FIVE 10-K & 10-Q changes, risk factors and insider trading

Our financial performance could be adversely impacted by inflation, which is subject to market conditions. Inflationary pressures on the products we sell could impact our net sales and earnings. If the cost of goods changes as a result of inflation, we may be unable to adjust our retail prices accordingly, which could adversely impact our sales or earnings. DuringIn fiscalrecent 2022,years wewe've experienced levels of inflation that are generally higher than wehistorical have experienced in recent years,levels, resulting in part from various supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain, monetary policy actions, and other disruptions caused by the uncertainin economic environment. While we have been able to mitigate this impact to date through our pricing strategies, we are unable to predict how long the current inflationary environment will continue or the impact of inflationary trends on consumer behavior and our sales and profitability in the future. Additionally, commodities can be subject to availability constraints and price volatility caused by weather, supply conditions, political instability, government regulations, tariffs, energy prices, recession risks and potential effects, general economic conditions and other unpredictable factors. Changes in commodity prices could also negatively impact our sales and earnings if our competitors react more aggressively.

Our growth is dependent on our ability to open profitable new stores. We believe we have an opportunity to continue to grow our store base from 1,7711,921 stores in 4446 states as of FebruaryJanuary 1,31, 20252026 to more than 3,500 locations over time.

Our reliance on merchandise manufactured outside of the United States subjects us to legal, regulatory, political and economic risks. In particular, tariffs imposed by the U.S. government have increased, and could increasefurther increase, the cost to us of certain products, lowerwhich lowers our margins, increaseincreases our import related expenses, causecauses us to increase our prices to consumers, and reducereduces consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.

A significant majority of our merchandise is manufactured outside of the United States, with China as the single largest source of merchandise we import and source from domestic vendors. Changes in the prices and flow of the goods we import and source from domestic vendors, for any reasonreason, could continue to have an adverse impact on our operations. The United States and other countries have occasionally proposed and enacted protectionist trade policies, which may result in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise.merchandise to a greater extent than presently. The trade issues between the United States and China and other countries may continue to be volatile and difficult to predict or forecast.

In particular, recent U.S. tariffs imposed or threatened to be imposed on China, Mexico, Canada, and other countries (including after the U.S. Supreme Court invalidated certain tariffs imposed under the International Emergency Economic Powers Act (the “IEEPA Decision”)) and any retaliatory actions taken by such countries could result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions: negotiate lower product costs with our vendors, purchase products produced in countries with no or lower tariffs or transition away from domestic vendors who source from China or other tariff impacted countries, increase our prices, or alter or cease offering certain products. Any increase in pricing, alteration of products or reduced product offering could reduce the competitiveness of our products, particularly if our competitors do not keep pace with any such changes or are able to offset the impact of tariffs through other actions. Furthermore, in response to the recent tariffs announced by the United States, China and other countries have imposed or proposed additional tariffs on certain exports from the United States. These and any future tariffs that may be imposed by the United States, or other retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses. Additionally, even if the products we import are not directly impacted by additional tariffs, the imposition of such additional tariffs on goods imported into the United States could cause increased prices for consumer goods in general, which could have a negative impact on consumer spending for discretionary items reducing demand for our products. Further, following the IEEPA Decision, there remains significant uncertainty regarding the processes that will govern refund claims related to the invalidated tariffs, the timing of any potential refunds, and the ultimate amounts, if any, that we may recover. These direct and indirect impacts of increased tariffs or trade restrictions implemented by the United States, both individually and cumulatively, could have a material adverse effect on our business, financial condition and results of future operations.

We, like many retailers, are and may in the future be subject to increasing operational costs, including escalating product costs, the imposition of tariffs on imported goods, and higher wage and benefits costs in response to legislative requirements and competitive pressures. From time to time, we may implement price increases (including beyond $5 per item) in an effort to mitigate some or all of the risks of operational cost increases. We can offer no assurances that price increases will be accepted by our customers, or that price increases will be sufficient to offset the impact of future cost increases. In addition, any increase in our prices may cause our unit sales to decline and could undermine our positioning as an extreme value retailer making us less attractive to our customers and less competitive in the marketplace. Accordingly, such factors could have a material adverse effect on our business, financial condition and results of future operations.

