovative and
stand out from everybody else, which can make this a tough industry to be in.
Link 1: https://www.marketresearch.com/Consumer-Goods-c1596/Consumer-GoodsRetailing-c80/Discount-Stores-c658/
FS Case FA23, – 5 –
Link 2: https://www.marmonretailsolutions.com/articles/discount-store-industry-analysis/
Link 3: https://www.marketresearchreports.com/discount-stores
NOTE: For the computational questions below, perform all calculations directly in the
respective Excel files using Excel formulas entered directly into the cells and clearly
label your work. Manual inputs of computed amounts will earn zero points.
Balance Sheet
4. Prepare a common-size balance sheet by expressing each item on the balance sheet
as a percentage of total assets. Do this for all years reported on the balance sheet.
Complete this task directly in the Excel file next to the balance sheet of each company.
5. Respond to the following items for each year reported on the balance sheet. The
common-size balance sheets should be used, when applicable, to respond to the
questions.
a) What is the date of the most recent balance sheet. What fiscal years are
reported?
The date of the most recent balance sheet is January 28th, 2023. The fiscal years reported
are 2023 and 2022. The other balance sheet is dated January 29th, 2022.
b) What percent of total assets are short-term assets and what percent are long-term
assets? How do these percentages differ between your companies.
2023: Short-term assets account for 27.66% of total assets while long-term assets account
for 72.34% of total assets.
2022: Short-term assets account for 25.82% of total assets while long-term assets account
for 74.18% of total assets
When comparing the percentage of short-term and long-term assets between Dollar tree
and Five below, I notice that Dollar tree has less % of short-term assets compared to Five
Below, but Dollar Tree has higher % of long-term assets compared to Five Below.
c) What percent of total liabilities are short-term liabilities and what percent are longterm liabilities? How do these percentages differ between your companies.
2023: Short-term liabilities account for 18.35% of total liabilities while long-term liabilities
account for 43.63% of total liabilities.
2022: Short-term liabilities account for 19.23% of total liabilities while long-term liabilities
account for 45.24% of total liabilities.
You provided liabilities as a % of assets; question calls for % of total liabilities.
FS Case FA23, – 6 When comparing the percentage of short-term and long-term liabilities between Dollar tree
and Five below, I notice that in 2022, Five Below has a higher % of short-term liabilities
compared to 2022 of Dollar Tree. However, in 2023 Five below has a lower % of short-term
liabilities compared to Dollar Tree. In terms of long-term liabilities, Dollar Tree has the
obvious higher % of long-term liabilities in comparison to Five Below.
d) Describe any significant changes in the composition of current assets or current
liabilities. Do you observe any noteworthy differences between your companies.
Current assets are comprised of cash and equivalents, merchandise inventories, and other
current assets. From 2022 to 2023, we see that cash and equivalents decreased from
4.53% to 2.79%. From 2022 to 2023, we see that merchandise inventories grew significantly
from 20.11% to 23.67%. From 2022 to 2023, other current assets pretty much stayed the
same as there was a 0.01% increase (1.18% vs 1.19%).
Current liabilities are comprised of current portion of operating lease liabilities, accounts
payable, income taxes payable, and other current liabilities. From 2022 to 2023, we see that
current portion of operating lease liabilities decreases from 6.48% to 6.30%. From 2022 to
2023, we see that accounts payable decreases from 8.67% to 8.25%. From 2022 to 2023,
we see that income taxes payable decreases from 0.38% to 0.25%. From 2022 to 2023, we
see that other current liabilities decreases as well from 3.69% to 3.55%.
When I look at both Dollar tree and Five Below, I notice that cash and cash equivalents
decreased for Dollar Tree while cash and cash equivalents increased significantly for Five
Below. Accounts payable decreased for both companies as well.
e) In which assets does the company have the most significant investment? Do you
observe any pattern when comparing your companies?
2023: Dollar tree has significant investment in operating lease right-of-use assets, as it is
their highest in terms of percentage and it is sitting at 28.05%. Followed by Merchandise
inventories which is at 23.67%. The 3rd most is Property, plant, and equipment which sits at
21.60%.
2022: Dollar tree has significant investment in operating lease right-of-use assets, as it is
their highest in terms of percentage and it is sitting at 29.58%. Followed by property, plant,
and equipment at 20.61%. The 3rd most is Merchandise inventories at 20.11%.
When comparing Dollar Tree and Five Below I notice that both companies tend to have their
highest investment in operating lease assets. Also, the top 3 for both companies in terms of
significant assets involve property and equipment as well as inventories.
f) What are the company’s largest liabilities? Do you observe any pattern when
comparing your companies?
2023: The company’s largest liabilities are Operating lease liabilities, long term and it is at
22.83%. It is followed by long-term debt, net which is at 14.86%. The 3rd largest is accounts
payable which is at 8.25%.
FS Case FA23, – 7 2022: The company’s largest liabilities are Operating lease liabilities, long term and it is at
23.69%. It is followed by long-term debt, net which is at 15.73%. The 3rd largest is accounts
payable which is at 8.67%
When comparing Dollar Tree and Five Below, I notice that operating lease liabilities is the
largest liability for both companies. Accounts payable is another large liability that they have
in common as well.
g) Describe any significant changes in long-term assets or long-term liabilities. Do
you observe any pattern when comparing your companies?
In terms of long-term assets, from 2022 to 2023, I see that for property, plant, and
equipment there was a change. It increased from 20.61% to 21.60%. For long-term
liabilities, from 2022 to 2023, I see that Long-term debt, net decreased from 15.73% to
14.86%.
When comparing Dollar Tree and Five Below, I notice that neither company had any
significant changes. If anything did change it was a slight increase or decrease.
h) What percent of total assets is financed by equity (owners) and what percent is
financed by debt (non-owners)? How do these percentages differ between your
companies.
Accounting Equation = (Investing) Assets = (Nonowner Financing) Liabilities + (Owner
Financing) Equity
GOOD!
2023: % of total assets financed by equity = 38.01% ; % of total assets financed by debt =
61.99%
2022: % of total assets financed by equity = 35.53% ; % of total assets financed by debt =
64.47%
In terms of how these percentages differ between Dollar tree and Five below, in 2022 Five
Below had a higher % of total assets financed by equity and a lower % of total assets
financed by debt. In 2023, Dollar Tree had a lower % of total assets financed by equity and
a higher % of total assets financed by debt.
i) Describe any significant year-over-year changes in the company’s capital
structure (i.e., owner financing vs. non-owner financing.
(Equity vs Liability) In terms of the significant changes year-over-year in the company’s
capital structure, we see that in 2022 total shareholders’ equity is 35.53%. and total
liabilities is 64.47%. In 2023, we see that total shareholders’ equity is 38.01% and total
liabilities is 61.99%. We see now that shareholders’ equity increased and that total liabilities
decreased.
Income Statement
FS Case FA23, – 8 6. Prepare a common-size income statement by expressing each item on the income
statement as a percent of total sales or total revenue. Do this for all years reported
Dollar Tree: you divided by total revenue for 2023 and by net sales for the other years,
on the income statement.
which distorts the horizontal analysis (across time)
7. Use the income statement to respond to the following items for each year reported on
the income statement:
a) What is the period covered in the income statement?
1.
The period covered in the income statement is the fiscal years ending on
January 30th, 2021, January 29th, 2022, and January 28th, 2023.
b) Discuss the trend in total revenue during the three-year period. Is it increasing or
decreasing? Compare your companies on this metric.
c)
1. The total revenue of Dollar Tree has increased each year over the three-year
period. In comparison to our second company, Five Below, it has done the
same thing as both companies have has revenue increases over the past
three years.
Discuss the trend in net income as a percent of sales during the three-year
period. Is it increasing or decreasing? How do your companies compare on this
metric?
1. The net income as a percent of sales throughout the three-year period for
Dollar Tree has dropped from the 2021 statement to the 2022 statement and
then has gone back up on the 2023 statement to the highest it has been in the
past three years. In comparison to Five Below, it has done the opposite as
Five Below started off on the 2021 statement at the lowest, then it had gone
up to its highest in the following year and then back down again on the 2023
statement.
d) Compute gross profit margin and discuss how it has changed over the three-year
period? How do your companies compare on this metric?
Gross profit margin = (Revenue – cost of goods)/ Revenue x 100
2023: (28,331.7 – 19,396.3)/28,331.7×100 = 31.53%
2022: (26,321.2 – 18,583.9)/26,321.7×100 = 29.29%
2021: (25,509.3 – 17,721)/25,509.3×100 = 30.53%
Over the three-year period, the gross profit margin has not changed much,
where
it has gone down from 2021 to 2022 and then back up a little bit in
2023. In
comparison to Five Below, they have done the opposite as Five Below
had started low, went to its highest the following year and then went back down on
the third year.
FS Case FA23, – 9 –
e) Discuss the trend in operating income as a percent of sales during the three-year
period. Is it increasing or decreasing? How do your companies compare on this
metric?
1. The operating income as a percent of sales for Dollar Tree has done the same
as the net income during the three-year period, it has dropped and then gone
back up from the 2022 statement to the 2023 statement. In comparison to Five
Below it has also done the opposite where Five Below started off at its lowest,
then increased to its highest and then went back down again.
f) What are the largest expenses? What percent of total revenue does each major
expense represent? Do you observe any significant changes in the cost structure
during the three-year period? Do you observe any pattern when comparing your
companies?
1. The largest expense for Dollar Tree selling, general, and administrative
expenses and cost of sales. Selling, general, and administrative expenses
represents roughly 23% of the total revenue and cost of sales represents
around 68-70% of total revenue. There have not been any significant changes
to the cost structure during the three-year period, as the biggest difference in
major expenses is 2.14% in selling, general, and administrative expenses
while cost of sales has stayed within 1% throughout the period. There are very
minor differences between the companies as they both have very similar
percentages of total revenue in both of those expense categories and Five
Below also has not fluctuated much throughout the period as well.
g) Are there any unusual or discontinued items reported on the income statement? If
so, are they large in magnitude?
