FIVE BELOW, INC 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our principal market risk relates to interest rate sensitivity, which is the risk that future changes in interest rates will reduce our net income or net assets. We have investment securities that are interest-bearing securities and if there are changes in interest rates, those changes would affect the interest income we earn on these investments and, therefore, impact our cash flows and results of operations. However, due to the short term nature of our investment portfolio, we do not believe an immediate 100 basis point increase or decrease in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates. We also have a Revolving Credit Facility which includes a revolving line of credit, which bears interest at a variable rate. Because our Revolving Credit Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates, which could materially impact our consolidated statements of operations should we have any material borrowings under our Revolving Credit Facility. As of January 31, 2026, we had approximately $214 million available on the Revolving Credit Facility, net of $11 million in outstanding letters of credit. 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 0.125% to 0.50% or (b) SOFR plus a margin ranging from 1.12% to 1.50%. Letter of credit fees range from 1.125% to 1.50%. 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. 46 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FIVE BELOW, INC. Index to Consolidated Financial Statements Page Report of KPMG LLP, Independent Registered Public Accounting Firm ( KPMG LLP , Philadelphia, PA , Audit Firm ID: 185 ) 48 Consolidated Balance Sheets as of January 31, 2026 and February 1, 2025 50 Consolidated Statements of Operations for Fiscal Years 2025, 2024 and 2023 51 Consolidated Statements of Changes in Shareholders’ Equity for Fiscal Years 2025, 2024 and 2023 52 Consolidated Statements of Cash Flows for Fiscal Years 2025, 2024 and 2023 53 Notes to Consolidated Financial Statements 54 47 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Five Below, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Five Below, Inc. and subsidiaries (the Company) as of January 31, 2026 and February 1, 2025, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended January 31, 2026, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2026 and February 1, 2025, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 31, 2026, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 19, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 48 Slow-moving and obsolete inventories at net realizable value As discussed in Note 1 to the consolidated financial statements, the Company monitors inventory levels in order to identify slow-moving or obsolete merchandise as these factors can indicate a decline in the net realizable value of the inventory on hand. The Company’s inventory balance was $847 million as of January 31, 2026. Inventory cost is reduced to net realizable value when cost exceeds the selling price less the cost of disposal. The net realizable value is subject to the effects of consumer demands, customer preferences, and the broader economy. We identified the evaluation of slow-moving and obsolete inventories at net realizable value as a critical audit matter because a high degree of auditor judgment was required to evaluate the Company’s ability to sell certain products. The following are the primary procedures we performed to address this critical audit matter. • We evaluated the design and implementation and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the review of historical product sales and inventory quantities on hand, and the estimate of net realizable value of slow-moving and obsolete inventories and adjustments of inventory cost to net realizable value. • We evaluated the Company’s methodology for determining slow-moving and obsolete merchandise. • We selected certain products determined to be slow-moving and obsolete and considered current market trends or seasonal impacts by assessing the nature of the slow-moving and obsolete merchandise. • We assessed the Company’s adjustments of inventory costs to net realizable value for certain slow-moving and obsolete inventories by (1) comparing the historical estimate for net realizable value adjustments to actual adjustments of inventory costs, and (2) analyzing sales subsequent to the measurement date. /s/ KPMG LLP We have served as the Company's auditor since 2002. Philadelphia, Pennsylvania March 19, 2026 49 FIVE BELOW, INC. Consolidated Balance Sheets (in thousands, except share and per share data) January 31, 2026 February 1, 2025 Assets Current assets: Cash and cash equivalents $ 723,699 $ 331,718 Short-term investment securities 208,508 197,073 Inventories 846,609 659,500 Prepaid income taxes and tax receivable 5,210 4,649 Prepaid expenses and other current assets 132,697 158,427 Total current assets 1,916,723 1,351,367 Property and equipment, net 1,234,331 1,261,728 Operating lease assets 1,765,704 1,706,542 Other assets 20,261 19,937 $ 4,937,019 $ 4,339,574 Liabilities and Shareholders’ Equity Current liabilities: Line of credit $ — $ — Accounts payable 368,381 260,343 Income taxes payable 56,644 51,998 Accrued salaries and wages 67,505 19,743 Other accrued expenses 160,328 149,495 Operating lease liabilities 301,148 274,863 Total current liabilities 954,006 756,442 Other long-term liabilities 8,667 8,210 Deferred income taxes 50,015 59,891 Long-term operating lease liabilities 1,731,041 1,706,704 Total liabilities 2,743,729 2,531,247 Commitments and contingencies (note 6) Shareholders’ equity: Common stock, $ 0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,228,735 and 55,028,682 shares, respectively. 551 549 Additional paid-in capital 178,791 152,471 Retained earnings 2,013,948 1,655,307 Total shareholders’ equity 2,193,290 1,808,327 $ 4,937,019 $ 4,339,574 See accompanying notes to consolidated financial statements. 50 FIVE BELOW, INC. Consolidated Statements of Operations (in thousands, except share and per share data) Fiscal Year 2025 2024 2023 Net sales $ 4,764,147 $ 3,876,527 $ 3,559,369 Cost of goods sold (exclusive of items shown separately below) 3,049,461 2,523,865 2,285,544 Selling, general and administrative expenses 1,065,164 861,398 757,507 Depreciation and amortization 192,123 167,447 130,747 Operating income 457,399 323,817 385,571 Interest income and other income, net 22,972 14,848 15,530 Income before income taxes 480,371 338,665 401,101 Income tax expense 121,730 85,054 99,995 Net income $ 358,641 $ 253,611 $ 301,106 Basic income per common share $ 6.51 $ 4.61 $ 5.43 Diluted income per common share $ 6.47 $ 4.60 $ 5.41 Weighted average shares outstanding: Basic shares 55,112,281 55,055,064 55,487,252 Diluted shares 55,436,972 55,156,342 55,621,619 See accompanying notes to consolidated financial statements. 