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What changed in FIVE BELOW, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIVE BELOW, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+232 added−260 removedSource: 10-K (2023-03-16) vs 10-K (2022-03-30)

Top changes in FIVE BELOW, INC's 2023 10-K

232 paragraphs added · 260 removed · 213 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

68 edited+6 added−15 removed79 unchanged
Biggest changeAs 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. 13 Marketing and Advertising Our cost-effective marketing strategy is designed to promote brand awareness and drive store and website traffic with our target demographic, as well as other value-oriented customers.
Biggest changeAs a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.
Our electronic filings with the Securities and Exchange Commission (including all annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to these reports), including the exhibits, are available, free of charge, through our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the Securities and Exchange Commission. 18
Our electronic filings with the Securities and Exchange Commission (including all annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to these reports), including the exhibits, are available, free of charge, through our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the Securities and Exchange Commission.
When entering new markets, we employ a store clustering strategy, opening multiple stores in a single market on the same day, enabling us to leverage marketing and pre-opening expenses and generate initial new market brand awareness. Our store growth is supported by our new store economics, which we believe to be compelling.
When entering new markets, we employ a store clustering strategy, opening multiple stores in a single market on the same day, enabling us to leverage marketing and pre-opening expenses and generate initial new market brand awareness. 11 Our store growth is supported by our new store economics, which we believe to be compelling.
We believe that we compare favorably relative to many of our competitors based on our merchandising strategy, edited product assortment targeted at tweens and teens, store environment, flexible real estate strategy and company culture. Nonetheless, certain of our competitors have greater financial, distribution, marketing and other resources than we do.
We believe that we 13 compare favorably relative to many of our competitors based on our merchandising strategy, edited product assortment targeted at tweens and teens, store environment, flexible real estate strategy and company culture. Nonetheless, certain of our competitors have greater financial, distribution, marketing and other resources than we do.
Our available benefits also include the following: Health and Wellness Medical (with a choice of two high deductible plans and a traditional plan) Prescription drug coverage included with every medical plan Dental (with a choice of three plans) Vision plan (with a choice of two plans) Health savings account with Company match Pre-tax flexible spending account for qualified medical and dependent care expenses Mental health support with medical benefits coverage Employee assistance program with supplemental mental health support Medical option for part-time employees Life and Disability No cost life and disability coverage provided for all full-time employees Supplemental life plan at option and cost of employees 401(k) 401(k) retirement savings option with safe harbor Company match Other In-store employee discount Employee Stock Purchase Plan Paid time off provided to all full-time employees Paid parental leave provided to all full-time employees Identification theft, pet insurance, legal services access, term life, as well as supplemental accident, hospital indemnity, and critical illness coverage Employment Practices We aim to provide challenging, meaningful and rewarding opportunities for personal and professional growth of all employees and encourage all employees to bring their unique backgrounds and experiences to the table to work together.
Our available benefits also include the following: Health and Wellness Medical (with a choice of two high deductible plans and a traditional plan) Prescription drug coverage included with every medical plan Dental (with a choice of three plans) Vision plan (with a choice of two plans) Health savings account with Company match Pre-tax flexible spending account for qualified medical and dependent care expenses Mental health support with medical benefits coverage Crew assistance program with supplemental mental health support Medical option for part-time crew Life and Disability No cost life and disability coverage provided for all full-time crew Supplemental life plan at option and cost of crew 401(k) 401(k) retirement savings option with safe harbor Company match Other In-store crew discount Employee Stock Purchase Plan Paid time off provided to all full-time crew Paid parental leave provided to all full-time crew Identification theft, pet insurance, legal services access, term life, as well as supplemental accident, hospital indemnity, and critical illness coverage Employment Practices 15 We aim to provide challenging, meaningful and rewarding opportunities for personal and professional growth of all crew and encourage all crew to bring their unique backgrounds and experiences to the table to work together.
This means that we make all employment decisions (such as who to recruit, hire, train, promote, transfer, and terminate, as well as compensation decisions) without considering an employee’s or applicant’s sex, race, religion, color, gender (including gender identity and gender expression), national origin, ancestry, physical or mental disability, medical condition, genetic information, marital status, registered domestic partner status, age, sexual orientation, military and veteran status or any other characteristic protected by federal, state or local law.
This means that we make all employment decisions (such as who to recruit, hire, train, promote, transfer, and terminate, as well as compensation decisions) without considering an crew’s or applicant’s sex, race, religion, color, gender (including gender identity and gender expression), national origin, ancestry, physical or mental disability, medical condition, genetic information, marital status, registered domestic partner status, age, sexual orientation, military and veteran status or any other characteristic protected by federal, state or local law.
We also employ district managers who are responsible for overseeing the operations of 10 to 15 stores, on average, and regional directors who are responsible for overseeing the operations of our district managers. We are guided by a philosophy that recognizes strong sales performance and customer service, allowing us to identify and reward employees who meet our high performance standards.
We also employ district managers who are responsible for overseeing the operations of 10 to 15 stores, on average, and regional directors who are responsible for overseeing the operations of our district managers. We are guided by a philosophy that recognizes strong sales performance and customer service, allowing us to identify and reward crew who meet our high performance standards.
Store managers participate in a rewarding bonus incentive program. We also recognize individual performance through internal promotions and provide extensive opportunities for advancement. Our employees are critical to achieving our goals, and we strive to hire talented people with high energy levels and motivation.
Store managers participate in a rewarding bonus incentive program. We also recognize individual performance through internal promotions and provide extensive opportunities for advancement. Our crew are critical to achieving our goals, and we strive to hire talented people with high energy levels and motivation.
Our new store model targets an average payback period of less than one year on our initial investment. Store Operations Each of our stores is managed by a store manager and one or two assistant managers who oversee full-time and part-time employees within each store.
Our new store model targets an average payback period of less than one year on our initial investment. Store Operations Each of our stores is managed by a store manager and one or two assistant managers who oversee full-time and part-time crew within each store.
In order to promote the desired work environment, we have adopted policies which describe the standards of respect, inclusivity and professionalism expected of all employees. As an equal opportunity employer, we comply with all federal, state and local laws.
In order to promote the desired work environment, we have adopted policies which describe the standards of respect, inclusivity and professionalism expected of all crew. As an equal opportunity employer, we comply with all federal, state and local laws.
Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses. 6 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, decreased by 5.5% in fiscal 2020, and increased by 0.6% in fiscal 2019.
Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses. 6 We believe that our business model has resulted in strong financial performance when considered in light of the economic environment: • Our comparable sales decreased by 2.0% in fiscal 2022, increased by 30.3% in fiscal 2021, and decreased by 5.5% in fiscal 2020.
Our customer service and store procedure training programs are designed to enable employees to assist customers in a friendly manner and to help create a positive sales-driven environment as well as teach successful operating practices and procedures.
Our customer service and store procedure training programs are designed to enable crew to assist customers in a friendly manner and to help create a positive sales-driven environment as well as teach successful operating practices and procedures.
Employee Engagement We engage our employees in a variety of ways, including: conducting an annual employee survey to directly engage with, and collect feedback from our employees, maintaining an open-door policy for employees to report concerns, and providing an anonymous reporting hotline, available in multiple languages and managed by an independent company not affiliated with us, to allow employees to voice concerns freely.
Crew Engagement We engage our crew in a variety of ways, including: conducting an annual crew survey to directly engage with, and collect feedback from our crew, maintaining an open-door policy for crew to report concerns, and providing an anonymous reporting hotline, available in multiple languages and managed by an independent company not affiliated with us, to allow crew to voice concerns freely.
We have developed a unique culture that emanates from our employees, many of whom frequently shop at Five Below, to our customers, thereby driving a higher level of connectivity and engagement.
We have developed a unique culture that emanates from our crew, many of whom frequently shop at Five Below, to our customers, thereby driving a higher level of connectivity and engagement.
Each store manager is responsible for the day-to-day operations of his or her store, including the unit’s operating results, maintaining a clean and appealing store environment and the hiring, training and development of employees.
Each store manager is responsible for the day-to-day operations of his or her store, including the unit’s operating results, maintaining a clean and appealing store environment and the hiring, training and development of crew.
These products are most often placed at the front of the store. Set forth below is data for the following groups of products – leisure, fashion and home, and party and snack.
These products are most often placed at the front of the store. Set forth below is data for the following groups of products – leisure, fashion and home, and snack and seasonal.
We continuously assess ways to maximize productivity and efficiency, and evaluate opportunities to further enhance our existing systems. 14 Government Regulation We are subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers and/or govern the promotion and sale of merchandise and the operation of stores and distribution centers.
We continuously assess ways to maximize productivity and efficiency, and evaluate opportunities to further enhance our existing systems. Government Regulation We are subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers and/or govern the promotion and sale of merchandise and the operation of stores and shipcenters.
We do not and will not tolerate harassment, discrimination, retaliation, and disrespectful or other unprofessional conduct against employees or any other covered persons based on any protected characteristic.
We do not and will not tolerate harassment, discrimination, retaliation, and disrespectful or other unprofessional conduct against crew or any other covered persons based on any protected characteristic.
We promote and strive to maintain a safe and healthy work environment and conduct our business in ways that protect our employees’ safety and are sensitive to the environment.
We promote and strive to maintain a safe and healthy work environment and conduct our business in ways that protect our crew’s safety and are sensitive to the environment.
Our new store model assumes a store size of approximate ly 9,000 sq uare feet that achieves sales of approximately $2.0 million in the first full year of operation and an average new store cash investment of approximate ly $0.4 million, including our store build-out (net of tenant allowances), inventory (net of payables) and cash pre-opening expenses.
Our new store model assumes a store size of approximately 9,500 sq uare feet that achieves sales of approximately $2 million in the first full year of operation and an average new store cash investment of approximately $0.4 million, including our store build-out (net of tenant allowances), inventory (net of payables) and cash pre-opening expenses.
Our recent store growth is summarized in the following table: Period Stores at Start of Period Stores Opened Stores Closed Net Store Increase Stores at End of Period Fiscal 2019 750 150 — 150 900 Fiscal 2020 900 122 2 120 1,020 Fiscal 2021 1020 171 1 170 1,190 Opening stores within existing markets enables Five Below to benefit from enhanced brand awareness and to achieve advertising, operating and distribution efficiencies.
Our recent store growth is summarized in the following table: Period Stores at Start of Period Stores Opened Stores Closed Net Store Increase Stores at End of Period Fiscal 2020 900 122 2 120 1,020 Fiscal 2021 1,020 171 1 170 1,190 Fiscal 2022 1,190 150 — 150 1,340 Opening stores within existing markets enables Five Below to benefit from enhanced brand awareness and to achieve advertising, operating and distribution efficiencies.
We utilize the survey results to identify strengths and weaknesses and create action plans to improve engagement and, ultimately, team performance. In 2021 a high percentage of our employees participated in the survey, and the results demonstrated that our overall engagement levels exceed Gallup’s averages in retail, in the United States and worldwide.
We utilize the survey results to identify strengths and weaknesses and create action plans to improve engagement and, ultimately, team performance. In 2022 a high percentage of our crew participated in the survey, and the results demonstrated that our overall engagement levels exceed Gallup’s averages in retail, in the United States and worldwide.
Our marketing team works with our merchandising team to develop novel and dynamic techniques to display our products, including distinctive merchandise fixtures and colorful and stimulating signage, which attract customers, encourage hands-on interaction with our quality products and convey our value pricing.
Our marketing team, which reports into our Chief Merchandising Officer, works with our merchandising team to develop novel and dynamic techniques to display our products, including distinctive merchandise fixtures and colorful and stimulating signage, which attract customers, encourage hands-on interaction with our quality products and convey our value pricing.
We conduct an annual employee survey to measure employee engagement. The survey results help us understand the employee experience, evaluate our performance, identify our strengths, and pinpoint opportunities for improvement. Starting in fiscal 2020, we partnered with Gallup, Inc., a global analytics and advisory firm, to monitor and improve the engagement of our workforce.
