Farah Soi – IR, ICR, Inc. Joel Anderson - CEO Kenneth Bull - CFO.

John Heinbockel - Guggenheim Securities Michael Lasser - UBS Judah Frommer - Credit Suisse Jeremy Hamblin - Dougherty & Company Vincent Sinisi - Morgan Stanley Kelly Halsor - Buckingham Research Group Patrick McKeever - MKM Partners Stephen Grambling - Goldman Sachs.

Good day and welcome to the Five Below First Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Ms. Farah Soi. Please go ahead..

Thank you, operator. Good afternoon everyone and thanks for joining us today for Five Below's first quarter 2016 financial results conference call. On today's call are Joel Anderson, President and Chief Executive Officer; and Ken Bull, Chief Financial Officer and Treasurer.

After management has made their formal remarks, we will open the call to questions. I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and Five Below's SEC filings.

The forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update our forward-looking statements. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of our website at fivebelow.com. I will now turn the call over to Joel..

Thank you, Farah, and thanks everyone for joining us for our first quarter earnings call. I will review the highlights of the quarter before handing it over to Ken to discuss our financials and our outlook and then we will open up the call for questions.

We are very pleased with our first quarter performance as our results continued to reinforce the strength and universal appeal of Five Below. We delivered sales and earnings ahead of our guidance range, the sales increase of 25% or $193 million and EPS growth of 50% to $0.12.

During the quarter, we opened 21 new stores and entered two new markets including South Florida and Louisiana. In fact, five of our new stores, this past quarter made the all-time top-10 list spring store grand openings of Five Below. Let me tell you where those stores are located. St.

Joseph, Missouri, Lafayette, Louisiana, Owensboro, Kentucky, Morgan Town, West Virginia, and Dover, Delaware. The five stores I just highlighted illustrate the broad universal appeal of Five Below and demonstrate how our brand awareness continues to grow across all markets.

Our new stores opened very strong and we could not be more pleased with the results. Already in the second quarter, we’ve opened 13 new stores and have entered the new markets of Wisconsin and Oklahoma and we are on track for the 85 planned stores openings for 2016.

And when we look at the top quartile performance of our existing stores, the market characteristics of these stores are very diverse and includes stores from Detroit, to Texas, to rural Mississippi, as well as multiple stores from our traditional stronghold in the Northeast.

With our continued and consistent success as we expand our store footprint, our conviction in the 2000 store potential of Five Below only grows. Our Q1 comp of 4.9% exceeded the high end of our guidance range and marked our 40th consecutive quarter or 10th consecutive year of positive comps.

This performance demonstrates the operating discipline that is an integral part of the Five Below culture. We continue to make progress across each of our strategic priorities with merchandizing being key among these, as customers continue to respond to our trend right assortment and the amazing value proposition we offer at $5 and below.

Our carefully added assortment at tremendous values combined with compelling marketing campaigns and exciting in-store experience continues to resonate with our customers and drive our performance. Our eight worlds give us ample flexibility to introduce newness, respond to trends and shift categories up and down.

This flexibility enables our merchandizing team to ensure our assortment is infused with the necessary newness to continue to surprise and delight our customer, as well as adapt and react quickly to shifting customer preferences.

In Q1, we saw broad based strength across our business with our comp performance led by our Candy, Style, and Room [world][ph]. Our merchandizing teams continues to drive newness and wow, both from a product assortment as well as from a visual merchandizing standpoint.

One of the major benefits of our 20% sales growth is the scale we enjoy that enables us to keep getting better. This means improved sourcing and vendor relationships, better buying power and improved trend capabilities, all of which allow for our already great customer experience to get even better.

As we reap our growing scale benefits, we will continue to utilize them for the benefit of our customer. I am pleased with the progress we are making on this front and continue to be very excited by the assortments that our buying teams are bringing into the stores. As I said on the last call, we want Five Below to be the destination for summer.