51 FIVE BELOW, INC. Consolidated Statements of Changes in Shareholders’ Equity (in thousands, except share and per share data) Common stock Additional paid-in capital Retained earnings Total shareholders’ equity Shares Amount Balance, January 28, 2023 55,537,221 $ 555 $ 260,784 $ 1,100,590 $ 1,361,929 Share-based compensation expense — — 17,307 — 17,307 Issuance of unrestricted stock awards 2,539 — 473 — 473 Exercise of options to purchase common stock 7,800 — 286 — 286 Vesting of restricted stock units and performance-based restricted stock units 235,460 2 — — 2 Common shares withheld for taxes ( 85,594 ) ( 1 ) ( 16,585 ) — ( 16,586 ) Repurchase and retirement of common stock ( 504,369 ) ( 5 ) ( 80,536 ) — ( 80,541 ) Issuance of common stock to employees under employee stock purchase plan 4,818 — 980 — 980 Net income — — — 301,106 301,106 Balance, February 3, 2024 55,197,875 $ 551 $ 182,709 $ 1,401,696 $ 1,584,956 Share-based compensation expense — — 14,939 — 14,939 Issuance of unrestricted stock awards 6,055 — 562 — 562 Exercise of options to purchase common stock 10,126 — 339 — 339 Vesting of restricted stock units and performance-based restricted stock units 108,762 1 — — 1 Common shares withheld for taxes ( 37,047 ) — ( 6,947 ) — ( 6,947 ) Repurchase and retirement of common stock ( 266,997 ) ( 3 ) ( 40,210 ) — ( 40,213 ) Issuance of common stock to employees under employee stock purchase plan 9,908 — 1,079 — 1,079 Net income — — — 253,611 253,611 Balance, February 1, 2025 55,028,682 $ 549 $ 152,471 $ 1,655,307 $ 1,808,327 Share-based compensation expense — — 34,049 — 34,049 Issuance of unrestricted stock awards 4,389 — 544 — 544 Exercise of options to purchase common stock — — — — — Vesting of restricted stock units and performance-based restricted stock units 254,595 2 — — 2 Common shares withheld for taxes ( 65,085 ) — ( 9,214 ) — ( 9,214 ) Repurchase and retirement of common stock — — — — — Issuance of common stock to employees under employee stock purchase plan 6,154 — 941 — 941 Net income 358,641 358,641 Balance, January 31, 2026 55,228,735 $ 551 $ 178,791 $ 2,013,948 $ 2,193,290 See accompanying notes to consolidated financial statements. 52 FIVE BELOW, INC. Consolidated Statements of Cash Flows (in thousands) Fiscal Year 2025 2024 2023 Operating activities: Net income $ 358,641 $ 253,611 $ 301,106 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 192,123 167,447 130,747 Share-based compensation expense 34,680 15,589 17,859 Deferred income tax (benefit) expense ( 9,876 ) ( 6,852 ) 7,592 Other non-cash expenses 2,985 1,312 351 Changes in operating assets and liabilities: Inventories ( 187,109 ) ( 74,873 ) ( 56,907 ) Prepaid income taxes and tax receivable ( 561 ) 185 4,064 Prepaid expenses and other assets 25,262 ( 7,539 ) ( 26,651 ) Accounts payable 105,516 9,464 35,133 Income taxes payable 4,646 10,226 21,844 Accrued salaries and wages 47,762 ( 10,285 ) 4,608 Operating leases ( 8,540 ) 45,891 51,515 Other accrued expenses 20,899 26,472 8,358 Net cash provided by operating activities 586,428 430,648 499,619 Investing activities: Purchases of investment securities and other investments ( 352,385 ) ( 192,918 ) ( 416,649 ) Sales, maturities, and redemptions of investment securities 340,950 283,974 195,364 Capital expenditures ( 174,741 ) ( 323,994 ) ( 335,050 ) Net cash used in investing activities ( 186,176 ) ( 232,938 ) ( 556,335 ) Financing activities: Net proceeds from issuance of common stock 941 1,079 980 Repurchase and retirement of common stock — ( 40,213 ) ( 80,541 ) Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units 2 340 288 Common shares withheld for taxes ( 9,214 ) ( 6,947 ) ( 16,586 ) Net cash used in financing activities ( 8,271 ) ( 45,741 ) ( 95,859 ) Net increase (decrease) in cash and cash equivalents 391,981 151,969 ( 152,575 ) Cash and cash equivalents at beginning of year 331,718 179,749 332,324 Cash and cash equivalents at end of year $ 723,699 $ 331,718 $ 179,749 Supplemental disclosures of cash flow information: Interest paid $ 475 $ 420 $ 496 Income taxes paid $ 127,613 $ 81,656 $ 68,277 Non-cash investing activities (Decrease) increase in accounts payable and accrued purchases of property and equipment $ ( 7,174 ) $ ( 27,963 ) $ 4,686 See accompanying notes to consolidated financial statements. 53 FIVE BELOW, INC. Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies (a) Description of Business Five Below, Inc. (collectively referred to herein with its wholly-owned subsidiaries as the "Company") is a specialty value retailer offering a broad range of trend-right, high-quality products loved by the kid and the kid in all of us. The Company offers an edited assortment of products, with most priced at $ 5 and below. The Company’s edited assortment of products includes select brands and licensed merchandise. The Company believes its merchandise is readily available, and that there are a number of potential vendors that could be utilized, if necessary, under approximately the same terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of vendors. The Company is incorporated in the Commonwealth of Pennsylvania and, as of January 31, 2026, operated in 46 states excluding Alaska, Hawaii, Idaho and Montana. As of January 31, 2026 and February 1, 2025, the Company operated 1,921 stores and 1,771 stores, respectively, each operating under the name “Five Below.” The Company also sells its merchandise on the internet, through the Company's fivebelow.com e-commerce website and mobile app, offering home delivery and the option to buy online and pick up in store. Additionally, the Company sells merchandise through on-demand third-party delivery services to enable its customers to shop online and receive convenient delivery. The Company's consolidated financial statements include the accounts of Five Below, Inc. and its subsidiaries (1616 Holdings, Inc., formerly known as Five Below Merchandising, Inc., 1616 Sourcing Holdco LLC and 1616 Holdings India Private Limited). All intercompany transactions and accounts are eliminated in the consolidation of the Company's and subsidiaries' financial statements. (b) Fiscal Year