The annual crew survey results help us understand the crew experience, evaluate our performance, identify our strengths, and pinpoint opportunities for improvement. Starting in fiscal 2020, we partnered with Gallup, Inc., a global analytics and advisory firm, to monitor and improve the engagement of our workforce.
The actual number, location and timing of new store openings in 2022 will depend on a number of factors, such as retail trends, competition, the general economic environment and our ability to hire and retain new store managers and employees.
The actual number, location and timing of new store openings in 2023 will depend on a number of factors, such as retail trends, competition, the general economic environment and our ability to hire and retain new store managers and crew.
Merchandising, Sourcing and Distribution We have developed a disciplined approach to buying and a dynamic inventory planning and allocation process to support our merchandising strategy. 12 Merchandising Our merchandising team consists of a Chief Merchandising Officer, who reports directly to our Chief Executive Officer, and is supported by general merchandising managers and an extensive team of merchandising employees.
Merchandising, Sourcing and Distribution We have developed a disciplined approach to buying and a dynamic inventory planning and allocation process to support our merchandising strategy. Merchandising Our merchandising team consists of a Chief Merchandising Officer, who reports directly to our Chief Executive Officer, and is supported by an extensive team of merchandising crew.
Our Company Five Below is a leading high-growth value retailer offering trend-right, high-quality products loved by tweens, teens and beyond. We know life is way better when you’re free to “let go & have fun” in an amazing experience filled with unlimited possibilities.
Our Company Five Below is a leading high-growth value retailer offering trend-right, high-quality products loved by tweens, teens and beyond. We believe life is better when customers are free to “let go & have fun” in an amazing experience filled with unlimited possibilities.
Our strategy includes highlighting our brand, exceptional value and quality proposition predominantly through the use of digital advertising, commercials (on television and through streaming), syndicated talk show integrations and local marketing, with a focus on peak selling seasons.
Our strategy includes highlighting our brand, exceptional value and quality proposition predominantly through the use of digital advertising, commercials (on television and through streaming), affiliate marketing, social influencers, content creators, syndicated talk show integrations and local marketing, with a focus on peak selling seasons.
We work with approximately 1,000 vendors, with no single vendor representing more than 5% of our purchases in fiscal 2021. We sourced approximately 60% of our purchases from domestic vendors in fiscal 2021. We typically have no long-term supply agreements or exclusive arrangements with our vendors.
We work with approximately 1,000 vendors, with no single vendor representing more tha n 5% of our purchases in fiscal 2022. We sourced approximately 60% of our purchases from domestic vendors in fiscal 2022. We typically have no long-term supply agreements or exclusive arrangements with our vendors.
We believe that executing on these strategies will increase the frequency of purchases by our existing customers and attract new customers to our stores. • Increase Brand Awareness. We have a cost-effective marketing strategy designed to promote brand awareness and drive store and website traffic.
We intend to increase our brand awareness through cost-effective marketing efforts and enthusiastic customer engagement. We believe that executing on these strategies will increase the frequency of purchases by our existing customers and attract new customers to our stores. • Increase Brand Awareness. We have a cost-effective marketing strategy designed to promote brand awareness and drive store and website traffic.
We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers. In March 2019, we completed the purchase of an approximately 700,000 square foot distribution center in Forsyth, Georgia. The total amount paid for the land and building was approximately $42 million.
We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional shipcenters. In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia. The total amount paid for the land and building was approximately $42 million. We began operating the shipcenter in April 2019.
Growth Strategy We believe we can grow our net sales and earnings by executing on the following strategies: • Grow Our Store Base. We believe there is significant opportunity to expand our store base throughout the United States from 1,190 locations as of January 29, 2022 to more than 3,500 locations within the United States over time.
Growth Strategy We believe we can grow our net sales and earnings by executing on the following strategies: • Grow Our Store Base. We believe there is significant opportunity to expand our store base throughout the United States from 1,340 locations as of January 28, 2023 to more than 3,500 l ocations within the United States over time.
We realize cost savings by working with our vendors to streamline and reduce packaging to diminish shipping costs. For our direct-to-customer e-commerce business, we commenced fulfillment operations in Pedricktown, New Jersey in fiscal 2018, Cincinnati, Ohio in fiscal 2019 and Buckeye, Arizona in fiscal 2021.
We realize cost savings by working with our vendors to streamline and reduce packaging to diminish shipping costs. 12 For our direct-to-customer e-commerce business, we commenced fulfillment operations in Pedricktown, New Jersey in fiscal 2018, Buckeye, Arizona in fiscal 2021, and Indianapolis, Indiana in fiscal 2022.
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. The total amount paid for the land and building was approximately $56 million. We began operating the distribution center in July 2020.
In August 2019, we acquired land in Conroe, Texas, to build an approximately 860,000 square foot shipcenter. The total amount paid for the land and building was approximately $56 million. We began operating the shipcenter in July 2020. In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter.
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 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.
Our typical store features in excess of 4,000 stock-keeping units, or SKUs, across a number of our category worlds including Style , Room, Sports, Tech , Create , Party, Candy and New & Now .
Our typical store features in excess of 4,000 products across a number of our category worlds including Style , Room, Sports, Tech , Create , Party, Candy and New & Now .
We maintain a pipeline of real estate sites that have been approved by our real estate committee and have executed 89 leases as of January 29, 2022 for new stores in fiscal 2022.
We maintain a pipeline of real estate sites that have been approved by our real estate committee and have executed 103 leases as of January 28, 2023 for new stores in fiscal 2023.
The following map shows the number of stores in each of the states in which we operated and the locations of our distribution centers as of January 29, 2022. 10 Store Design and Layout We present our products in a unique and engaging in-store atmosphere.
The following map shows the number of stores in each of the states in which we operated and the locations of our shipcenters as of January 28, 2023. 10 Store Design and Layout We present our products in a unique and engaging in-store atmosphere.
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%. Our Competitive Strengths We believe the following strengths differentiate Five Below from competitors and are the key drivers of our success: • Unique Focus on the Tween and Teen Customer.
Over the same period, our operating income increased from $154.8 million to $345.0 million, representing a compounded annual growth rate of 49.3%. Our Competitive Strengths We believe the following strengths differentiate Five Below from competitors and are the key drivers of our success: • Unique Focus on the Tween and Teen Customer.
We opened the first Five Below store in the greater Philadelphia area in 2002 and, since then, have been expanding throughout the United States. As of January 29, 2022, we operated a total of 1,190 locations across 40 states.
We opened the first Five Below store in the greater Philadelphia area in 2002 and, since then, have been expanding throughout the United States. As of January 28, 2023, we operated a total of 1,340 locations across 42 states.
Distribution and Fulfillment We distribute over 85% of our merchandise for our retail stores from our approximately 1,000,000 square foot distribution center in Pedricktown, New Jersey, our approximately 860,000 square foot distribution center in Conroe, Texas, our approximately 860,000 square foot distribution center in Buckeye, Arizona, our approximately 700,000 square foot distribution center in Forsyth, Georgia and our approximately 600,000 square foot distribution center in Olive Branch, Mississippi, with the remaining merchandise shipped directly from the vendor to our stores.
Distribution and Fulfillment We distribute approximately 85% of our merchandise for our retail stores from our approximately 1,030,000 square foot shipcenter in Indianapolis, Indiana, our approximately 1,000,000 square foot shipcenter in Pedricktown, New Jersey, our approximately 860,000 square foot shipcenter in Conroe, Texas, our approximately 860,000 square foot shipcenter in Buckeye, Arizona and our approximately 700,000 square foot shipcenter in Forsyth, Georgia, with the remaining merchandise shipped directly from the vendor to our stores.
The principal basis upon which we compete is by offering a dynamic, edited assortment of trend-right products, with most priced at $5 and below and also inclusive of select brands and licensed merchandise, targeted at the tweens, teens and beyond.
We also compete with online retailers who do not have traditional brick and mortar locations. The principal basis upon which we compete is by offering a dynamic, edited assortment of trend-right products, with most priced at $5 and below and also inclusive of select brands and licensed merchandise, targeted at the tweens, teens and beyond.
These values guide all of our decisions and actions. • Wow Our Customers • Unleash Your Passion • Hold the Penny Hostage • Achieve the Impossible • Work Hard, Have Fun and Build a Career Employees As of January 29, 2022, we employed approximately 6,100 full-time and 14,100 part-time employees.
These values guide all of our decisions and actions. • Wow Our Customers • Unleash Your Passion • Hold the Penny Hostage • Achieve the Impossible • Work Hard, Have Fun and Build a Career Crew As of January 28, 2023, we employed approximately 6,500 full-time and 15,400 part-time crew.
Comparable sales results in fiscal 2021 and fiscal 2020 were impacted by the COVID-19 pandemic. • We expanded our store base from 900 stores at the end of fiscal year 2019 to 1,190 stores at the end of fiscal year 2021, representing a compounded annual growth rate of 15.0%. • Between fiscal 2019 and 2021, our net sales increased from $1.8 billion to $2.8 billion, representing a compounded annual growth rate of 24.2%.
Comparable sales results in fiscal 2021 and fiscal 2020 were impacted by the COVID-19 pandemic. • We expanded our store base from 1,020 stores at the end of fiscal year 2020 to 1,340 stores at the end of fiscal year 2022, representing a compounded annual growth rate of 14.6%. • Between fiscal 2020 and 2022, our net sales increased from $2.0 billion to $3.1 billion, representing a compounded annual growth rate of 25.2%.
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.
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.
In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot distribution center. The total amount paid for the land and building was 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.
The total amount paid for the land and building was approximately $65 million. We began operating the shipcenter in August 2021. In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot shipcenter. The total amount paid for the land and building was approximately $60 million. We began operating the shipcenter in June 2022.
Why We Exist - Our Purpose - What We Believe - The Five Below Way - How We Behave - Our Five Core Values - Five Below knows life is way better when you're free to Let Go and Have Fun in an amazing experience filled with unlimited possibilities priced so low we make it easy to say YES! to the newest, coolest stuff!
Human Capital Our Purpose, Beliefs and Core Values The success and growth of Five Below is the direct result of our crew who embrace our purpose, our beliefs and our core values. 14 Why We Exist - Our Purpose - What We Believe - The Five Below Way - How We Behave - Our Five Core Values - Five Below believes life is better when customers are free to Let Go and Have Fun in an amazing experience filled with unlimited possibilities priced so low we make it easy to say YES! to the newest, coolest stuff!
References to 2022, 2021, 2020, 2019, 2018, and 2017 are to our fiscal years unless otherwise specified. 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.
Due to the 53rd week in fiscal 2017, the period from January 29, 2017 to February 3, 2018, 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.
Our new store model assumes a store size of approximately 9,000 square feet and is typically located within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets.
Our new store model assumes a store size of approximately 9,500 square feet and is typically located within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets. We opened 150 new stores in fiscal 2022 and we plan to open 200 new stores in fiscal 2023.
We generally ship merchandise from our distribution centers to our stores between two and four times a week, depending on the season and the volume of a specific store. We use contract carriers to ship merchandise to our stores.
We generally ship merchandise from our shipcenters to our stores one to four times a week, depending on the season and the volume of a specific store. We use either contract carriers or our own private-fleet of trucks to ship merchandise to our stores.
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.
The results also reflected that we are a mission-driven company with crew’s response on our strength of purpose far exceeding Gallup’s measurement for world class. 16 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.
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 2023 or "fiscal 2023" refer to the period from January 29, 2023 to February 3, 2024, which consists of a 53-week fiscal 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.
Of our total employees, approximately 600 were corporate, approximately 1,100 were based at our distribution centers in Pedricktown, New Jersey, Olive Branch, Mississippi, Forsyth, Georgia, Conroe, Texas, Cincinnati, Ohio and Buckeye, Arizona and approximately 18,500 were store employees located in 40 states throughout the United States. The number of part-time employees fluctuates depending on seasonal needs.
