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| So that will come back as a positive and improved gross margins and operating margin year-on-year |
| Joel Anderson Before turning to questions, I want to reiterate what a great year it was from a sales perspective and my gratitude to the awesome Five Below crew who helped drive this performance, along with achievement of key strategic initiatives that we just talked about that are critical to the success of our continued long-term growth |
| Consistent with the rest of the year, results for both the holiday period and the quarter overall were achieved through comp transaction growth led by the Five Beyond format stores, which continued to outperform the non-Five Beyond format stores |
| We're really pleased with the progress we've made on our long-term goals in 2023, that should continue to drive success in 2024 and beyond |
| Total fourth quarter sales were $1.34 billion, or growth of over 19% and comparable sales increased 3.1%, driven by outperformance in the candy, style, sports and seasonal worlds |
| Our Q4 success at the department level is probably the most departments we've ever had positive since I've been here |
| But I'll tell you relative to where we were two years ago with the supply chain, I felt really very positive about our inventory levels |
| We are excited for 2024 and to deliver against our key operational priorities as we advance toward our triple-double goals |
| We expect inventory to benefit from AI-powered tools and our crew to embrace simpler processes and systems utilizing technology |
| These improvements are key to supporting our future high growth |
| We are now integrating our new capabilities to improve inventory forecasting ordering replenishment and flow, which will improve turns, in stocks and end-to-end visibility |
| But shrink aside, as I said earlier, a really strong quarter for us |
| And that tradition given the early read on our Easter product seems to be very positive |
| We still have a huge opportunity to make further strides, particularly in the movement and levels of inventory |
| Our strong sales and transactions in these converted stores demonstrate the appeal of Five Beyond |
| As discussed in early January at the ICR conference, we were pleased with our holiday sales led by an amazing assortment of Wow products sourced by our passionate merchants |
| We are still in the early stages of this journey and see great future potential to both increase brand awareness as well as customer loyalty |
| We have improved our ability to meet our customers where they are, whether it be Facebook, Instagram or Snapchat among other social media platforms |
| And in fact, I'll tell you, George and the store operators have done a great job over time of mitigating wage inflation with productivity gains in the stores |
| As we've seen in the past, our growing scale opens up even more incredible opportunities to source amazing products across categories, our customers will love |
| Feedback from customers on our ability to provide extreme value in new and existing product categories has been very positive |
| With this flexibility, we were able to capitalize on various opportunities in very desirable existing centers |
| But we have definitely seen a nice improvement from what we saw in February |
| Brand awareness is the product of our growing scale and improved target marketing |
| So I think it's pretty good |
| And I think, in general, what I would say to all of you is that shrink aside, we really had a great year in 2023 |
| While 2024 has started off more slowly than we expected, which we believe is due to the slower start of tax refunds, we are encouraged by the early sales of our Easter seasonal category |
| We create efficiencies and opportunities across our deal making, legal, new stores, and hiring teams to achieve the growing number of store openings |
| We are very proud with the level of engagement of our crew and we will continue to focus on hiring outstanding crew members |
| So this - we've been consistently now settling down into the mid-80s and feel pretty good about that number, Chuck |
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| Joel, your new store productivity dropped below 80% for the second consecutive quarter here |
| Operating margin of 10.8% decreased approximately 40 basis points from last year's operating margin of 11.2% as lower inbound freight was more than offset by higher shrink and SG&A |
| So, from a Q4 perspective, what we had told you and you should have expected from us in the guide was about a 60 basis point pressure or headwind at the midpoint, right? We told you $50 to $70, that came in at about 60 basis points worse than we thought |
| The midpoint of this EPS guidance assumes operating margin deleverage of approximately 80 basis points entirely driven by higher SG&A, due to higher planned marketing, payroll expenses and deleverage on fixed costs |
| It actually came in about 125 basis points worse than that, which did include the true-up that I mentioned |
| What's unique about shrink is when it's going the wrong way, you always have that true-up, and that's why the fourth quarter felt extra challenging |
| Honestly, when we first started rolling this out a couple of years ago, that even surprised us |
| But overall, our net goal is to increase SG&A pressures slower than we expect to see rate declines in shrink |
| And we've also seen the last place when a consumer feel squeezed is cutting out on their kids |
| And then as you get into the holiday with the five fewer shopping days, that will slow down from the 3% down to about 1% |
| Look, Ed, we own this one in terms of probably being a little too optimistic on how easy it would be to turn shrink around |
| And David, if you recall, 2019 we misguided there and we really didn't effectively account for the five less days, which is the sister year from when that happened |
| And there's no glaring areas that we're overly concerned about |
| And so on the SG&A challenges, Scot |
| So it sounds like it didn't get better as you were expecting |
| Despite these strong sales results earnings per share of $3.65 was at the low end of our internal expectations and can be fully attributed to higher-than-planned shrink |
| Unfortunately, another shrink-related question |
| At the end of the day, it doesn't do us much good at the operating margin level if we have to take up labor by 30 points just to reduce shrink by 30% |
| Could you just talk about what you think drove the negative surprise on shrink? And I'm curious about this because I'm wondering if to reopen of stuff checkout, during holiday had anything to do with it |
| While shrink will be a headwind in Q1, it will be offset by lower freight and distribution costs |
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