1. The only unusual item on the income statement would be in the other revenue
category. It is only on the 2022 and 2023 income statements but they are very
minimal only being .04% and .05% of the total revenue for their respective
years.
h) Compute return on assets (ROA) for the last two years and comment on the
trend. Note: You will need balance sheet information for three years to do this
computation.) How do your companies compare on this metric?
– ROA = net income/total assets
– 2023: 1615.4/22,371.95 = .072% .072 = 7.2%
– 2022: 1327.9/21,208.9 = .062% .062 = 6.2%
o The last two years of ROA for Dollar tree have been trending up, changing at a
.01% difference.
i)
Based on your responses to items a) through h), explain whether the changes
indicate a positive or negative trend for the company.
1. The changes that Dollar Tree has had throughout the three-year period
indicate a positive trend for the company. From their 2021 income statement
FS Case FA23, – 10 –
j)
to their 2023 income statement, they have had increases across the board in
net sales, total revenue, and net income. Throughout that period they have
also been able to maintain almost the same expenses, only a very minimal
increase, and even bring cost of sales down to its lowest within the period.
Which of your two companies do you think has performed better? Explain your
answer.
1. I believe that Five Below has performed better than Dollar Tree throughout this
three-year period. Throughout the period they have had a small percentage
more of expenses, but they have kept their cost of goods sold significantly
lower than Dollar Tree has and have also had a much better percentage of net
income. Five Below has also increased their net income from their 2021
statement to their 2023 statement, with the 2022 year being their most
successful.
Statement of Cash Flows
8. Use the statement of cash flows to determine the size and direction (i.e., net cash
source or use) of cash flows from operating, investing, and financing activities. Do this missing prior yea
for every year reported on the statement. One goal is to understand each company’s
pattern of cash flows and to form an opinion about the general strength of its cash flows.
Please check Dollar Tree Excel sheet labeled “Condensed Consoledated Cash Flows”
a) What is the period covered in the statement of cash flows?
The cash flow statement covers a 6-month period ending July 29, 2023, and a comparative
period ending July 30, 2022. The 10-K financial statement downloaded from Edgar is required. Six-month statement
is not acceptable
b) What are the cash flows from operating activities? Are they positive or negative?
Cash flows from operating activities were positive at $923.8 million.
c)
Compare net income to net cash provided/used by operating activities. Explain
why they are different and whether operating cash flows smaller or larger than net
income.
Net income was $499.4 million. Net cash provided by operating activities exceeded net
income, indicating that operating cash flows were larger than net income. This difference is
primarily due to adjustments such as depreciation, stock-based compensation, and changes
in working capital.
d) Did the company “generate” or “use” cash from investing activities? What is the
amount?
The company used cash in investing activities, with a net cash outflow of $781 million.
FS Case FA23, – 11 e) Did the company “generate” or “use” cash from financing activities? What is the
amount?
The company used cash in financing activities, with a net cash outflow of $272.2 million.
f)
How much cash did your company use for expenditures for property, plant and
equipment? Highlight the amount on the Cash Flows statement in your Excel file.
The company used $775.8 million for capital expenditures.
g) Did your company pay a dividend during the year. What is the amount? Highlight
the amount on the Cash Flows statement in your Excel files.
The provided statement of cash flows does not explicitly show dividend payments.
Additional information may be required to determine dividend payments.
h) Discuss any significant changes in cash flow items. Is there an observable
pattern?
Cash from operating activities increased compared to the previous year, primarily due to
changes in working capital.
Book Value and Market Value
9. What is meant by a company’s book value? What is meant by market value? Explain
why these values often differ for a particular company. (Hint: the differences are
explained in the textbook.)
The book value of a company is the total value of its assets minus its total liabilities, as
reported on its balance sheet. It represents the net asset value of the company, essentially
what would be left for shareholders if all assets were sold, and all debts were paid off. Book
value is a historical measure and is based on the original cost of assets and liabilities
recorded on the balance sheet.
Whereas, Market value, also known as market capitalization, is the total value of a
company’s outstanding shares of stock on the open market. It is determined by the current
market price of the company’s stock multiplied by the total number of outstanding shares.
Market value reflects what investors are willing to pay for a company’s ownership stake,
considering factors like investor sentiment, future growth expectations, and market
conditions.
In summary, book value is a static measure based on historical accounting, while market
value is dynamic and reflects investor perceptions of a company’s prospects. The
differences between these values highlight the importance of considering both when
evaluating a company’s financial health and investment potential.
FS Case FA23, – 12 Second Company: Five Below
Company and Industry Description and Competitive Analysis
10. Provide the company name and ticker symbol. What is the date of the most recent fiscal
year?
The industry we have chosen is Discount Stores and the second company we have chosen
from that industry is Five Below. The ticker symbol is FIVE. The date of the most recent
fiscal year is January 28th, 2023.
11. In the 10-K report, review the Management Discussion & Analysis and other information
about the company. Briefly describe the nature of the company’s business operations,
primary products and services, and in what other countries they operate.
Five Below is a specialty value retailer that offers a variety of merchandise that is targeted
for kids between 8-12 and teenagers as well. They offer products which are mostly priced at
$5 and below. They also have select brands available along with licensed merchandise
across all categories. Five below has recently rolled out a new pricing scale where they
increase the price on certain products to over $5. They offer merchandise on the internet as
well, through their e-commerce website as well as on demand third party delivery service for
their customers. They primarily merchandise including toys, games, electronics, clothing,
accessories, and snacks. They also have those trendy/popular items available for their
targeted tween and teen customers such as fashion accessories or tech gadgets. Five
below operates in the United States across 42 states, it seems they have not expanded to
international markets.
12. Briefly describe the industry in which your companies operate and the competitive
landscape of the industry. Porter’s Five Forces might be helpful here. After doing your
research on the internet, use your own words when responding to this question. Provide
references with links.
Our second company, Five Below, operates in the Discount Stores industry. The discount
store industry is unique because it provides value to customers through low prices.
According to marketresearch.com, Discount stores are like department stores when you
compare the size and the layout. However, they differ because discount stores provide
similar products at much lower costs. Discount stores sell a variety of different goods such
as clothes and shoes, accessories, household goods, electronics, toys and games,
groceries, cleaning supplies, and beauty products. These discount stores are generally
aimed to garner the support of low-income and middle-income families/customers. This is
an industry that is very prominent and growing at a great pace. It is keeping up with the
times especially since COVID came about. According to marmonretailsolutions.com,
Discount stores started to innovate new ways to how customers can shop. There are now
click and collect options for purchasing online as well as home delivery through apps like
Instacart. This industry is now keeping up with the digital age that we are in. In terms of the
competition landscape of the industry, according to marketresearchreports.com, discount
stores tend to compete with the likes of department stores, outlets, online retailers, drug
stores, supercenters, etc. Most of the competition comes from within the industry as well.
The biggest names are Walmart, Dollar tree, Dollar general, and more. It’s important for
those that are already in the industry to constantly focus on offering quality products and
FS Case FA23, – 13 offering great prices because there are always new threats/entrants coming. So, it is
important for everyone to be innovative and stand out from everybody else, which can make
this a tough industry to be in.
Link 1: https://www.marketresearch.com/Consumer-Goods-c1596/Consumer-GoodsRetailing-c80/Discount-Stores-c658/
Link 2: https://www.marmonretailsolutions.com/articles/discount-store-industry-analysis/
Link 3: https://www.marketresearchreports.com/discount-stores
NOTE: For the computational questions below, perform all calculations directly in the
respective Excel files using Excel formulas entered directly into the cells and clearly
label your work. Manual inputs of computed amounts will earn zero points.
Balance Sheet
13. Prepare a common-size balance sheet by expressing each item on the balance sheet
as a percentage of total assets. Do this for all years reported on the balance sheet.
Complete this task directly in the Excel file next to the balance sheet of each company.
14. Respond to the following items for each year reported on the balance sheet. The
common-size balance sheets should be used, when applicable, to respond to the
questions.
j) What is the date of the most recent balance sheet. What fiscal years are
reported?
The date of the most recent balance sheet is January 28th, 2023. The fiscal years reported
are 2023 and 2022. The other balance sheet is dated January 29th, 2022.
k) What percent of total assets are short-term assets and what percent are long-term
assets? How do these percentages differ between your companies.
2023: Short-term assets account for 32.07%% of total assets while long-term assets
account for 67.93% of total assets.
2022: Short-term assets account for 31.41% of total assets while long-term assets account
for 67.28% of total assets
When comparing the percentage of short-term and long-term assets between Dollar tree
and Five below, I notice that Dollar tree has less % of short-term assets compared to Five
Below, but Dollar Tree has higher % of long-term assets compared to Five Below.
FS Case FA23, – 14 l) What percent of total liabilities are short-term liabilities and what percent are longterm liabilities? How do these percentages differ between your companies.
2023: Short-term liabilities account for 18.12% of total liabilities while long-term liabilities
account for 40.92% of total liabilities.
2022: Short-term liabilities account for 20.38% of total liabilities while long-term liabilities
account for 40.73% of total liabilities.
When comparing the percentage of short-term and long-term liabilities between Dollar tree
and Five below, I notice that in 2022, Five Below has a higher % of short-term liabilities
compared to 2022 of Dollar Tree. However, in 2023 Five below has a lower % of short-term
liabilities compared to Dollar Tree. In terms of long-term liabilities, Dollar Tree has the
obvious higher % of long-term liabilities in comparison to Five Below.
m) Describe any significant changes in the composition of current assets or current
liabilities. Do you observe any noteworthy differences between your companies.
Current assets are comprised of cash and cash equivalents, short-term investment
securities, inventories, prepaid income taxes and tax receivable, and prepaid expenses and
other current assets. From 2022 to 2023, we see that cash and cash equivalents increased
significantly from 2.26% to 9.99%. Also, from 2022 to 2023, we see that short-term
investment securities decreased significantly from 9.62% to 2.01%.