The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2025" or "fiscal 2025" refer to the period from February 2, 2025 to January 31, 2026, which consists of a 52-week year. References to "fiscal year 2024" or "fiscal 2024" refer to the period from February 4, 2024 to February 1, 2025, which consists of a 52-week 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. (c) Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity date of three months or less when purchased to be cash equivalents. Our cash equivalents consist of cash management solutions, credit and debit card receivables, money market funds, and corporate bonds with original maturities of 90 days or less, which are classified as cash and cash equivalents in the accompanying consolidated balance sheets. The cash management solutions relate to cash deposit products that provide credit generally processed the next business day for cash deposited in third-party tech-enabled solutions. For credit card and debit card receivables, the majority of payments due from banks for third-party credit card and debit card transactions resulting from customer purchases at the Company’s retail stores process within 24 to 48 hours, except for transactions occurring on a Friday, which are generally processed the following Monday. Amounts due from banks for these transactions classified as cash equivalents totaled $ 32.2 million and $ 24.7 million as of January 31, 2026 and February 1, 2025, respectively. Book overdrafts, which are outstanding checks in excess of funds on deposit, are recorded within accounts payable in the accompanying consolidated balance sheets and within operating activities in the accompanying consolidated statements of cash flows. As of January 31, 2026 and February 1, 2025, the Company had cash equivalents of $ 700.4 million and $ 310.4 million, respectively. (d) Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Inputs, other than Level 1, that are either directly or indirectly observable. Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market participants would use. 54 The classification of fair value measurements within the hierarchy are based upon the lowest level of input that is significant to the measurement. The Company’s financial instruments consist primarily of cash equivalents, investment securities, accounts payable, and borrowings, if any, under a line of credit. The Company believes that: (1) the carrying value of cash equivalents and accounts payable are representative of their respective fair value due to the short-term nature of these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit approximates fair value because the line of credit’s interest rates vary with market interest rates. Under the fair value hierarchy, the fair market values of cash equivalents and the investments in corporate bonds are Level 1 while the investments in municipal bonds are Level 2. The fair market values of Level 2 instruments are determined by management with the assistance of a third-party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third-party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities. As of January 31, 2026 and February 1, 2025, the Company's investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost-plus accrued interest and consist of the following (in thousands): As of January 31, 2026 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Short-term: Corporate bonds $ 208,508 $ — $ 64 $ 208,444 Total $ 208,508 $ — $ 64 $ 208,444 As of February 1, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Short-term: Corporate bonds $ 197,073 $ — $ 115 $ 196,958 Total $ 197,073 $ — $ 115 $ 196,958 Short-term investment securities as of January 31, 2026 and February 1, 2025 all mature in one year or less. (e) Inventories Inventories consist of finished goods purchased for resale, including freight and tariffs, and are stated at the lower of cost and net realizable value, at the individual product level. Cost is determined on a weighted average cost method. Management of the Company reviews inventory levels in order to identify slow-moving merchandise and uses markdowns to clear merchandise. Inventory cost is reduced when the selling price less costs of disposal is below cost. The Company accrues an estimate for inventory shrink for the period between the last physical count and the balance sheet date. The shrink estimate can be affected by changes in merchandise mix and changes in actual shrink trends. (f) Prepaid Expenses and Other Current Assets Prepaid expenses as of January 31, 2026 and February 1, 2025 were $ 36.1 million and $ 37.7 million, respectively. Other current assets as of January 31, 2026 and February 1, 2025 were $ 96.6 million and $ 120.7 million, respectively. (g) Property and Equipment Property and equipment are stated at cost. Additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Depreciation and amortization is recorded using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the respective leases, if applicable. The estimated useful lives are three to ten years for furniture and fixtures and computers and equipment. Store leasehold improvements are amortized over the shorter of the useful life or the lease term plus assumed extensions, which is generally ten years . Leasehold improvements located in the shipcenters and the corporate headquarters are amortized over the shorter of the useful life or the lease term. Depreciation and amortization expense for property and equipment was $ 192.1 million, $ 167.4 million and $ 130.7 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. 55 Property and equipment, net, consists of the following (in thousands): January 31, 2026 February 1, 2025 Land $ 30,371 $ 30,371 Furniture and fixtures 677,483 630,465 Leasehold improvements 903,773 843,044 Computers and equipment 475,296 424,282 Construction in process 68,435 83,489 Property and equipment, gross 2,155,358 2,011,651 Less: Accumulated depreciation and amortization ( 921,027 ) ( 749,923 ) Property and equipment, net $ 1,234,331 $ 1,261,728 (h) 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. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows, which is generally at a store level. Assets are reviewed for impairment using factors including, but not limited to, the Company's future operating plans and projected cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is based on discounted future cash flows of the asset using a discount rate commensurate with the risk. In the event of a store closure, the Company will record an impairment charge, if appropriate, or accelerate depreciation over the revised useful life of the asset. Based on the Company's analysis performed in fiscal 2025, fiscal 2024 and fiscal 2023, management believes that no impairment of long-lived assets exists for the periods ended January 31, 2026, February 1, 2025 and February 3, 2024. (i) Deferred Financing Costs Deferred financing costs are amortized to interest expense over the term of the related credit agreement. As of January 31, 2026 and February 1, 2025, the Company had $ 0.2 million and $ 0.4 million remaining in the accompanying consolidated balance sheets within Other Assets. (j) Operating Leases The Company leases store locations, shipcenters, the corporate headquarters and equipment used in its operations and evaluates and classifies its leases as operating or capital leases for financial reporting purposes. Any assets held under a finance lease are included in property and equipment, net. Leases are accounted for in accordance with the guidance in "Leases" (Topic 842). The Company is required to recognize an operating lease asset and an operating lease liability for its leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of the lease payments using an estimated incremental borrowing rate, on a collateralized basis over similar term, that the Company would have incurred to borrow the funds necessary to purchase the leased asset. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. Operating leases result in straight-line expense while finance leases result in a front-loaded expense pattern. At the inception of a lease, the Company determines the lease term, which includes periods under the exercise of renewal options that are reasonably assured. Renewal options are exercised at the Company's sole discretion. In September 2016, the Company signed a 15 -year lease for a new corporate headquarters location in Philadelphia, Pennsylvania. The Company currently occupies approximately 230,000 square feet of office space with multiple options to expand in the future. The lease agreement expires in early 2033 with three successive options to renew for additional terms up to approximately fifteen years . The shipcenter in Pedricktown, New Jersey is leased under a lease agreement expiring in 2030 with options to renew for two successive five-year periods. Generally, the Company’s store leases have expected lease terms of ten years , which are comprised of an initial term of ten years or an initial term of five years and one assumed five-year extension, resulting in a ten-year life. The expected lease term is used to determine whether a lease is finance or operating and to calculate straight-line rent expense. 56 Substantially all of the Company's leases include options that allow the Company to renew or extend the lease term beyond the initial lease period, subject to terms and conditions agreed upon at the inception of the lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later in the life of the lease, depending upon market conditions at the time of such renewal or extension. In addition, the Company's leases may include early termination options. (k) Other Accrued Expenses Other accrued expenses include accrued capital expenditures of $ 16.0 million and $ 25.7 million as of January 31, 2026 and February 1, 2025, respectively. (l) Deferred Compensation The Company approved and adopted the Five Below, Inc. Nonqualified Deferred Compensation Plan (the "Deferred Comp Plan") and a related, irrevocable grantor trust (the "Trust") during fiscal 2021. The Deferred Comp Plan provides eligible key crew with the opportunity to elect to defer up to 80% of their eligible compensation. The Company may make discretionary contributions, at the discretion of the Board. Payments under the Deferred Comp Plan will be made from the general assets of the Company or from the assets of the Trust, funded by the Company. The related liability is recorded as deferred compensation and included in other long-term liabilities in the consolidated balance sheets. (m) Share-Based Compensation The Company measures the cost of crew services received in exchange for share-based compensation based on the grant date fair value of the employee stock award. The Company recognizes compensation expense generally on a straight-line basis over the crew's requisite service period (generally the vesting period of the equity grant) based on the estimated grant date fair value of restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") except for PSUs that have a market condition based on its total shareholder return relative to a pre-defined peer group, which are subject to multi-year performance objectives with vesting periods of approximately three years from the date of grant (if the applicable performance objectives are achieved). The fair value of these PSUs are determined using a Monte Carlo simulation model, which utilizes multiple input variables such as (i) total shareholder return from the beginning of the performance cycle through the performance measurement date(s); (ii) volatility; (iii) risk-free interest rates; and (iv) the correlation of the pre-defined peer group's total shareholder return. The Company uses the Black-Scholes option-pricing model for grants of stock options. The fair value of restricted stock awards are based on the closing price of the Company's common stock on the grant date and the fair value of stock options are based on the Black-Scholes option-pricing model utilizing the closing price of the Company's common stock on the grant date as the fair value of common stock in the model. Modifications, cancellations or repurchases of awards after the grant date may require the Company to accelerate any remaining unearned share-based compensation cost or incur incremental compensation costs. Share-based compensation cost recognized and included in expenses for fiscal 2025, fiscal 2024 and fiscal 2023, was $ 34.7 million, $ 15.6 million and $ 17.9 million, respectively. (n) Revenue Recognition Revenue from store operations, including third-party delivery services, is recognized at the point of sale when control of the product is transferred to the customer at such time. Internet sales, through the Company's fivebelow.com e-commerce website and mobile app, are recognized when the customer receives the product as control transfers upon delivery. Returns subsequent to the period end are immaterial; accordingly, no significant reserve has been recorded. Gift card sales to customers are initially recorded as liabilities and recognized as sales upon redemption for merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer in net sales. The transaction price for the Company’s sales is based on the item’s stated price. To the extent that the Company charges customers for shipping and handling on e-commerce sales, the Company records such amounts in net sales. Shipping and handling costs, which include fulfillment and shipping costs related to the Company's e-commerce operations, are included in costs of goods sold. The Company has elected to exclude all sales taxes collected from customers and remitted to governmental authorities from net sales in the accompanying consolidated statements of operations. 