Of our total crew, approximately 700 were corporate, approximately 900 were based at our shipcenters in Pedricktown, New Jersey, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona, and Indianapolis, Indiana and approximately 20,300 were store crew located in 42 states throughout the United States. The number of part-time crew fluctuates depending on seasonal needs.
We believe our policies and practices are in compliance with all applicable laws and have been designed with significant inputs from the employees themselves. Turnover Retention of our talented employees is an important focus for us. We, therefore, monitor employee turnover, particularly at the store management level and employ various strategies to strive to improve our turnover rate.
Turnover Retention of our talented crew is an important focus for us. We, therefore, monitor crew turnover, particularly at the store management level and employ various strategies to strive to improve our turnover rate.
We are committed to maintaining a drug-free workplace and prohibit the manufacture, distribution, sale, purchase, transfer, possession, or use of illegal substances in the workplace, while representing us outside the workplace or if such activity affects work performance or the work environment of the Company. 17 We encourage open, timely communications that help us achieve organizational goals, share information, increase understanding, participate in the decision-making process, enhance our pride in the organization and provide recognition for our work-related successes.
We are committed to maintaining a drug-free workplace and prohibit the manufacture, distribution, sale, purchase, transfer, possession, or use of illegal substances in the workplace, while representing us outside the workplace or if such activity affects work performance or the work environment of the Company.
Our new store model assumes a store size of approxim ately 9,000 squa re feet. Our stores are primarily located in power, community and lifestyle shopping centers; approximately 5% of our stores are located in malls.
Our Stores As of January 28, 2023, we operated 1,340 stores throughout the United States. Our new store model assumes a store size of approxim atel y 9,500 sq ua re feet. Our stores are primarily located in power, community and lifestyle shopping centers; approximately 5% of our stores are located in malls.
Insurance We maintain third-party insurance for a number of risk management activities including but not limited to workers’ compensation, cyber, directors & officers, general liability, property and employee-related health care benefits. We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.
We monitor changes in these laws and believe that we are in material compliance with applicable laws. Insurance We maintain third-party insurance for a number of risk management activities including but not limited to workers’ compensation, cyber, directors & officers, general liability, property and crew-related health care benefits.
Fashion and home includes items such as personal accessories, “attitude” t-shirts, beauty offerings, home goods and storage options. Party and snack includes items such as party and seasonal goods, greeting cards, candy and other snacks, and beverages. Our Stores As of January 29, 2022, we operated 1,190 stores throughout the United States.
Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, arts and crafts, and party. Fashion and home includes items such as personal accessories, “attitude” t-shirts, beauty offerings, home goods and storage options. Snack and seasonal includes items such as seasonal goods, greeting cards, candy and other snacks, and beverages.
We also aim to execute multiple store openings in a given new market on the same day in order to leverage marketing efforts to produce maximum impact. In addition to our marketing and advertising efforts described above, we also maintain an e-commerce website ( www.fivebelow.com ) and, over the last few years, our online following has grown substantially.
In addition to our marketing and advertising efforts described above, we also maintain an e-commerce website ( www.fivebelow.com ) and, over the last few years, our online following has grown substantially. We use both our website and social media channels to highlight our featured products, value/quality proposition, store locations, employment opportunities, and grand openings.
Employees on our real estate team spend considerable time evaluating prospective sites before bringing a proposal to our real estate committee.
Crew on our real estate team spend considerable time evaluating prospective sites before bringing a proposal to our real estate committee. Our real estate committee, which is composed of senior management including our executive officers, approves all of our locations before a lease is signed.
Many of these retail companies operate stores in many of the areas where we operate, and many of them engage in extensive advertising and marketing efforts. We also compete with online retailers who do not have traditional brick and mortar locations.
Competition We compete with a broad range of retailers including discount, mass merchandise, grocery, drug, convenience, variety and other specialty stores with both physical locations and online stores. Many of these retail companies operate stores in many of the areas where we operate, and many of them engage in extensive advertising and marketing efforts.
Our new store model assumes approximatel y 9,000 s quare feet and is primarily in-line locations within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets. We have a talented and disciplined real estate management team and a rigorous real estate site selection process.
We opened 170 net new stores in fiscal 2021 and 150 new stores in fiscal 2022, and we plan to open 200 new stores in fiscal 2023. Our new store model assumes approximately 9,500 square feet and is primarily in-line locations within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets.
In August 2016, we commenced selling merchandise on the internet, through our fivebelow.com e-commerce website. We launched our e-commerce operation as an additional channel to serve 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.
We believe that we have the opportunity to grow our store base to more than 3,500 locations over time. We also offer our merchandise on the internet, through our fivebelow.com e-commerce website as well as with an on demand third party delivery service to enable our customers to shop online and receive convenient same day delivery.
The percentage of net sales represented by each product group for each of the last three fiscal years was as follows: Percentage of Net Sales 2021 2020 2019 Leisure 47.8 % 47.3 % 49.8 % Fashion and home 30.2 % 35.8 % 31.3 % Party and snack 22.0 % 16.9 % 18.9 % Total 100.0 % 100.0 % 100.0 % Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, and arts and crafts.
The percentage of net sales represented by each product group for each of the last three fiscal years was as follows: Percentage of Net Sales 2022 2021 2020 Leisure (1) 47.6 % 49.6 % 49.2 % Fashion and home 29.2 % 30.2 % 35.8 % Snack and seasonal (1) 23.2 % 20.2 % 15.0 % Total 100.0 % 100.0 % 100.0 % (1) Due to realignment of certain products, there was a minor adjustment to historical sales by product group.
For new store openings, we seek to create community awareness and consumer excitement predominantly through digital advertising, public relations and community outreach promoting the grand opening and by creating an engaging grand opening event that includes contests, and giveaways.
For new store openings, we seek to create community awareness and consumer excitement predominantly through digital advertising, public relations, community outreach and events promoting the grand opening. We also aim to execute multiple store openings in a given new market on the same day in order to leverage marketing efforts to produce maximum impact.
We analyze the demographics of the surrounding trade areas and the performance of adjacent retailers, as well as traffic and specific site characteristics and other variables. As of January 29, 2022, we have executed lease agreements for the opening of 89 new stores in fiscal 2022. • Drive Comparable Sales.
We have a talented and disciplined real estate management team and a rigorous real estate site selection process. We analyze the demographics of the surrounding trade areas and the performance of adjacent retailers, as well as traffic and specific site characteristics and other variables.
We expect to continue generating positive comparable sales growth by continuing to hone and refine our dynamic merchandising offering and differentiated in-store shopping experience. We intend to increase our brand awareness through cost-effective marketing efforts and enthusiastic customer engagement.
As of January 28, 2023, we have executed lease agreements for the opening of 103 new stores in fiscal 2023. • Drive Comparable Sales. We expect to continue generating positive comparable sales growth by continuing to hone and refine our dynamic merchandising offering and differentiated in-store shopping experience.
We opened 170 net new stores in 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 through expansion in existing markets and by entering new markets.
We believe there is a significant opportunity to expand our store base in the United States. We opened 150 new stores in fiscal 2022 and we plan to open 200 new stores in fiscal 2023 through expansion in existing markets and by entering new markets.
Removed
We opened 170 net new stores in 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 believe that we have the opportunity to grow our store base to more than 3,500 locations over time.
Added
As used herein, references to “Crew” refers to our employees, and references to “Shipcenters” refers to our distribution and logistics centers.
Removed
We opened 120 net new stores in fiscal 2020 and 170 net new stores in 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.
Added
References to 2023, 2022, 2021, 2020, 2019, and 2018 are to our fiscal years unless otherwise specified.
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Our real estate committee, which is composed of senior management including our executive officers, approves all of our locations before a lease is signed. 11 We believe there is a significant opportunity to expand our store base in the United States.
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Marketing and Advertising Our cost-effective marketing strategy is designed to promote brand awareness and drive store and website traffic with our target demographic, as well as other value-oriented customers.
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The total cost of the land and building is expected to be approximately $61 million, of which approximate ly $43 million has been paid thro ugh January 29, 2022. We expect to occupy the distribution center in the first half of fiscal 2022.
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We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.
Removed
We use both our website and social media channels to highlight our featured products, value/quality proposition, store locations, employment opportunities, and grand openings. Competition We compete with a broad range of retailers including discount, mass merchandise, grocery, drug, convenience, variety and other specialty stores with both physical locations and online stores.
Added
None of our crew belong to a union or are party to any collective bargaining or similar agreement. Total Rewards We provide a comprehensive suite of benefits designed to help crew and their families stay healthy, meet their financial goals, protect their income and help them balance their work and personal lives.
Removed
We monitor changes in these laws and believe that we are in material compliance with applicable laws. As a result of the COVID-19 pandemic, federal, state and local governments and private entities 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.
Added
We encourage open, timely communications that help us achieve organizational goals, share information, increase understanding, participate in the decision-making process, enhance our pride in the organization and provide recognition for our work-related successes. We believe our policies and practices are in compliance with all applicable laws and have been designed with significant inputs from the crew themselves.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+6 added−13 removed146 unchanged
Biggest changeThese provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold. For example, Pennsylvania law may restrict a third party's ability to obtain control of us and may prevent shareholders from receiving a premium for their shares of our common stock.
Biggest changeIn addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third party to acquire control of us. These provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold.
Our revolving credit facility contains, and any additional debt financing we may incur would likely contain, covenants requiring us to maintain or adhere to certain financial ratios or limits and covenants that restrict our operations, which may include limitations on our ability to, among other things: • incur additional indebtedness; • pay dividends and make certain distributions, investments and other restricted payments; • create certain liens or encumbrances; • enter into transactions with our affiliates; • redeem our common stock; and • engage in certain merger, consolidation or asset sale transactions. 31 Complying with these covenants could adversely affect our ability to respond to changes in our business and manage our operations.
Our revolving credit facility contains, and any additional debt financing we may incur would likely contain, covenants requiring us to maintain or adhere to certain financial ratios or limits and covenants that restrict our operations, which may include limitations on our ability to, among other things: • incur additional indebtedness; • pay dividends and make certain distributions, investments and other restricted payments; • create certain liens or encumbrances; • enter into transactions with our affiliates; • redeem our common stock; and • engage in certain merger, consolidation or asset sale transactions. 29 Complying with these covenants could adversely affect our ability to respond to changes in our business and manage our operations.
In addition, we operate in markets that are susceptible to pandemic outbreaks, including COVID-19, or terrorist acts, and our operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the US, where protests and other disturbances have affected, and may continue to affect, our ability to operate our stores. 29 Our business may be harmed if our ability to sell and distribute products is impacted by any such events, any of which could influence customer trends and purchases and may negatively impact our net sales, properties or operations.
In addition, we operate in markets that are susceptible to pandemic outbreaks, including COVID-19, or terrorist acts, and our operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the US, where protests and other disturbances have affected, and may continue to affect, our ability to operate our stores. 27 Our business may be harmed if our ability to sell and distribute products is impacted by any such events, any of which could influence customer trends and purchases and may negatively impact our net sales, properties or operations.
For example, unexpected delivery delays or increases in transportation costs (including through increased fuel costs or a decrease in transportation capacity for overseas shipments or resulting from labor shortages or work stoppages) could significantly decrease our ability to generate sales and earn profits.
Unexpected delivery delays or increases in transportation costs (including through increased fuel costs or a decrease in transportation capacity for overseas shipments or resulting from labor shortages or work stoppages) could significantly decrease our ability to generate sales and earn profits.
Furthermore, our distribution centers in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Indianapolis, Indiana subject us to the risks of owning real property, which include, but are not limited to: • the possibility of environmental contamination and the costs associated with remediating any environmental problems; • adverse changes in the value of this property, and any future properties we may own, due to interest rate changes, changes in the neighborhood in which the property is located, or other factors; • the possible need for structural improvements in order to comply with zoning, seismic and other legal or regulatory requirements; • the potential disruption of our business and operations arising from or connected with a relocation due to moving to or renovating the facility; • increased cash commitments for improvements to the building or the property, or both; • increased operating expenses for the buildings or the property, or both; and • the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of earthquakes, floods and/or other natural disasters. 23 A significant disruption to our distribution network or to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.