Current liabilities are comprised of Line of credit, accounts payable, income taxes payable,
accrued salaries and wages, other accrued expenses, and operating lease liabilities. Not
too much significant change here, but from 2022 to 2023, the Accounts payable decreased
from 6.82% to 6.65%. Also, from 2022 to 2023, accrued salaries and wages decreased from
1.86% to 0.76%.
When I look at both Dollar tree and Five Below, I notice that cash and cash equivalents
decreased for Dollar Tree while cash and cash equivalents increased significantly for Five
Below. Accounts payable decreased for both companies as well.
n) In which assets does the company have the most significant investment? Do you
observe any pattern when comparing your companies?
2023: Five Below has significant investment in operating lease assets which sits at 39.67%.
Followed by that is property and equipment, net which is at 27.84%. The 3rd most significant
is inventories which is at 15.87%.
2022: Five Below has significant investment in operating lease assets which sits at 39.97%.
Followed by that is property and equipment, net which is at 26.99%. The 3rd most significant
is inventories which is at 15.80%.
When comparing Dollar Tree and Five Below I notice that both companies tend to have their
highest investment in operating lease assets. Also, the top 3 for both companies in terms of
significant assets involve property and equipment as well as inventories.
FS Case FA23, – 15 o) What are the company’s largest liabilities? Do you observe any pattern when
comparing your companies?
2023: The company’s largest liabilities are long-term operating lease liabilities which is at
39.01%. Followed by accounts payable which is at 6.65%. The 3rd largest liability is
operating lease liabilities which is at 6.01%.
2022: The company’s largest liabilities are long-term operating lease liabilities which is at
39.42%. Followed by accounts payable which is at 6.82%. The 3rd largest liability is
operating lease liability which is at 5.68%.
When comparing Dollar Tree and Five Below, I notice that operating lease liabilities is the
largest liability for both companies. Accounts payable is another large liability that they have
in common as well.
p) Describe any significant changes in long-term assets or long-term liabilities. Do
you observe any pattern when comparing your companies?
In terms of long-term assets, operating lease assets decreased from 39.97% to 39.67%.
Property and equipment, net increased from 26.99% to 27.84%. There was not really any
significant change among the long-term assets. In terms of long-term liabilities, long-term
operating lease liabilities slightly decreased from 39.42% to 39.01%. Deferred income taxes
increased from 1.26% to 1.78%. Not really anything significant going on.
When comparing Dollar Tree and Five Below, I notice that neither company had any
significant changes. If anything did change it was a slight increase or decrease.
q) What percent of total assets is financed by equity (owners) and what percent is
financed by debt (non-owners)? How do these percentages differ between your
companies.
Accounting Equation = (Investing) Assets = (Nonowner Financing) Liabilities + (Owner
Financing) Equity
2023: % of total assets financed by equity = 40.96% ; % of total assets financed by debt =
59.04%
2022: % of total assets financed by equity = 38.89% ; % of total assets financed by debt =
61.11%
In terms of how these percentages differ between Dollar tree and Five below, in 2022 Five
Below had a higher % of total assets financed by equity and a lower % of total assets
financed by debt. In 2023, Dollar Tree had a lower % of total assets financed by equity and
a higher % of total assets financed by debt.
r) Describe any significant year-over-year changes in the company’s capital
structure (i.e., owner financing vs. non-owner financing.
(Equity vs Liability) In terms of significant year-over-year changes in the company’s capital
structure, we see that in 2022 total shareholders’ equity was 38.89% and total liabilities was
FS Case FA23, – 16 61.11%. In 2023, we see that total shareholders’ equity is 40.96% and total liabilities is
59.04%. We see now that total shareholders’ equity increased, and total liabilities
decreased.
Income Statement
15. Prepare a common-size income statement by expressing each item on the income
statement as a percent of total sales or total revenue. Do this for all years reported
on the income statement.
– The common-size income statements are in the Consolidated Statement of
Operations sheet within the excel file.
16. Use the income statement to respond to the following items for each year reported on
the income statement:
What is the period covered in the income statement?
–
The period covered in the income statement are the fiscal years ending on January
28th, 2023, January 29th, 2022, and January 30th, 2021.
Discuss the trend in total revenue during the three-year period. Is it increasing or
decreasing? Compare your companies on this metric.
–
The total revenue of Five Below has increased over the three-year period. In
comparison to Dollar Tree, they have done the same thing as both companies
increased throughout the three years.
Discuss the trend in net income as a percent of sales during the three-year period. Is it
increasing or decreasing? How do your companies compare on this metric
–
The net income as a percentage of sales for Five Below had started off on the 2021
statement at its lowest, then had gone up to the highest in 2022 and dropped back
down a little bit again in the following year. Compared to Dollar Tree they had done
the opposite where Dollar Tree had dropped from 2021 to 2022 and then gone back
up to its highest point in 3 years in the 2023 year.
Compute gross profit margin and discuss how it has changed over the three-year period?
How do your companies compare on this metric?
Gross profit margin = (Revenue – cost of goods)/ Revenue x 100
2023: (3,076,308 – 1,980,817)/3,076,308×100 = 35.61%
2022: (2,848,354 – 1,817,910)/2,848,354×100 = 36.17%
2021: (1,962,137 – 1,309,807)/1,962,137×100 = 33.24%
Over the three-year period the gross profit margin started at its lowest, then went
to its highest, and then went back down a little bit again. In comparison to Dollar Tree,
they have done the opposite, where Dollar Tree had gone down from the first year and
then went back up to the highest following that.
FS Case FA23, – 17 Discuss the trend in operating income as a percent of sales during the three-year period. Is
it increasing or decreasing? How do your companies compare on this metric.
–
The operating income as a percent of sales for Five Below had started off at its
lowest in 2021, then jumped to its highest percentage in 2022, and then back down a
little bit in the 2023 year. In comparison to Dollar Tree, they had done the opposite
where it had dropped from 2021 to 2022 and then gone back up in 2023. The
operating income as a percent of sales has followed the same trend as net income.
What are the largest expenses? What percent of total revenue does each major expense
represent? Do you observe any significant changes in the cost structure during the threeyear period? Do you observe any pattern when comparing your companies?
–
The largest expenses of Five Below are the selling, general and administrative
expenses that represent a total of 24.39% of the total revenue, the cost of goods
solds which represents 64.39% of the total revenue and the operating income, which
represents 11.22% of the total revenue. There are no significant changes throughout
the three-year period to the cost structure. When looking at both companies, they
have very similar percentages of total revenue for these expenses, but Five Below
has not fluctuated as much throughout the years as Dollar Tree has.
Are there any unusual or discontinued items reported on the income statement? If so, are
they large in magnitude?
–
There are no unusual or discontinued items reported on the income statement of Five
Below.
Compute return on assets (ROA) for the last two years and comment on the trend. Note:
You will need balance sheet information for three years to do this computation.) How do
your companies compare on this metric?
–
ROA = Net income / total assets
2023: 261,528/3,102,911 = .084% .084 = 8.4%
2022: 278,810/2,592,615 = .107% .107 = 10.7%
The ROA of Five Below is on a downward trend from 2022 to 2023, changing 0.023%
between the years.
Based on your responses to items a) through h), explain whether the changes indicate a
positive or negative trend for the company.
–
The changes throughout the three year period indicate a positive trend for the
company. They have increased in net sales each year and have had direct
correlation with the increases in cost of goods sold and the general expenses that
come with the company as they grow.
Which of your two companies do you think has performed better? Explain your answer.
FS Case FA23, – 18 –
I believe that Five Below has performed better than Dollar Tree throughout this threeyear period. Throughout the period they have had a small percentage more of
expenses, but they have kept their cost of goods sold significantly lower than Dollar
Tree has and have also had a much better percentage of net income. Five Below has
also increased their net income from their 2021 statement to their 2023 statement,
with the 2022 year being their most successful.
Statement of Cash Flows
17. Use the statement of cash flows to determine the size and direction (i.e., net cash
source or use) of cash flows from operating, investing, and financing activities. Do this
for every year reported on the statement. One goal is to understand each company’s
pattern of cash flows and to form an opinion about the general strength of its cash flows.
Please check Five Below Excel sheet labeled “Condensed Consoledated Cash Flows”
i)
What is the period covered in the statement of cash flows?
The cash flow statement covers a 12-month period ending January 28, 2023, and
comparative periods ending January 29, 2022, and January 30, 2021.
j)
What are the cash flows from operating activities? Are they positive or negative?
Cash flows from operating activities were positive at $314.9 million for 2023, $327.9 million
for 2022, and $366.9 million for 2021.
k)
Compare net income to net cash provided/used by operating activities. Explain
why they are different and whether operating cash flows smaller or larger than net
income.
Net income was $261.5 million for 2023, $278.8 million for 2022, and $123.4 million for
2021. Net cash provided by operating activities was larger than net income in all three
years, reflecting non-cash adjustments and changes in working capital.
l)
Did the company “generate” or “use” cash from investing activities? What is the
amount?
The company used cash in investing activities, with a net cash outflow of $3.9 million for
2023, $465.6 million for 2022, and $286.9 million for 2021
m) Did the company “generate” or “use” cash from financing activities? What is the
amount?
The company used cash in financing activities, with a net cash outflow of $43.6 million for
2023, $66.1 million for 2022, and $12.8 million for 2021.
FS Case FA23, – 19 n) How much cash did your company use for expenditures for property, plant and
equipment? Highlight the amount on the Cash Flows statement in your Excel file.
The company used $252 million for capital expenditures in 2023, $288.2 million in 2022,
and $200.2 million in 2021.
o) Did your company pay a dividend during the year. What is the amount? Highlight
the amount on the Cash Flows statement in your Excel files.
The provided statement of cash flows does not explicitly show dividend payments.
