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
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. References to "fiscal year 2019" or
"fiscal 2019" refer to the period from February 3, 2019 to February 1, 2020,
which consists of a 52-week fiscal year. References to "fiscal year 2018" or
"fiscal 2018" refer to the period from February 4, 2018 to February 2, 2019,
which consists of a 52-week fiscal year. References to "fiscal year 2017" or
"fiscal 2017" refer to the period from January 29, 2017 to February 3, 2018,
which consists of a 53-week fiscal year. 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.

                                    Overview

Five Below, Inc. (collectively referred to herein with its wholly owned
subsidiary as "we," "us," or "our") is a rapidly growing specialty value
retailer offering a broad range of trend-right, high-quality merchandise
targeted at the tween and teen customer. 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. As of January 29, 2022, we
operated 1,190 stores in 40 states. In addition, in fall 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.

We also offer our merchandise on the internet, through our fivebelow.com
e-commerce website. We launched our e-commerce operation as an additional
channel to service our customers. During fiscal 2020, we entered into a
partnership with an on demand third party delivery service to enable our
customers to shop online and receive convenient same day delivery. All
e-commerce sales, which includes shipping and handling revenue, are included in
net sales and are included in comparable sales. Our e-commerce expenses will
have components classified as both cost of goods sold and selling, general and
administrative expenses.

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 30.3% in fiscal 2021, and decreased by 5.5% in fiscal 2020 and
increased by 0.6% in fiscal 2019. Between fiscal 2019 and fiscal 2021, our net
sales increased from $1,846.7 million to $2,848.4 million, representing a
compounded annual growth rate of 24.2%. Over the same period, our operating
income increased from $217.3 million to $379.9 million, representing a
compounded annual growth rate of 32.2%. In addition, we expanded our store base
from 900 stores at the end of fiscal 2019 to 1,190 stores at the end of fiscal
2021 and we plan to open approximately 375 to 400 new stores over the next two
fiscal years including approximately 160 new stores in fiscal 2022.

We expect to continue our strong growth in the future. By offering trend-right
merchandise at a differentiated price points, our stores have been successful in
varying geographic regions, population densities and real estate settings. As of
January 29, 2022, we operated stores in 40 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 1,190 locations as of January 29, 2022 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 a proven and highly profitable store model that has produced consistent
financial results and returns, and our new stores have achieved average payback
periods of less than one year. Our new store model assumes a store size of
approximately 9,000 square feet that achieves annual sales of approximately $2.0
million in the first full year of operation. Our new store model also assumes an
average new store investment of approximately $0.4 million. Our new store
investment includes our store build-out (net of tenant allowances), inventory
(net of payables) and cash pre-opening expenses.
                                       39
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Our planned store expansion will place increased demands on our operational,
managerial, administrative and other resources. Managing our growth effectively
will require us to continue to maintain adequate distribution capacity, enhance
our store management systems, financial and management controls, information
systems and other operational system capabilities. In addition, we will be
required to hire, train and retain store management and other qualified
personnel. For further information, see Part I, Item 1A "Risk Factors-Risk
Relating to our Business and Industry."

Over the past five years, 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 related to expansion of our
infrastructure and systems in future periods. In fiscal 2015, we invested in a
new ERP and began the multi-year implementation of the ERP, which is designed to
enhance functionality and provide timely information to the Company's management
team related to the operation of the business. In fiscal 2020, we invested in a
new Retail Merchandising System and began the multi-year implementation of the
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 distribution center in Pedricktown, New Jersey. We occupy approximately
1,000,000 square feet at this distribution center, 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. We currently
occupy approximately 190,000 square feet of office space with multiple options
to expand in the future. In March 2019, we completed the purchase of an
approximately 700,000 square foot distribution center in Forsyth, Georgia. We
began operating the distribution center in April 2019. In August 2019, we
acquired land in Conroe, Texas, to build an approximately 860,000 square foot
distribution center for approximately $56 million. We began operating the
distribution center in July 2020. In July 2020, we acquired land in Buckeye,
Arizona, to build an approximately 860,000 square foot distribution center for
approximately $65 million. We began operating the distribution center in August
2021. In March 2021, we acquired land in Indianapolis, Indiana, to build an
approximately 1,030,000 square foot distribution center for approximately $61
million. We expect to occupy the distribution center in fiscal 2022. As a result
of the significant expansion of our network of distribution facilities over the
last several years, including the planned opening in the first half of fiscal
2022 of our Indianapolis, Indiana distribution center, we expect to cease
operations at our distribution centers in Olive Branch, Mississippi and
Cincinnati, Ohio in the first half of fiscal 2022, and expect the costs incurred
to be immaterial to our consolidated statements of operations.

We continuously assess ways to maximize the productivity and efficiency of our
existing facilities, infrastructure and systems. The timing and amount of
investments in our facilities, infrastructure and systems could affect the
comparability of our results of operations in future periods. The completion
date and ultimate cost of future projects could differ significantly from
initial expectations due to construction-related or other reasons.

We believe our business strategy will continue to offer significant opportunity,
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.

                 How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, cost of goods sold and gross profit, selling, general and administrative expenses and operating income.

Net Sales



Net sales constitute gross sales net of merchandise returns for damaged or
defective goods. Net sales consist of sales from comparable stores,
non-comparable stores, and e-commerce, which includes shipping and handling
revenue. Revenue from the sale of gift cards is deferred and not included in net
sales until the gift cards are redeemed to purchase merchandise or as breakage
revenue in proportion to the pattern of redemption of the gift cards by the
customer.

Our business is seasonal and as a result, our net sales fluctuate from quarter
to quarter. Net sales are usually highest in the fourth fiscal quarter due to
the year-end holiday season.
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Comparable Sales



Comparable sales include net sales from stores that have been open for at least
15 full months from their opening date, and e-commerce sales. Comparable stores
include the following:

•Stores that have been remodeled while remaining open;
•Stores that have been relocated within the same trade area, to a location that
is not significantly different in size, in which the new store opens at about
the same time as the old store closes; and
•Stores that have expanded, but are not significantly different in size, within
their current locations.

For stores that are relocated or expanded, the following periods are excluded when calculating comparable sales:



•The period beginning when the closing store receives its last merchandise
delivery from one of our distribution centers through:
?the last day of the fiscal year in which the store was relocated or expanded
(for stores that increased significantly in size); or
?the last day of the fiscal month in which the store re-opens (for all other
stores); and
•The period beginning on the first anniversary of the date the store received
its last merchandise delivery from one of our distribution centers through the
first anniversary of the date the store re-opened.

Comparable sales exclude the 53rd week of sales for 53-week fiscal years. In the
52-week fiscal year subsequent to a 53-week fiscal year, we exclude the sales in
the non-comparable week from the same-store sales calculation. Due to the 53rd
week in fiscal 2017, all comparable sales related to any reporting period during
the year ended February 2, 2019 are reported on a restated calendar basis using
the National Retail Federation's restated calendar comparing similar weeks.

There may be variations in the way in which some of our competitors and other
retailers calculate comparable or "same store" sales. As a result, data in this
Annual Report regarding our comparable sales may not be comparable to similar
data made available by other retailers. Non-comparable sales are comprised of
new store sales, sales for stores not open for a full 15 months, and sales from
existing store relocation and expansion projects that were temporarily closed
(or not receiving deliveries) and not included in comparable sales.

Measuring the change in fiscal year-over-year comparable sales allows us to evaluate how we are performing. Various factors affect comparable sales, including:



•consumer preferences, buying trends and overall economic trends;
•our ability to identify and respond effectively to customer preferences and
trends;
•our ability to provide an assortment of high-quality, trend-right and everyday
product offerings that generate new and repeat visits to our stores;
•the customer experience we provide in our stores and online;
•the level of traffic near our locations in the power, community and lifestyle
centers in which we operate;
•competition;
•changes in our merchandise mix;
•pricing;
•our ability to source and distribute products efficiently;
•the timing of promotional events and holidays;
•the timing of introduction of new merchandise and customer acceptance of new
merchandise;
•our opening of new stores in the vicinity of existing stores;
•the number of items purchased per store visit; and
•weather conditions; and
•the impacts associated with the COVID-19 pandemic, including closures of our
stores, adverse impacts on our operations, and consumer sentiment regarding
discretionary spending.