Furthermore, our shipcenters in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Indianapolis, Indiana subject us to the risks of owning real property, which include, but are not limited to: • the possibility of environmental contamination and the costs associated with remediating any environmental problems; • adverse changes in the value of this property, and any future properties we may own, due to interest rate changes, changes in the neighborhood in which the property is located, or other factors; • the possible need for structural improvements in order to comply with zoning, seismic and other legal or regulatory requirements; • the potential disruption of our business and operations arising from or connected with a relocation due to moving to or renovating the facility; • increased cash commitments for improvements to the building or the property, or both; • increased operating expenses for the buildings or the property, or both; and • the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of earthquakes, floods and/or other natural disasters. 21 A significant disruption to our distribution network or to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.
Alternatively, with respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we could be required to license the applicable intellectual property rights from third parties, and we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms. 30 We purchase merchandise from vendors that may be subject to copyrights or patents, or that may otherwise incorporate protected intellectual property.
Alternatively, with respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we could be required to license the applicable intellectual property rights from third parties, and we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms. 28 We purchase merchandise from vendors that may be subject to copyrights or patents, or that may otherwise incorporate protected intellectual property.
Our ability to successfully execute a further expansion of our e-commerce strategy may suffer if we are unable to sell and fulfill our products in a cost-efficient manner. 28 In addition, if we are successful, we will encounter risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems.
Our ability to successfully execute a further expansion of our e-commerce strategy may suffer if we are unable to sell and fulfill our products in a cost-efficient manner. 26 In addition, if we are successful, we will encounter risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems.
If we fail to successfully implement our growth strategy, we will not be able to sustain the rapid growth in sales and profits that we expect, which would likely have an adverse impact on the price of our common stock. 20 Any disruption in our ability to select, obtain, distribute and market merchandise attractive to customers at prices that allow us to profitably sell such merchandise could impact our business negatively.
If we fail to successfully implement our growth strategy, we will not be able to sustain the rapid growth in sales and profits that we expect, which would likely have an adverse impact on the price of our common stock. 18 Any disruption in our ability to select, obtain, distribute and market merchandise attractive to customers at prices that allow us to profitably sell such merchandise could impact our business negatively.
Such events or circumstances include, but are not limited to: • political and economic instability; • the financial instability and labor problems of the manufacturers of our merchandise; • the availability and cost of raw materials; 21 • merchandise quality or safety issues; • changes in currency exchange rates; • the regulatory environment in the countries in which the manufacturers of our merchandise are located; • work stoppages or other employee rights issues; • inflation or deflation; and • transportation availability, costs and disruptions.
Such events or circumstances include, but are not limited to: • political and economic instability; • the financial instability and labor problems of the manufacturers of our merchandise; • the availability and cost of raw materials; 19 • merchandise quality or safety issues; • changes in currency exchange rates; • the regulatory environment in the countries in which the manufacturers of our merchandise are located; • work stoppages or other employee rights issues; • inflation or deflation; and • transportation availability, costs and disruptions.
Nevertheless, these security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every such breach or disruption, including through the intentional or negligent actions of our employees, business associates or third parties. As a result, unauthorized parties may obtain access to our data systems and misappropriate customer data and company confidential information.
Nevertheless, these security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every such breach or disruption, including through the intentional or negligent actions of our crew, business associates or third parties. As a result, unauthorized parties may obtain access to our data systems and misappropriate customer data and company confidential information.
The terms of our revolving credit facility may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.
The terms and availability of our revolving credit facility may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.
Failure to manage these and other similar factors effectively may affect our ability to timely build or lease new facilities, which could have a material adverse effect on our future growth and profitability. 27 We operate in a competitive environment and, as a result, we may not be able to compete effectively or maintain or increase our sales, market shares or margins.
Failure to manage these and other similar factors effectively may affect our ability to timely build or lease new facilities, which could have a material adverse effect on our future growth and profitability. 25 We operate in a competitive environment and, as a result, we may not be able to compete effectively or maintain or increase our sales, market shares or margins.
Such cyberattacks and cyber incidents can take many forms including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce employees or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials.
Such cyberattacks and cyber incidents can take many forms including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce crew or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials.
Although we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents, no cyberattack or other cyber incident has, to our knowledge, had a material adverse effect on our business, financial condition or results of operations to date. The protection of our customer, employee and company data is critical to us.
Although we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents, no cyberattack or other cyber incident has, to our knowledge, had a material adverse effect on our business, financial condition or results of operations to date. The protection of our customer, crew and company data is critical to us.
If we are not successful in managing our inventory balances, our profitability and cash flows from operations may be negatively affected. 26 Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
If we are not successful in managing our inventory balances, our profitability and cash flows from operations may be negatively affected. 24 Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
Furthermore, if these third parties are unable to secure our private data from cyberattacks and other cyber incidents, it may disrupt or reduce the efficiency of our operations or otherwise have a material adverse effect on our business, financial condition or reputation. We also rely heavily on our information technology staff.
Furthermore, if these third parties are unable to secure our private data from cyberattacks and other cyber incidents, it may disrupt or reduce the efficiency of our operations or otherwise have a material adverse effect on our business, financial condition or reputation. We also rely heavily on our information technology crew.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, employees, other third parties and the communities and industries in which we operate, as well as, on our business, share price, financial condition, access to capital or results of operations.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, crew, other third parties and the communities and industries in which we operate, as well as, on our business, share price, financial condition, access to capital or results of operations.
We operate in a highly competitive retail environment with numerous competitors, including online retailers, some of which have greater resources or better brand recognition than we do. We compete with respect to customers, price, store location, merchandise quality and supply, assortment and presentation, in-stock consistency, customer service and employees.
We operate in a highly competitive retail environment with numerous competitors, including online retailers, some of which have greater resources or better brand recognition than we do. We compete with respect to customers, price, store location, merchandise quality and supply, assortment and presentation, in-stock consistency, customer service and crew.
If we are unable to secure our customers’ confidential or credit card information, or other private data relating to our employees or our Company, we could be subject to negative publicity, costly government enforcement actions or private litigation, which could damage our business reputation and adversely affect our financial results. As with other companies, we are periodically subject to cyberattacks.
If we are unable to secure our customers’ confidential or credit card information, or other private data relating to our crew or our Company, we could be subject to negative publicity, costly government enforcement actions or private litigation, which could damage our business reputation and adversely affect our financial results. As with other companies, we are periodically subject to cyberattacks.
We have procedures and technology in place designed to safeguard our customers’ debit and credit card and other personal information, our employees’ private data and company records, intellectual property and other confidential information, and we continue to devote significant resources to network security, backup and disaster recovery, and other security measures, including training, to protect our systems and data.
We have procedures and technology in place designed to safeguard our customers’ debit and credit card and other personal information, our crew’s private data and company records, intellectual property and other confidential information, and we continue to devote significant resources to network security, backup and disaster recovery, and other security measures, including training, to protect our systems and data.
Further resurgences in COVID-19 cases, including from variants, could cause additional restrictions, including temporarily closing all or some of our stores again. An outbreak at one of our stores, even if we follow appropriate precautionary measures, could negatively impact our employees, customers, and brand.
Further resurgences in COVID-19 cases, including from variants, could cause additional restrictions, including temporarily closing all or some of our stores again. An outbreak at one of our stores, even if we follow appropriate precautionary measures, could negatively impact our crew, customers, and brand.
This could cause us to lose market share to our competitors and could have an adverse effect on our financial results. 25 We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft, subject us to potential liability and potentially disrupt our business.
This could cause us to lose market share to our competitors and could have an adverse effect on our financial results. 23 We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft, subject us to potential liability and potentially disrupt our business.
If the pandemic were to worsen or continue, including from variants of COVID-19, for a longer period than currently anticipated, business and consumer responses to the pandemic could adversely affect, among other aspects of our business: • our ability to maintain and increase sales and margins and to execute effectively on our business plans; • our ability to identify and respond effectively to changes in consumer preferences and behavior, including decreased consumer discretionary spending; • our ability to implement and maintain safety measures to keep our employees and customers safe; • our ability to generate increased sales through our e-commerce website and curbside pickup (in the event any store is required to be closed to the public); • our ability to receive products from our vendors and to distribute such products to our store locations; • our vendors’ ability to manufacture and distribute products to us; • our business partners’ ability to operate or manage increases in their operating costs and other supply chain effects that may have an adverse effect on our ability to meet consumer demand and achieve cost targets; • our ability to comply with financial covenants in credit agreements and with credit terms in agreements with our suppliers; and • our ability to restructure our lease obligations. 19 In November 2021, the U.S.
If the pandemic were to worsen or continue, including from variants of COVID-19, for a longer period than currently anticipated, business and consumer responses to the pandemic could adversely affect, among other aspects of our business: • our ability to maintain and increase sales and margins and to execute effectively on our business plans; • our ability to identify and respond effectively to changes in consumer preferences and behavior, including decreased consumer discretionary spending; • our ability to implement and maintain safety measures to keep our crew and customers safe; • our ability to generate increased sales through our e-commerce website and curbside pickup (in the event any store is required to be closed to the public); • our ability to receive products from our vendors and to distribute such products to our store locations; • our vendors’ ability to manufacture and distribute products to us; • our business partners’ ability to operate or manage increases in their operating costs and other supply chain effects that may have an adverse effect on our ability to meet consumer demand and achieve cost targets; • our ability to comply with financial covenants in credit agreements and with credit terms in agreements with our suppliers; and • our ability to restructure our lease obligations.
If weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected. 24 A significant disruption in our information technology systems and our inability to adequately maintain and update those systems could adversely affect our operations and negatively affect our customers.
If weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected. 22 A significant disruption in our information technology systems and our inability to adequately maintain and update those systems could adversely affect our operations and negatively affect our customers.
Such events could result in physical damage to one or more of our properties, the temporary closure of some or all of our stores or distribution centers, the temporary lack of an adequate work force in a market, temporary or long-term disruption in the transport of goods, decreases in transportation capacity, increases in transportation costs, delay in the delivery of goods to our distribution centers or stores, disruption of our technology support or information systems, or fuel shortages or dramatic increases in fuel prices, which increase the cost of doing business.
Such events could result in physical damage to one or more of our properties, the temporary closure of some or all of our stores or shipcenters, the temporary lack of an adequate work force in a market, temporary or long-term disruption in the transport of goods, decreases in transportation capacity, increases in transportation costs, delay in the delivery of goods to our shipcenters or stores, disruption of our technology support or information systems, or fuel shortages or dramatic increases in fuel prices, which increase the cost of doing business.
In addition, the fixed costs associated with owning, operating and maintaining our distribution centers during a period of economic weakness or declining sales can result in lower operating efficiencies, financial deleverage and potential impairment in the recorded value of distribution assets.
In addition, the fixed costs associated with owning, operating and maintaining our shipcenters during a period of economic weakness or declining sales can result in lower operating efficiencies, financial deleverage and potential impairment in the recorded value of distribution assets.
Our ability to open profitable new stores depends on many factors, including our ability to: • identify suitable markets and sites for new stores; • negotiate leases with acceptable terms; • achieve brand awareness in the new markets; • efficiently source and distribute additional merchandise; • expand our distribution capacity by successfully opening and operating new distribution centers; • maintain adequate distribution capacity, information systems and other operational system capabilities; • hire, train and retain store management and other qualified employees; and • achieve sufficient levels of cash flow and financing to support our expansion.
Our ability to open profitable new stores depends on many factors, including our ability to: • identify suitable markets and sites for new stores; • negotiate leases with acceptable terms; • achieve brand awareness in the new markets; • efficiently source and distribute additional merchandise; • expand our distribution capacity by successfully opening and operating new shipcenters; • maintain adequate distribution capacity, information systems and other operational system capabilities; • hire, train and retain store management and other qualified crew; and • achieve sufficient levels of cash flow and financing to support our expansion.
