What changed in this filing

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Item 1A. Risk Factors

2025-03-20 compared with 2024-03-21 · 26 added, 21 removed, 372 unchanged (11% of the section changed)

10 unchanged sentences

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.

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.

Additionally, commodities can be subject to availability constraints and price volatility caused by weather, supply conditions, political instability, government regulations, tariffs, energy prices, recession risks and potential effects, 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.

31 unchanged sentences

government could increase the cost to us of certain products, lower our margins, increase our import related expenses, cause us to increase our prices to consumers, and reduce consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.

A significant majority of our merchandise is manufactured outside of the United States, and changes in the prices and flow of these goods for any reason could have an adverse impact on our operations.

A significant majority of our merchandise is manufactured outside of the United States, with China as the single largest source of merchandise we import and source from domestic vendors.

Changes in the prices and flow of the goods we import and source from domestic vendors, for any reason could have an adverse impact on our operations.

The United States and other countries have occasionally proposed and enacted protectionist trade policies, which may result in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise.

For example, in 2018 and 2019 the United States imposed increased tariffs on certain imports from China (up to 30%), and the then-President of the United States, at one point, directed United States companies to immediately begin to look for alternatives to China and suggested he had the authority to order United States companies to cease production in, and importation from, China.

Although a partial trade deal has been reached between the United States and China, the trade issues between these countries are not fully resolved.

The trade issues between the United States and China may continue to be volatile and difficult to predict or forecast.

Increased tariffs as well as any newly imposed tariffs on items imported from China or elsewhere would likely result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions:

The trade issues between the United States and China and other countries may continue to be volatile and difficult to predict or forecast.

In particular, recent U.S.

tariffs imposed or threatened to be imposed on China, Mexico, Canada, and other countries and any retaliatory actions taken by such countries could result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions:

negotiate lower product costs with our vendors, purchase products produced in countries with no or lower tariffs or transition away from domestic vendors who source from China or other tariff impacted countries, increase our prices, or alter or cease offering certain products.

Any increase in pricing, alteration of products or reduced product offering could reduce the competitiveness of our products.

Furthermore, any retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses.

Any increase in pricing, alteration of products or reduced product offering could reduce the competitiveness of our products, particularly if our competitors do not keep pace with any such changes or are able to offset the impact of tariffs through other actions.

Furthermore, in response to the recent tariffs announced by the United States, China and other countries have imposed or proposed additional tariffs on certain exports from the United States.

These and any other retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses.

Additionally, even if the products we import are not directly impacted by additional tariffs, the imposition of such additional tariffs on goods imported into the United States could cause increased prices for consumer goods in general, which could have a negative impact on consumer spending for discretionary items reducing demand for our products.

These direct and indirect impacts of increased tariffs or trade restrictions implemented by the United States, both individually and cumulatively, could have a material adverse effect on our business, financial condition and results of future operations.

It has also been suggested that the United States may materially modify or withdraw from some of its existing trade agreements.

In addition, our ability to conduct business could be significantly impacted if the United States materially modifies or withdraws from its existing trade agreements.

Any of these or other measures, if ultimately enacted, or events relating to the manufacturers of our merchandise and the countries in which they are located, some or all of which are beyond our control, could adversely affect our ability to access suitable merchandise on acceptable terms, negatively impact our operations, increase costs and lower our margins.

14 unchanged sentences

We, like many retailers, are and may in the future be subject to increasing operational costs, including escalating product costs, the imposition of tariffs on imported goods, and higher wage and benefits costs in response to legislative requirements and competitive pressures.

In fiscal 2019, we implemented price increases (including beyond $5 per item) in an effort to mitigate some or all of the risks of such operational cost increases.

From time to time, we may implement price increases (including beyond $5 per item) in an effort to mitigate some or all of the risks of operational cost increases.

We can offer no assurances that price increases will be accepted by our customers, or that price increases will be sufficient to offset the impact of future cost increases.

3 unchanged sentences

Most of our stores are located in power, community and lifestyle shopping centers that benefit from the ability of “anchor” retail tenants, generally big box stores, and other destination retailers and attractions to generate sufficient levels of consumer traffic in the vicinity of our stores.

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, recession risks and potential effects, 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.

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.

1 unchanged sentence

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, which we began operating in April 2019, and will expand to approximately 1,000,000 square feet in the first half of 2024.

In March 2019, we completed the purchase of an approximately 700,000 square foot shipcenter in Forsyth, Georgia, which we began operating in April 2019, and expanded to approximately 1,100,000 square feet in the first half of 2024.

In August 2019, we acquired land in Conroe, Texas to building an approximately 860,000 square foot shipcenter, which we began operating in July 2020.