57 (o) Supply Chain Finance The Company utilizes a supply chain finance program whereby qualifying suppliers may elect at their sole discretion to sell the Company's payment obligations to a designated third-party financial institution. While the terms of these agreements are between the supplier and the financial institution, the financial institution allows the participating suppliers to utilize the Company's creditworthiness in establishing credit spreads and associated costs. The payment terms that the Company has with participating suppliers under these programs generally range up to 90 days. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements. Supplier participation is voluntary, and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the financial institution. The amount of obligations outstanding under the supply chain finance program, which are included within a ccounts payable in the Consolidated Balance Sheets, was $ 6.2 million and $ 0.7 million as of January 31, 2026 and February 1, 2025, respectively. The following table is a reconciliation of the obligations outstanding under the Company’s supply chain finance program for fiscal 2025 (in thousands): Fiscal 2025 Amount Obligations outstanding as of February 1, 2025 $ 734 Obligations confirmed during the period 32,826 Obligations settled during the period 27,358 Obligations outstanding as of January 31, 2026 $ 6,202 (p) Shipping and Handling Revenues and Costs The Company includes all shipping and handling revenue from e-commerce sales in net sales. Shipping and handling costs, which are included in cost of goods sold in the accompanying consolidated statements of operations, include fulfillment and shipping costs related to the Company's e-commerce operations. (q) Cost of Goods Sold Cost of goods sold reflects the direct costs of purchased merchandise and inbound freight and tariffs, as well as store occupancy, distribution and buying expenses. Store occupancy costs include rent, common area maintenance, utilities and property taxes for all store locations. Distribution costs include costs for receiving, processing, warehousing and shipping of merchandise to or from the Company's shipcenters and between store locations. Buying costs include compensation expense for the Company's internal buying organization. (r) Selling, General and Administrative Expenses (including Depreciation and Amortization) Selling, general and administrative expenses (including depreciation and amortization) include payroll and other compensation, marketing and advertising expense, depreciation and amortization expense, and other selling and administrative expenses. (s) Vendor Allowances The Company receives various incentives in the form of allowances, free product and promotional funds from its vendors based on product purchases and advertising activities. The amounts received are subject to changes in market conditions, vendor marketing strategies and changes in the profitability or sell-through of the related merchandise for the Company. Merchandise allowances are recognized in the period the related merchandise is sold within cost of goods sold. Marketing allowances are recorded in selling, general and administrative expenses and are recognized in the period the related advertising occurs to the extent the allowance is a reimbursement that is specific and incremental, and identifiable costs have been incurred by the Company to sell the vendor’s products. To the extent these conditions are not met, these allowances are recorded as merchandise allowances. (t) Store Pre-Opening Costs Costs incurred between completion of a new store location’s construction and its opening (pre-opening costs) are charged to expense as incurred. Pre-opening costs were $ 14.8 million, $ 18.9 million and $ 18.3 million in fiscal 2025, fiscal 2024, and fiscal 2023, respectively, and are recorded in the accompanying consolidated statements of operations based on the nature of the expense. 58 (u) Advertising Costs Advertising costs are charged to expense as the advertising takes place. Advertising expenses were $ 76.2 million, $ 64.3 million and $ 62.5 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. (v) Income Taxes Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. (w) Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. (x) Use of Estimates The preparation of consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, net realizable value for inventories, income taxes, share-based compensation expense, and the incremental borrowing rate utilized in operating lease liabilities . (y) Recently Issued Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. This new guidance requires consistent categories and enhanced disaggregation of information in the rate reconciliation and enhanced disaggregation of income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted this guidance prospectively on January 31, 2026, and enhanced the disclosures included in Note 9 - Income Taxes. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. This new guidance requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory, employee compensation, and depreciation and amortization. In January 2025, the FASB issued ASU 2025-01, which clarifies the effective date of ASU 2024-03. The amendment is effective for fiscal years beginning after December 15, 2026 and interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software. This new guidance amends certain aspects of the accounting for and disclosure of costs incurred to develop internal use software by removing references to project stages of a software development project, which better aligns with current software development methods. The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-06 on its consolidated financial statements. 