We have set our stores for summer and our merchandize is all about sun, water and fun, key elements of the season. Five Below is your local summer store shop from sunscreen to boogie boards to beach styles, all at our incredible value price points of $5 and below.

Along with the focus on new stores and merchandizing, we continue to evolve our marketing mix. In Q1, we had relatively the same marketing cadence as last year. As we look to Q2, we plan to test digital in the form of mobile social campaigns and repeat our summer TV test.

We will do this while maintaining our overall marketing spend rate year-over-year as we work to determine the optimal mix for this summer period. As we have said before, e-commerce is also a part of our broader digital initiative.

In Q1, we began work on our initial e-commerce platform and expect the soft launch with a small percentage of our assortment in the second half of this year or be in the beginning of next year. The minimal P&L impact from this soft launch is already embedded in our outlook for fiscal 2016.

So in summary, we are very pleased with our first quarter performance and I could not be prouder of our teams who are responsible for delivering these results. We remain firmly focused on the remainder of the year and continuing to deliver against our goals. With that, I’ll turn it over to Ken.

Ken?.

Thanks Joel, and good afternoon everyone. I will begin my remarks with a review of our first quarter fiscal 2016 results and then discuss our outlook for the second quarter and the rest of the year. Our sales in the first quarter of 2016 were $192.7 million, up 25.4% from $153.7 million in the first quarter of 2015.

We ended the quarter with 458 stores, an increase of 73 net new stores or 19% versus the 385 stores at the end of the first quarter of 2015. Comparable store sales increased 4.9% for the first quarter of 2016, as compared to a 1.7% comp increase in the first quarter of 2015.

This comp increase was driven by an increase in average ticket and transactions. Gross profit increased 27.8% to $60.3 million from the $47.2 million reported in the first quarter of 2015.

Gross margin increased by approximately 60 basis points to 31.3% driven by freight leverage as well as overall fixed cost leverage resulting from our strong 4.9% first quarter comp and new store performance. You will recall in Q1 last year, we incurred higher freight cost and associated deleverage driven in large part by the West Coast Port issue.

As a percentage of sales, SG&A for the first quarter of 2016 decreased to 25.7% from 26.1% in the first quarter of 2015 as we leveraged expenses on the 4.9% comp and strong new store performance. Our operating income increased 53.1% to $10.8 million or 5.6% of sales from $7 million or 4.6% of sales last year.

Our effective tax rate for the first quarter of 2016 was 37.6% compared to 39% in the first quarter of 2015. The decrease in the effective tax rate for the first quarter of 2016 was the result of a change in our average day tax rate.

Net income increased 58% to $6.8 million or $0.12 per diluted share from $4.3 million or $0.08 per diluted share last year. We ended the quarter with approximately $25.8 million in cash and cash equivalents, $55.9 million in short-term investment securities, availability of $20 million under our revolving credit facility, and no debt.

Inventory at the end of the first quarter was $156.3 million, as compared to $119.8 million at the end of the first quarter of last year. Ending inventory on a per store basis was up 9.7% year-over-year, driven primarily by higher import penetration versus last year.

As a reminder, we take ownership of these direct imported goods earlier as we record in-transit inventory on our balance sheet as soon as the goods leave the overseas port. Now I would like to turn to our guidance. For the second quarter ending July 30, 2016 net sales are expected to be between $216 million to $219 million.

We plan to open approximately 28 new stores in Q2 this year as compared to 32 stores opened in the second quarter last year and are assuming a Q2 comp sales increase of approximately 3%. Diluted earnings per share for the second quarter of fiscal 2016 are expected to be $0.16 to $0.17.

For the full year 2016, we are reiterating our previously provided outlook. Sales are expected to be in the range of $995 million to $1,005 million with a comparable store sales increase of approximately 3%. This compares to net sales of $832 million for fiscal 2015 representing a growth rate of 20% to 21%.