Opening new stores is an important part of our growth strategy. As we continue
to pursue our growth strategy, we expect that a significant percentage of our
net sales will continue to come from new stores not included in comparable
sales. Accordingly, comparable sales is only one measure we use to assess the
success of our growth strategy.
                                       41
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Cost of Goods Sold and Gross Profit



Gross profit is equal to our net sales less our cost of goods sold. Gross margin
is gross profit as a percentage of our net sales. Cost of goods sold reflects
the direct costs of purchased merchandise and inbound freight and tariffs, as
well as shipping and handling costs, store occupancy, distribution and buying
expenses. Shipping and handling costs include internal fulfillment and shipping
costs related to our e-commerce operations. Store occupancy costs include rent,
common area maintenance, utilities and property taxes for all store locations.
Distribution costs include costs for receiving, processing, warehousing and
shipping of merchandise to or from our distribution centers and between store
locations. Buying costs include compensation expense and other costs for our
internal buying organization, including our merchandising and product
development team and our planning and allocation group. These costs are
significant and can be expected to continue to increase as our Company grows.

The components of our cost of goods sold may not be comparable to the components
of cost of goods sold or similar measures of our competitors and other
retailers. As a result, data in this Annual Report regarding our gross profit
and gross margin may not be comparable to similar data made available by our
competitors and other retailers.

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 as well as gross margin. Any inability to obtain acceptable levels of
initial markups, a significant increase in our use of markdowns, and a
significant increase in inventory shrinkage or inability to generate sufficient
sales leverage on the store occupancy, distribution and buying components of
cost of goods sold could have an adverse impact on our gross profit and results
of operations. 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.

Selling, General and Administrative Expenses



Selling, general and administrative, or SG&A, expenses are composed of payroll
and other compensation, marketing and advertising expense, depreciation and
amortization expense and other selling and administrative expenses. SG&A
expenses as a percentage of net sales are usually higher in lower sales volume
quarters and lower in higher sales volume quarters.

The components of our SG&A expenses may not be comparable to those of other
retailers. We expect that our SG&A expenses will increase in future periods due
to our continuing store growth. In addition, any increase in future share-based
grants or modifications will increase our share-based compensation expense
included in SG&A expenses.

Operating Income



Operating income equals gross profit less SG&A expenses. Operating income
excludes interest expense or income, other expense or income, and income tax
expense or benefit. We use operating income as an indicator of the productivity
of our business and our ability to manage SG&A expenses. Operating income
percentage measures operating income as a percentage of our net sales.
                                       42
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                       Results of Consolidated Operations

The following tables summarize key components of our results of consolidated
operations for the periods indicated, both in dollars and as a percentage of our
net sales. Refer to Item 7 "Results of Consolidated Operations" in our Annual
Report on Form 10-K for the year ended January 30, 2021 for a comparison of
fiscal years 2020 and 2019.

                                                                                 Fiscal Year
                                                                         2021                     2020
                                                                 (in

millions, except percentages and total


                                                                                stores data)
Consolidated Statements of Operations Data (1):
Net sales                                                        $       2,848.4            $     1,962.1
Cost of goods sold                                                       1,817.9                  1,309.8
Gross profit                                                             1,030.4                    652.3
Selling, general and administrative expenses                               650.6                    497.5
Operating income                                                           379.9                    154.8
Interest (expense) income and other (expense) income, net                  (13.2)                    (1.7)