The completion date and ultimate cost of future projects, including opening the planned new distribution centers could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any project will be completed on time or within established budgets.
The completion date and ultimate cost of future projects, including opening the planned new shipcenters could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that any project will be completed on time or within established budgets.
As we seek to expand our operation through the implementation of our online retail capabilities, we may face increased or unexpected demands on distribution center operations, as well as new demands on our distribution network.
As we seek to expand our operation through the implementation of our online retail capabilities, we may face increased or unexpected demands on shipcenter operations, as well as new demands on our distribution network.
If we fail to realize our goals of successfully managing our store operations and increasing our customer retention and recruitment levels, our sales may not increase and our growth may be impacted adversely. Our success depends on our executive officers, senior management, district, store, and distribution center managers, and other key personnel.
If we fail to realize our goals of successfully managing our store operations and increasing our customer retention and recruitment levels, our sales may not increase and our growth may be impacted adversely. Our success depends on our executive officers, senior management, district, store, and shipcenter managers, and other key personnel.
In addition, distribution center-related construction entails risks that could cause delays and cost overruns, such as: shortages of materials or skilled labor; work stoppages; unforeseen construction, scheduling, engineering, environmental or geological problems, weather interference; fires or other casualty losses; and unanticipated cost increases.
In addition, shipcenter-related construction entails risks that could cause delays and cost overruns, such as: shortages of materials or skilled labor; work stoppages; unforeseen construction, scheduling, engineering, environmental or geological problems, weather interference; fires or other casualty losses; and unanticipated cost increases.
The completion date and ultimate cost of these projects could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that these distribution centers or any future operational projects will be completed on time or within established budgets.
The completion date and ultimate cost of these projects could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that these shipcenters or any future operational projects will be completed on time or within established budgets.
We do not currently maintain key person life insurance policies with respect to our executive officers or key personnel. Our profitability and cash flows from operations may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage. Our inventory balance represented approximately 16% of our total assets as of January 29, 2022.
We do not currently maintain key person life insurance policies with respect to our executive officers or key personnel. Our profitability and cash flows from operations may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage. Our inventory balance represented approximately 16% of our total assets as of January 28, 2023.
Our future success depends to a significant degree on the skills, experience and efforts of our executive officers, senior management, district, store, and distribution center managers, and other key personnel, including Joel Anderson, our President and Chief Executive Officer.
Our future success depends to a significant degree on the skills, experience and efforts of our executive officers, senior management, district, store, and shipcenter managers, and other key personnel, including Joel Anderson, our President and Chief Executive Officer.
Our headquarters, store locations and distribution centers, as well as certain of our vendors and customers, are located in areas which have been and could be subject to natural disasters such as floods, hurricanes, tornadoes, fires or earthquakes.
Our headquarters, store locations and shipcenters, as well as certain of our vendors and customers, are located in areas which have been and could be subject to natural disasters such as floods, hurricanes, tornadoes, fires or earthquakes.
We also rely upon independent third-party transportation to provide goods to our stores in a timely and cost-effective manner, through deliveries to our distribution centers from vendors and then from the distribution centers or direct ship vendors to our stores.
We also rely upon independent third-party transportation to provide goods to our stores in a timely and cost-effective manner, through deliveries to our shipcenters from vendors and then from the shipcenters or direct ship vendors to our stores.
If we lose our executive officers, senior management, district, store, and distribution center managers, or any other key personnel, or are unable to hire additional qualified personnel, our business could be harmed.
If we lose our executive officers, senior management, district, store, and shipcenter managers, or any other key personnel, or are unable to hire additional qualified personnel, our business could be harmed.
The loss of the services of any of our executive officers, senior management, district, store, and distribution center managers, or other key personnel could have an adverse effect on our operations.
The loss of the services of any of our executive officers, senior management, district, store, and shipcenter managers, or other key personnel could have an adverse effect on our operations.
Delays in opening these new distribution centers could adversely affect our future financial performance by slowing store growth, which may in turn reduce revenue growth, or by increasing transportation costs.
Delays in opening these new shipcenters could adversely affect our future financial performance by slowing store growth, which may in turn reduce revenue growth, or by increasing transportation costs.
Because most of our products are distributed from our distribution centers, the unexpected loss of any one of our distribution centers, due to natural disaster or otherwise, would materially affect our operations.
Because most of our products are distributed from our shipcenters, the unexpected loss of any one of our shipcenters, due to natural disaster or otherwise, would materially affect our operations.
The full extent to which the pandemic will negatively affect our business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including the severity of COVID-19 and its variants, the scope and duration of the pandemic and actions taken by governmental authorities businesses and customers in response to the pandemic.
The full extent to which the pandemic will negatively affect our business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including the severity of COVID-19 and its variants, the scope and duration of the pandemic and actions taken by governmental authorities businesses and customers in response to the pandemic. 17 Inflation and rising commodity prices could adversely affect our business.
Delays in opening the planned new distribution centers could adversely affect our future operations by slowing store growth, which could in turn reduce sales growth.
Delays in opening the planned new shipcenters could adversely affect our future operations by slowing store growth, which could in turn reduce sales growth.
Factors that could cause fluctuation in the price of our common stock may include, among other things: • actual or anticipated fluctuations in quarterly operating results or other operating metrics, such as comparable sales, that may be used by the investment community; • changes in financial estimates by us or by any securities analysts who might cover our stock; • speculation about our business in the press or the investment community; • conditions or trends affecting our industry or the economy generally; • stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the retail industry; • announcements by us or our competitors of new product offerings, significant acquisitions, strategic partnerships or divestitures; • our entry into new markets; • timing of new store openings; • percentage of sales from new stores versus established stores; • additions or departures of key personnel; • actual or anticipated sales of our common stock, including sales by our directors, officers or significant shareholders; • significant developments relating to our relationships with business partners, vendors and distributors; • customer purchases of new products from us and our competitors; • investor perceptions of the retail industry in general and our Company in particular; • major catastrophic events; • volatility in our stock price, which may lead to higher share-based compensation expense under applicable accounting standards; and • changes in accounting standards, policies, guidance, interpretation or principles, for example, the adoption of Financial Accounting Standards Board (“FASB”) ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which involves employee share-based payment accounting and the volatility of the effective tax rate.
Factors that could cause fluctuation in the price of our common stock may include, among other things: • actual or anticipated fluctuations in quarterly operating results or other operating metrics, such as comparable sales, that may be used by the investment community; • changes in financial estimates by us or by any securities analysts who might cover our stock; • speculation about our business in the press or the investment community; • conditions or trends affecting our industry or the economy generally, including, without limitation, the systemic failure of the banking system in the United States or globally; • stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the retail industry; • announcements by us or our competitors of new product offerings, significant acquisitions, strategic partnerships or divestitures; • our entry into new markets; • timing of new store openings; • percentage of sales from new stores versus established stores; • additions or departures of key personnel; • actual or anticipated sales of our common stock, including sales by our directors, officers or significant shareholders; • significant developments relating to our relationships with business partners, vendors and distributors; • customer purchases of new products from us and our competitors; • investor perceptions of the retail industry in general and our Company in particular; • major catastrophic events; • volatility in our stock price, which may lead to higher share-based compensation expense under applicable accounting standards; and • changes in accounting standards, policies, guidance, interpretation or principles, for example, the adoption of Financial Accounting Standards Board (“FASB”) ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which involves employee share-based payment accounting and the volatility of the effective tax rate. 30 In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price.
Given the unpredictability of possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.
As tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.
In particular, these provisions, among other things: • provide that only the chairman of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders; • classify our Board of Directors into three separate classes with staggered terms; • provide for supermajority approval requirements for amending or repealing provisions in our amended and restated articles of incorporation and amended and restated bylaws; • establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and • permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock. 33 In addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third party to acquire control of us.
In particular, these provisions, among other things: • provide that only the chairman of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders; • classify our Board of Directors into three separate classes with staggered terms; • provide for supermajority approval requirements for amending or repealing provisions in our amended and restated articles of incorporation and amended and restated bylaws; 31 • establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and • permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
As of January 29, 2022, 2.6 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.6 million shares of our common stock are issuable upon the exercise of options outstanding, the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan.
As of January 28, 2023, 3.5 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.7 million shares of our common stock are issuable upon the exercise of options outstanding, the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan.
Operational difficulties, including those associated with our ability to either lease or build and operate our distribution centers, could adversely impact our business. We maintain a network of distribution centers and are planning to lease or build new distribution centers over the next few years to support our growth objectives.
Operational difficulties, including those associated with our ability to either lease or build and operate our shipcenters, could adversely impact our business. We maintain a network of shipcenters and are planning to lease or build new shipcenters in the future to support our growth objectives.
We maintain distribution centers in Pedricktown, New Jersey, Olive Branch, Mississippi, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Cincinnati, Ohio. We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers.
We maintain shipcenters in Pedricktown, New Jersey, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona, Indianapolis and Indiana. We continuously assess ways to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional shipcenters.
We believe we have an opportunity to continue to grow our store base from 1,190 stores in 40 states as of January 29, 2022 to more than 3,500 locations over time .
We believe we have an opportunity to continue to grow our store base from 1,340 stores in 42 states as of January 28, 2023 to more than 3,500 locations over time .
Our use of outside delivery services for shipments is subject to risks outside of our control and any disruption, unanticipated expense or operational failure related to this process could affect store operations negatively. Since early 2020, the COVID-19 pandemic disrupted our supply chain.
Our use of outside delivery services for shipments is subject to risks outside of our control and any disruption, unanticipated expense or operational failure related to this process could affect store operations negatively.
Any decline in the volume of consumer traffic at shopping centers, whether because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business.
Any decline in the volume of consumer traffic at shopping centers, whether because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business. 20 Our new store growth is dependent upon our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans could affect our performance adversely.
In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot distribution center, which we began operating in August 2021. In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot distribution center, which we expect to occupy in the first half of fiscal 2022.
In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter, which we began operating in August 2021. In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot shipcenter, which we began operating in June 2022.
An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock. In addition, broad market and industry factors, most of which we cannot control, may harm the price of our common stock, regardless of our actual operating performance.
In addition, broad market and industry factors, most of which we cannot control, may harm the price of our common stock, regardless of our actual operating performance.
Currently, we lease all of our store locations, as well as our corporate headquarters and distribution facilities in Pedricktown, New Jersey, Olive Branch, Mississippi and Cincinnati, Ohio (and own our distribution centers in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and land in Indianapolis, Indiana, where we are building a distribution center).
Currently, we lease all of our store locations, as well as our corporate headquarters and distribution facilities in Pedricktown, New Jersey (and own our shipcenters in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Indianapolis, Indiana).
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.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of 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.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.
If the indebtedness under our revolving credit facility and any future debt instruments were to be accelerated, our future financial condition could be materially adversely affected. Risks Related to Ownership of Our Common Stock Our stock price may be volatile or may decline regardless of our operating performance.
If the indebtedness under our revolving credit facility and any future debt instruments were to be accelerated, our future financial condition could be materially adversely affected.
Risks Relating to Our Business and Industry The COVID-19 global pandemic and measures intended to prevent its spread present material uncertainty and risk and have had, and are expected to continue to have, a material adverse impact on our business, results of operations, financial condition, and cash flows.
Risks Relating to Our Business and Industry The COVID-19 global pandemic may continue to have, a material adverse impact on our business, results of operations, financial condition, and cash flows. The COVID-19 global pandemic and related preventative and protective actions have materially adversely impacted our business.
Pennsylvania law also provides that our shareholders are not entitled by statute to propose amendments to our amended and restated articles of incorporation.
For example, Pennsylvania law may restrict a third party's ability to obtain control of us and may prevent shareholders from receiving a premium for their shares of our common stock. Pennsylvania law also provides that our shareholders are not entitled by statute to propose amendments to our amended and restated articles of incorporation.