We maintain shipcenters in Pedricktown, New Jersey, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona, Indianapolisand andIndianapolis, Indiana. We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional shipcenters. In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia, which we began operating in April 2019, and expanded to approximately 1,100,000 square feet in the first half of 2024. In August 2019, we acquired land in Conroe, Texas to buildingbuild an approximately 860,000 square foot shipcenter, which we began operating in July 2020. In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter, which we began operating in August 2021, and expanded to approximately 1,200,000 square feet in the second half of 2024. In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot shipcenter, which we began operating in June 2022. As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022 as well as the e-commerce shipcenter operations in our Pedricktown, New Jersey shipcenter in the first half of fiscal 2023.2023 and in our Buckeye, Arizona shipcenter in the back half of fiscal 2025. Delays in opening the plannedany new shipcenters could adversely affect our future operations by slowing store growth, which could in turn reduce sales growth. In addition, any distribution-related construction or expansion projects entail risks which could cause delays and cost overruns, such as: shortages of materials; shortages of skilled labor or work stoppages; unforeseen construction, scheduling, engineering, environmental or geological problems; weather interference; fires or other casualty losses; and unanticipated cost increases. The completion date and ultimate cost of any future projects, including the opening theof plannedany new shipcenters could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any projectfuture projects will be completed on time or within established budgets.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that revealsreveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Moreover, our proprietary, confidential, and/or sensitive information could be leaked, disclosed, or revealed as a result of or in connection with the use of generative artificial intelligence technologies.

Our inventory balance represented approximately 15%17% of our total assets as of FebruaryJanuary 1,31, 2025.2026. Efficient inventory management is a key component of our business success and profitability. To be successful, we must maintain sufficient inventory levels and an appropriate product mix to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold the goods unduly impacts our financial results. If our buying decisions do not accurately predict customer trends or purchasing actions, or if our expectations about customer spending levels are inaccurate, we may have to take unanticipated markdowns to dispose of excess inventory, which also can adversely impact our financial results. We have historically experienced loss of inventory (also called “inventory shrink”, “shrink”, or "shrinkage") due to damage, theft, and other causes and have recently seen inventory shrink reach higher than historic levels. Although we are making every effort to minimize inventory shrinkage, we cannot assure you that incidences of inventory loss and theft will decrease in the future, or that the measures we are taking will effectively address the problem. We continue to focus on ways to reduce these risks, but we cannot assure you that we will be successful in our inventory management. If we are not successful in managing our inventory balances, our profitability and cash flows from operations may be negatively affected.

Currently, we lease all of our store locations, as well as our corporate headquarters and distribution facility in Pedricktown, New Jersey (and own our shipcenters in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Indianapolis, Indiana). As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.2022 as well as the e-commerce shipcenter operations in our Pedricktown, New Jersey shipcenter in the first half of fiscal 2023 and in our Buckeye, Arizona shipcenter in the back half of fiscal 2025. Our stores are leased from third parties, with typical initial lease terms of ten years. Many of our lease agreements also have additional five-year renewal options. Historically, we have been able to negotiate terms that fit within our economic model and that we believe are favorable; however, there is no guarantee that we will be able to continue to negotiate such terms. Consolidation in the commercial retail real estate market could affect our ability to successfully negotiate favorable rental terms for our stores in the future. Should significant consolidation occur, a large proportion of our store base could be concentrated with one or a few landlords that would then be in a position to dictate unfavorable terms to us due to their significant negotiating leverage. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our occupancy costs and difficulty in identifying economically suitable new store locations could have significant negative consequences, which include:

Our business is seasonal, with the highest percentage of sales (approximately 40% of total annual sales over the last two fiscal years) occurring during the fourth fiscal quarter (November, December and January), which includes the year-end holiday season. This increased percentage of net sales has historically resulted in the highest percentages of net income during the fourth fiscal quarter. We purchase substantial amounts of inventory in the end of the third fiscal quarter (October) and beginning of the fourth fiscal quarter (November and December) and incur higher shipping costs and higher payroll costs in anticipation of the increased sales activity during these time periods. Adverse events, such as inclement or unusual weather, deteriorating economic conditions, recession risks and potential effects, higher unemployment, increased wage rates, higher gas prices or public transportation disruptions, could result in lower-than-planned sales during the holiday season which may lead to unanticipated markdowns. Since we rely on third parties for transportation and use third-party warehouses when we build up inventory, a number of these factors are outside of our control. Our holiday sales are also materially impacted by the length of the holiday selling season. In years wherewhen the selling season is shorter than typical due to the timing of the major holidays, our retail sales could be negatively impacted. In addition, the occurrence of any other operational disruptions during a shorter holiday period could have a heightened negative impact. An unsuccessful fourth quarter, or holiday season, will have a substantial negative impact on our financial condition and results of operations for the entire fiscal year.

