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 February 1, 2020 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen weeks ended May 2, 2020 included in Part I, Item I 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 2020" or "fiscal 2020" refer to the period from February 2, 2020 to January 30, 2021, which is 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 is a 52-week fiscal year. The fiscal quarters ended May 2, 2020 and May 4, 2019 refer to the thirteen 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.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements pursuant
to the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and
similar expressions concerning matters that are not historical facts or present
facts or conditions, such as statements regarding our future financial condition
or results of operations, our prospects and strategies for future growth, the
introduction of new merchandise, and the implementation of our marketing and
branding strategies. In many cases, you can identify forward-looking statements
by terms such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or the negative of these terms
or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q
reflect our views as of the date of this report about future events and are
subject to risks, uncertainties, assumptions and changes in circumstances that
may cause events or our actual activities or results to differ significantly
from those expressed in any forward-looking statement. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future events, results, actions, levels of activity,
performance or achievements. A number of important factors could cause actual
results to differ materially from those indicated by the forward-looking
statements, including, but not limited to, those factors described in Part I,
Item 1A "Risk Factors" in our Annual Report, as amended by the risk factors
included in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form
10-Q. These factors include without limitation:
•      uncertainties associated with the Coronavirus (or COVID-19) pandemic,

including closures of our stores, adverse impacts on our sales and

operations, future impairment charges and the risk of global recession;

• failure to successfully implement our growth strategy;




•      disruptions in our ability to select, obtain, distribute and market
       merchandise profitably;

• reliance on merchandise manufactured outside of the United States;




•      the direct and indirect impact of recent and potential tariffs imposed and
       proposed by the United States on foreign imports, including, without
       limitation, the tariffs themselves, any counter-measures thereto and any
       indirect effects on consumer discretionary spending, which could increase
       the cost to us of certain products, lower our margins, increase



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our import related expenses, and reduce consumer spending for discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations; • the impact of price increases, such as, a reduction in our unit sales,


       damage to our reputation with our customers, and our becoming less
       competitive in the marketplace;


• dependence on the volume of traffic to our stores and website;

• inability to attract and retain qualified employees;




•      inability to successfully build, operate or expand our distribution
       centers or network capacity;

• disruptions to our distribution network or the timely receipt of inventory;




•      extreme weather conditions in the areas in which our stores are located
       could negatively affect our business and results of operations;


•      the risks of cyberattacks or other cyber incidents, such as the failure to
       secure customers' confidential or credit card information, or other
       private data relating to our employees or our company, including the costs
       associated with protection against or remediation of such incidents;


•      increased operating costs or exposure to fraud or theft due to customer
       payment-related risks;


•      inability to increase sales and improve the efficiencies, costs and
       effectiveness of our operations;


•      dependence on our executive officers, senior management and other key
       personnel or inability to hire additional qualified personnel;


•      inability to successfully manage our inventory balances and inventory
       shrinkage;

• inability to meet our lease obligations;

• the costs and risks of constructing and owning real property;




•      changes in our competitive environment, including increased competition
       from other retailers and the presence of online retailers;


•      increasing costs due to inflation, increased operating costs, wage rate
       increases or energy prices;

• the seasonality of our business;

• inability to successfully implement our expansion into online retail;




•      disruptions to our information technology systems in the ordinary course
       or as a result of system upgrades;

• the impact of damage or interruptions to our technology systems;

• failure to maintain adequate internal controls;




•      complications with the design or implementation of the new enterprise
       resource system;


•      natural disasters, adverse weather conditions, pandemic outbreaks (in
       addition to COVID-19), global political events, war, terrorism or civil
       unrest;

• the impact of changes in tax legislation;

• current economic conditions and other economic factors;

• the impact of governmental laws and regulations;

• the impact of changes in accounting standards;

• the impact to our financial performance related to insurance programs;

• the costs and consequences of legal proceedings;




•      inability to protect our brand name, trademarks and other intellectual
       property rights;


•      the costs and liabilities associated with infringement of third-party
       intellectual property rights;

• the impact of product and food safety claims and effects of legislation;

• inability to obtain additional financing, if needed;




•      restrictions imposed by our indebtedness on our current and future
       operations; and

• regulations related to conflict minerals.

Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this



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Quarterly Report on Form 10-Q are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.


                                    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 May 2, 2020, we
operated 920 stores in 36 states. In fall 2018, we began offering an expanded
product assortment with prices exceeding $5 in a select number of our stores
(with such product offerings branded as "Ten Below" or "JUST WOW"). 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. All e-commerce sales, which includes shipping and handling
revenue, are included in net sales. Beginning with the third fiscal quarter of
2016, when we launched our e-commerce channel, all e-commerce sales 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.
Effect of the COVID-19 Pandemic on our Business and Operations
The outbreak of the coronavirus (or COVID-19) has been declared a pandemic by
the World Health Organization, has significantly disrupted businesses around the
world, and has adversely impacted our business operations and results of
operations for the first quarter of 2020. On March 13, 2020, the President of
the United States declared a national emergency as a result of the outbreak in
the United States. Federal, state and local governments and private entities
have mandated various restrictions, including travel restrictions, restrictions
on public gatherings, stay at home orders and advisories, and quarantining of
people who may have been exposed to the virus. Such mandates have required
reduction of operating hours and forced temporary closures of non-essential
retailers and other businesses. It is impossible to predict the effect and
ultimate impact of the pandemic as the situation continues to evolve.
As a result of these restrictions and out of concern for our customers and
employees, we temporarily closed all of our stores as of March 20, 2020. We
began reopening our stores at the end of April in compliance with federal, state
and local requirements. As a result of the temporary store closures, we withheld
store rent for the closure period.  We have been actively negotiating with our
landlords on rent deferrals and abatements related to this closure period and
have resumed rent payments for reopened locations. Although we expect to
favorably resolve these negotiations with our landlords, there can be no
assurances in that regard, and all or some of these landlords could claim that
our failure to pay rent is a default under our leases. If such claims were made
and a significant number of such claims were to prevail, this could have a
material adverse impact on our business, financial condition, profitability and
cash flows, including our future growth.
As of May 2, 2020, 111 stores had been reopened to the general public and as of
the date of this filing, approximately 90% of our stores have now been reopened
to the general public. Additionally, we launched a new service, offering
curbside pick-up, where stores are not otherwise permitted to be reopen to the
public.
While the ultimate health and economic impact of the COVID-19 pandemic is highly
uncertain, we expect that our business operations and results of operations,
including our net sales, earnings and cash flows, will be materially impacted
for the foreseeable future, as a result of:
• temporary closure of our stores;


•            decreased customer traffic in stores, including, without limitation,
             as the result of limitations on the number of persons permitted in
             stores at one time by certain local and state regulations;


•            uncertainty of the extent to which customers will maintain purchases
             through our e-commerce website and through curbside pickup (where
             stores remain closed to the public);


•            changes in consumer confidence and consumer spending habits,
             including spending for the merchandise that we sell, and negative
             trends in consumer purchasing patterns due to changes in consumers'
             disposable income, credit availability and debt levels;


•            disruption to our supply chain including the manufacturing, supply,
             distribution, transportation and delivery of our products; and



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•            a slowdown in the U.S. and global economies, and an uncertain global
             economic outlook or a potential credit crisis.


To seek to mitigate the effects of the pandemic and to create financial
flexibility, we have taken the following actions:
•            a majority of our store and distribution center employees were
             furloughed in March and we covered the cost of health benefits for
             such furloughed employees through the end of May;


•            we implemented a voluntary temporary base salary reduction of 50%
             for Joel Anderson, our Chief Executive Officer, and a 25% base
             salary reduction for the remainder of the executive leadership team
             that reports into Mr. Anderson;


•            our Board of Directors elected to forgo its quarterly cash retainers
             for the first quarter of 2020;


•            we implemented a temporary pay reduction for all salaried corporate
             associates and certain field and supply chain leadership and delayed
             annual salary increases for corporate associates;


•            we elected to defer the payment of the employer's portion of FICA
             taxes as allowed by the Coronavirus Aid, Relief, and Economic
             Security ("CARES") Act;


•            we implemented significant non-payroll expense reductions, including
             advertising, occupancy and other store operating expenses,
             distribution and corporate office operating expenses, as well as
             professional and consulting fees;


•            we temporarily ceased paying rent on all closed store locations
             starting in April, are paying rent going forward in connection with
             store re-openings and plan to negotiate with our landlords on rent
             adjustments where appropriate for such stores;


•            we cancelled certain vendor orders and delayed receipts on others in
             order to manage inventory levels, and extended payment terms for
             product and non-product vendors;


•            we significantly reduced our 2020 capital expenditure budget,
             including reducing the number of new stores to be opened in 2020 and
             delaying purchase and construction of a new Midwest distribution
             center; and


•            we amended our credit facility and increased our line of credit from
             $50 million to $225 million.


                 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.
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.



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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
Quarterly Report on Form 10-Q 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.




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.
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, as well as
shipping and handling costs, store occupancy, distribution and buying expenses.
Shipping and handling costs include both internal and third-party 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 Quarterly Report on Form 10-Q regarding our
gross profit and gross margin may not be comparable to similar data made
available by our competitors and other retailers.

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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. 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, 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.

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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.

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