This type of litigation, even if it does not result in liability for us, could result in substantial costs to us and divert management's attention and resources. 32 Our business and reputation may be adversely affected by environmental, social and governance matters. Investor and regulatory focus is intensifying with respect to certain environmental, social and governance ("ESG") matters.
Our business and reputation may be adversely affected by environmental, social and governance matters. Investor and regulatory focus is intensifying with respect to certain environmental, social and governance ("ESG") matters.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. For example, we and certain of our current and former senior officers had been parties to a securities class action lawsuit filed against us, which was dismissed.
For example, we and certain of our current and former senior officers had been parties to a securities class action lawsuit filed against us, which was dismissed. This type of litigation, even if it does not result in liability for us, could result in substantial costs to us and divert management's attention and resources.
Removed
The COVID-19 global pandemic that began in the first quarter of 2020 has both ebbed and surged multiple times since in many parts of the United States, with a resultant cycle of the imposition, lapsing and re-imposition of federal, state and local restrictions on our ability to operate.
Added
Our financial performance could be adversely impacted by inflation, which is subject to market conditions. Inflationary pressures on the products we sell could impact our net sales and earnings. If the cost of goods changes as a result of inflation, we may be unable to adjust our retail prices accordingly, which could adversely impact our sales or earnings.
Removed
These restrictions included restrictions on business operations, freedom of travel, border closings, shelter in place orders, quarantines and a mandate related to the vaccination status and testing of employees.
Added
During fiscal 2022, we experienced levels of inflation that are higher than we have experienced in recent years, resulting in part from various supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain, monetary policy actions, and other disruptions caused by the COVID‐19 pandemic and the uncertain economic environment.
Removed
The pandemic and the related preventative and protective actions have adversely impacted the global economy, resulted in unprecedented levels of unemployment, reduced consumer confidence and discretionary consumer spending, disrupted global supply chains, and created significant volatility in financial markets.
Added
While we have been able to mitigate this impact to date through our pricing strategies, we are unable to predict how long the current inflationary environment will continue or the impact of inflationary trends on consumer behavior and our sales and profitability in the future.
Removed
The pandemic and the related actions have materially adversely impacted our business, results of operations, financial condition and cash flows, including through the temporary store closures that began in March 2020, as well as reductions in operating hours and decreases in store traffic which continued through the balance of fiscal 2020.
Added
Additionally, commodities can be subject to availability constraints and price volatility caused by weather, supply conditions, political instability, government regulations, tariffs, energy prices and general economic conditions and other unpredictable factors. Changes in commodity prices could also negatively impact our sales and earnings if our competitors react more aggressively.
Removed
As a result of the temporary store closures due to the COVID-19 pandemic, we withheld store rent for the closure period. With respect to virtually all of our lease portfolio, we have resumed rent payments, and in most cases, agreed to rent deferrals and/or abatements related to this closure period with landlords.
Added
Furthermore, a systemic failure of the banking system in the United States or globally may result in a situation in which we lose our ability to draw down funds from our revolving credit facility, lose access to our deposits and are unable to obtain financing from other sources which could materially and adversely affect our business and financial condition.
Removed
If, in response to additional store closures, we were to decide to withhold rent, all or some of our landlords could claim that our failure to pay rent is a default under our leases and seek remedies such as damages, acceleration of lease payments and/or termination of the subject leases.
Added
Risks Related to Ownership of Our Common Stock Our stock price may be volatile or may decline regardless of our operating performance. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock.
Removed
A successful assertion by the landlords of a breach of a significant number of our leases could have a material adverse impact on our business, financial condition, profitability and cash flows.
Removed
Occupational Safety and Health Administration ("OSHA") issued an Emergency Temporary Standard ("ETS") requiring that certain large employers enforce a mandatory COVID-19 vaccination policy or adopt a policy requiring employees to either receive a COVID-19 vaccination or undergo regular COVID-19 testing.
Removed
Although the Supreme Court ultimately enjoined enforcement of this particular ETS, implementing similar standards in the future across the entire country, particularly testing protocols for unvaccinated employees, could be costly and disruptive to our store operations. Additionally, enforcing such standards could adversely impact our workforce and ability to attract and retain employees.
Removed
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 due to, in part, decreased customer traffic in stores, including, without limitation, on account of limitations on the number of persons permitted in stores at one time by certain local and state regulations.
Removed
If the pandemic were to worsen again, and, in particular if regulatory restrictions were reintroduced as a result, our business operations and results of operations may again be materially impacted by a number of factors including a decrease in customer traffic. 22 Our new store growth is dependent upon our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans could affect our performance adversely.
Removed
Although we were able to mitigate the impact to our business from such disruptions, there can be no guarantee that we would be able to mitigate future COVID-19 related disruptions.
Removed
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The changes included in the TCJA are broad and complex. As these and other tax laws and related regulations change, our financial results could be materially impacted.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot distribution center for approximately $65 million, for the land and building. 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 to support the Company's anticipated growth.
Biggest changeWe began operating the shipcenter in July 2020. In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter for approximately $65 million, for the land and building. We began operating the shipcenter in August 2021.
ITEM 2. PROPERTIES In September 2016, we signed a fifteen-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate our current and anticipated future growth. We currently occupy approximately 190,000 square feet of office space with multiple options to expand in the future.
ITEM 2. PROPERTIES In September 2016, we signed a fifteen-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate our current and anticipated future growth. We currently occupy approximately 230,000 square feet of office space with multiple options to expand in the future.
We currently occupy approximately 1,000,000 square feet at this distribution center, having expanded from 800,000 square feet in September 2018 and it is leased under a lease agreement expiring in 2025 with options to renew for three successive five-year periods.
We currently occupy approximately 1,000,000 square feet at this shipcenter, having expanded from 800,000 square feet in September 2018 and it is leased under a lease agreement expiring in 2025 with options to renew for three successive five-year periods.
At the end of fiscal 2021, there were 1,190 Five Below store locations in 40 states. All of our stores are leased from third parties. These leases typically have ten-year terms with additional five-year renewal options, and many provide us with the option to terminate early under specified conditions.
At the end of fiscal 2022, there were 1,340 Five Below store locations in 42 states. All of our stores are leased from third parties. These leases typically have ten-year terms with additional five-year renewal options, and many provide us with the option to terminate early under specified conditions.
The lease agreement expires in early 2033 with three successive options to renew for additional terms of up to approximately fifteen years. In fiscal 2013, we opened a distribution center in Olive Branch, Mississippi.
The lease agreement expires in early 2033 with three successive options to renew for additional terms of up to approximately fifteen years. In fiscal 2015, we opened a shipcenter in Pedricktown, New Jersey.
In March 2019, we completed the purchase of an approximately 700,000 square foot distribution center in Forsyth, Georgia for approximately $42 million, for the land and building. We began operating the distribution center in April 2019.
In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia for approximately $42 million, for the land and building. We began operating the shipcenter in April 2019. In August 2019, we acquired land in Conroe, Texas, to build an approximately 860,000 square foot shipcenter for approximately $56 million, for the land and building.
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.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.
In August 2019, we acquired land in Conroe, Texas, to build an approximately 860,000 square foot distribution center for approximately $56 million, for the land and building. We began operating the distribution center in July 2020.
In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot shipcenter for approximately $60 million, for land and building.We began operating the shipcenter in June 2022.
Removed
We currently occupy approximately 600,000 square feet at this distribution center and it is leased under a lease agreement expiring in 2022 with options to renew for three successive five-year periods. In fiscal 2015, we opened a distribution center in Pedricktown, New Jersey.
Removed
The total costs of the land and building is expected to be approximately $61 million, which we expect to occupy in the first half of fiscal 202 2.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe plaintiffs in some actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance. We cannot predict with assurance the outcome of actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement or resolution.
Biggest changeThe plaintiffs and government authorities in some actions may seek unspecified damages, injunctive relief, penalties and cost reimbursement. Actions are in various procedural stages, and some are covered in part by insurance. We cannot predict with assurance the outcome of actions brought against us.
Although the outcome of these and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 35 PART II
Although the outcome of these and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 PART II
ITEM 3. LEGAL PROCEEDINGS We are subject to various proceedings, lawsuits, disputes, and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, and employment actions, including class action lawsuits.
ITEM 3. LEGAL PROCEEDINGS We are subject to various proceedings, lawsuits, investigations, disputes, and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Such matters from time to time include commercial, intellectual property, customer, consumer, and employment proceedings, including class action lawsuits.
If a potential loss arising from these lawsuits, claims and pending actions is probable and reasonably estimable, we record the estimated liability based on circumstances and assumptions existing at the time.
Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement or resolution. If a potential loss arising from these lawsuits, claims and pending actions is probable and reasonably estimable, we record the estimated liability based on circumstances and assumptions existing at the time.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 35 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 36 ITEM 6. SELECTED FINANCIAL DATA 37 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 39 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 49 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 33 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 34 ITEM 6. SELECTED FINANCIAL DATA 35 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 47 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The table below sets forth information regarding repurchases of our common stock during the fourth fiscal quarter of 2021: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of a Publicly Announced Program (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Program Third Quarter 2021 — — — $ 100,000,000 October 31, 2021 - November 27, 2021 — $ — — $ 100,000,000 November 28, 2021 - January 1, 2022 — $ — — $ 100,000,000 January 2, 2022 - January 29, 2022 368,699 $ 162.75 368,699 $ 39,992,663 Fourth Quarter 2021 368,699 $ 162.75 368,699 $ 39,992,663 (1) On March 21, 2018, we announced that 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.
Biggest changeIssuer Purchases of Equity Securities The table below sets forth information regarding repurchases of our common stock during the fourth fiscal quarter of 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of a Publicly Announced Program (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Program Third Quarter 2022 — $ — — $ 100,000,000 October 30, 2022 - November 26, 2022 — $ — — $ 100,000,000 November 27, 2022 - December 31, 2022 — $ — — $ 100,000,000 January 1, 2023 - January 28, 2023 — $ — — $ 100,000,000 Fourth Quarter 2022 — $ — — $ 100,000,000 (1) On March 21, 2018, we announced that 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.
The following graph compares the cumulative total shareholder return on our common stock from July 19, 2012 (the date our common stock commenced trading on the NASDAQ Global Select Market) through January 29, 2022, with the return on (i) the NASDAQ Global Market Composite Index and (ii) the NASDAQ US Benchmark Retail Index over the same period.
The following graph compares the cumulative total shareholder return on our common stock from July 19, 2012 (the date our common stock commenced trading on the Nasdaq Global Select Market) through January 28, 2023, with the return on (i) the Nasdaq Global Market Composite Index and (ii) the Nasdaq US Benchmark Retail Index over the same period.
Such returns are based on historical results and are not intended to suggest future performance. 7/19/2012 2/1/2013 1/31/2014 1/30/2015 1/29/2016 1/27/2017 2/2/2018 2/1/2019 1/31/2020 1/29/2021 1/28/2022 FIVE BELOW, INC. $ 100.00 $ 140.00 $ 138.30 $ 125.70 $ 132.90 $ 141.90 $ 237.50 $ 470.70 $ 427.20 $ 663.13 $ 599.40 NASDAQ GLOBAL MARKET COMPOSITE INDEX $ 100.00 $ 107.20 $ 138.40 $ 156.30 $ 155.60 $ 190.90 $ 244.10 $ 244.90 $ 308.50 $ 440.70 $ 464.30 NASDAQ US BENCHMARK RETAIL INDEX $ 100.00 $ 111.00 $ 132.70 $ 161.50 $ 168.00 $ 182.50 $ 242.80 $ 251.70 $ 295.90 $ 457.96 $ 479.00 36 Dividends During the past five fiscal years, we have not declared, and currently do not plan to declare in the foreseeable future, dividends on shares of our common stock.