Our inability to upgrade or expand,expand our technology systems as a result of external factors, staffing shortages or difficulties in updating our existing technology or developing or implementing new technology could have a material adverse effect on our business or results of operations.

We are continuing to expand, upgrade and develop our information technology capabilities, including, most recently, with the continued investment in our enterprise wide human capital management system, Workday, which was implemented in 2021, the implementation of a new core-enterprise resource planning system (or "ERP"), Oracle Fusion, in fiscal 2024 for use in fiscal 2025, the implementation of a new enterprise wide human capital management system, Workday, in 2021, the implementation of our Retail Merchandising System in fiscal 2020, and the launch of our e-commerce website in fiscal 2020. If we are unable to successfully continue upgrading or expanding our technological capabilities to support our growth, we may not be able to take advantage of market opportunities, manage our costs and transactional data effectively, satisfy customer requirements, execute our business plan or respond to competitive pressures. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology, or with maintenance or adequate support of existing systems, could also disrupt or reduce the efficiency of our operations.

Further, recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, increased market volatility, and recession risks. Military conflicts and wars (such as the ongoing conflict in Iran and the surrounding region, conflicts between Russia and Ukraine, Israel and Hamas, and the Red Sea crisis and its impact on shipping and logistics), terrorist attacks, instability following regime change in Venezuela, other geopolitical events, high inflation, increasing interest rates, bank failures and associated financial instability and crises, and supply chain issues can cause exacerbated volatility and disruptions to various aspects of the global economy. The uncertain nature, magnitude, and duration of hostilities stemming from such conflicts, including the potential effects of sanctions and countersanctions, or retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business and operations.

Our business and reputation may be adversely affected by environmental,certain socialcorporate and governanceresponsibility matters.

InvestorIn recent years, investor and regulatory focus arehas intensifyingintensified with respect to certain environmental,corporate social and governance ("ESG")responsibility matters. These matters include, among others, (i) efforts and mitigation of the impact of climate change, (ii) human rights matters, (iii) ethics and compliance with law, (iv) diversity, equity and inclusion, and (v) the role of the Company's board of directors in supervising various sustainability issues. Additionally, in the retail industry, the materials used in the products we sell as well as where we source our products isare of particular importance.

In addition, investment in funds that specialize in companies that perform well in ESGcorporate responsibility assessments are increasingly popular, and major institutional investors and advisors have publicly emphasized the importance of ESGcorporate responsibility measures to their investment decisions and recommendations. Investors who are focused on ESGcorporate responsibility matters may seek enhanced disclosures or require implementation of policies that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns or other public or private means, for us to take ESGcorporate responsibility focused actions on an accelerated timeline.

Additionally, there can be no certainty that we will successfully navigate or manage ESGcorporate responsibility issues or that we will successfully meet investors or others' expectations. Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, crew, other third parties and the communities and industries in which we operate, as well as, on our business, share price, financial condition, access to capital or results of operations.

Our Board of Directors has the authority, without action or vote of our shareholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, shares issuable upon the vesting of restricted stock units or performance-based restricted stock units, shares that may be issued to satisfy our obligations under our equity incentive plan or shares of our authorized but unissued preferred stock. As of FebruaryJanuary 1,31, 2025,2026, 3.22.9 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.60.7 million shares of our common stock are issuable upon the exercise of options outstanding, the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan. Exercises of these options or issuances of common stock or preferred stock could reduce your influence over matters on which our shareholders vote and, in the case of issuances of preferred stock, likely could result in your interest in us being subject to the prior rights of holders of that preferred stock.

•provide that only the chairmanchair of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders;

These and other provisions of Pennsylvania law and our amended and restated articles of incorporation and amended and restated bylaws could delay, defer or prevent us from experiencing a change of control or changes in our Board of Directors and management and may adversely affect our shareholders' voting and other rights. Any delay or prevention of a change of control transaction or changes in our Board of Directors and management could deter potential acquirers or prevent the completion of a transaction in which our shareholders could receive a substantial premium over the then current market price for their shares of our common stock.

