Five Below, Inc.

Good day and welcome to the Five Below Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Christiana Pell's VP of Investor Relations and Treasury. Please go ahead.

Thank you. Good afternoon, everyone, and thanks for joining us today for Five Below's second quarter 2023 financial results conference call. On today's call are Joel Anderson, President and Chief Executive Officer, Ken Bull, Chief Operating Officer, and Kristi Chipman, Chief Financial Officer and Treasurer. After management has made their formal remarks, we will open the call to questions. Please limit yourself to one question to enable us to accommodate everyone in the queue. I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and our SEC filings. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update our forward-looking statements. If you do not have a copy of today's press release, you may obtain one by visiting the investor relations page of our website at FiveBelow.com. I will now turn the call over to Joel.

Thank you, Christiana. Before I get started, I want to officially introduce Christy Chipman to you as our new CFO and Treasurer. We're really excited to have her on board. And while she's only been here six weeks, she has hit the ground running and is already well immersed in the business. As you recall, we promoted Ken Boll to COO in March, and he has been a great resource to help with the transition. Christy, welcome to Five Below. Moving now to our second quarter results. We are pleased to deliver Q2 in line with our guidance with sales growth over 13% to $759 million and a 2.7% comp sales increase, which continued to be driven by transactions. Our comp transactions increased a strong 4.5%. This once again illustrates the success of our Five Beyond conversion strategy and the appeal of our WOW offering that represents outstanding value, value that is even more appealing when customers are stretching their dollars further. Diluted earnings per share came in towards the high end of our outlook range, increasing approximately 14% to $0.84. Our merchants teams, again, curated a product assortment that reinforces Five Below's relevancy and we saw continued popularity of a broad variety of trends across our worlds. Notable performers were squish, Hello Kitty, anime, collectibles, and our version of consumables, including candy, snacks, and beverages. Our teams also captured the popular Swifty trend with stylish clothing, jewelry, such as friendship bracelets, and beauty products. Finally, We were thrilled to see licenses begin to grow again as new movie releases like the Super Mario Brothers in April and Barbie in late July drove customers into theaters and our stores. In anticipation of a successful release of the Barbie movie, our buyers were able to source several Barbie related items, including a mini styling head, beauty sets, and even Barbie dolls, all selling for only $5. This is a great example of how we can quickly capitalize on a trend by sourcing amazing product at incredible value for our customers. Overall, given the still challenging economic backdrop, we were pleased with our results and progress in executing across the five key strategic pillars that underpin Five Below's long-term triple-double vision. Let me give you a quick update on each. The first pillar is store expansion. With nationwide potential of over 3,500 locations, new stores are the key growth driver for us. And our new store economics remain industry leading with a payback period under a year. In the second quarter, we opened 40 new stores across 24 states. One of these openings in Louisiana made our top 25 all-time grand opening lists. We continue to see great opportunities in the marketplace remain on track to achieve our goal of opening over 200 stores this year, and our real estate teams have a strong pipeline of new stores for 2024. As an example, we will open over 130 stores in the next four months, and our first half 2024 openings will get much closer to our historical 50-50 opening cadence. Moving to our second pillar, store potential, We set an aggressive store conversion goal for fiscal 2023 and are pleased to have already completed close to 400 conversions. This brings our total converted stores to over 600 since we announced the new prototype at Investor Day in March of 2022. We continue to see these converted stores drive higher sales and transactions, ultimately growing our average unit volume through the addition of both Buy Beyond as well as new products and services. Our third pillar is product and brand strategy. Finding great product at extraordinary value for our customers is our passion. And Five Below's merchants persistently pursue trends, wow, newness, and value, both in the United States and across the globe. We are excited about the new global sourcing office in India and the opportunities it will bring in the future. We're already beginning to realize the benefits of having our own team in Asia to drive speed and improve quality, along with strengthening strategic partnerships with key suppliers in the region. In fact, we will be delivering the first product source to this new office in time for the upcoming holiday season. On brand strategy, we continue to integrate data and analytics into our digital marketing efforts to better understand the cohorts of customers. As I mentioned last quarter, we kicked off a marketing campaign for the store conversions in May with the goal of bringing to life the new Five Beyond store format. We believe it was successful in reaching new customers as evidenced by increases in transactions and customer count. Through our efforts and growing presence on social media, the Five Below brand has established itself as a go-to brand for value and fun, and we want to ensure the word is out to everyone. Our fourth pillar is inventory optimization. This is the pillar Ken is now focused on as COO, while also ensuring the other four pillars are scaling effectively, enabling the delivery of our triple-double vision. Ken will update you in a few minutes. The fifth pillar, crew innovation, focuses on the store crew and the pipeline of talent that is critical to achieving the triple-double. By focusing on and investing in our associates through training, wages, and opportunities for advancement, the engagement of our crew continues to improve year over year. We will begin holiday recruiting later this quarter, looking to hire over 20,000 seasonal associates at our stores and ship centers for the all-important holiday season. They are key to delivering the wow shopping experience at Buy Below for our customers. In summary, We are pleased with our financial results and operational accomplishments year to date. We're also seeing success with the start of the second half, which kicked off with a solid back to school season. A notable call out is backpacks. At Five Below, a staple that we infuse with newness each year. For example, this year, we introduced clear backpacks, expanded our license assortment, and added coordinated patches and key chains for customers to personalize their backpacks. We also significantly increased our donation program with over 360,000 backpacks provided for kids in need. As we look to the rest of the year, we remain mindful of the macro pressures facing our customers. Additionally, as many retailers have discussed, we also expect higher than originally anticipated shrink levels for the year and have adjusted our guidance accordingly, which Christy will discuss in more detail. Against this backdrop, I am very pleased with how the teams continue to play offense. Our merchants are ready for holiday and have procured a terrific lineup of fresh, trend-right product at outstanding values we believe our customers will love. I want to thank our other teams at Wildtown, supporting the stores and ship centers, and our overall holiday plans. With that, I will turn it over to Ken to say a few words before Christy reviews the financials and our outlook in more detail. Ken?