In 2016, we plan to open 85 new stores and expect to end the year with a store count of 522, as compared to our 2015 ending store count of 437. For the full year, we continue to expect operating margins to be up slightly versus 2015 driven by improvement in gross margin and offset by modest deleverage in SG&A.

As a reminder, our guidance takes into consideration benefit from our 2015 investments, as well as cost associated with our launch of e-commerce, and our 2017 entry into California.

We continue to expect the full year effective tax rate of approximately 37.5% and net income is expected to be in the range of $69.9 million to $72.2 million representing a growth rate of approximately 21% to 25% over 2015 with diluted earnings per share in the range of $1.27 to $1.31.

With respect to CapEx, we continue to plan to spend in total approximately $44 million in 2016 reflecting the opening of 85 new stores, investing in distribution centers and corporate infrastructure including systems. For all of the details related to our results and guidance, please refer to our earnings press release.

And with that I would like to turn the call back over to Joel to provide some closing comments before we open it up for questions.

Joel?.

Yes, thanks, Ken. In closing, I want to thank the entire Five Below team for their hard work that has driven our strong first quarter results. We have had a great start to the year with an outstanding first quarter delivering strong top-line results as well as a 50% increase in earnings per share.

I am encouraged by our continued momentum as our teams work diligently to deliver exciting assortment, compelling marketing campaigns and an engaging in-store experience for our customers. The start to 2016 reinforces the five year vision I outlined on our recent year end call.

We believe we are well positioned to deliver on our goals for this year, as well as our long-term vision that we call our 2020 through 2020 plan. As a reminder, these goals include 20% average annual sales growth, the greater than 20% average annual net income growth through 2020.

We are just coming off a great Memorial Day weekend that traditionally marks the kickoff to the summer season. We have our big summer weeks ahead of us and we worked hard to deliver an assortment that makes Five Below the go to destination for all things summer. With that, I’d like to turn the call over to the operator for questions.

Operator, if you’d open it up for questions. Thank you. .

Thank you. [Operator Instructions] And the first question comes from John Heinbockel with Guggenheim Securities. .

So, Joel, a couple things.

The summer TV test, so how is that going to compare to a year ago, right, in terms of number of market stores intensity and where are you with the email acquisition – of the email acquisition effort, in terms of how many you have and what type of growth you are seeing in that?.

Yes, thanks, John. On the first one, the summer TV, we currently – as I shared before, for fourth quarter are preparing for more of a rollout. As it relates to Q2, we are still in the test mode for summer TV. This will be our second summer of doing TV.

Last year it was in the mid-teens for the number of stores, this year it will be in the low 20s for the number of stores. So, slight increase over last year, but certainly not in a rollout phase for it.

We are pleased with the results last year and we are going to repeat that this year like we did with fall as things like testing larger markets, testing repeat markets, so we can understand what happens in the second year you did, where you can understand what happens in new and different larger markets. Your second question was on, oh, email.

Yes, so, email is alive and well, our stores do a fantastic job collecting emails and we are fast approaching kind of at a 5 million number for emails in our database. .

And then just as a follow-up to that, if I look at, obviously, you’ve got terrific momentum and certainly, let’s assume that continues, what are the kinds of things you would like to that may not be in your plan or budget right now that you’d like to invest in as we go through the rest of the year and particularly in the holiday season, is it a larger fourth quarter marketing push in terms of markets or intensity? What would you like to do on that front if you are capable of?.

Well, John, we strategically, as I said many, many times, our shift over time to a more digitally oriented marketing campaign is probably the biggest area you are seeing us make investments. And we need to do that methodically and we need to do it with rigor and really study the results.

I think that’s an area you’ll see us continue to look at, would we do more TV, would we do more social mobile and I think, if anything I think those would be the areas you’d see us invest more. .

Okay, thank you. .

Okay, thanks, John. Appreciate it..

And next will be Michael Lasser with UBS..