You should read the following discussion together with “Selected Financial Data,” and the consolidated financial statements and related notes included elsewhere in this Annual Report. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Part I, Item 1A “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2026" or "fiscal 2026" refer to the period from February 1, 2026 to January 30, 2027, which consists of a 52-week fiscal year. References to "fiscal year 2025" or "fiscal 2025" refer to the period from February 2, 2025 to January 31, 2026, which consists of a 52-week fiscal year. References to "fiscal year 2024" or "fiscal 2024" refer to the period from February 4, 2024 to February 1, 2025, which consists of a 52-week fiscal year. References to "fiscal year 2023" or "fiscal 2023" refer to the period from January 29, 2023 to February 3, 2024, which consists of a 53-week fiscal year. 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.

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiaries as "we," "us," or "our") is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandiseproducts targetedloved atby the tweenkid and teenthe customer.kid in all of us. We offer a dynamic, edited assortment of exciting products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. In fiscal 2019, we rolled out new pricing to our full chain, increasing prices on certain products over $5. Most of our products remain at $5 and below. As of FebruaryJanuary 1,31, 2025,2026, we operated 1,7711,921 stores in 4446 states.

We believe that our business model has resulted in strong financial performance when considered in light of the economic environment. Our comparable sales increased by 12.8% in fiscal 2025, decreased by 2.7% in fiscal 2024, and increased by 2.8% in fiscal 2023, and decreased by 2.0% in fiscal 2022.2023. We expanded our store base from 1,3401,544 stores at the end of fiscal 20222023 to 1,7711,921 stores at the end of fiscal 20242025 and we plan to open approximately 150 net new stores in fiscal 2025.2026. Between fiscal 20222023 and fiscal 2024,2025, our net sales increased from $3,076.3$3.6 billion to $4.8 billion, representing a compounded annual growth rate of 15.7%. Over the same period, our operating income increased from $385.6 million to $3,876.5$457.4 million, representing a compounded annual growth rate of 12.3%. Over the same period, our operating income decreased from $345.0 million to $323.8 million.8.9%.

We expect to continue our strong growth in the future. By offering trend-right merchandise at differentiated price points, our stores have been successful in varying geographic regions, population densities and real estate settings. As of FebruaryJanuary 1,31, 2025,2026, we operated stores in 4446 states throughout the United States. We are primarily located in power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets with trade areas including at least 100,000 people in the specified market. We continue to believe we have the opportunity to expand our store base in the United States from 1,7711,921 locations as of FebruaryJanuary 1,31, 20252026 to more than 3,500 locations over time. Our ability to open profitable new stores depends on many factors, including our ability to identify suitable markets and sites; negotiate leases with acceptable terms; achieve brand awareness in the new markets; efficiently source and distribute additional merchandise; and achieve sufficient levels of cash flow and financing to support our expansion.

We have invested a significant amount of capital in infrastructure and systems necessary to support our future growth and we expect to incur additional capital expenditures to expand, upgrade, and develop our infrastructure and systems in future periods. In fiscal 2025, we continued to invest in our enterprise-wide human capital management system, which supports the management of our workforce and provides an integrated suite of tools for human resources, talent management, payroll, time tracking, benefits administration, and workforce planning. Our fiscal 2025 investments were primarily focused on enhancing payroll functionality and timekeeping capabilities as part of our ongoing efforts to modernize and streamline payroll and workforce management processes. In fiscal 2024, we invested in a new ERP, Oracle Fusion, which is designed to enhance functionality and provide timely information to our management team related to the operation of the business. In fiscal 2021, we invested in a new enterprise wide human capital management system which is designed to manage our workforce by providing a comprehensive suite of tools for human resources, talent management, payroll, time tracking, benefits administration and workforce planning. In fiscal 2020, we launched our e-commerce website and invested in a new Retail Merchandising System, which is designed to manage, control, and perform seamless execution of day-to-day merchandising activities, including purchasing, distribution, order fulfillment, and financial close. In fiscal 2015, we opened a shipcenter in Pedricktown, New Jersey and currently occupy approximately 1,000,000 square feet, having expanded from 800,000 square feet in September 2018. In fiscal 2016, we signed a 15-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania, and currently occupy approximately 230,000 square feet of office space. In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia for approximately $42 million, and currently occupy approximately 1,100,000 square feet after expanding in the first half of 2024. In August 2019,2021, we acquired land in Conroe,Indianapolis, Texas,Indiana, to build an approximately 860,0001,030,000 square foot shipcenter for approximately $56$60 million. In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter for approximately $65 million, and currently occupy approximately 1,200,000 square feet after expanding in the second half of 2024. In MarchAugust 2021,2019, we acquired land in Indianapolis,Conroe, Indiana,Texas, to build an approximately 1,030,000860,000 square foot shipcenter for approximately $60$56 million. In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia for approximately $42 million, and currently occupy approximately 1,100,000 square feet after expanding in the first half of 2024. In fiscal 2016, we signed a 15-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania, which currently expires in early 2033 and occupies approximately 230,000 square feet of office space. In fiscal 2015, we opened a shipcenter in Pedricktown, New Jersey and currently occupy approximately 1,000,000 square feet, having expanded from 800,000 square feet in September 2018.

We believe our business strategy will continue to offer significant opportunity,opportunities, but it also presents risks and challenges. These risks and challenges include, but are not limited to, that we may not be able to effectively identify and respond to changing trends and customer preferences, that we may not be able to find desirable locations for new stores and that we may not be able to effectively manage our future growth. In addition, our financial results can be expected to be directly impacted by substantial increases in product costs due to commodity cost increases or general inflation which could lead to a reduction in our sales as well as greater margin pressure as costs may not be able to be passed on to consumers. To date, changes in commodity prices and general inflation have not materially impacted our business. In response to increasing commodity prices or general inflation, we seek to minimize the impact of such events by sourcing our merchandise from different vendors and changing our product mix. See Part I, Item 1A “Risk Factors” for a description of these and other important factors that could adversely impact us and our results of operations.

•weather conditions; andconditions.

Net sales increased to $3,876.5$4.8 millionbillion in fiscal year 20242025 from $3,559.4$3.9 millionbillion in fiscal year 2023,2024, an increase of $317.1$0.9 million,billion, or 8.9%.22.9%. The increase was the result of a comparable sales increase of $473.0 million and a non-comparable sales increase of $407.6 million, partially offset by a comparable sales decrease of $90.5$414.6 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2024,2025, and the number of stores that opened in fiscal 20232024 but have not been open for 15 full months.

Comparable sales decreasedincreased 2.7%.12.8%. This decreaseincrease resulted from a decreaseincreases of approximately 2.7%7.1% in the number of transactions and approximately 5.3% in the average dollar value of transactions.

Cost of goods sold increased to $3,049.5 million in fiscal year 2025 from $2,523.9 million in fiscal year 2024 from $2,285.5 million in fiscal year 2023,2024, an increase of $238.4$525.6 million, or 10.4%.20.8%. The increase in cost of goods sold was primarily the result of an increaseincreases in the merchandise costs of goods sold resulting from an increase in net sales and included the impact of a non-recurring inventory write-off. Also contributing to the increase in costs of goods sold was an increase in store occupancy costs primarily resulting from new store openings.

Gross profit increased to $1,714.7 million in fiscal year 2025 from $1,352.7 million in fiscal year 20242024, froman $1,273.8increase millionof $362.0 million, or 26.8%. Gross margin increased to 36.0% in fiscal year 2023,2025 an increase of $78.9 million, or 6.2%. Gross margin decreased tofrom 34.9% in fiscal year 20242024, froman 35.8% in fiscal year 2023, a decreaseincrease of approximately 90110 basis points. The decreaseincrease in gross margin was primarily the result of ana increasedecrease as a percentage of net sales in store occupancy costs, partially offset by aan decreaseincrease as a percentage of net sales in distributionmerchandise costs.costs of goods sold, which includes the impact of lower inventory shrinkage.

Selling, general and administrative expenses (including depreciation and amortization) increased to $1,257.3 million in fiscal year 2025 from $1,028.8 million in fiscal year 2024 from $888.3 million in fiscal year 2023,2024, an increase of $140.5$228.5 million, or 15.8%.22.2%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) increaseddecreased approximately 15010 basis points to 26.4% in fiscal year 2025 compared to 26.5% in fiscal year 2024 compared to 25.0% in fiscal year 2023.2024. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increase of $126.1$154.7 million in store-related expenses primarily to support new storeand growth.existing stores. Also contributing to the increase in selling, general and administrative expenses (including depreciation and amortization) was an increase of $14.4$73.8 million in corporate-related expenses, which includedincludes thehigher impact of retention awards, partially offset by lowerincentive compensation expensesand andlapping the impact of a non-recurring stock compensation benefit.