Such returns are based on historical results and are not intended to suggest future performance. 2/1/2013 1/31/2014 1/30/2015 1/29/2016 1/27/2017 2/2/2018 2/1/2019 1/31/2020 1/29/2021 1/28/2022 1/27/2023 FIVE BELOW, INC. $ 140.00 $ 138.30 $ 125.70 $ 132.90 $ 141.90 $ 237.50 $ 470.70 $ 427.20 $ 663.13 $ 599.40 $ 736.72 NASDAQ GLOBAL MARKET COMPOSITE INDEX $ 107.20 $ 138.40 $ 156.30 $ 155.60 $ 190.90 $ 244.10 $ 244.90 $ 308.50 $ 440.70 $ 464.30 $ 391.84 NASDAQ US BENCHMARK RETAIL INDEX $ 111.00 $ 132.70 $ 161.50 $ 168.00 $ 182.50 $ 242.80 $ 251.70 $ 295.90 $ 457.96 $ 479.00 $ 302.24 34 Dividends During the past five fiscal years, we have not declared, and currently do not plan to declare in the foreseeable future, dividends on shares of our common stock.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the NASDAQ Global Select Market under the symbol “FIVE.” On January 28, 2022 (the last trading day of fiscal 2021), the last reported sale price on the NASDAQ Global Select Market of our common stock was $158.84 per share.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the Nasdaq Global Select Market under the symbol “FIVE.” On January 27, 2023 (the last trading day of fiscal 2022), the last reported sale price on the Nasdaq Global Select Market of our common stock was $195.23 per share.
On March 9, 2021, our Board of Directors approved a new share repurchase program for up to $100 million of our common shares through March 31, 2024. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time.
On June 14, 2022, our Board of Directors approved a new share repurchase program for up to $100 million of our comm stock through June 30, 2025. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time.
As of March 4, 2022, we had approximately 149,249 holders of record of our common stock.
As of March 8, 2023, we had approximately 239,069 holders of record of our common stock.
Added
This program expired on March 31, 2021. On March 9, 2021, our Board of Directors approved a new share repurchase program for up to $100 million of our common shares through March 31, 2024. We have exhausted repurchases under this program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThe reporting periods contained in the following table consist of 53 weeks of operations in fiscal 2017 and 52 weeks of operations in each of fiscal 2021, 2020, 2019, and 2018, respectively. 37 Fiscal Year 2021 2020 2019 2018 2017 (in millions, except share and per share data) Consolidated Statements of Operations Data (1) : Net sales $ 2,848.4 $ 1,962.1 $ 1,846.7 $ 1,559.6 $ 1,278.2 Cost of goods sold 1,817.9 1,309.8 1,172.8 994.5 814.8 Gross profit 1,030.4 652.3 674.0 565.1 463.4 Selling, general and administrative expenses 650.6 497.5 456.7 377.9 306.0 Operating income 379.9 154.8 217.3 187.2 157.4 Interest (expense) income and other (expense) income, net (13.2) (1.7) 4.3 4.6 1.5 Income before income taxes 366.7 153.1 221.6 191.8 158.8 Income tax expense 87.9 29.7 46.5 42.2 56.4 Net income $ 278.8 $ 123.4 $ 175.1 $ 149.6 $ 102.5 Per Share Data: Basic income per common share (2) $ 4.98 $ 2.21 $ 3.14 $ 2.68 $ 1.86 Diluted income per common share (2) $ 4.95 $ 2.20 $ 3.12 $ 2.66 $ 1.84 Weighted average shares outstanding: Basic shares 55,999,713 55,816,508 55,823,535 55,763,034 55,208,246 Diluted shares 56,303,854 56,060,039 56,166,167 56,220,864 55,561,472 Fiscal Year 2021 2020 2019 2018 2017 (in millions, except percentages and total stores data) Consolidated Statements of Cash Flows Data (1) : Net cash provided by (used in): Operating activities $ 327.9 $ 366.0 $ 187.0 $ 184.1 $ 167.4 Investing activities $ (465.6) $ (286.9) $ (193.6) $ (39.5) $ (139.2) Financing activities $ (66.1) $ (12.8) $ (42.7) $ (5.6) $ 8.4 Other Operating and Financial Data (1) : Total stores at end of period 1,190 1,020 900 750 625 Comparable sales increase (decrease) 30.3 % (5.5) % 0.6 % 3.9 % 6.5 % Average net sales per store (3) $ 2.5 $ 2.0 $ 2.2 $ 2.2 $ 2.2 Capital expenditures $ 288.2 $ 200.2 $ 212.3 $ 113.7 $ 67.8 Consolidated Balance Sheet Data (1) (4) : Cash and cash equivalents $ 65.0 $ 268.8 $ 202.5 $ 251.7 $ 112.7 Short-term investment securities 277.1 140.9 59.2 85.4 132.0 Total current assets 904.7 755.4 665.7 642.3 479.4 Total assets 2,880.5 2,314.8 1,958.7 952.3 695.7 Total current liabilities 586.9 435.7 351.3 253.1 164.5 Total liabilities 1,760.2 1,432.9 1,198.9 337.2 237.2 Total shareholders’ equity $ 1,120.3 $ 881.9 $ 759.8 $ 615.1 $ 458.6 (1) Components may not add to total due to rounding.
Biggest changeThe reporting periods contained in the following table consist of 52 weeks of operations in each of fiscal 2022, 2021, 2020, 2019, and 2018 respectively. 35 Fiscal Year 2022 2021 2020 2019 2018 (in millions, except share and per share data) Consolidated Statements of Operations Data (1) : Net sales $ 3,076.3 $ 2,848.4 $ 1,962.1 $ 1,846.7 $ 1,559.6 Cost of goods sold 1,980.8 1,817.9 1,309.8 1,172.8 994.5 Gross profit 1,095.5 1,030.4 652.3 674.0 565.1 Selling, general and administrative expenses 750.4 650.6 497.5 456.7 377.9 Operating income 345.0 379.9 154.8 217.3 187.2 Interest income (expense) and other income (expense), net 2.5 (13.2) (1.7) 4.3 4.6 Income before income taxes 347.5 366.7 153.1 221.6 191.8 Income tax expense 86.0 87.9 29.7 46.5 42.2 Net income $ 261.5 $ 278.8 $ 123.4 $ 175.1 $ 149.6 Per Share Data: Basic income per common share (2) $ 4.71 $ 4.98 $ 2.21 $ 3.14 $ 2.68 Diluted income per common share (2) $ 4.69 $ 4.95 $ 2.20 $ 3.12 $ 2.66 Weighted average shares outstanding: Basic shares 55,547,267 55,999,713 55,816,508 55,823,535 55,763,034 Diluted shares 55,745,279 56,303,854 56,060,039 56,166,167 56,220,864 Fiscal Year 2022 2021 2020 2019 2018 (in millions, except percentages and total stores data) Consolidated Statements of Cash Flows Data (1) : Net cash provided by (used in): Operating activities $ 314.9 $ 327.9 $ 366.0 $ 187.0 $ 184.1 Investing activities $ (3.9) $ (465.6) $ (286.9) $ (193.6) $ (39.5) Financing activities $ (43.6) $ (66.1) $ (12.8) $ (42.7) $ (5.6) Other Operating and Financial Data (1) : Total stores at end of period 1,340 1,190 1,020 900 750 Comparable sales (decrease) increase (2.0) % 30.3 % (5.5) % 0.6 % 3.9 % Average net sales per store (3) $ 2.4 $ 2.5 $ 2.0 $ 2.2 $ 2.2 Capital expenditures $ 252.0 $ 288.2 $ 200.2 $ 212.3 $ 113.7 Consolidated Balance Sheet Data (1) (4) : Cash and cash equivalents $ 332.3 $ 65.0 $ 268.8 $ 202.5 $ 251.7 Short-term investment securities 66.8 277.1 140.9 59.2 85.4 Total current assets 1,066.4 904.7 755.4 665.7 642.3 Total assets 3,324.9 2,880.5 2,314.8 1,958.7 952.3 Total current liabilities 602.6 586.9 435.7 351.3 253.1 Total liabilities 1,963.0 1,760.2 1,432.9 1,198.9 337.2 Total shareholders’ equity $ 1,361.9 $ 1,120.3 $ 881.9 $ 759.8 $ 615.1 (1) Components may not add to total due to rounding.
(2) Please see Note 4 in our consolidated financial statements included elsewhere in this Annual Report for an explanation of per share calculations. (3) Only includes stores open before the beginning of the fiscal year. (4) Fiscal 2019 Consolidated Balance Sheet data includes adoption of ASU 2016-02 "Leases" based on the modified retrospective method. 38
(2) Please see Note 4 in our consolidated financial statements included elsewhere in this Annual Report for an explanation of per share calculations. (3) Only includes stores open before the beginning of the fiscal year. (4) Fiscal 2019 Consolidated Balance Sheet data includes adoption of ASU 2016-02 "Leases" based on the modified retrospective method. 36
The selected financial data for fiscal 2021, 2020 and 2019 and selected consolidated balance sheet data as of January 29, 2022 and January 30, 2021 have been derived from our consolidated financial statements audited by KPMG LLP, our independent registered public accounting firm, included elsewhere in this Annual Report.
The selected financial data for fiscal 2022, 2021 and 2020 and selected consolidated balance sheet data as of January 28, 2023 and January 29, 2022 have been derived from our consolidated financial statements audited by KPMG LLP, our independent registered public accounting firm, included elsewhere in this Annual Report.
The selected financial data for fiscal 2018 and fiscal 2017, and the selected balance sheet data as of February 1, 2020, February 2, 2019, and February 3, 2018, have been derived from our audited consolidated financial statements that have not been included in this Annual Report.
The selected financial data for fiscal 2019 and fiscal 2018, and the selected balance sheet data as of January 30, 2021, February 1, 2020, and February 2, 2019, have been derived from our audited consolidated financial statements that have not been included in this Annual Report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeContractual 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: 48 (In millions) Payments Due By Period Total Less than 1 year 1-3 years 3-5 years More than 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.
Biggest changeRecently 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. 46 Contractual Obligations The following table summarizes, as of January 28, 2023, our minimum rental commitments under operating lease agreements including assumed extensions, minimum payments for long-term debt and other obligations in future periods: (In millions) Payments Due By Period Total Less than 1 year 1-3 years 3-5 years More than 5 years Operating lease obligations (1) $ 1,790.5 $ 264.4 $ 498.7 $ 433.1 $ 594.3 Purchase obligations (2) 15.8 15.8 — — — Total $ 1,806.3 $ 280.2 $ 498.7 $ 433.1 $ 594.3 (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.
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.
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 2022, 2021 and 2020 fiscal years.
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 Liquidity and Capital Resources Overview Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments.
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. Liquidity and Capital Resources 42 Overview Cash capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments.
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.
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 shipcenter in Pedricktown, New Jersey.
Our estimates may be impacted by changes in certain underlying assumptions and may not be indicative of future activity. 47 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.
Our estimates may be impacted by changes in certain underlying assumptions and may not be indicative of future activity. 45 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.
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.
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 borrowing base consisting of eligible credit card receivables and inventory, as reduced by certain reserves in effect from time to time.
Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season. 40 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.
Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season. 38 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.
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.
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 shipcenters 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 shipcenters through the first anniversary of the date the store re-opened.
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 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. This program expired on March 31, 2021.
Accordingly, comparable sales is only one measure we use to assess the success of our growth strategy. 41 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.
Accordingly, comparable sales is only one measure we use to assess the success of our growth strategy. 39 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.
Operating income percentage measures operating income as a percentage of our net sales. 42 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.
Operating income percentage measures operating income as a percentage of our net sales. 40 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.
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.
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, which expires in September 2027, 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.
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 March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia. We began operating the shipcenter in April 2019. In August 2019, we acquired land in Conroe, Texas, to build an approximately 860,000 square foot shipcenter for approximately $56 million. We began operating the shipcenter in July 2020.
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.
Also included in operating leases are our leases for the corporate office, shipcenters 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 shipcenters.
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 plan to make cash capital expenditures of approximately $325 million in fiscal 2023, 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 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.
We occupy approximately 1,000,000 square feet at this shipcenter, 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 230,000 square feet of office space with multiple options to expand in the future.