Good evening. Thanks a lot for taking my question. .

Yes. .

Thanks, Joel.

How should we think about the 3% comp guidance for the second quarter in light of the fact that you just put up a really strong first quarter and last year in the second quarter you pulled back on that circular, which you indicated you had some impact on your trends during that period, presumably, you are going to bring that back this year, so should we interpret it as trends to start the period have been pretty slow and that’s why you are guiding as you are?.

I think, every time we guide, let’s back up and start with – we’ve guided for the year at approximately 3%..

Yes. .

And we remain focused on that approximately 3% and while it was a great number for first quarter and it gives us great momentum it’s still a very small part of our overall number, right.

And when we come down to then translating that approximately 3 for the year, for the quarter, as we certainly look at the quarter-to-date trend and then we look forward to the balance of the year.

And, I think in first quarter, we had the balance of the – or we had the trends of – or excuse me, Easter in our line of sight as we guided for you and I think as we look at Q2, the big weeks of summer are still in front of us.

And so, we see a 3% as a really solid number and I think if summer turns out bigger than that, there is probably some upside in that. .

And do you plan on bringing back that circular that you had removed last year?.

Our overall marketing cadence year-over-year, Michael from a percent of sales will be the same as last year and summer is an important marketing quarter for us where we are continuing to tweak our marketing spend until we get it right. What we are doing from that one is, we will have two summer circulars like we did last year.

However, we are shifting our summer circular from the end of July into that all important 4th of July period. I think I shared with you before there certain times a year that the circular is really a matter for our business, Easter, holiday and certainly in that key summer period of month of June.

So you’ll see us bring that circular forward into the 4th of July period. .

And Joel, let me ask you one quick follow-up question. On the five stores that you said were amongst the most productive start that the company seen, as you reflect on those, is there anything unique about those locations historically you’ve said what determines the ultimate productivity of a unit is the vibrancy of the local retail trade area.

So is it that those stores were just in very vibrant retail location or were there other elements such as pretty high existing brand recognition in that area combined with solid execution that drove such a great start in those five locations?.

So, you know, I certainly called out those five, I mean, they are in our top five all-time for spring openings, grand openings.

As far as, I think what we learned from all those, what’s unique in about all those is the broad REITs throughout the United States that those five states represent and coincidentally none of them are in the upper Northeast, where we started this concept.

I think it demonstrates for you and gives us more confidence in this 2000 store opportunity for Five Below. But, overall Michael, there was nothing overall unique in those five centers. In fact, I was at the Dover, Delaware one and we are the only store open in that center. So, it just shows you that our brand awareness is building.

Our merchandise assortment is getting better. Our operators are improving the store experience and the momentum of the brand is building. .

And our next question will come from Edward Kelly with Credit Suisse. .

Hi, it’s actually Judah on for Ed. I was wondering if you could help us with some color on cadence of the comp in Q1.

It seems like, whether it’s been a mix bag for different type of retailers and specifically in the northeast, any color there would be helpful?.

Yes, I think, who is this on the call?.

Judah on for Ed Kelly. .

Great.

First of all, we usually don’t get into the monthlies and weekly cadence and if we go back to my prepared remarks, I just want to remind everybody, this is our 40th consecutive quarter of positive comps and I think the way you got to think about it, or the way we think about weather is every quarter is going to have puts and takes and we recognize those strong periods and the weak periods.

Our job is, to make sure we have great merchandize and to have the stores brands ready for when the customer comes. And so, there are times you benefit from the weather and there are times we don’t benefit.

But when you look at it overall for the quarter, I think the overall puts and takes are relatively the same year-over-year, it just comes at different time periods. .

Okay, great and then, switching gears little bit related to SG&A as you come into 2017, obviously not looking for guidance, but you are going to be moving into California which is slightly a higher cost operating market and you have these two over time rules.

Do you have any directional commentary you guess on those two pieces?.