Income tax expense decreasedincreased to $121.7 million in fiscal year 2025 from $85.1 million in fiscal year 20242024, froman $100.0 million in fiscal year 2023, a decreaseincrease of $14.9$36.7 million, or 14.9%.43.1%. The decreaseincrease in income tax expense was primarily due to a $62.4$141.7 million decreaseincrease in pre-tax net income and non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting.

Our effective tax rate for fiscal year 20242025 was 25.1%25.3% compared to 24.9%25.1% in fiscal year 2023.2024. The increase in our effective tax rate was primarily driven by non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting, partially offset by non-deductible expenses.accounting.

As a result of the foregoing, net income decreasedincreased to $358.6 million in fiscal year 2025 from $253.6 million in fiscal year 20242024, froman $301.1 million in fiscal year 2023, a decreaseincrease of approximately $47.5$105.0 million, or 15.8%.41.4%.

Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. We plan to make cash capital expenditures of approximately $210$230 million to $230$250 million in fiscal 2025,2026, which exclude the impact of tenant allowances, and which we expect to fund from cash generated from operations, cash on-hand, investments and, as needed, borrowings under our Revolving Credit Facility. We expect to incur approximately $120$100 million of our cash capital expenditure budget in fiscal 20252026 to construct and open approximately 150 net new stores, with the remainder projected to be spent on our store relocations and remodels, corporate infrastructure and shipcenter facilities.

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on hand, net cash provided by operating activities and borrowings under our Revolving Credit Facility, which expires in September 2027, as needed, and we expect that funding to continue. When we have used our Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. To the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. As of FebruaryJanuary 1,31, 2025,2026, we did not have any direct borrowings under our Revolving Credit Facility and had approximately $225$214 million available on the line of credit, net of $11 million in outstanding letters of credit.

On November 27, 2023, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through November 27, 2026. In fiscal 2024, we purchased 266,997 shares at an aggregate cost of approximately $40.0 million, or average price of $149.79 per share. There were no repurchases in fiscal 2025.

Net cash provided by operating activities for fiscal 20242025 was $430.6$586.4 million, aan decreaseincrease of $69.0$155.8 million compared to fiscal 2023.2024. The decreaseincrease was primarily due to changesan in working capital, a decreaseincrease in operating cash flows from store performance and changes in working capital, partially offset by an increase in income taxes paid.

Net cash used in investing activities for fiscal 20242025 was $232.9$186.2 million, a decrease of $323.4$46.7 million compared to fiscal 2023.2024. The decrease was primarily due to a decrease in capital expenditures, partially offset by an increase in net sales, maturities, and redemptionspurchases of investment securities and aother decrease in capital expenditures.investments.

Net cash used in financing activities for fiscal year 20242025 was $45.7$8.3 million, a decrease of $50.1$37.4 million compared to fiscal 2023.2024. The decrease was primarily the result of decreasesa decrease in the repurchase and retirement of common stock and common shares withheld for taxes.stock.

All obligations under the Revolving Credit Facility are guaranteed by 1616 Holdings and secured by substantially all of the assets of the Company and 1616 Holdings. As of FebruaryJanuary 1,31, 20252026 and February 3,1, 2024,2025, we were in compliance with the covenants applicable to us under the First Amendment and the Revolving Credit Facility.

We have identified the policies below as critical to our business operations and understanding of our consolidated results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. Our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles,principles in the United States ("GAAP"), require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. For a detailed discussion on the application of these and other accounting policies, see Note 1 in our annual consolidated financial statements included elsewhere in this Annual Report.

Inventories consist of finished goods purchased for resale, including freight and tariffs, and are stated at the lower of cost and net realizable value, at the individual product level. Cost is determined on a weighted average cost method. The marketinventory valuecost used in the lower of cost or marketnet realizable value analysis is subject to the effects of consumer demands, customer preferences and the broader economy. The effects of the previously listed criteria are not controllable by management. Our management reviews inventory levels in order to identify obsolete and slow-moving merchandise as these factors can indicate a decline in the market value of inventory on hand. Inventory cost is reduced when the selling price less costs of disposal is below cost. We accrue 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. These estimates are derived using available data and our historical experience. Our estimates may be impacted by changes in certain underlying assumptions and may not be indicative of future activity.