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, and will expand to approximately 1,200,000 square feet in the second half of 2024.

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, and expanded to approximately 1,200,000 square feet in the second half of 2024.

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.

61 unchanged sentences

This could cause us to lose market share to our competitors and could have an adverse effect on our financial results.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

Moreover, our proprietary, confidential, and/or sensitive information could be leaked, disclosed, or revealed as a result of or in connection with the use of generative artificial intelligence technologies.

Even if we are not targeted directly, cyberattacks on the U.S.

government, financial markets, financial institutions, or other businesses, including our vendors, software creators, cloud providers, cybersecurity service providers, and other third parties with whom we work, may occur, and such events could disrupt our normal business operations and networks in the future.

We use, and may over time increase the usage of, machine learning and other types of artificial intelligence in our business, and challenges with properly managing its use could adversely affect our business.

19 unchanged sentences

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.

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 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 Winnie Park, our President and Chief Executive Officer.

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.

11 unchanged sentences

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.

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).

Currently, we lease all of our store locations, as well as our corporate headquarters and distribution facility 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 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.

47 unchanged sentences

We purchase substantial amounts of inventory in the end of the third fiscal quarter (October) and beginning of the fourth fiscal quarter (November and December) and incur higher shipping costs and higher payroll costs in anticipation of the increased sales activity during these time periods.

Adverse events, such as inclement or unusual weather, deteriorating economic conditions, higher unemployment, increased wage rates, higher gas prices or public transportation disruptions, could result in lower-than-planned sales during the holiday season which may lead to unanticipated markdowns.

Adverse events, such as inclement or unusual weather, deteriorating economic conditions, recession risks and potential effects, higher unemployment, increased wage rates, higher gas prices or public transportation disruptions, could result in lower-than-planned sales during the holiday season which may lead to unanticipated markdowns.

Since we rely on third parties for transportation and use third-party warehouses when we build up inventory, a number of these factors are outside of our control.

4 unchanged sentences

We may not be successful in our continued expansion into online retail and if we are successful, we will face new risks and challenges, which could adversely affect our results of operations.

We sell merchandise on the internet, through our fivebelow.com e-commerce website.

We sell merchandise on the internet, through our fivebelow.com e-commerce website and mobile app.

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.

7 unchanged sentences

Our inability to upgrade or expand, our technology systems as a result of external factors, staffing shortages or difficulties in updating our existing technology or developing or implementing new technology could have a material adverse effect on our business or results of operations.

We are continuing to expand, upgrade and develop our information technology capabilities, including, most recently, our core-enterprise resource planning system (or "ERP") which we implemented through Oracle software in fiscal 2020, the re-launch of our e-commerce website on the Hollar platform in fiscal 2020, and the implementation of a new enterprise wide human capital management system, Workday, in 2021.

We are continuing to expand, upgrade and develop our information technology capabilities, including, most recently, with the implementation of a new core-enterprise resource planning system (or "ERP"), Oracle Fusion, in fiscal 2024 for use in fiscal 2025, the implementation of a new enterprise wide human capital management system, Workday, in 2021, the implementation of our Retail Merchandising System in fiscal 2020, and the launch of our e-commerce website in fiscal 2020.

If we are unable to successfully continue upgrading or expanding our technological capabilities to support our growth, we may not be able to take advantage of market opportunities, manage our costs and transactional data effectively, satisfy customer requirements, execute our business plan or respond to competitive pressures.

13 unchanged sentences

In addition, we operate in markets that are susceptible to pandemic outbreaks, 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.

Further, recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility.

Military conflicts and wars (such as the ongoing conflicts between Russia and Ukraine, Israel and Hamas, and the Red Sea crisis and its impact on shipping and logistics), terrorist attacks, instability in Venezuela, other geopolitical events, high inflation, increasing interest rates, bank failures and associated financial instability and crises, and supply chain issues can cause exacerbated volatility and disruptions to various aspects of the global economy.

38 unchanged sentences

Product and food safety claims and the effects of legislation and regulations on product safety and quality and food safety and quality could affect our sales and results of operations adversely.

We may be subject to product liability claims from customers or actions brought or penalties assessed by government agencies relating to products, including food products or over-the-counter drug products that are recalled, mis-labeled, expired, defective or otherwise alleged to be harmful.

We may be subject to product liability claims from customers or actions brought or penalties assessed by government agencies relating to products, including food products or over-the-counter drug products that are recalled, mislabeled, expired, defective or otherwise alleged to be harmful.

Such claims may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling and transportation phases.

34 unchanged sentences

• 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;

• conditions or trends affecting our industry or the economy generally, including, without limitation, recession risks and potential effects and 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;

46 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors