Five Below Ends Fiscal Year With Strong Q4
Five Below ended the year with a strong fourth quarter, but increasing shrink has become a significant headwind for the company.
Net income was $202.2 million, or $3.65 per diluted share, compared to $171.3 million, $3.07 per diluted share, in the 2022 fourth quarter of fiscal 2022. The fourth quarter of fiscal 2022 included a one cent benefit from shared-based accounting.
Net sales increased by 19.1% to $1.34 billion in the fourth quarter year over year. Excluding the impact of a 53rd week in fiscal 2023, net sales increased 14.9%, and comparable sales increased by 3.1% on a 13-week basis. Net sales in the 53rd week were $48.1 million, while the extra week produced $0.15 in diluted earnings per share. Operating income for the quarter was $268.4 million versus $225.8 million in the quarter a year prior.
Five Below opened 63 new stores and ended the quarter with 1,544 stores in 43 states.
For the fiscal 2022 full year, net income was $301.1 million, or $5.41 per diluted share, compared to $261.5 million, or $4.69 per diluted share, in the prior year. The benefit from share-based accounting was $0.07 in fiscal 2023 compared to $0.04 in fiscal 2022.
Net sales increased by 15.7% to $3.56 billion year over year. Excluding the impact of the 53rd week, net sales increased 14.1% and comparable sales increased by 2.8%. Operating income was $385.6 million compared to $345 million in fiscal 2022.
"Holiday 2023 marked a strong end to the year for sales performance as our amazing assortment of Wow products drove yet another quarter of comp transaction growth, led by the Five Beyond format stores,” said Joel Anderson, president and CEO of Five Below. “In fiscal 2023, we opened a record 205 new stores and ended the year with over half of our comparable stores in the Five Beyond format. The benefit of strong sales performance to our profitability was offset by higher than anticipated shrink headwinds, resulting in earnings at the low end of our guidance range."
When looking ahead, the retailer is concerned about the continued challenge of shrink and has taken steps to mitigate the issue, company officials said.
“We have implemented additional shrink mitigation initiatives based on our 2023 learnings,” Anderson said. “However, we expect the resulting benefits to take some time to realize, and therefore, we have not included any associated improvement in our outlook this year.”
He said the company will continue to focus on driving growth in 2024, supported by the company’s five strategic pillars. This includes the opening of between 225 and 235 new stores, converting an additional 200 locations to the Five Beyond format, and completing the expansion of two distribution centers.
“We will leverage our growing scale and sourcing capabilities to deliver even more ‘wow’ to our customers while we utilize technology and data analytics throughout the organization to refine our marketing strategies, generate inventory efficiencies, and simplify processes for our crew,” Anderson said.