The following table summarizes, as of FebruaryJanuary 1,31, 2025,2026, our minimum rental commitments under operating lease agreements including assumed extensions, minimum payments for long-term debt and other obligations in future periods:

You should read the following discussion together with “Selected Financial Data” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for our fiscal year ended January 31, 2026 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen and twenty-six weeks ended MayAugust 2,1, 2026 included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described below in “Special Note Regarding Forward-Looking Statements” and in Part II, Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2026" or "fiscal 2026" refer to the period from February 1, 2026 to January 30, 2027, which is a 52-week fiscal year. References to "fiscal year 2025" or "fiscal 2025" refer to the period from February 2, 2025 to January 31, 20262026, which is a 52-week fiscal year. The fiscal quarters ended MayAugust 2,1, 2026,2026 and MayAugust 3,2, 2025 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended August 1, 2026 and August 2, 2025 refer to the twenty-six weeks ended as of those dates. Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

•the impact of price increases, such as,as a reduction in our unit sales, damage to our reputation with our customers, and our becoming less competitive in the marketplace;

Five Below, Inc. (collectively referred to herein with its wholly owned subsidiaries as "we," "us," or "our") is a leading growth retailer offering trend-right, extreme value, high-quality products loved by the kid and the kid in all of us. We offer an edited assortment of products, with most priced at $5 and below, including select brands and licensed merchandise across our category worlds. As of MayAugust 2,1, 2026, we operated 1,9702,022 stores in 46 states.

The variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase. We regularly analyze the components of gross profit, a non-GAAP financial measure, as well as gross margin as it provides a useful and relevant measure to analyze our financial performance. Our gross profit and results of operations could be adversely affected by our inability to achieve acceptable initial markup levels, an increased reliance on markdowns, elevated inventory shrinkage, or insufficient sales leverage over the store occupancy, distribution, and buying components of cost of goods sold. In addition, current global supply chain disruptions, the cost of freight and constraints on shipping capacity to transport inventory may have an adverse impact on our gross profit and results of operations, as well as our sales. Changes in the mix of our products may also impact our overall cost of goods sold.

(23)Only includes stores that opened before the beginning of the thirteen weeks ended and twenty-six weeks ended.

Thirteen Weeks Ended MayAugust 2,1, 2026 Compared to the Thirteen Weeks Ended MayAugust 3,2, 2025

Net sales increased to $1,285.6$1,261.5 million in the thirteen weeks ended MayAugust 2,1, 2026 from $970.5$1,026.8 million in the thirteen weeks ended MayAugust 3,2, 2025, an increase of $315.1$234.7 million, or 32.5%.22.9%. The increase was the result of a comparable sales increase of $214.0$140.1 million and a non-comparable sales increase of $101.1$94.6 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2026 and the number of stores that opened in fiscal 2025 but have not been open for 15 full months and new stores that opened in fiscal 2026.months.

Cost of goods sold increaseddecreased to $807.0$649.1 million in the thirteen weeks ended MayAugust 2,1, 2026 from $646.6$684.5 million in the thirteen weeks ended MayAugust 3,2, 2025, ana increasedecrease of $160.4$35.4 million, or 24.8%.5.2%. The increasedecrease in cost of goods sold was primarily the result of increasesa decrease in merchandise cost of goods sold resultingdue fromto the impact of IEEPA tariff refunds, partially offset by an increase in net salessales. andThe decrease in cost of goods sold was partially offset by an increase in store occupancy costs resulting from new store openings.openings and an increase in distribution costs primarily due to higher fuel costs.

Gross profit increased to $478.6$612.4 million in the thirteen weeks ended MayAugust 2,1, 2026 from $323.9$342.4 million in the thirteen weeks ended MayAugust 3,2, 2025, an increase of $154.7$270.0 million, or 47.8%.78.9%. Gross margin increased to 37.2%48.5% in the thirteen weeks ended MayAugust 2,1, 2026 from 33.4%33.3% in the thirteen weeks ended MayAugust 3,2, 2025, an increase of approximately 380 basis points.2025. The increase in gross margin was primarily the result of decreases as a percentage of net sales in store occupancy costs and distribution costs. Also contributing to the increase in gross margin were the decreasesdecrease as a percentage of net sales in merchandise costs of goods sold, which includes the impact of IEEPA tariff refunds and a lower inventory shrinkage accrual rate,rate. andAlso lappingcontributing to the impactincrease in gross margin was the decrease as a percentage of non-recurringnet cost-optimizationsales initiatives.in store occupancy costs, partially offset by the increase as a percentage of net sales in distribution costs due to higher fuel costs.