Additional information may be required to determine dividend payments.
p) Discuss any significant changes in cash flow items. Is there an observable
pattern?
Cash from operating activities remained relatively stable over the three-year period. Cash
used in investing activities decreased in 2023 compared to the previous year. Cash used in
financing activities fluctuated but remained negative throughout the period.
Book Value and Market Value
18. What is meant by a company’s book value? What is meant by market value? Explain
why these values often differ for a particular company. (Hint: the differences are
explained in the textbook.)
The book value of a company is the total value of its assets minus its total liabilities, as
reported on its balance sheet. It represents the net asset value of the company, essentially
what would be left for shareholders if all assets were sold, and all debts were paid off. Book
value is a historical measure and is based on the original cost of assets and liabilities
recorded on the balance sheet.
Whereas, Market value, also known as market capitalization, is the total value of a
company’s outstanding shares of stock on the open market. It is determined by the current
market price of the company’s stock multiplied by the total number of outstanding shares.
Market value reflects what investors are willing to pay for a company’s ownership stake,
considering factors like investor sentiment, future growth expectations, and market
conditions.
In summary, book value is a static measure based on historical accounting, while market
value is dynamic and reflects investor perceptions of a company’s prospects. The
differences between these values highlight the importance of considering both when
evaluating a company’s financial health and investment potential.
FS Case FA23, – 20 –
SUMMARY PAGE
Ryan Murphy: For this project, I completed the income statements for
both of the companies. This included all of the questions relating to the
income statements as well as the common size statements on the excel
sheets for both companies.
Turrell Tonge: For this project, I completed all questions under the Statement
of Cash Flows sections as well as Book Value and Market Value for the two
companies (Questions 8. a-h, 9 and 17. i-p, 18). I also did the Excel sheets for
both companies labeled “Condensed Consolidated Cash Flows”.
FS Case FA23, – 21 –
Arsal Choudhry: For this project, I completed the Company and Industry
Description and Competitive Analysis questions for the two companies. I also
did the balance sheets for both companies (4 balance sheets in total). I also
answered the questions that followed for the balance sheets, for both
companies.
Cover – USD ($)
Cover [Abstract]
Document Type
Document Annual Report
Document Period End Date
Current Fiscal Year End Date
Document Transition Report
Entity File Number
Entity Registrant Name
Entity Incorporation, State or Country Code
Entity Tax Identification Number
Entity Address, Address Line One
Entity Address, Address Line Two
Entity Address, City or Town
Entity Address, State or Province
Entity Address, Postal Zip Code
City Area Code
Local Phone Number
Title of 12(b) Security
Trading Symbol
Security Exchange Name
Entity Well-known Seasoned Issuer
Entity Voluntary Filers
Entity Current Reporting Status
Entity Interactive Data Current
Entity Filer Category
Entity Small Business
Entity Emerging Growth Company
Entity Shell Company
Entity Common Stock, Shares Outstanding (in shares)
Entity Public Float
Documents Incorporated by Reference
Amendment Flag
Document Fiscal Year Focus
Document Fiscal Period Focus
Entity Central Index Key
ICFR Auditor Attestation Flag
12 Months Ended
Jan. 28, 2023
Mar. 15, 2023
Jul. 29, 2022
10-K
true
Jan. 28, 2023
–01-28
false
001-35600
Five Below, Inc.
PA
75-3000378
701 Market Street
Suite 300
Philadelphia
PA
19106
(215)
546-7909
Common Stock, $0.01 par value per share
FIVE
NASDAQ
Yes
No
Yes
Yes
Large Accelerated Filer
false
false
false
55,655,710
$ 6,914,474,150
Portions of the registrant’s Proxy Statement for the 2023 Annual Meeting of Shareholders to be
held on June 13, 2023 (hereinafter referred to as the “Proxy Statement”) are incorporated by
reference into Part III of this report.
false
2022
FY
0001177609
true
Audit Information
Audit Information [Abstract]
Auditor Firm ID
Auditor Name
Auditor Location
12 Months Ended
Jan. 28, 2023
185
KPMG LLP
Philadelphia, PA
Consolidated Balance Sheets – USD ($) $ in Thousands
Current assets:
Cash and cash equivalents
Short-term investment securities
Inventories
Prepaid income taxes and tax receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease assets
Other assets
Total assets
Current liabilities:
Line of credit
Accounts payable
Income taxes payable
Accrued salaries and wages
Other accrued expenses
Operating lease liabilities
Total current liabilities
Other long-term liabilities
Deferred income taxes
Long-term operating lease liabilities
Total liabilities
Commitments and contingencies (note 6)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding
55,537,221 and 55,662,400 shares, respectively.
Additional paid-in capital
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity (deficit)
Long-term Investments
Jan. 28, 2023
Jan. 29, 2022
$ 332,324
66,845
527,720
8,898
130,592
1,066,379
925,530
1,319,132
13,870
3,324,911
$ 64,973
277,141
455,104
11,325
96,196
904,739
777,497
1,151,395
9,112
2,880,460
0
221,120
19,928
25,420
136,316
199,776
602,560
4,296
59,151
1,296,975
1,962,982
0
196,461
28,096
53,539
145,268
163,537
586,901
1,663
36,156
1,135,456
1,760,176
555
556
Five Below, INC.
Common Size Balance Sheet
January 28th, 2023
Current assets:
Cash and cash equivalents
Short-term investment securities
Inventories
Prepaid income taxes and tax receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease assets
Other assets
Total assets
Current liabilities:
Line of credit
Accounts payable
Income taxes payable
Accrued salaries and wages
Other accrued expenses
Operating lease liabilities
Total current liabilities
Other long-term liabilities
Deferred income taxes
Long-term operating lease liabilities
Total liabilities
9.99%
2.01%
15.87%
0.27%
3.93%
32.07%
27.84%
39.67%
0.42%
100.00%
Question 14 Part k below
% of short term assets
% of long term assets
Question 14 Part l Below
% of short term liabilities
% of long term liabilities
Question 14 part q below
% of total assets financed by equity
% of total assets financed by debt
32.07%
67.93%
18.12%
40.92%
40.96%
59.04%
0.00%
6.65%
0.60%
0.76%
4.10%
6.01%
18.12%
0.13%
1.78%
39.01%
59.04%
260,784
1,100,590
1,361,929
3,324,911
$0
280,666
839,062
1,120,284
2,880,460
$ 37,717
Commitments and contingencies (note 6)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding
55,537,221 and 55,662,400 shares, respectively.
Additional paid-in capital
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity (deficit)
Long-term Investments
0.02%
7.84%
33.10%
40.96%
100.00%
0.00%
Five Below, INC.
Common Size Balance Sheet
January 29th, 2022
Current assets:
Cash and cash equivalents
Short-term investment securities
Inventories
Prepaid income taxes and tax receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease assets
Other assets
Total assets
Current liabilities:
Line of credit
Accounts payable
Income taxes payable
Accrued salaries and wages
Other accrued expenses
Operating lease liabilities
Total current liabilities
Other long-term liabilities
Deferred income taxes
Long-term operating lease liabilities
Total liabilities
Commitments and contingencies (note 6)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding
55,537,221 and 55,662,400 shares, respectively.
Additional paid-in capital
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity (deficit)
Long-term Investments
2.26%
9.62%
15.80%
0.39%
3.34%
31.41%
26.99%
39.97%
0.32%
100.00%
0.00%
6.82%
0.98%
1.86%
5.04%
5.68%
20.38%
0.06%
1.26%
39.42%
61.11%
0.02%
9.74%
29.13%
38.89%
100.00%
1.31%
Question 5 Part B below
% of short term assets
% of long term assets
Question 5 Part C Below
% of short term liabilities
% of long term liabilities
Question 14 part q below
% of total assets financed by equity
% of total assets financed by debt
31.41%
67.28%
20.38%
40.73%
38.89%
61.11%
Consolidated Balance Sheets (Parenthetical) – $ / shares
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)
Common stock, shares authorized (in shares)
Common stock, shares issued (in shares)
Common stock, shares outstanding (in shares)
Jan. 28, 2023
Jan. 29, 2022
$ 0.01
120,000,000
55,537,221
55,537,221
$ 0.01
120,000,000
55,662,400
55,662,400
Consolidated Statements of Operations – USD ($) $ in Thousands
Income Statement [Abstract]
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Interest income (expense) and other income (expense), net
Income before income taxes
Income tax expense
Net income
Basic income per common share (dollars per share)
Diluted income per common share (dollars per share)
Weighted average shares outstanding:
Basic shares
Diluted shares
12 Months Ended
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
$ 3,076,308
1,980,817
1,095,491
750,448
345,043
(2,491)
347,534
86,006
$ 261,528
$ 4.71
$ 4.69
$ 2,848,354
1,817,910
1,030,444
650,564
379,880
13,177
366,703
87,893
$ 278,810
$ 4.98
$ 4.95
$ 1,962,137
1,309,807
652,330
497,527
154,803
1,736
153,067
29,706
$ 123,361
$ 2.21
$ 2.20
55,547,267
55,745,279
55,999,713
56,303,854
55,816,508
56,060,039
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Interest income (expense) and other income (expense), net
Income before income taxes
Income tax expense
net income
Basic income per common share (dollars per share)
Diluted income per common share (dollars per share)
Weighted average shares outstanding:
Basic shares
Dilutes shares
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Interest income (expense) and other income (expense), net
Income before income taxes
Income tax expense
net income
Basic income per common share (dollars per share)
Diluted income per common share (dollars per share)
Weighted average shares outstanding:
Basic shares
Dilutes shares
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Interest income (expense) and other income (expense), net
Income before income taxes
Income tax expense
net income
Basic income per common share (dollars per share)
Diluted income per common share (dollars per share)
Weighted average shares outstanding:
Basic shares
Dilutes shares
Five Below, INC.