Sure, yes, I’ll answer that one. Again, just to start there with, I think as you are referring to the FLSA rules that have just been enacted.

Just as some color, in our stores, we have one salaried employee, he is the General Manager and our chain average right now is inline with the threshold chain average of their salaries is inline with the threshold of the FLSA rules.

So, as you look at that for the current year, if it’s enacted there and starts in December 1st of this year, really a minimal impact for this year has been factored into our guidance.

And then if you look out into 2017, and again, we’ll still stay on top of this in any rule changes, but our current estimate at this stage it would probably have about a penny impact for us in 2017 for us on a full year basis. .

Okay, great. Thank you..

You are welcome. .

And our next question comes from Dan Binder with Jefferies. .

Hey this is John [Indiscernible] on for Dan. Congrats on a great quarter guys. .

Yes, John, thank you.

What can we do for you?.

I’d just like to ask a little bit about gross margin. It sounds like freight was a lot of the upside in that and I know that there is also some sourcing gains in China, I know that you guys have previously spoken to these levers as, basically, that would be mostly invested back into products.

Is that – well, I guess, first can you just speak to the degree, whether these talents are accelerating or decelerating? And then, just talk about whether it is still being in kind of all reinvested into product delay that you’ve expected or if there is something that you are seeing in the buying opportunities that’s kind of allowing you to have the level of newness that you want with the product while, so, capturing some of the upside?.

Yes, thanks, John.

Again, when you look at the first quarter and where we landed, you look at the operating margin leverage of about 100 basis points, as you can see that’s really split evenly between gross margin and SG&A and as you dig a little bit deeper into the gross margin side as I mentioned in my prepared remarks that, a good portion of that benefit leverage in gross margin was coming from the benefits of coming off that the freight expenses in last year’s Q1 under the West Coast Port issues and then the remainder was really leveraging of the fixed cost components that are included in cost of goods sold.

And then when you jump down into SG&A which again it was about – about a half of that total operating margin leverage, that again was driven by the fixed cost leverage. But your point that you made before around reinvesting in merchandize and products is true, so any benefits we are getting there, we continue to put them back into the products. .

And then, just one other question, if you can just talk a little bit about the licensed product, how that’s been doing and if there is anything significant on the horizon there?.

Yes, our licensed business has continued to be solid. As I said before, it was great to see is the transition from it really being frozen only to now really being multi-dimensional and several licenses carrying our business in the license area, but we are pleased with the license trend we continue to see. .

Okay, great, thank you. .

Thank you..

And next will be Jeremy Hamblin with Dougherty & Company..

Good afternoon guys. Congratulations on the really strong results given the challenging environment. First wanted to start with making sure I understood, Ken, the commentary around the puts and takes on operating margins for Q2.

I think what I heard was that your guidance assumes a little bit of leverage on gross margin and maybe a little bit of drag on SG&A.

Did I hear that correctly?.

Yes, I would expect to see from any of the operating margin leverage in Q2 that we would get that and the majority of that would come through in gross margin..

Okay. .

Versus SG&A, yes. .

Can you just help me understand that, because last year as I look back through the notes, there was about 50 basis points of deleverage associated with the new distribution center and about a 100 basis points of deleverage because you were lapping some comp expense from the leadership investments made on most of your seasoned, your executive team.

Just help me understand then, why would you assume that there would be a little bit more deleverage in that line item this year? Is that because of the e-commerce investments or are there other things that are causing that?.

Yes, Jeremy, let me go back to just to kind of recap the Q2 of last year, if you remember, we had two – I think it was 240 basis points of deleverage. About half of that was driven by moving marketing expenses into Q2 for that initial Q TV test. So that was half of it which we won’t get that back and that was all embedded in SG&A.

And then we are seeing some slight leverage from a distribution standpoint in Q2 and then we are seeing, we probably see some slight leverage in SG&A, but again, we’ve had ongoing investments that we discussed before, that’s really kind of how it’s shaking out.