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.
Distribution costs include costs for receiving, processing, warehousing and shipping of merchandise from our shipcenters 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.
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.
Due to the 53rd week in fiscal 2017, the period from January 29, 2017 to February 3, 2018, 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.
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.
Refer to Item 7 "Results of Consolidated Operations" in our Annual Report on Form 10-K for the year ended January 29, 2022 for a comparison of fiscal years 2021 and 2020.
The Company's ability to operate improved beginning in the second half of fiscal 2020 and extending into fiscal 2021. 45 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.
Our ability to operate improved beginning in the second half of fiscal 2020 and extending into fiscal 2021. 43 Cash Flows A summary of our cash flows from operating, investing and financing activities is presented in the following table (in millions): Fiscal Year 2022 2021 Net cash provided by operating activities $ 314.9 $ 327.9 Net cash used in investing activities (3.9) (465.6) Net cash used in financing activities (43.6) (66.1) Net increase (decrease) during period in cash and cash equivalents (1) $ 267.4 $ (203.8) (1) Components may not add to total due to rounding.
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.
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. Pursuant to the Second Amendment, the Revolving Credit Facility expires on the earliest to occur of (i) September 16, 2027 or (ii) an event of default.
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").
Line of Credit On September 16, 2022, we entered into a Second Amendment to Credit Agreement (the "Second Amendment") which amended the Fifth Amended and Restated Credit Agreement, dated as of April 24, 2020, as previously amended by that certain First Amendment to Credit Agreement, dated as of January 27, 2021 (the "First Amendment"; the Fifth Amended and Restated Credit Agreement as amended by the First Amendment and the Second Amendment, the “Credit Agreement”), 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").
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.
We continue to believe we have the opportunity to expand our store base in the United States from 1,340 locations as of January 28, 2023 to more than 3,500 locations over time.
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 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.
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.
In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot shipcenter for approximately $65 million. We began operating the shipcenter in August 2021. In March 2021, we acquired land in Indianapolis, Indiana, to build an approximately 1,030,000 square foot shipcenter for approximately $60 million. We began operating the shipcenter in June 2022.
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.
As of January 28, 2023, we did not have any direct borrowings under our Revolving Credit Facility and had approximately $192 million available on the line of credit.
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.
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 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.
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 in non-comparable sales was primarily driven by new stores that opened in fiscal 2022 and the number of stores that opened in fiscal 2021 but have not been open for 15 full months. Comparable sales decreased 2.0%.
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.
This decrease in income tax expense was primarily due to a $19.2 million decrease in pre-tax net income, partially offset by discrete items, which includes 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 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.
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.
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 $1 53 million and $191 million, respectively, available in the Revolving Credit Facility.
As of January 28, 2023 and January 29, 2022, we were in compliance with the covenants applicable to us under the First Amendment and the Revolving Credit Facility. As of January 28, 2023 and January 29, 2022, we had approximately $192 million and $153 million, respectively, available in the Revolving Credit Facility.
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.
Fiscal Year 2022 2021 (in millions, except percentages and total stores data) Consolidated Statements of Operations Data (1) : Net sales $ 3,076.3 $ 2,848.4 Cost of goods sold 1,980.8 1,817.9 Gross profit 1,095.5 1,030.4 Selling, general and administrative expenses 750.4 650.6 Operating income 345.0 379.9 Interest income (expense) and other income (expense), net 2.5 (13.2) Income before income taxes 347.5 366.7 Income tax expense 86.0 87.9 Net income $ 261.5 $ 278.8 Percentage of Net Sales (1) : Net sales 100.0 % 100.0 % Cost of goods sold 64.4 % 63.8 % Gross profit 35.6 % 36.2 % Selling, general and administrative expenses 24.4 % 22.8 % Operating income 11.2 % 13.3 % Interest income (expense) and other income (expense), net 0.1 % (0.5) % Income before income taxes 11.3 % 12.9 % Income tax expense 2.8 % 3.1 % Net income 8.5 % 9.8 % Operational Data: Total stores at end of period 1,340 1,190 Comparable sales (decrease) increase (2.0) % 30.3 % Average net sales per store (2) $ 2.4 $ 2.5 (1) Components may not add to total due to rounding.
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.
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.
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 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 28, 2023, we operated stores in 42 states throughout the United States.
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.
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. In fiscal 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.
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%.
Our comparable sales decreased by 2.0% in fiscal 2022, increased by 30.3% in fiscal 2021, and decreased by 5.5% in fiscal 2020. Between fiscal 2020 and fiscal 2022, our net sales increased from $1,962.1 million to $3,076.3 million, representing a compounded annual growth rate of 25.2%.
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.
We expect to incur approximately $145 million of our cash capital expenditure budget in fiscal 2023 to construct and open 200 new stores, with the remainder projected to be spent on our store relocations and remodels, distribution facilities and our corporate infrastructure.
(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%.
(2) Only includes stores open before the beginning of the fiscal year. Fiscal Year 2022 Compared to Fiscal Year 2021 Net Sales Net sales increased to $3,076.3 million in fiscal year 2022 from $2,848.4 million in fiscal year 2021, an increase of $227.9 million, or 8.0%.
O ur new store investment includes our store build-out (net of tenant allowances), inventory (net of payables) and cash pre-opening expenses. 39 Our planned store expansion will place increased demands on our operational, managerial, administrative and other resources.
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. 37 Our planned store expansion will place increased demands on our operational, managerial, administrative and other resources.
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.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening in the first half of fiscal 2022 of our Indianapolis, Indiana shipcenter, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.
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.
From January 29, 2023 to March 16, 2023, we committed to 26 new leases with terms of 10 years that have future minimum lease payments of approximately $50.4 million.
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.
The increase in interest income and other, net was primarily driven by an other than temporary impairment related to an equity method investment in fiscal year 2021. Income Tax Expense Income tax expense decreased to $86.0 million in fiscal year 2022 from $87.9 million in fiscal year 2021, a decrease of $1.9 million, or approximately 2.1%.
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 2023 or "fiscal 2023" refer to the period from January 29, 2023 to February 3, 2024, which consists of a 53-week fiscal 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.
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.
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 9,500 square feet that achieves annual sales of approximately $2 million in the first full year of operation.
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. 46 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.
The entire amount of the Revolving Credit Facility is available for the issuance of letters of credit and allows for swingline loans. 44 The Credit Agreement contains customary covenants that limit, 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.
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 was the result of a non-comparable sales increase of $281.7 million, partially offset by a comparable sales decrease of $53.8 million. In fiscal year 2022, we opened 150 new stores compared to 170 net new stores in fiscal year 2021.
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.
Gross profit increased to $1,095.5 million in fiscal year 2022 from $1,030.4 million in fiscal year 2021, an increase of $65.1 million, or 6.3%. Gross margin decreased to 35.6% in fiscal year 2022 from 36.2% in fiscal year 2021, a decrease of approximately 60 basis points.
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.
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. Also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings.
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.
Cash Used in Investing Activities Net cash used in investing activities for fiscal 2022 was $3.9 million, a decrease of $461.7 million compared to fiscal 2021. The decrease was primarily due an increase in net sales, maturities, and redemptions of investment securities and a decrease in capital expenditures.
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.
Cash Provided by Operating Activities Net cash provided by operating activities for fiscal 2022 was $314.9 million, a decrease of $13.0 million compared to fiscal 2021. The decrease was primarily due to an increase in income taxes paid.
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.
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." Net Income As a result of the foregoing, net income decreased to $261.5 million in fiscal year 2022 from $278.8 million in fiscal year 2021, a decrease of approximately $17.3 million, or 6.2%.
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.
As a percentage of net sales, selling, general and administrative expenses increased approximately 160 basis points to 24.4% in fiscal year 2022 compared to 22.8% in fiscal year 2021. The increase in selling, general and administrative expenses was the result of an increase of $80.7 million in store-related expenses to support new store growth and $19.1 million of corporate-related expenses.
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%.
Interest Income (Expense) and Other Income (Expense), net Interest income and other, net increased to $2.5 million in fiscal year 2022 from interest expense and other, net of $13.2 million in fiscal year 2021, an increase of $15.7 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.
The share repurchase program may be modified or discontinued at any time.
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%.
The decrease in gross margin was primarily the result of an increase as a percentage of net sales in store occupancy costs. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $750.4 million in fiscal year 2022 from $650.6 million in fiscal year 2021, an increase of $99.8 million, or 15.3%.
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.
As of January 28, 2023, we operated 1,340 stores in 42 states. We also offer our merchandise on the internet, through our fivebelow.com e-commerce website as well as with an on demand third party delivery service to enable our customers to shop online and receive convenient same day delivery.
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.
Cash Used in Financing Activities Net cash used in financing activities for fiscal year 2022 was $43.6 million, a decrease of $22.5 million compared to fiscal 2021. The decrease was primarily the result of a decrease in the repurchase and retirement of common stock.
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%.
Over the same period, our operating income increased from $154.8 million to $345.0 million, representing a compounded annual growth rate of 49.3%. In addition, we expanded our store base from 1,020 stores at the end of fiscal 2020 to 1,340 stores at the end of fiscal 2022 and we plan to open 200 new stores in fiscal 2023.
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.
In fiscal 2022, we purchased 247,132 shares at an aggregate costs of approximately $40.0 million, or an average price of $161.88 per share. We have exhausted repurchases under this program. On June 14, 2022, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through June 30, 2025.
Removed
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.
Added
This decrease resulted from decreases of approximately 1.9% in the average dollar value of transactions and approximately 0.1% in the number of transactions. 41 Cost of Goods Sold and Gross Profit Cost of goods sold increased to $1,980.8 million in fiscal year 2022 from $1,817.9 million in fiscal year 2021, an increase of $162.9 million, or 9.0%.
Removed
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.
Added
Our effective tax rate for fiscal year 2022 was 24.7% compared to 24.0% in fiscal year 2021.
Removed
Our new store model assumes a store size of approximat ely 9,000 square f eet that achieves annual sales of approximate ly $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.
Added
As of January 28, 2023, we have not made any repurchases under this program. Since approval of the share repurchase program in March 2018, we have purchased approximately 1,100,000 shares for an aggregate cost of approximately $150 million. There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any repurchases.
Removed
We expect to occupy the distribution cent er in fiscal 2022.
Added
The Second Amendment also replaced the existing LIBOR rate provisions with SOFR rate provisions which converted then outstanding LIBOR loans into SOFR loans and additionally makes a number of other revisions to other provisions of the Credit Agreement.
Removed
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 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% .
Added
Giving effect to the Second Amendment, outstanding borrowings under the Revolving Credit Facility would accrue interest at floating rates plus an applicable margin ranging from 1.12% to 1.50% for SOFR loans and 0.125% to 0.50% for base rate loans, and letter of credit fees range from 1.125% to 1.50%, in each case based on the average availability under the Revolving Credit Facility.
Removed
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.
Removed
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.
Removed
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.
Removed
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%.
Removed
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.
Removed
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.
Removed
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.
Removed
The increase was primarily the result of an increase in the repurchase and retirement of common stock.
Removed
The entire amount of the Revolving Credit Facility is available for the issuance of letters of credit and allows for swingline loans.
Removed
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%.
Removed
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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−1 removed5 unchanged
Biggest changeThe 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. We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future. 49
Biggest changeWe do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future. 47
As of January 29, 2022, we had approximatel y $153 million available on the line of credit.
As of January 28, 2023, we had approximatel y $192 million available on the line of credit.
Removed
The Credit Agreement provides that the interest rate payable on borrowings shall be, at the Company’s 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%.
Added
Giving effect to the Second Amendment, outstanding borrowings under the Revolving Credit Facility would accrue interest at floating rates plus an applicable margin ranging from 1.12% to 1.50% for SOFR loans and 0.125% to 0.50% for base rate loans, and letter of credit fees range from 1.125% to 1.50%, in each case based on the average availability under the Revolving Credit Facility.

Other FIVE 10-K year-over-year comparisons