Common Size Income Statement
January 28th, 2023
100.00%
64.39%
35.61%
24.39%
11.22%
-0.08%
11.30%
2.80%
8.50%
0.00%
0.00%
1805.65%
1812.08%
Five Below, INC.
Common Size Income Statement
January 29th, 2022
100.00%
63.82%
36.18%
22.84%
13.34%
0.46%
12.87%
3.09%
9.79%
0.00%
0.00%
1966.04%
1976.72%
Five Below, INC.
Common Size Income Statement
January 30th, 2021
100.00%
66.75%
33.25%
25.36%
7.89%
0.09%
7.80%
1.51%
6.29%
0.00%
0.00%
2844.68%
2857.09%
Consolidated Statements of Changes in Shareholders’ Equity – USD ($) $ in Thousands
Balance at Feb. 01, 2020
Balance, common stock, shares (in shares) at Feb. 01, 2020
Issuance of unrestricted stock awards
Issuance of unrestricted stock awards (in shares)
Exercise of options to purchase common stock
Exercise of options and warrants to purchase common stock (in shares)
Vesting of restricted stock units and performance-based restricted stock units
Vesting of restricted stock units and performance-based restricted stock units (in shares)
Common Shares Withheld
Common shares withheld for taxes (in shares)
Repurchase and retirement of common stock
Repurchase and retirement of stock (in shares)
Issuance of common stock to employees under employee stock purchase plan
Issuance of common stock to employees under employee stock purchase plan (in shares)
Net income
Balance at Jan. 30, 2021
Balance, common stock, shares (in shares) at Jan. 30, 2021
Issuance of unrestricted stock awards
Exercise of options to purchase common stock
Exercise of options and warrants to purchase common stock (in shares)
Vesting of restricted stock units and performance-based restricted stock units
Vesting of restricted stock units and performance-based restricted stock units (in shares)
Common Shares Withheld
Common shares withheld for taxes (in shares)
Repurchase and retirement of common stock
Repurchase and retirement of stock (in shares)
Issuance of common stock to employees under employee stock purchase plan
Issuance of common stock to employees under employee stock purchase plan (in shares)
Net income
Balance at Jan. 29, 2022
Balance, common stock, shares (in shares) at Jan. 29, 2022
Issuance of unrestricted stock awards
Exercise of options to purchase common stock
Exercise of options and warrants to purchase common stock (in shares)
Vesting of restricted stock units and performance-based restricted stock units
Vesting of restricted stock units and performance-based restricted stock units (in shares)
Common Shares Withheld
Common shares withheld for taxes (in shares)
Repurchase and retirement of common stock
Repurchase and retirement of stock (in shares)
Issuance of common stock to employees under employee stock purchase plan
Issuance of common stock to employees under employee stock purchase plan (in shares)
Net income
Balance at Jan. 28, 2023
Balance, common stock, shares (in shares) at Jan. 28, 2023
Total
$ 759,778
9,294
Unrestricted stock [Member]
Common Stock [Member]
$ 557
55,712,067
Common Stock [Member] Unrestricted stock [Member]
$ 208
Additional Paid-in Capital [Member]
$ 322,330
9,294
Additional Paid-in Capital [Member] Unrestricted stock [Member]
Retained Earnings [Member]
$ 436,891
$ 208
1,518
5,346
$2
176,846
$2
(230,002)
$ (1)
51,734
$ (1)
(137,023)
2
(3,917)
(12,663)
5,344
(3,916)
(12,662)
477
477
3,561
123,361
881,886
25,378
389
$ 559
55,935,237
321,075
335
25,378
389
12,834
$1
(115,763)
1
123,361
560,252
335
(1,790)
(7,332)
(7,332)
38,342
$ (4)
(368,699)
(60,011)
(60,007)
828
828
3,817
278,810
$ 1,120,284
55,662,400
$ 22,981
776
1
$ 556
55,662,400
$ 523
22,981
776
21,737
$1
(122,349)
(4,981)
(40,007)
280,666
839,062
$ 523
(3,349)
(5,000)
31,971
$ (2)
(247,132)
824
(40,005)
824
6,489
261,528
$ 1,361,929
55,537,221
$ 555
55,537,221
$ 260,784
$ 1,100,590
Consolidated Statements of Cash Flows – USD ($) $ in Thousands
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation expense
Deferred income tax expense
Other non-cash expenses
Changes in operating assets and liabilities:
Inventories
Prepaid income taxes and tax receivable
Prepaid expenses and other assets
Accounts payable
Income taxes payable
Accrued salaries and wages
Operating leases
Other accrued expenses
Net cash provided by operating activities
Investing activities:
Purchases of investment securities and other investments
Sales, maturities, and redemptions of investment securities
Capital expenditures
Net cash used in investing activities
Financing activities:
Borrowing on note payable under Revolving Credit Facility
Repayment of note payable under Revolving Credit Facility
Cash paid for Revolving Credit Facility financing costs
Net proceeds from issuance of common stock
Repurchase and retirement of common stock
Proceeds from exercise of options to purchase common stock and vesting of restricted and
performance-based restricted stock units
Common shares withheld for taxes
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at end of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Interest paid
Income taxes paid
Increase (decrease) in accounts payable and accrued purchases of property and equipment
12 Months Ended
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
$ 261,528
$ 278,810
$ 123,361
105,617
23,583
22,995
409
84,831
25,787
7,245
708
69,345
9,551
20,195
2,572
-72,616
2,427
24,891
30,022
314,926
-173,837 42,761
-4,975
-2,287
-39,379
-26,287 17,141
61,559
11,146
-8,168 26,071
-7,480
-28,119 10,094
23,572
13,131
29,362
-8,264 24,775
26,727
327,912
365,966
-56,459
304,473
0
0
824
-477,082
-192,612
299,652
105,912
-251,954
-288,167
-200,189
-3,940
-465,597
-286,889
0
0
-248 0
828
-40,007
777
4,981
390
7,332
-43,635
50,000
-50,000
-2,029
477
-60,011
-12,663
5,348
3,917
267,351
64,973
332,324
-66,125
-12,784
-203,810 66,293
268,783
202,490
64,973
268,783
537
75,561
$ 1,634
590
59,550
$ 8,810
757
19,264
$ (2,445)
b) What are the cash flows from operating activities? Are they positive or negative?
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
Positive Positive Positive
c) Compare net income to net cash provided/used by operating activities. Explain why they are different and whether operating cash flows are smaller or larger than net income.
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
53,398
49,102
242,605
d) Did the company “generate” or “use” cash from investing activities? What is the amount?
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
Used
Used
Used
e) Did the company “generate” or “use” cash from financing activities? What is the amount?
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
Used
Used
Used
f) How much cash did your company use for expenditures for property, plant, and equipment?
Jan. 28, 2023
Jan. 29, 2022
Jan. 30, 2021
$ 1,634
$ 8,810
$ (2,445)
Summary of Significant Accounting Policies
Accounting Policies [Abstract]
Summary of Significant Accounting Policies
12 Months Ended
Jan. 28, 2023
Summary of Significant Accounting PoliciesDescription of Business Five Below, Inc. (collectively
referred to herein with its wholly owned subsidiary as the “Company”) is a specialty value retailer
offering merchandise targeted at the tween and teen demographic. The Company offers an edited
assortment of products, with most priced at $5 and below. The Company’s edited assortment of
products includes select brands and licensed merchandise. The Company believes its merchandise
is readily available and that there are a number of potential vendors that could be utilized, if
necessary, under approximately the same terms the Company is currently receiving; thus, it is not
dependent on a single vendor or a group of vendors. The Company is incorporated in the
Commonwealth of Pennsylvania and, as of January 28, 2023, operated in 42 states excluding
Alaska, Hawaii, Idaho, Montana, Oregon, Vermont, Washington and Wyoming. As of January 28,
2023 and January 29, 2022, the Company operated 1,340 stores and 1,190 stores, respectively,
each operating under the name “Five Below,” and sells merchandise on the internet, through the
Company’s fivebelow.com e-commerce website as well as with an on demand third party delivery
service to enable our customers to shop online and receive convenient same day delivery. The
Company’s consolidated financial statements include the accounts of Five Below, Inc. and its
subsidiary (1616 Holdings, Inc., formerly known as Five Below Merchandising, Inc.). All
intercompany transactions and accounts are eliminated in the consolidation of the Company’s and
subsidiary’s financial statements. Impact of COVID-19 Cash and Cash Equivalents The Company
considers all highly liquid investments purchased with a maturity date of three months or less when
purchased to be cash equivalents. Our cash equivalents consist of cash management solutions,
credit and debit card receivables, money market funds, corporate bonds and municipal bonds with
original maturities of 90 days or less, which are classified as cash and cash equivalents in the
accompanying consolidated balance sheets. The cash management solutions relate to cash deposit
products that provide credit generally processed the next business day for cash deposited in thirdparty tech-enabled solutions. For credit card and debit card receivables, the majority of payments
due from banks for third-party credit card and debit card transactions resulting from customer
purchases at the Company’s retail stores process within 24 to 48 hours, except for transactions
occurring on a Friday, which are generally processed the following Monday. Amounts due from
banks for these transactions classified as cash equivalents totaled $17.4 million and $13.0 million as
of January 28, 2023 and January 29, 2022, respectively. Book overdrafts, which are outstanding
checks in excess of funds on deposit, are recorded within accounts payable in the accompanying
consolidated balance sheets and within operating activities in the accompanying consolidated
Revenue Recognition (Notes)
Revenue from Contract with Customer [Abstract]
Revenue from Contracts with Customers
12 Months Ended
Jan. 28, 2023
Revenue from Contracts with Customers Disaggregation of Revenue The following table provides
information about disaggregated revenue by groups of products: leisure, fashion and home, and
snack and seasonal (in thousands): Fiscal Year Fiscal Year Fiscal Year 2022 2021 2020 Amount
Percentage of Net Sales Amount Percentage of Net Sales Amount Percentage of Net Sales Leisure
(1) $ 1,465,402 47.6 % $ 1,412,382 49.6 % $ 965,816 49.2 % Fashion and home 898,187 29.2 %
859,586 30.2 % 701,461 35.8 % Snack and seasonal (1) 712,719 23.2 % 576,386 20.2 % 294,860 15.0
% Total $ 3,076,308 100.0 % $ 2,848,354 100.0 % $ 1,962,137 100.0 %
Income Per Common Share
Earnings Per Share [Abstract]
Income Per Common Share
12 Months Ended
Jan. 28, 2023
Income Per Common Share Basic income per common share amounts are calculated using the
weighted-average number of common shares outstanding for the period. Diluted income per
common share amounts are calculated using the weighted-average number of common shares
outstanding for the period and include the dilutive impact of exercised stock options as well as
assumed vesting of restricted stock awards and shares currently available for purchase under the
Company’s Employee Stock Purchase Plan, using the treasury stock method. Performance-based
restricted stock units are considered contingently issuable shares for diluted income per common
share purposes and the dilutive impact, if any, is not included in the weighted-average shares until
the performance conditions are met. The dilutive impact, if any, for performance-based restricted
stock units, which are subject to market conditions based on the Company’s total shareholder
return relative to a pre-defined peer group, are included in the weighted average shares. The
following table reconciles net income and the weighted average common shares outstanding used
in the computations of basic and diluted income per common share (in thousands, except for share
and per share data): Fiscal Year 2022 2021 2020 Numerator: Net income $ 261,528 $ 278,810 $
123,361 Denominator: Weighted average common shares outstanding – basic 55,547,267
55,999,713 55,816,508 Dilutive impact of options, restricted stock units, and employee stock
purchase plan 198,012 304,141 243,531 Weighted average common shares outstanding – diluted
55,745,279 56,303,854 56,060,039 Per common share: Basic income per common share $ 4.71 $
4.98 $ 2.21 Diluted income per common share $ 4.69 $ 4.95 $ 2.20 The effects of the assumed
vesting of restricted stock units outstanding as of January 28, 2023, January 29, 2022 and January
30, 2020 for 72,043, 9,781 and 20,425 shares of common stock, respectively, were excluded from
the fiscal 2022, fiscal 2021 and fiscal 2020 calculation of diluted income per common share as their
impact would have been anti-dilutive.