Income before income taxes                                                 366.7                    153.1
Income tax expense                                                          87.9                     29.7
Net income                                                       $         278.8            $       123.4
Percentage of Net Sales (1):
Net sales                                                                  100.0    %               100.0  %
Cost of goods sold                                                          63.8    %                66.8  %
Gross profit                                                                36.2    %                33.2  %
Selling, general and administrative expenses                                22.8    %                25.4  %
Operating income                                                            13.3    %                 7.9  %
Interest (expense) income and other (expense) income, net                   (0.5)   %                (0.1) %

Income before income taxes                                                  12.9    %                 7.8  %
Income tax expense                                                           3.1    %                 1.5  %
Net income                                                                   9.8    %                 6.3  %
Operational Data:
Total stores at end of period                                              1,190                    1,020
Comparable sales increase (decrease)                                        30.3    %                (5.5) %
Average net sales per store (2)                                  $           2.5            $         2.0

(1)Components may not add to total due to rounding. (2)Only includes stores open before the beginning of the fiscal year.

Fiscal Year 2021 Compared to Fiscal Year 2020

Net Sales



Net sales increased to $2,848.4 million in fiscal year 2021 from $1,962.1
million in fiscal year 2020, an increase of $886.3 million, or 45.2%. The
increase was the result of a comparable sales increase of $566.6 million and a
non-comparable sales increase of $319.7 million. In fiscal year 2021, we opened
170 net new stores compared to 120 net new stores in fiscal year 2020. The
increase in non-comparable sales was primarily driven by new stores that opened
in fiscal 2021 and the number of stores that opened in fiscal 2020 but have not
been open for 15 full months.

Comparable sales increased 30.3%. The increase was primarily the result of the
impact of COVID-19 during fiscal year 2020 as we temporarily closed all of our
stores as of March 20, 2020, began reopening our stores at the end of April
2020, and had reopened substantially all of our stores by the end of June 2020.


                                       43
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Cost of Goods Sold and Gross Profit



Cost of goods sold increased to $1,817.9 million in fiscal year 2021 from
$1,309.8 million in fiscal year 2020, an increase of $508.1 million, or 38.8%.
The increase in cost of goods sold was primarily the result of an increase in
the merchandise costs of goods resulting from an increase in net sales and due
to the impact of COVID-19 in fiscal 2020.

Gross profit increased to $1,030.4 million in fiscal year 2021 from $652.3
million in fiscal year 2020, an increase of $378.1 million, or 58.0%. Gross
margin increased to 36.2% in fiscal year 2021 from 33.2% in fiscal year 2020, an
increase of approximately 300 basis points. The increase in gross margin was
primarily the result of a decrease as a percentage of net sales in store
occupancy costs due to the impact of COVID-19 in fiscal year 2020 as we
temporarily closed all of our stores while still incurring rent expense.

Selling, General and Administrative Expenses



Selling, general and administrative expenses increased to $650.6 million in
fiscal year 2021 from $497.5 million in fiscal year 2020, an increase of $153.1
million, or 30.8%. As a percentage of net sales, selling, general and
administrative expenses decreased approximately 260 basis points to 22.8% in
fiscal year 2021 compared to 25.4% in fiscal year 2020. The increase in selling,
general and administrative expenses was the result of an increase of $107.0
million in store-related expenses to support new store growth and due to the
impact of COVID-19 during fiscal year 2020, which included the temporary closure
of all of our stores, furloughing of employees, and other non-payroll expense
reductions. This increase was also driven by an increase of $46.1 million of
corporate-related expenses, which included both the benefit related to the CARES
Act and the reversal of certain compensation related accruals in fiscal year
2020.

Interest (Expense) Income and Other (Expense) Income, net



Interest expense and other, net increased to $13.2 million in fiscal year 2021
from $1.7 million in fiscal year 2020, an increase of $11.5 million. The
increase in interest expense and other, net was primarily driven by an other
than temporary impairment related to an equity method investment.

Income Tax Expense



Income tax expense increased to $87.9 million in fiscal year 2021 from $29.7
million in fiscal year 2020, an increase of $58.2 million, or approximately
195.9%. This increase in income tax expense was primarily due to a $213.6
million increase in pre-tax net income and discrete items, which includes the
impact of the CARES Act in fiscal year 2020 and 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.