So the majority of that delever in SG&A last year was really driven by marketing which we are not going to see that come back because of the repeat of the TV test. .

Okay, and the gross margin leverage, that’s all primarily because of the port impact or is that also because – I think, you had 20 or 30 basis points of start-up and relocation cost also associated with the new DC?.

Exactly, so there are really two things coming there. There is – we do have a little bit of a tail left in the West Coast Port issues in terms of freight in and then we are seeing some slight leverage from a distribution standpoint coming off those initial start-up cost that we incurred last Q2. .

Okay, and then a common question on some of the merchandizing categories in Q2.

Given that in the northeast, mid-Atlantic, you have seen some cooler and wetter weather, certainly through most of May with the exception of that last week, has that impacted your seasonal category at all? I mean, as I visit stores, it looks like the merchandize is pretty clean and moving through nicely.

Have you had any negative impacts from that weather on your seasonal your now category?.

Well, as I said, we are coming off a strong Memorial Day weekend here. So, really nice warm temperatures and everything.

But I think what – at the end of the day, we got to look at the summer in total and not by weeks and so certainly while May was cool, our big summer seasonal weeks really kick in as Memorial Day gets here and as kids across the country get out of school.

So, while – if that cool weather had continued all the way through June and July, that might be a different story. But the teams really manage for the big weeks in June and July as it relates to seasoning efforts.

And overall, as you know, we look at things, as I shared in my commentary earlier, there is going to be puts and takes in the weather and I think when we kind of put it all together and look at it quarter-by-quarter, the relative differences are pretty minor..

Okay, and Ken, one last quick one here on – in terms of your working capital, there was about a $25 million, $26 million drag in Q1 on working capital and you start really on both sides, both on your prepaid, we knew inventories would obviously grow, but also your income taxes payable, your accounts payable those are all drags.

Is that’s something that’s just specific time in Q1? Is there anything else underneath that should we expect to see some recapture in Q2? Can you just provide any additional color on that Ken?.

Sure, and you really called it out Jeremy, the one piece was taxes and just timing of the tax payment, we’ll actually see that coming back to us in Q2 and then from an accounts payable standpoint, you are looking at the timing of certain payments around things like rent and things like that.

So, that was – both of those things are really timing-related as it pertains to the Q1. .

Great, thanks for taking the questions. Congrats and best of luck on the continued success. .

Yes, we really appreciate. It was great first quarter. .

Thanks, Jeremy..

And next question comes from Vincent Sinisi with Morgan Stanley..

Hey and congrats guys as well. Thanks for taking my question.

Just wanted to ask, just to make sure that we are calculating in the same way, unless I missed it, did you give a new store productivity number for this quarter and then just within that, anything to call out in terms of any geographic differences variances there?.

Well, I didn’t give a specific productivity number, but if you do the math, it’s in advance or it’s above 100%..

Yes, so, roughly pretty similar to 4Q trends?.

Correct. And there is – a piece of that is related to the timing of stores and then a piece of that is related to outperformance. .

Okay, great. Thank you.

And pretty consistent geographically?.

Yes, with the exception obviously of weather and we’ve seen this historically the range of performance when you look across the regions, it’s still in a pretty reasonable range. .

Okay, great.

And then, maybe just one quick follow-up regarding the 2Q advertising, obviously from a competitive standpoint, can’t say too much, but in terms of the overall message from the TV that will be launching in some more stores as well as I think you called out before, should we expect it to be pretty similar messaging versus last year? Any changes that you can discuss at this point?.

Yes, I had aged as you just said, it’ll be pretty similar last year in a sense that, it’s going to be all about summer.

And Five Below being your summer destination and our stores are alive and they are vibrant and it’s your go to place for all things summer and that’s the message we want to communicate and the marketing team is doing a great job of getting that across in traditional network TV, cable TV, on the internet now and really trying to reach our quarter between customers.