Leases (Notes)
Leases [Abstract]
Leases
12 Months Ended
Jan. 28, 2023
Leases The Company determines if an arrangement contains a lease at the inception of a contract.
Operating lease assets represent the Company’s right to use an underlying asset for the lease term
and operating lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Operating lease assets and operating lease liabilities are recognized at the
commencement date based on the present value of the remaining future minimum lease
payments. As the rate implicit in the lease is not readily determinable for the Company’s leases, the
Company utilizes its incremental borrowing rate to determine the present value of future lease
payments. The incremental borrowing rate represents a significant judgment and is determined
based on an analysis of the Company’s synthetic credit rating, prevailing financial market
conditions, corporate bond yields, treasury bond yields, and the effect of collateralization. The
operating lease assets also include lease payments made before commencement and exclude lease
incentives. The Company’s real estate leases typically contain options that permit renewals for
additional periods of up to five years. For real estate leases, except for renewals that generally take
the lease to a ten-year term, the options to renew are not considered reasonably certain at lease
commencement because the Company reevaluates each lease on a regular basis to consider the
economic and strategic benefits of exercising the renewal options, and regularly opens, relocates or
closes stores to align with its operating strategy. Therefore, generally, except for renewals that take
the lease to a ten-year term, the renewal option periods are not included within the lease term and
the associated payments are not included in the measurement of the operating lease asset and
operating lease liability as the exercise of such options is not reasonably certain. The Company’s
operating lease agreements, including assumed renewals, which are generally those that take the
lease to a ten-year term, expire through fiscal 2037. Similarly, renewal options are not included in
the lease term for non-real estate leases because they are not considered reasonably certain of
being exercised at lease commencement. Leases with an initial term of 12 months or less are not
recorded on the balance sheets and lease expense is recognized on a straight-line basis over the
term of the short-term lease. For certain real estate leases, the Company accounts for lease
components and nonlease components as a single lease component. Certain real estate leases
require additional payments for reimbursement of real estate taxes, common area maintenance
and insurance as well as payments based on sales volume, all of which are expensed as incurred as
variable lease costs. Other real estate leases contain one fixed lease payment that includes real
estate taxes, common area maintenance and insurance. These fixed payments are considered part
of the lease payment and included in the operating lease assets and operating lease liabilities. All of
Term Loan and Line of Credit
Debt Disclosure [Abstract]
Term Loan and Line of Credit
12 Months Ended
Jan. 28, 2023
Line of Credit On September 16, 2022, the Company entered into a Second Amendment to Credit
Agreement (the “Second Amendment”) which amended the Fifth Amended and Restated Credit
Agreement, dated as of April 24, 2020, as previously amended by that certain First Amendment to
Credit Agreement, dated as of January 27, 2021 (the “First Amendment”; the Fifth Amended and
Restated Credit Agreement as amended by the First Amendment and the Second Amendment, the
“Credit Agreement”), among the Company, 1616 Holdings, Inc., a wholly-owned subsidiary of the
Company (“1616 Holdings” and together with the Company, the “Loan Parties”), Wells Fargo Bank,
National Association as administrative agent (the “Agent”), and other lenders party thereto (the
“Lenders”). The Credit Agreement provides for a secured asset-based revolving line of credit in the
amount of up to $225 million (the “Revolving Credit Facility”). Advances under the Revolving Credit
Facility are tied to a borrowing base consisting of eligible credit card receivables and inventory, as
reduced by certain reserves in effect from time to time. Pursuant to the Credit Agreement,
inventory appraisals and certain other diligence items are deferred, with reduced advance rates
during the period that such appraisals have not been delivered. Pursuant to the Second
Amendment, the Revolving Credit Facility expires on the earliest to occur of (i) September 16, 2027
or (ii) an event of default. The Second Amendment also replaced the existing LIBOR rate provisions
with SOFR rate provisions which converted then outstanding LIBOR loans into SOFR loans and
additionally makes a number of other revisions to other provisions of the Credit Agreement. Giving
effect to the Second Amendment, outstanding borrowings under the Revolving Credit Facility
would accrue interest at floating rates plus an applicable margin ranging from 1.12% to 1.50% for
SOFR loans and 0.125% to 0.50% for base rate loans, and letter of credit fees range from1.125% to
1.50%, in each case based on the average availability under the Revolving Credit Facility. The
Revolving Credit Facility may be increased up to $150.0 million, subject to certain conditions,
including obtaining commitments from one or more Lenders (the “Accordion”). Pursuant to the
First Amendment, the Company obtained commitments from the Lenders that would allow the
Company at its election (subject only to satisfaction of certain customary conditions such as the
absence of any Event of Default), to increase the amount of the Revolving Credit Facility by an
aggregate principal amount up to $50 million within the Accordion (the “Committed Increase”). The
entire amount of the Revolving Credit Facility is available for the issuance of letters of credit and
allows for swingline loans. The Credit Agreement contains customary covenants that limit, absent
lender approval, the ability of the Company and certain of its affiliates to, among other things, pay
cash dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, enter into
Commitments and Contingencies
Commitments and Contingencies Disclosure [Abstract]
Commitments And Contingencies
12 Months Ended
Jan. 28, 2023
Commitments and Contingencies Commitments Other Contractual Commitments The Company has
an executive severance plan that is applicable to certain key crew that provide for, among other
things, salary, bonus, severance, and change-in-control provisions. As of January 28, 2023, the
Company has other purchase commitments of approximately $15.8 million consisting of purchase
agreements for materials that will be used in the construction of new stores. Contingencies Legal
Matters
Shareholders’ Equity
Equity [Abstract]
Shareholders’ Equity
12 Months Ended
Jan. 28, 2023
Shareholders’ Equity As of January 28, 2023, the Company is authorized to issue 120 million shares
of $0.01 par value common stock and 5 million shares of $0.01 par value preferred stock. The
holders of the common stock are entitled to one vote per share of common stock and are entitled
to receive dividends if declared by the Board of Directors. The preferred stock may be issued from
time to time in series as designated by the Board of Directors. The designations, powers,
preferences, voting rights, privileges, options, conversion rights, and other special rights of the
shares of each such series and the qualifications, limitations and restrictions thereof shall be
designated by the Board of Directors. Common Stock The Five Below, Inc. 2012 Employee Stock
Purchase Plan (the “ESPP”) is intended to be qualified as an “employee stock purchase plan” within
the meaning of Section 423 of the Internal Revenue Code of 1986. The number of shares of
common stock reserved for issuance, which is subject to other limitations, is 500,000 shares. The
ESPP allows eligible crew the opportunity to purchase, subject to limitations, shares of the
Company’s common stock through payroll deductions at a discount of 10% of the fair market value
of such shares on the purchase date. In fiscal 2022, the Company issued 6,489 shares of common
stock under the ESPP resulting in proceeds of $0.8 million and recorded share-based compensation
expense of $78 thousand in connection with the ESPP related to the amount of the discount. In
fiscal 2021, the Company issued 3,817 shares of common stock under the ESPP resulting in
proceeds of $0.8 million and recorded share-based compensation expense of $74 thousand in
connection with the ESPP related to the amount of the discount. In fiscal 2020, the Company issued
3,561 shares of common stock under the ESPP resulting in proceeds of $0.5 million and recorded
share-based compensation expense of $50 thousand in connection with the ESPP related to the
amount of the discount.