Our effective tax rate for fiscal year 2021 was 24.0% compared to 19.4% in fiscal year 2020. The increase in our effective tax rate was primarily driven by discrete items, which includes the impact of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" and the impact of the CARES Act in fiscal year 2020.

Net Income



As a result of the foregoing, net income increased to $278.8 million in fiscal
year 2021 from $123.4 million in fiscal year 2020, an increase of approximately
$155.4 million, or 126.0%.

                                  Seasonality

Our business is seasonal in nature with the highest level of net sales and net
income generated in the fourth fiscal quarter due to the year-end holiday season
and, therefore, operating results for any fiscal quarter are not necessarily
indicative of results for the full fiscal year. To prepare for the holiday
season, we must order and keep in stock more merchandise than we carry during
other parts of the year. We expect inventory levels, along with an increase in
accounts payable and accrued expenses, generally to reach their highest levels
in the third and fourth fiscal quarters in anticipation of the increased net
sales during the year-end holiday season. As a result of this seasonality, and
generally because of variation in consumer spending habits, we experience
fluctuations in net sales, net income and working capital requirements during
the year.


                                       44

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                        Liquidity and Capital Resources

Overview

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 $220 million in fiscal 2022, 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 $85 million of our
cash capital expenditure budget in fiscal 2022 to construct and open
approximately 160 new stores of the planned 375 to 400 new stores over the next
two fiscal years, with the remainder projected to be spent on our store
relocations and remodels, distribution facilities and our corporate
infrastructure.

Our primary working capital requirements are for the purchase of store inventory
and payment of payroll, rent, other store operating costs and distribution
costs. Our working capital requirements fluctuate during the year, rising in the
third and fourth fiscal quarters as we take title to increasing quantities of
inventory in anticipation of our peak, year-end holiday shopping season in the
fourth fiscal quarter. Fluctuations in working capital are also driven by the
timing of new store openings.

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, 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. Although it is not possible to reliably estimate
the duration or severity of the COVID-19 pandemic and the resulting financial
impact on our results of operations, financial position and liquidity, we have
the ability to draw down on our Revolving Credit Facility if and as needed. As
of January 29, 2022, we did not have any direct borrowings under our Revolving
Credit Facility and had approximately $153 million available on the line of
credit.

On March 20, 2018, our Board of Directors approved a share repurchase program
authorizing the repurchase of up to $100 million of our common stock through
March 31, 2021, on the open market, in privately negotiated transactions, or
otherwise. On March 9, 2021, our Board of Directors approved a new share
repurchase program for up to $100 million of our common stock through March 31,
2024. In fiscal 2018, we purchased 21,810 shares under this program at an
aggregate cost of approximately $2.0 million, or an average price of $91.07 per
share. In fiscal 2019, we purchased 337,552 shares under this program at an
aggregate cost of approximately $36.9 million, or an average price of $109.27
per share. In fiscal 2020, we purchased 137,023 shares under this program at an
aggregate cost of approximately $12.7 million, or an average price of $92.42 per
share. In fiscal 2021, we purchased 368,699 shares under this program at an
aggregate cost of approximately $60.0 million, or an average price of $162.75
per share. Since March 2018, we have purchased approximately 865,000 shares for
an aggregate cost of approximately $112 million. There can be no assurances that
any additional repurchases will be completed, or as to the timing or amount of
any repurchases. The share repurchase program may be modified or discontinued at
any time.

Based on our growth plans, we believe that our cash position which includes our
cash equivalents and short-term investments, net cash provided by operating
activities and availability under our Revolving Credit Facility will be adequate
to finance our planned capital expenditures, authorized share repurchases and
working capital requirements over the next 12 months and for the foreseeable
future thereafter. If cash flows from operations and borrowings under our
Revolving Credit Facility are not sufficient or available to meet our
requirements, then we will be required to obtain additional equity or debt
financing in the future. There can be no assurance that equity or debt financing
will be available to us when we need it or, if available, that the terms will be
satisfactory to us and not dilutive to our then-current shareholders.

