Business Context and Reporting Period
Five Below, Inc. operates a U.S. specialty value-retail chain targeting tweens and teens, with most merchandise priced at $5 or less. This 10-K covers fiscal 2020, the 52 weeks ended January 30, 2021—not 2019 Q4 as indicated in the request metadata. The filing also provides fourth-quarter results. The company operated 1,020 stores in 38 states at year-end.
Key Financial Results
| Metric | Fiscal 2020 | Fiscal 2019 |
|---|---|---|
| Net sales | $1,962.1 million | $1,846.7 million |
| Gross profit / margin | $652.3 million / 33.2% | $674.0 million / 36.5% |
| Operating income / margin | $154.8 million / 7.9% | $217.3 million / 11.8% |
| Net income | $123.4 million | $175.1 million |
| Diluted earnings per share | $2.20 | $3.12 |
| Net cash provided by operating activities | $366.0 million | $187.0 million |
| Capital expenditures | $200.2 million | $212.3 million |
- Full-year sales rose 6.2%, driven by $209.9 million of non-comparable sales, partly offset by a $94.5 million comparable-sales decline. Comparable sales fell 5.5%.
- Fourth-quarter sales were $858.5 million versus $687.1 million; net income was $123.9 million versus $110.4 million, and diluted EPS was $2.20 versus $1.97.
- Year-end cash and cash equivalents were $268.8 million, with $140.9 million in short-term investments. Current assets were $755.4 million and current liabilities $435.7 million.
- No revolver borrowings were outstanding at year-end; approximately $191 million was available on the $225 million asset-based facility. The company borrowed and repaid approximately $50 million during the year.
- Total liabilities were $1.43 billion, including $1.11 billion of operating lease liabilities. Operating lease commitments totaled $1.39 billion; these lease obligations are distinct from funded debt.
Material Changes Versus the Prior Period
- COVID-19 closures beginning March 20, 2020 and reduced store traffic weighed on comparable sales and margins. Substantially all stores had reopened by the end of June.
- Despite higher sales, gross profit fell 3.2%, gross margin contracted about 330 basis points, and net income declined 29.5%. Management attributed gross-margin pressure primarily to merchandise costs and store occupancy costs, including rent during store closures.
- SG&A rose 8.9% to $497.5 million, and increased from 24.7% to 25.4% of sales. The company opened 120 net stores, ending the year at 1,020, compared with 150 openings in fiscal 2019.
- Operating cash flow increased by $179.0 million, principally due to working-capital changes and lower income taxes paid; investing cash outflow increased to $286.9 million, including investment-security activity and capital spending.
Outlook, Risks, and Unusual Items
- Management planned approximately 170–180 store openings and about $315 million of capital expenditures in fiscal 2021. It gave no specific sales or earnings guidance in the provided filing text.
- The company expects to fund planned spending with operating cash flow, cash and investments, and revolver availability. Its stated expectation was that these resources would cover planned capital expenditures, authorized repurchases, and working capital needs over the next 12 months and foreseeable future.
- Growth plans include expanding toward more than 2,500 U.S. stores over time. The company reported 96 leases signed for fiscal 2021 openings as of January 30, 2021.
- COVID-19 remains a material uncertainty, with potential effects from renewed closures or restrictions, traffic and consumer spending, employee safety, and supply-chain disruption. Other principal risks include international sourcing and tariffs, cost inflation and pricing pressure, inventory management, distribution capacity, competition, e-commerce execution, cyber incidents, and long-term lease commitments.
- The company expanded its revolving facility to $225 million during 2020 and amended its terms in January 2021, including lower pricing and additional potential capacity. The facility is secured by substantially all company assets and includes covenants and minimum-availability requirements.
- Management reported no material long-lived-asset impairment in fiscal 2020. KPMG issued unqualified opinions on the financial statements and internal controls; its critical audit matter was valuation of slow-moving and obsolete inventory, which totaled $281 million.
- Ordinary-course legal matters were disclosed; management did not believe their resolution would materially affect financial condition or results. The company reported no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Confirm the intended period: this filing reports fiscal 2020 ended January 30, 2021, not fiscal 2019 Q4.
- Assess the recovery in comparable sales and margins after pandemic closures, separating comparable-store performance from new-store growth.
- Review cash-flow drivers and planned fiscal 2021 capital spending, including distribution-center construction and store openings.
- Evaluate lease commitments, revolver borrowing-base availability, covenants, and the distinction between lease liabilities and funded debt.
- Monitor inventory quality and markdown or shrink risk, given inventory’s significance and its designation as the audit’s critical matter.