Share-Based Compensation
Share-based Payment Arrangement [Abstract]
Share-Based Compensation
12 Months Ended
Jan. 28, 2023
Share-Based CompensationEquity Incentive PlanPursuant to the Company’s 2022 Equity Incentive
Plan (the “Plan”), the Company’s Board of Directors may grant stock options, restricted shares and
restricted stock units to officers, directors, key crew and professional service providers. The Plan, as
amended, allows for the issuance of up to a total of 4.3 million shares under the Plan. As of January
28, 2023, approximately 3.5 million stock options, restricted shares, or restricted stock units were
available for grant. Common Stock Options All stock options have a term not greater than ten
years. Stock options vest and become exercisable in whole or in part, in accordance with vesting
conditions set by the Company’s Board of Directors. Options granted to date generally vest over
four years from the date of grant. Stock option activity under the Plan was as follows: Options
Weighted Weighted Balance as of February 1, 2020 231,525 $ 30.92 4.1 Granted — — Forfeited
(1,650) 31.49 Exercised (176,846) 30.23 Balance as of January 30, 2021 53,029 33.22 3.2 Granted —
— Forfeited (432) 4.28 Exercised (12,834) 30.29 Balance as of January 29, 2022 39,763 34.48 2.3
Granted — — Forfeited — — Exercised (21,737) 34.11 Balance as of January 28, 2023 18,026 34.92
1.8 Exercisable as of January 28, 2023 18,026 $ 34.92 1.8 The Company uses the simplified method
to estimate the expected term of the option. The expected volatility incorporates historical and
implied volatility of similar entities whose share prices are publicly available. The risk-free rate for
the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. The total intrinsic value of stock options exercised during fiscal 2022, fiscal 2021 and fiscal
2020 was $3.1 million , $2.1 million and $17.6 million, respectively. The aggre gate intrinsic value of
stock options outstanding and exercisable was $2.9 million as of January 28, 2023. In fiscal 2022,
fiscal 2021 and fiscal 2020, the Company received cash from the exercise of options of $0.8 million,
$0.4 million and $5.3 million, respectively. Upon option exercise, the Company issued new shares
of common stock. Restricted Stock Units and Performance-Based Restricted Stock Units All
restricted stock units (“RSU”) and performance-based restricted stock units (“PSU”) vest in
accordance with vesting conditions set by the compensation committee of the Company’s Board of
Directors. RSUs granted to date have vesting periods ranging from less than one year to five years
from the date of grant and the fair value of RSUs is the market price of the underlying common
stock on the date of grant. PSUs granted to date have vesting periods ranging from less than one
year to five years from the date of grant. PSUs that have a performance condition are subject to
satisfaction of the applicable performance goals established for the respective grant. The Company
periodically assesses the probability of achievement of the performance criteria and adjusts the
amount of compensation expense accordingly. The fair value of these PSUs is the market price of
Income Taxes
Income Tax Disclosure [Abstract]
Income Taxes
12 Months Ended
Jan. 28, 2023
Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon generation of future
taxable income during the periods in which temporary differences representing net future
deductible amounts become deductible. As of January 28, 2023, there were no material valuation
allowances that have been provided for net deferred tax assets as management believes that it is
more likely than not that the Company will realize all material deferred tax assets before any
expirations as of January 28, 2023. The components of the income tax expense are as follows (in
thousands): Fiscal Year 2022 2021 2020 Current: Federal $ 49,470 $ 68,224 $ 2,276 State 13,541
12,424 7,235 63,011 80,648 9,511 Deferred: Federal 21,232 6,088 21,954 State 1,763 1,157 (1,759)
22,995 7,245 20,195 Income tax expense $ 86,006 $ 87,893 $ 29,706 The reconciliation of the
statutory federal income tax rate to the Company’s effective income tax rate is as follows: Fiscal
Year 2022 2021 2020 Statutory federal tax rate 21.0 % 21.0 % 21.0 % State taxes, net of federal
benefit 3.5 2.9 2.8 Other (1) 0.2 0.1 (4.4) 24.7 % 24.0 % 19.4 % (1) Other line includes excess tax
benefits relating to share-based payment accounting. The effective tax rate for fiscal 2022
compared to fiscal 2021 was primarily driven by discrete items, which includes the impact of ASU
2016-09, “Improvements to Employee Share-Based Payment Accounting” with respect to the
requirements to recognize excess income tax benefits or deficiencies as income tax benefit or
expense in the consolidated statements of operations rather than as additional paid-in capital in
the consolidated balance sheets. The effective tax rate for fiscal 2021 compared to fiscal 2020 was
primarily driven by discrete items, which includes the impact of ASU 2016-09, “Improvements to
Employee Share-Based Payment Accounting” with respect to the requirements to recognize excess
income tax benefits or deficiencies as income tax benefit or expense in the consolidated
statements of operations rather than as additional paid-in capital in the consolidated balance
sheets and the impact of the CARES Act in fiscal 2020. The tax effects of temporary differences that
give rise to deferred tax assets and liabilities are (in thousands): January 28, 2023 January 29, 2022
Deferred tax assets: Net operating loss carryforwards $ 230 $ — Inventories 18,463 18,561
Deferred revenue 3,156 1,821 Accrued bonus 2,132 8,224 Operating lease liabilities 379,059
335,960 Other 9,758 7,947 Deferred tax assets 412,798 372,513 Valuation allowance (1,442)
(1,383) Deferred tax assets, net of valuation allowance 411,356 371,130 Deferred tax liabilities:
Employee Benefit Plan
Retirement Benefits [Abstract]
Employee Benefit Plan
12 Months Ended
Jan. 29, 2022
Employee Benefit Plan
The Company has a 401(k) Retirement Savings Plan and crew can contribute up to the maximum
amount allowed under law. The Company may make discretionary matching and profit sharing
contributions. During fiscal 2022, fiscal 2021 and fiscal 2020, the Company made matching
contributions of $5.0 million, $4.2 million and $2.8 million, respectively.
Segment Reporting
Segment Reporting [Abstract]
Segment Reporting
12 Months Ended
Jan. 28, 2023
Segment ReportingThe Company evaluates performance internally and manages the business on
the basis of one operating segment; therefore, it has only one reportable segment. All of the
Company’s identifiable assets are located in the United States. Set forth below is data for the
following groups of products: leisure, fashion and home, and snack and seasonal. The percentage of
net sales represented by each product group for each of the last three fiscal years was as follows:
Percentage of Net Sales Fiscal Year 2022 2021 2020 Leisure 47.6 % 49.6 % 49.2 % Fashion and home
29.2 % 30.2 % 35.8 % Snack and seasonal 23.2 % 20.2 % 15.0 % Total 100.0 % 100.0 % 100.0 %
Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, arts
and crafts, and party. Fashion and home includes items such as personal accessories, “attitude” tshirts, beauty offerings, home goods and storage options. Snack and seasonal includes items such
as seasonal goods, greeting cards, candy and other snacks, and beverages.
Quarterly Results of Operations and Seasonality (Unaudited)
Quarterly Financial Information Disclosure [Abstract]
Quarterly Results of Operations and Seasonality
12 Months Ended
Jan. 28, 2023
Quarterly Results of Operations and Seasonality (Unaudited) Quarterly financial results for fiscal
2022 and fiscal 2021 were as follows (in thousands except for per share data): Fiscal Year 2022 (1)
Fiscal Year 2021 (1) Fourth Third Second First Fourth Third Second First Net sales $ 1,122,751 $
645,034 $ 668,927 $ 639,596 $ 996,332 $ 607,645 $ 646,554 $ 597,823 Gross profit $ 452,397 $
207,808 $ 228,509 $ 206,777 $ 396,894 $ 202,362 $ 230,319 $ 200,869 Net income $ 171,320 $
16,146 $ 41,344 $ 32,718 $ 140,196 $ 24,177 $ 64,841 $ 49,596 Basic income per common share $
3.09 $ 0.29 $ 0.74 $ 0.59 $ 2.50 $ 0.43 $ 1.16 $ 0.89 Diluted income per common share $ 3.07 $
0.29 $ 0.74 $ 0.59 $ 2.49 $ 0.43 $ 1.15 $ 0.88 (1) The sum of the quarterly per share amounts may
not equal per share amounts reported for the fiscal year due to rounding.
Summary of Significant Accounting Policies (Policies)
Accounting Policies [Abstract]
Description of Business
12 Months Ended
Jan. 28, 2023
Description of Business Five Below, Inc. (collectively referred to herein with its wholly owned
subsidiary as the “Company”) is a specialty value retailer offering merchandise targeted at the
tween and teen demographic. The Company offers an edited assortment of products, with most
priced at $5 and below. The Company’s edited assortment of products includes select brands and
licensed merchandise. The Company believes its merchandise is readily available and that there are
a number of potential vendors that could be utilized, if necessary, under approximately the same
terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of
vendors. The Company is incorporated in the Commonwealth of Pennsylvania and, as of January
28, 2023, operated in 42 states excluding Alaska, Hawaii, Idaho, Montana, Oregon, Vermont,
Washington and Wyoming. As of January 28, 2023 and January 29, 2022, the Company operated
1,340 stores and 1,190 stores, respectively, each operating under the name “Five Below,” and sells
merchandise on the internet, through the Company’s fivebelow.com e-commerce website as well
as with an on demand third party delivery service to enable our customers to shop online and
receive convenient same day delivery. The Company’s consolidated financial statements include
the accounts of Five Below, Inc. and its subsidiary (1616 Holdings, Inc., formerly known as Five
Below Merchandising, Inc.). All intercompany transactions and accounts are eliminated in the
consolidation of the Company’s and subsidiary’s financial statements.
Impact of COVID-19
Impact of COVID-19As a result of the COVID-19 pandemic, the Company’s business operations and
results of operations, including its net sales, earnings and cash flows, were materially impacted in
fiscal 2020 as a result of the temporary closures of its stores in the first half of 2020, and decreased
customer traffic in stores, as the result of limitations on the number of persons permitted in stores
at one time by certain local and state regulations. The Company’s ability to operate improved
beginning in the second half of fiscal 2020 and extending into fiscal 2021.