.

Okay, great. Thanks, Joel. Good luck going forward guys. .

Thank you. Appreciate it. .

Thanks, Sinisi..

And next will be Kelly Halsor with Buckingham Research Group..

Hi, thanks for taking my question and congrats for the great quarter. .

Thanks, Kelly. .

Could you guys talk a little bit more about your sales guidance for the year with the comp being strong new store productivity in 1Q you maintained full year comp sales guidance.

So, is there just any way you are thinking differently about the comps by quarter in the back half of the year? Also I guess, could you help us marry your guidance with the clear strength you are seeing in new store productivity. So what are the new store productivity timeframe we should be using to get us to the full year sales guidance? Thanks. .

Let me, I’ll take the big picture on that and Ken talk about new store productivity a little bit. It sounds like, people are on the call are just trying to read into things. We see this as a 3% comp guiding – comp concept and we are really pleased with the first quarter and we are really pleased with the outlook for the back half of the year.

We go into the summer which is important time for us. I think as all of you start to see the TV commercials do you like what you are doing seeing the merchandize is strong. Michael and his team have really put together a great summer cadence and now we are getting ready for holiday from a merchandizing perspective.

So, while first quarter was strong, you got to still remember it’s less than 10% of our overall business and it gives us the momentum what we need and want but we also want to keep in perspective of where we are at in terms of the whole year.

And Ken, anything on the new stores?.

Yes, the new store productivity, Kelly, if you look at the full year, you do the calculation it’s north of 90%.

But keeping in mind though the timing of new store openings, remember last year through the midpoint of the year, we opened up about 70% of our stores and this year based on timing it’s closer to 60% base on what we’ve opened in Q1 and what we’ve guided to in Q2.

So that’s a piece of it that rolled into the productivity calculation for the full year..

Okay, that’s helpful, thanks.

And then, you called out a few categories of strength, Candy, Style and Room, but could you elaborate a little more for us on some of the trends I think, adult coloring has been strong in 4Q, Star Wars, so has the continued into 1Q and if any fall outs of notable trends you are seeing in the business and just how we should be thinking about that going forward?.

Yes, Kelly, certainly adult colorants remains strong and I think the way you got to continue to think about this business and what makes Five Below so unique is the Eight Worlds.

And the merchants do a great job of pressing up or down a world that has the trends change and the emergence of the room world is a recent change for us and that continues to get stronger as you get in our stores and see the new merchandize in the room world. So, as far as license goes as I said earlier, it remains strong for us.

Shop cadence is certainly one of those properties that we like and continue to see the trends, Series 5 just came out a few weeks ago and that continues to be the strong license for us. So, pleased with license, pleased with adult coloring, but in terms of the broader world, past quarter was really led by Candy, Style and Room..

Okay, thank you. .

Okay, thanks, Kelly..

Thanks, Kelly..

And our next question will come from Patrick McKeever with MKM Partners. .

Great, thanks. So, e-commerce now, it sounds like second half of this year, perhaps earlier next year, early next year and you are pushing forward in all, coming off of 4.9% comp and 40 consecutive quarters of positive same-store sales.

So, my question is, just on e-commerce, maybe you could just give us a little taste of what might be to come there? You said it was going to be a sort of a limited number of SKUs.

But anything more than as we look into the back half of the year?.

Patrick, I’d just rather start by reiterating your opening comments, right, 4.9 comp, 40 consecutive quarters, I mean, that’s the consistency of this business and when I started year and a half ago, I think our timeline we outlined for you in March of 2015 is that we planned to launch e-commerce within two years and we are still on that track and what’s nice about this concept is that, we don’t need e-commerce to rebuild our model.

E-commerce will be part of our larger digital strategy. E-commerce is icing into the cake, it’s another way for us to communicate with our customers, ratings and reviews, research on our products, be more relevant with SCM and SEO.