As a result of the COVID-19 pandemic, our business operations and results of
operations, including our net sales, earnings and cash flows, were materially
impacted in fiscal 2020 as a result of the temporary closures of our 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.
                                       45
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Cash Flows

A summary of our cash flows from operating, investing and financing activities is presented in the following table (in millions):




                                                                                  Fiscal Year
                                                                            2021              2020

Net cash provided by operating activities                                $  327.9          $  366.0
Net cash used in investing activities                                      (465.6)           (286.9)
Net cash used in financing activities                                       (66.1)            (12.8)

Net (decrease) increase during period in cash and cash equivalents (1) $ (203.8) $ 66.3

(1) Components may not add to total due to rounding.

Cash Provided by Operating Activities



Net cash provided by operating activities for fiscal 2021 was $327.9 million, a
decrease of $38.1 million compared to fiscal 2020. The decrease was primarily
due to changes in working capital and an increase in income taxes paid,
partially offset by an increase in operating cash flows from store performance
due to the impact of COVID-19 as we temporarily closed all of our stores in
March 2020 and had reopened substantially all of our stores as of the end of
June 2020. During fiscal 2021, we added 170 net new stores.

Cash Used in Investing Activities



Net cash used in investing activities for fiscal 2021 was $465.6 million, an
increase of $178.7 million compared to fiscal 2020. The increase was primarily
due to increases in net purchases of investment securities and other investments
and capital expenditures. The increase in capital expenditures was primarily for
our distribution centers, new store construction and corporate infrastructure.

Cash Used in Financing Activities



Net cash used in financing activities for fiscal year 2021 was $66.1 million, an
increase of $53.3 million compared to fiscal 2020. The increase was primarily
the result of an increase in the repurchase and retirement of common stock.

Line of Credit



On January 27, 2021, we entered into a First Amendment to Credit Agreement (the
"First Amendment") which amended the Fifth Amended and Restated Credit Agreement
(as amended by the Fifth Amendment, the "Credit Agreement") dated April 24, 2020
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 borrow 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. The
Revolving Credit Facility expires on the earliest to occur of (i) April 24, 2023
or (ii) an event of default.

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, we obtained commitments from
the Lenders that would allow us at our 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 provides that the interest rate payable on borrowings shall
be, at our option, a per annum rate equal to (a) a base rate plus an applicable
margin ranging from 0.25% to 0.75%, or (b) a LIBOR rate plus a margin ranging
from 1.25% to 1.75%. Letter of credit fees range from 1.25% to 1.75%. The
interest rate and letter of credit fees under the Credit Agreement are subject
to an increase of 2.00% per annum upon an event of default.

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The Credit Agreement contains customary covenants that limits, 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 certain acquisition transactions with
affiliates, merge, dissolve, repay certain indebtedness, change the nature of
our business, enter sale or leaseback transactions, make investments or dispose
of assets. In some cases, these restrictions are subject to certain negotiated
exceptions or permit us to undertake otherwise restricted activities if it
satisfies certain conditions. In addition, we will be required to maintain
availability of not less than (i) 12.5% of the lesser of (x) aggregate
commitments under the Revolving Credit Facility and (y) the borrowing base (the
"loan cap") during the period that inventory appraisals have not been delivered
as described above and (ii) at all other times 10.0% of the loan cap.

If there exists an event of default or availability under the Revolving Credit
Facility is less than 15% of the loan cap, amounts in any of the Loan Parties'
or subsidiary guarantors' designated deposit accounts will be transferred daily
into a blocked account held by the Agent and applied to reduce outstanding
amounts under the Revolving Credit Facility (the "Cash Dominion Event"), so long
as (i) such event of default has not been waived and/or (ii) until availability
has exceeded 15% of the loan cap for sixty (60) consecutive calendar days
(provided that such ability to discontinue the Cash Dominion Event shall be
limited to two times during the term of the Credit Agreement).

The Credit Agreement contains customary events of default including, among other
things, failure to pay obligations when due, initiation of bankruptcy or
insolvency proceedings, defaults on certain other indebtedness, change of
control, incurrence of certain material judgments that are not stayed,
satisfied, bonded or discharged within 30 days, certain ERISA events, invalidity
of the credit documents, and violation of affirmative and negative covenants or
breach of representations and warranties set forth in the Credit Agreement.
Amounts under the Revolving Credit Facility may become due upon events of
default (subject to any applicable grace or cure periods).

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 January 29, 2022 and January 30, 2021, we were in compliance
with the covenants applicable to us under the First Amendment and the Revolving
Credit Facility.

As of January 29, 2022 and January 30, 2021, we had approximately $153 million and $191 million, respectively, available in the Revolving Credit Facility.


                   Critical Accounting Policies and Estimates

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,
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



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 market value used in the lower of cost or market 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.
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Impairment of Long-Lived Assets



Long-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, our 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 as the amount by which the carrying amount of the assets exceeds
the fair value of the assets. 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, we will record an impairment charge, if appropriate,
or accelerate depreciation over the revised useful life of the asset. Based on
the analysis performed, our management believes that there was no impairment of
long-lived assets for each of the 2021, 2020 and 2019 fiscal years. The
impairment loss analysis requires management to apply judgment and make
estimates.

Leases



Leases are accounted for in accordance with the guidance in "Leases" (Topic
842). We are required to recognize an operating lease asset and an operating
lease liability for all of our leases (other than leases that meet the
definition of a short-term lease). The liability is equal to the present value
of lease payments using an estimated incremental borrowing rate, on a
collateralized basis over a similar term, that we would have incurred to borrow
the funds necessary to purchase the leased asset. The asset is based on the
liability, subject to certain adjustments, such as for initial direct costs. For
income statement purposes, leases are required to be classified as either
operating or finance leases. Operating leases result in straight-line expense
while finance leases result in a front-loaded expense pattern.

Income Taxes



Income taxes are accounted for under the asset-and-liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. We
recognize the effect of income tax positions only if those positions are more
likely than not of being sustained. Recognized income tax positions are measured
at the largest amount that is greater than 50% likely of being realized. Changes
in recognition or measurement are reflected in the period in which the change in
judgment occurs.

We record a valuation allowance to reduce our deferred tax assets when
uncertainty regarding their realizability exists. In assessing the realizability
of deferred tax assets, our 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 the generation
of future taxable income during periods in which those temporary differences
become deductible. Our management considers the scheduled reversal of deferred
tax liabilities, projected future taxable income, and tax planning strategies in
making this assessment.

Recently Issued Accounting Pronouncements



See "Note 1 - Summary of Significant Accounting Policies" to the consolidated
financial statements included in Item 8 "Consolidated Financial Statements and
Supplementary Data" of this Form 10-K, for a detailed description of recently
issued accounting pronouncements.


                            Contractual Obligations

The following table summarizes, as of January 29, 2022, our minimum rental commitments under operating lease agreements including assumed extensions, minimum payments for long-term debt and other obligations in future periods:


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                                                                              Payments Due By Period
                                                                Less than                                                   More than
(In millions)                                 Total              1 year             1-3 years           3-5 years            5 years
Operating lease obligations (1)            $ 1,566.1          $    227.0          $    434.3          $    378.5          $    526.3
Purchase obligations (2)                         9.9                 9.9                   -                   -                   -
Total                                      $ 1,576.0          $    236.9          $    434.3          $    378.5          $    526.3



(1)Our store leases generally have initial lease terms of 10 years and include
renewal options on substantially the same terms and conditions as the original
lease. Also included in operating leases are our leases for the corporate
office, distribution centers and other.
(2)Purchase obligations are primarily for materials that will be used in the
construction of new stores and purchase commitments for infrastructure and
systems that will be used by the corporate office and distribution centers.

From January 30, 2022 to March 30, 2022, we committed to 28 new leases with terms of 10 years that have future minimum lease payments of approximately $62.1 million.

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