Fiscal Year
Fiscal YearThe Company operates on a 52/53-week fiscal year ending on the Saturday closest to
January 31. References to “fiscal year 2022” or “fiscal 2022” refer to the period from January 30,
2022 to January 28, 2023, which consists of a 52-week fiscal year. References to “fiscal year 2021”
or “fiscal 2021” refer to the period from January 31, 2021 to January 29, 2022, which consists of a
52-week fiscal year. References to “fiscal year 2020” or “fiscal 2020” refer to the period from
February 2, 2020 to January 30, 2021, which consists of a 52-week fiscal year.
Cash and Cash Equivalents
Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a
maturity date of three months or less when purchased to be cash equivalents. Our cash equivalents
consist of cash management solutions, credit and debit card receivables, money market funds,
corporate bonds and municipal bonds with original maturities of 90 days or less, which are
classified as cash and cash equivalents in the accompanying consolidated balance sheets. The cash
management solutions relate to cash deposit products that provide credit generally processed the
next business day for cash deposited in third-party tech-enabled solutions. For credit card and debit
card receivables, the majority of payments due from banks for third-party credit card and debit
card transactions resulting from customer purchases at the Company’s retail stores process within
24 to 48 hours, except for transactions occurring on a Friday, which are generally processed the
following Monday. Amounts due from banks for these transactions classified as cash equivalents
totaled $17.4 million and $13.0 million as of January 28, 2023 and January 29, 2022, respectively.
Book overdrafts, which are outstanding checks in excess of funds on deposit, are recorded within
accounts payable in the accompanying consolidated balance sheets and within operating activities
in the accompanying consolidated statements of cash flows. As of January 28, 2023 and January 29,
2022, the Company had cash equivalents of $313.2 million and $41.3 million, respectively.
Fair Value of Financial Instruments
Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Assets and liabilities measured at fair value are classified using the following
hierarchy, which is based upon the transparency of inputs to the valuation at the measurement
date: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2:
Inputs, other than Level 1, that are either directly or indirectly observable. Level 3: Unobservable
inputs developed using the Company’s estimates and assumptions which reflect those that market
participants would use. The classification of fair value measurements within the hierarchy are
based upon the lowest level of input that is significant to the measurement. The Company’s
financial instruments consist primarily of cash equivalents, investment securities, accounts payable,
borrowings, if any, under a line of credit (as defined in note 5), equity method investments, and
notes receivable. The Company believes that: (1) the carrying value of cash equivalents and
accounts payable are representative of their respective fair value due to the short-term nature of
these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit
approximates fair value because the line of credit’s interest rates vary with market interest rates.
Under the fair value hierarchy, the fair market values of cash equivalents and the investments in
corporate bonds are Level 1 while the investments in municipal bonds are Level 2. The fair market
values of Level 2 instruments are determined by management with the assistance of a third party
pricing service. Since quoted prices in active markets for identical assets are not available, these
prices are determined by the third party pricing service using observable market information such
as quotes from less active markets and quoted prices of similar securities. As of January 28, 2023
and January 29, 2022, the Company’s investment securities are classified as held-to-maturity since
the Company has the intent and ability to hold the investments to maturity. Such securities are
carried at amortized cost plus accrued interest and consist of the following (in thousands): As of
January 28, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value
Short-term: Corporate bonds $ 66,845 $ — $ 292 $ 66,553 Total $ 66,845 $ — $ 292 $ 66,553 As of
January 29, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value
Short-term:
Corporate bonds
— $ 286
$ 235,783
bonds 41,072
44tariffs,
41,028
InventoriesInventories
consist$of236,069
finished$ goods
purchased
forMunicipal
resale, including
freight—
and
Total
$
277,141
$
—
$
330
$
276,811
Long-term:
Corporate
bonds
$
37,717
$
—
$
199
$
37,518
and are stated at the lower of cost and net realizable value, at the individual product level. Cost is
Total
$ 37,717
$ 199 $ average
37,518 Short-term
investment
securities
of January
28, 2023
and
determined
on$a—
weighted
cost method.
Management
of theasCompany
reviews
inventory
January
2022
all mature
in one yearmerchandise
or less. Long-term
investment
securities
of January 29,
levels in 29,
order
to identify
slow-moving
and uses
markdowns
to clearasmerchandise.
2022
all
mature
after
one
year
but
in
less
than
two
years.
Inventory cost is reduced when the selling price less costs of disposal is below cost. The Company
Inventories
accrues an estimate for inventory shrink for the period between the last physical count and the
balance sheet date. The shrink estimate can be affected by changes in merchandise mix and
changes in actual shrink trends.
Prepaid Expenses and Other Current Assets
Property and Equipment
Impairment of Long-Lived Assets
Deferred Financing Costs
Prepaid Expenses and Other Current AssetsPrepaid expenses in fiscal 2022 and fiscal 2021 were
$25.9 million and $26.4 million, respectively. Other current assets in fiscal 2022 and fiscal 2021
were $104.7 million and $69.8 million, respectively.
Property and Equipment Property and equipment are stated at cost. Additions and improvements
are capitalized, while repairs and maintenance are charged to expense as incurred. Depreciation
and amortization is recorded using the straight-line method over the shorter of the estimated
useful lives of the assets or the terms of the respective leases, if applicable. The estimated useful
lives are three Property and equipment, net, consists of the following (in thousands): January 28,
2023 January 29, 2022 Land $ 30,371 $ 29,625 Furniture and fixtures 433,517 340,252 Leasehold
improvements 558,723 428,291 Computers and equipment 293,553 229,054 Construction in
process 63,393 113,529 Property and equipment, gross 1,379,557 1,140,751 Less: Accumulated
depreciation and amortization (454,027) (363,254) Property and equipment, net $ 925,530 $
777,497
Impairment of Long-Lived AssetsLong-lived assets, such as property and equipment, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Assets are grouped and evaluated for impairment at the lowest
level of which there are identifiable cash flows, which is generally at a store level. Assets are
reviewed for impairment using factors including, but not limited to, the Company’s future operating
plans and projected cash flows. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated
undiscounted future cash flows, then an impairment charge is recognized by the amount by which
the carrying amount of the asset exceeds the fair value of the asset. Fair value is based on
discounted future cash flows of the asset using a discount rate commensurate with the risk. In the
event of a store closure, the Company will record an impairment charge, if appropriate, or
accelerate depreciation over the revised useful life of the asset. Based on the Company’s analysis
performed in fiscal 2022, fiscal 2021 and fiscal 2020, management believes that no impairment of
long-lived assets exists for the periods ended January 28, 2023, January 29, 2022 and January 30,
2021.
Deferred Financing CostsDeferred financing costs are amortized to interest expense over the term
of the related credit agreement. As of January 28, 2023 and January 29, 2022, the Company had
$0.7 million and $0.9 million remaining in the accompanying consolidated balance sheets within
Other Assets.
Operating Leases
Operating Leases The Company leases store locations, shipcenters, the corporate headquarters and
equipment used in its operations and evaluates and classifies its leases as operating or capital
leases for financial reporting purposes. Any assets held under a finance lease are included in
property and equipment, net. Operating lease expense is recorded on a straight-line basis over the
lease term. At the inception of a lease, the Company determines the lease term, which includes
periods under the exercise of renewal options that are reasonably assured. Renewal options are
exercised at the Company’s sole discretion. In September 2016, the Company signed a 15 year lease
for a new corporate headquarters location in Philadelphia, Pennsylvania. The Company currently
occupies approximately 230,000 square feet of office space with multiple options to expand in the
future. The lease agreement expires in early 2033 with three successive options to renew for
additional terms up to approximately fifteen years. The shipcenter in Pedricktown, New Jersey is
leased under a lease agreement expiring in 2025 with options to renew for three successive fiveyear periods. Generally, the Company’s store leases have expected lease terms of ten years, which
are comprised of an initial term of ten years or an initial term of five years and one assumed fiveyear extension, resulting in a ten-year life. The expected lease term is used to determine whether a
lease is finance or operating and to calculate straight-line rent expense. Substantially all of the
Company’s leases include options that allow the Company to renew or extend the lease term
beyond the initial lease period, subject to terms and conditions agreed upon at the inception of the
lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that
could represent below or above market rental rates later in the life of the lease, depending upon
market conditions at the time of such renewal or extension. In addition, the Company’s leases may
include early termination options.
Other Accrued Expenses
Other Accrued ExpensesOther accrued expenses include accrued capital expenditures of $43.6
million and $41.7 million in fiscal 2022 and fiscal 2021, respectively.
Deferred Compensation
Deferred CompensationThe Company approved and adopted the Five Below, Inc. Nonqualified
Deferred Compensation Plan (the “Deferred Comp Plan”) and a related, irrevocable grantor trust
(the “Trust”) during fiscal 2021. The Deferred Comp Plan provides eligible key crew with the
opportunity to elect to defer up to 80% of their eligible compensation. The Company may make
discretionary contributions, at the discretion of the Board. Payments under the Deferred Comp
Plan will be made from the general assets of the Company or from the assets of the Trust, funded
by the Company. The related liability is recorded as deferred compensation and included in other
long-term liabilities in the consolidated balance sheets.
Equity Method Investments
Equity Method InvestmentsThe Company uses the equity method to account for its investments in
which the Company is deemed to have the ability to exercise significant influence over an
investee’s operating and financial policies or in which the Company holds a significant partnership
or limited liability company interest. Equity method investments are initially recorded at cost in
other assets in the consolidated balance sheets. The cost is adjusted to recognize the Company’s
proportionate share of the investee’s net income or loss after the date of investment and is also
adjusted for any impairments resulting from other-than-temporary declines in fair value that is less
than its carrying value. During fiscal 2021, the Company recorded an other-than-temporary
impairment utilizing the market and cost approach considering historical and projected financial
results to calculate fair value. Also related to this investment, management recorded a reserve
against outstanding debt owed to the Company based on management’s evaluation of
collectability. The total amount of impairment and reserve…