And so, we will participate, but we see e-commerce as convenience, we see it as an opportunity for bulk purchases, but our stores continue to remain our number one priority and as I shared with you in my prepared remarks, we are just seeing better and stronger results across multiple markets, multiple states throughout the country and we’ll continue to emphasize stores.

But we will be prepared and are beginning to build out the e-commerce and I think it’s just too early to speculate as we haven’t even launched sight yet on that. But, it will certainly remain on track and I want to share with everybody we are still on track within the two years that originally outline. .

Got it, okay, so it’s offensive and not defensive, I mean, clearly you are not – you don’t appear to be losing share to any of the online retailers?.

It’s certainly offensive. We are not in a situation where we need that to change our model, but at the same time, Five Below is continuing to get broader and the appeal is getting bigger and there are certain customers that want to take advantage of an online channel, we need to be there for them too. .

Okay. And then a couple of quick ones. I think you had given some, maybe some numbers around brand awareness in the past. So I just wonder if you had any update there. And then are you seeing any performance variance in some of your stores in places like Texas where you’ve got some of the issues with the energy economy.

I mean a lot of retailers have called out Texas and some other places, energy-dependent areas as it’s being weaker. .

Yes, as far as the brand awareness, we’d probably be prepared to talk about that on the next call. We are in slight right now with our spring brand awareness study.

Early reads are that it continues to move positive and I think all the steps we’ve taken digitally proving our merchandize assortment, proving the in-store experience are really helping that move forward. As far as Texas goes, outside weather, I mean they were floating away there this week.

We really aren’t seeing Texas perform any differently than the rest of our chain. .

Got it. Okay. Thanks..

Thanks, appreciate it. .

Thanks..

And moving on to Stephen Grambling with Goldman Sachs..

Hey, thanks for taking the questions and good afternoon.

First, are there any specific products driving the outperformance in Room and Style that you’d be able to call out? And could these offer a positive read as gift giving items going into the back half?.

No, I think, when we call out areas that are outperforming, take as the assumption better than how the overall chain did. But it wasn’t really any specific items with that. I think it’s just a great demonstration of the progress, the merch team led by Michael has made.

And we’ve seen those areas really evolving are continuing to get better and resonating with the customer. It’s a terrible value. .

Thanks, and then, I know it’s still early for this soft e-commerce launch.

But is there any detail you can provide on how you are thinking about the potential product that would go on the web side and even as you think about potential breakeven for the basket?.

Yes, it’s really seasonal, way too early for that. I mean, certainly we created a budget, it’s embedded in our overall guidance for the year. As I’ve said several times though, we are going to do this with discipline and prudence that do no expect to see a big drag on earnings or anything like that due to e-commerce.

This is additive and a benefit to our customers. It’s not the core driver of our future sales. It’s too early on the assortment. .

Okay, and then, I guess, as we see some of the other online players pop-up, whether it’s Haller or Wish.com, I mean, what percentage of the products I guess, that you carry now are exclusive to Five Below?.

Off the top of my head, Stephen, I don’t know that piece. I would say, it’s less than half, but it’s certainly – it’s probably in the 20% to 30% range from – if you are just talking purely exclusive. You get into the Candy category, Hershey’s and Baby Ruth and all that can be bought anywhere.

But, from our other worlds, we source it and it’s exclusive, that’s probably in the third range. .

Okay, thanks so much. Great start to the year and good luck in the back half..

Yes, I appreciate, Stephen and we’ll take all the luck we can get. .

And that does conclude the question answer session. I’ll now turn the conference back over to you for any additional or closing remarks. .

Thank you, operator and thanks everyone for joining us today. Have a great summer and don’t forget to visit Five Below to stock up for all your summer needs and thanks for joining us on the call and allowing us to share our first quarter results with you. Have a great day. .

Thank you. That does conclude today's conference. We do thank you for your participation today..