59 (2) Revenue from Contracts with Customers Disaggregation of Revenue The following table provides information about disaggregated revenue by groups of products: leisure, fashion and home, and snack and seasonal (in thousands): Fiscal Year Fiscal Year Fiscal Year 2025 2024 2023 Amount Percentage of Net Sales Amount Percentage of Net Sales Amount Percentage of Net Sales Leisure $ 2,118,114 44.5 % $ 1,715,847 44.3 % $ 1,644,171 46.2 % Fashion and home 1,472,911 30.9 % 1,171,541 30.2 % 1,043,579 29.3 % Snack and seasonal 1,173,122 24.6 % 989,139 25.5 % 871,619 24.5 % Total $ 4,764,147 100.0 % $ 3,876,527 100.0 % $ 3,559,369 100.0 % (3) Leases The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the rate implicit in the lease is not readily determinable for the Company's leases, the Company utilizes its incremental borrowing rate to determine the present value of future lease payments. The incremental borrowing rate represents a significant judgment and is determined based on an analysis of the Company's synthetic credit rating, prevailing financial market conditions, corporate bond yields, treasury bond yields, and the effect of collateralization. The operating lease assets also include lease payments made before commencement and exclude lease incentives. The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years . For real estate leases, except for renewals that generally take the lease to a ten-year term, the options to renew are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic benefits of exercising the renewal options, and regularly opens, relocates or closes stores to align with its operating strategy. Therefore, generally, except for renewals that take the lease to a ten-year term, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease asset and operating lease liability as the exercise of such options is not reasonably certain. The Company’s operating lease agreements, including assumed renewals, which are generally those that take the lease to a ten-year term, expire through fiscal 2037. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease. For certain real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments for reimbursement of real estate taxes, common area maintenance and insurance as well as payments based on sales volume, all of which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease assets and operating lease liabilities. All of the Company's leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the consolidated balance sheets. As of January 31, 2026 and February 1, 2025, the weighted average remaining lease term for the Company's operating leases was 7.0 years and 7.4 years, respectively, and the weighted average discount rate was 5.3 % and 5.3 %, respectively. The following table is a summary of the Company's components for net lease costs as of January 31, 2026 and February 1, 2025 (in thousands): Fiscal Year Ended Lease Cost January 31, 2026 February 1, 2025 Operating lease cost $ 346,481 $ 311,841 Variable lease cost 103,390 92,195 Net lease cost* $ 449,871 $ 404,036 * Excludes short-term lease cost, which is immaterial 60 The following table summarizes the maturity of lease liabilities under operating leases as of January 31, 2026 (in thousands): Maturity of Lease Liabilities Operating Leases 2026 $ 400,026 2027 383,225 2028 357,774 2029 325,200 2030 280,111 After 2030 701,959 Total lease payments 2,448,295 Less: imputed interest 416,106 Present value of lease liabilities $ 2,032,189 The following table summarizes the supplemental cash flow disclosures related to leases as of January 31, 2026 and February 1, 2025 (in thousands): Fiscal Year Ended January 31, 2026 February 1, 2025 Cash paid for amounts included in the measurement of lease liabilities: Cash payments arising from operating lease liabilities (1) $ 316,857 $ 245,950 Supplemental non-cash information: Operating lease liabilities arising from obtaining right-of-use assets $ 289,396 $ 400,021 (1) Included within operating activities in the Company's Consolidated Statements of Cash Flows. As of January 31, 2026, the Company has entered into commitments for new stores for which the leases have not yet commenced that have future minimum lease payments of approximately $ 126.8 million. During the fiscal year ended January 31, 2026, the Company committed to 141 new store leases with average terms of approximately ten years that have future minimum lease payments of approximately $ 258.0 million. From February 1, 2026 to March 19, 2026, the Company committed to 27 new leases with terms of ten years that have future minimum lease payments of approximately $ 48.0 million. (4) Income Per Common Share Basic income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of assumed vesting of restricted stock awards and shares currently available for purchase under the Company's Employee Stock Purchase Plan, using the treasury stock method. Performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted-average shares until the performance conditions are met. The dilutive impact, if any, for performance-based restricted stock units, which are subject to market conditions based on the Company's total shareholder return relative to a pre-defined peer group, are included in the weighted average shares. 61 The following table reconciles net income and the weighted average common shares outstanding used in the computations of basic and diluted income per common share (in thousands, except for share and per share data): Fiscal Year 2025 2024 2023 Numerator: Net income $ 358,641 $ 253,611 $ 301,106 Denominator: Weighted average common shares outstanding - basic 55,112,281 55,055,064 55,487,252 Dilutive impact of restricted stock units and employee stock purchase plan 324,691 101,278 134,367 Weighted average common shares outstanding - diluted 55,436,972 55,156,342 55,621,619 Per common share: Basic income per common share $ 6.51 $ 4.61 $ 5.43 Diluted income per common share $ 6.47 $ 4.60 $ 5.41 The effects of the assumed vesting of restricted stock units outstanding as of January 31, 2026, February 1, 2025 and February 3, 2024 for 62,733 , 99,741 and 19,152 shares of common stock, respectively, were excluded from the fiscal 2025, fiscal 2024 and fiscal 2023 calculation of diluted income per common share as their impact would have been anti-dilutive. The aforementioned excluded shares do not reflect the impact of any incremental repurchases under the treasury stock method. (5) Line of Credit On September 16, 2022, the Company 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"). 