Selling, general and administrative expenses (including depreciation and amortization) increased to $324.4$337.1 million in the thirteen weeks ended MayAugust 2,1, 2026 from $273.1$290.0 million in the thirteen weeks ended MayAugust 3,2, 2025, an increase of $51.3$47.1 million, or 18.8%.16.2%. As a percentage of net sales, selling, general and administrative expenses (including depreciation and amortization) decreased approximately 290150 basis points to 25.2%26.7% in the thirteen weeks ended MayAugust 2,1, 2026 from 28.1%28.2% in the thirteen weeks ended MayAugust 3,2, 2025. The increase in selling, general and administrative expenses (including depreciation and amortization) was the result of an increaseincreases of $42.6$41.5 million in store-related expenses and $5.6 million in corporate-related expenses primarily to support new and existing stores. Also contributing to the increase in selling, general and administrative expenses (including depreciation and amortization) was an increase of $8.7 million in corporate-related expenses primarily due to higher incentive compensation, partially offset by the impact of retention awards.

Income tax expense increased to $39.4$69.4 million in the thirteen weeks ended MayAugust 2,1, 2026 from $15.3$15.1 million in the thirteen weeks ended MayAugust 3,2, 2025, an increase of $24.1$54.3 millionmillion, or 157.0%.358.1%. The increase in income tax expense was primarily due to the $106.0$232.9 million increase in pre-tax income, partially offset by discrete items, which includes the impact of share-based accounting.

Our effective tax rate for the thirteen weeks ended MayAugust 2,1, 2026 was 24.3%23.9% compared to 27.2%26.2% in the thirteen weeks ended MayAugust 3,2, 2025. Our effective tax rate for the thirteen weeks ended MayAugust 2,1, 2026 was lower than the comparable prior year period primarily due to discrete items, which includes the impact of share-based accounting.

As a result of the foregoing, net income increased to $123.1$221.4 million in the thirteen weeks ended MayAugust 2,1, 2026 from $41.1$42.8 million in the thirteen weeks ended MayAugust 3,2, 2025, an increase of $82.0$178.6 millionmillion, or 199.1%.417.7%.

Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on-hand, net cash provided by operating activities and borrowings under our Revolving Credit Facility, which expires in September 2027, as needed, and we expect that funding to continue. When we have used our Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. To the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. As of MayAugust 2,1, 2026, we did not have any direct borrowings under our Revolving Credit Facility and had approximately $214$225 million available on the line of credit, net of $11 million in outstanding letters of credit.

On November 27, 2023, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through November 27, 2026. In fiscal 2024, we purchased 266,997 shares at an aggregate cost of approximately $40.0 million, or an average price of $149.79 per share. ThereNo shares were norepurchased repurchasesunder this program during fiscal 2025. During the thirteen weeks ended MayAugust 2,1, 2026.2026, Therewe canrepurchased be310,501 noshares assurancesat thatan anyaggregate additionalcost repurchasesof willapproximately be$60.0 completed,million, or asan toaverage the timing or amountprice of any$193.24 repurchases.per The share repurchase program may be modified or discontinued at any time.share.

Net cash provided by operating activities for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was $227.2$442.7 million, an increase of $94.5$217.0 million compared to the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The increase was primarily due to an increase in operating cash flows from store performance,performance and the impact of IEEPA tariff refunds, partially offset by an increase in income taxes paid and changes in working capital.

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was $303.1$528.7 million, an increase of $267.4$537.5 million compared to the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The increase was primarily due to an increaseincreases in net purchases of investment securities and other investments.investments and capital expenditures.

Net cash used in financing activities for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was $9.0$76.6 million, an increase of $7.7$73.2 million compared to the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The increase was primarily due to anincreases increasein the repurchase and retirement of common stock and in common shares withheld for taxes.

From February 1, 2026 to MayAugust 2,1, 2026, we have entered into 4875 new fully executed retail leases with average terms of approximately 10 years and other lease modifications that have future minimum lease payments of approximately $83.3$135.0 million.

For the thirteen weeks ended MayAugust 2,1, 2026, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources.