Five Below, Inc. (NASDAQ:FIVE) Q3 2017 Earnings Conference Call Transcript

Nov 30, 2017 • 04:30 pm ET

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Five Below, Inc. (NASDAQ:FIVE) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day and welcome to the Five Below Third Quarter Fiscal 2017 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Christiane Pelz, VP of IR. Please go ahead.

Executive
Christiane Pelz

Thank you, Gary. Good afternoon everyone and thanks for joining us today for Five Below's third quarter 2017 financial results conference call. On today's call are Joel Anderson, President and CEO; and Ken Bull, CFO and Treasurer. After management has made their formal remarks, we will open the call to questions.

(Forward-Looking Cautionary Statements) I will now turn the call over to Joel.

Executive
Joel Anderson

Thank you, Christiane, and thanks everyone for joining us for our third quarter earnings call.

I will review the highlights of the quarter before handing it over to Ken to discuss our financials and outlook, and then, we will open the call for questions.

I'd like to start by saying, I'm very excited to report that we delivered another phenomenal quarter. And I'd also like to thank our many long-term shareholders for your continued support of Five Below. Sales, comps and earnings in the third quarter, all outperformed and exceeded our expectations.

Sales increased 29% to $257 million, driven by strong results from our new stores and a traffic-driven comp of 8.5%. As a reminder, remember, we use transactions as a proxy for traffic.

Earnings per share grew 80% to $0.18, representing our highest earnings per share growth quarter in over four years. New stores typically account for over 80% of our annual growth, and growing the store base remains our highest priority. During the quarter, we opened a record 41 new stores in diverse markets across 24 states, including our 600th store in Augusta, Maine and the 15th Five Below in Southern California.

Our new stores continued delivering strong performance across both new and existing markets in urban, suburban and semirural settings. Three new stores in fact, made our top 10 of all-time fall grand openings. And we ended the quarter with 625 stores, an increase of 21% versus Q3 last year. Additionally, in early November, we opened one more new store, which completed our new store program for the year. All of these new stores reflect the refreshed Five Below store experience to which our customers have responded favorably.

The class of 2017 is generating very strong productivity with average first year unit volumes that we believe are on track to exceed to $2 million. That would make this our strongest class yet.

From a real estate perspective, our growing brand awareness, consistent results and strong balance sheet increased our desirability of the tenant. We continue to see great new store opportunities in shopping centers with solid traffic and well-known national co-tenants. I'm happy to report that the majority of next year stores already have leases in progress and we are beginning working on