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. 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. The Second Amendment also replaced the existing LIBOR (the "London Interbank Offered Rate") provisions with SOFR (the "Secured Overnight Financing 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. 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. The Revolving Credit Facility may be increased by up to an additional $150.0 million, subject to certain conditions, including obtaining commitments from one or more Lenders (the "Accordion"). Pursuant to the First Amendment, the Company obtained commitments from the Lenders that would allow the Company at its election (subject only to satisfaction of certain customary conditions such as the absence of any Event of Default), to increase the amount of the Revolving Credit Facility by an aggregate principal amount up to $ 50 million within the Accordion (the "Committed Increase"). The entire amount of the Revolving Credit Facility is available for the issuance of letters of credit and allows for swingline loans. 62 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 the Company’s business, enter sale or leaseback transactions, make investments or dispose of assets. In some cases, these restrictions are subject to certain negotiated exceptions or permit the Company to undertake otherwise restricted activities if it satisfies certain conditions. In addition, the Company will be required to maintain availability of not less than (i) 12.5 % of the lesser of (x) aggregate commitments under the Revolving Credit Facility and (y) the borrowing base (the "loan cap") during the period that inventory appraisals have not been delivered as described above and (ii) at all other times 10.0 % of the loan cap. If there exists an event of default or availability under the Revolving Credit Facility is less than 15% of the loan cap, amounts in any of the Loan Parties' or subsidiary guarantors' designated deposit accounts will be transferred daily into a blocked account held by the Agent and applied to reduce outstanding amounts under the Revolving Credit Facility (the "Cash Dominion Event"), so long as (i) such event of default has not been waived and/or (ii) until availability has exceeded 15% of the loan cap for sixty (60) consecutive calendar days (provided that such ability to discontinue the Cash Dominion Event shall be limited to two times during the term of the Credit Agreement). The Credit Agreement contains customary events of default including, among other things, failure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on certain other indebtedness, change of control, incurrence of certain material judgments that are not stayed, satisfied, bonded or discharged within 30 days, certain ERISA events, invalidity of the credit documents, and violation of affirmative and negative covenants or breach of representations and warranties set forth in the Credit Agreement. Amounts under the Revolving Credit Facility may become due upon events of default (subject to any applicable grace or cure periods). All obligations under the Revolving Credit Facility are guaranteed by 1616 Holdings and secured by substantially all of the assets of the Company and 1616 Holdings. As of January 31, 2026 and February 1, 2025, the Company was in compliance with the covenants applicable to it under the Revolving Credit Facility. During fiscal 2025 and fiscal 2024, the Company had no borrowings or interest expense under the Revolving Credit Facility. As of January 31, 2026, the Company had approximately $ 214 million available on the Revolving Credit Facility, net of $ 11 million in outstanding letters of credit. As of February 1, 2025, the Company had approximately $ 225 million available on the Revolving Credit Facility. (6) Commitments and Contingencies Commitments Other Contractual Commitments The Company has an executive severance plan that is applicable to certain key crew that provide for, among other things, salary, bonus, severance, and change-in-control provisions. As of January 31, 2026, the Company has other purchase commitments of approximately $ 3.9 million consisting of purchase agreements for materials that will be used in the construction of new stores. 63 Contingencies Legal Matters The Company is subject to various proceedings, lawsuits, investigations, disputes, and claims arising in the ordinary course of the Company's business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against the Company from time to time include commercial, intellectual property, customer, consumer, and employment proceedings, including class action lawsuits. The 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. The Company cannot predict with assurance the outcome of actions brought against the Company. 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, the Company records the estimated liability based on circumstances and assumptions existing at the time. 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 the Company's financial condition or results of operations. On August 1, 2024, a putative class action was filed against the Company and a certain former senior officer in the United States District Court for the Eastern District of Pennsylvania, purportedly on behalf of a class of the Company's investors who purchased or otherwise acquired the Company's publicly traded securities between March 20, 2024 and July 16, 2024. On September 16, 2024, a similar action was commenced against the Company in the same court on behalf of a class of investors who purchased or otherwise acquired the Company's publicly traded securities between December 1, 2022 and July 16, 2024. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder in connection with various public statements made by the Company. On October 28, 2024, the court entered an order consolidating the actions and appointing the lead plaintiff. On January 13, 2025, lead plaintiff filed its Consolidated Amended Complaint. On March 14, 2025, Defendants filed their Motion to Dismiss the Consolidated Amended Complaint. On May 13, 2025, lead plaintiff filed a response in opposition to Defendants' Motion to Dismiss. Defendants filed their reply in support of their Motion to Dismiss on June 12, 2025. The Motion to Dismiss was granted in part and denied in part on August 25, 2025. On October 3, 2025, the Company filed an Answer to the Consolidated Amended Complaint. Plaintiffs filed a motion for class certification on January 16, 2026, and Defendants filed an opposition to class certification on March 13, 2026, for which briefing will conclude in April 2026. Discovery is ongoing. In October 2024, the Company received two separate letters from purported shareholders demanding that the Company investigate certain potential derivative claims relating to the same circumstances and allegations included in the shareholder class action. The Company subsequently received four additional separate letters from purported shareholders making similar demands. In response, the Board of Directors formed a Special Litigation Committee, which has investigated the allegations contained in each of these letters, and on September 10, 2025, the Special Litigation Committee completed its investigation and determined that it would not be in the best interests of the Company to pursue litigation or take other steps in response to the demand letters. In October and December 2025, four of the purported shareholders filed derivative suits based on the allegations in their demand letters, two of which were filed in the United States District Court for the Eastern District of Pennsylvania (and have been consolidated into one action) and two of which were filed in Philadelphia County Court of Common Pleas (which the Company is in the process of consolidating into one action). The action in the United States District Court for the Eastern District of Pennsylvania has been stayed pending the outcome of the class action. The Company has agreed with the plaintiffs to a stay of the state court proceedings in the Philadelphia County Court of Common Pleas and is working with them to seek Court approval. The Company intends to vigorously defend against the foregoing actions, which the Company believes to be without merit. The potential impact of these actions, which seek unspecified damages, attorneys’ fees and expenses, is uncertain. (7) Shareholders’ Equity As of January 31, 2026, the Company is authorized to issue 120 million shares of $ 0.01 par value common stock and 5 million shares of $ 0.01 par value preferred stock. The holders of the common stock are entitled to one vote per share of common stock and are entitled to receive dividends if declared by the Board of Directors. The preferred stock may be issued from time to time in series as designated by the Board of Directors. The designations, powers, preferences, voting rights, privileges, options, conversion rights, and other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof shall be designated by the Board of Directors. 64 Common Stock The Five Below, Inc. 2012 Employee Stock Purchase Plan (the “ESPP”) is intended to be qualified as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986. The number of shares of common stock reserved for issuance, which is subject to other limitations, is 500,000 shares. The ESPP allows eligible crew the opportunity to purchase, subject to limitations, shares of the Company’s common stock through payroll deductions at a discount of 10 % of the fair market value of such shares on the purchase date. In fiscal 2025, the Company issued 6,154 shares of common stock under the ESPP resulting in proceeds of $ 0.9 million and recorded share-based compensation expense of $ 87 thousand in connection with the ESPP related to the amount of the discount. In fiscal 2024, the Company issued 9,908 shares of common stock under the ESPP resulting in proceeds of $ 1.1 million and recorded share-based compensation expense of $ 88 thousand in connection with the ESPP related to the amount of the discount. In fiscal 2023, the Company issued 4,818 shares of common stock under the ESPP resulting in proceeds of $ 1.0 million and recorded share-based compensation expense of $ 96 thousand in connection with the ESPP related to the amount of the discount. (8) Share-Based Compensation Equity Incentive Plan Pursuant to the Company's 2022 Equity Incentive Plan (the “Plan”), the Company’s Board of Directors may grant stock options, restricted shares and restricted stock units to officers, directors, key crew and professional service providers. The Plan allows for the issuance of up to a total of 4.3 million shares under the Plan. As of January 31, 2026, approximately 2.9 million stock options, restricted shares, or restricted stock units were available for grant. Common Stock Options All stock options have a term not greater than ten years . Stock options vest and become exercisable in whole or in part, in accordance with vesting conditions set by the Company’s Board of Directors. Options granted to date generally vest over four years from the date of grant. Stock option activity under the Plan was as follows: Options outstanding Weighted average exercise price Weighted average remaining contractual term Balance as of January 28, 2023 18,026 $ 34.92 1.8 Forfeited ( 100 ) 41.67 Exercised ( 7,800 ) 36.70 Balance as of February 3, 2024 10,126 33.48 1.6 Exercised ( 10,126 ) 33.48 Balance as of February 1, 2025 — — — Balance as of January 31, 2026 — — — Exercisable as of January 31, 2026 — $ — — The fair value of each option award granted to crew, including outside directors, is estimated on the date of grant using the Black-Scholes option-pricing model. The Company did not grant any stock options in fiscal 2025, fiscal 2024 and fiscal 2023. The Company uses the simplified method to estimate the expected term of the option. The expected volatility incorporates historical and implied volatility of similar entities whose share prices are publicly available. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The total intrinsic value of stock options exercised during fiscal 2024 and fiscal 2023 was $ 0.6 million and $ 1.1 million, respectively. There were no stock options outstanding and exercisable as of January 31, 2026. In fiscal 2024 and fiscal 2023, the Company received cash from the exercise of options of $ 0.3 million and $ 0.3 million, respectively. Upon option exercise, the Company issued new shares of common stock. 65 Restricted Stock Units and Performance-Based Restricted Stock Units All restricted stock units ("RSU") and performance-based restricted stock units ("PSU") vest in accordance with vesting conditions set by the compensation committee of the Company’s Board of Directors. RSUs granted to date generally have vesting periods ranging from less than one year to five years from the date of grant and the fair value of RSUs is the market price of the underlying common stock on the date of grant. PSUs granted to date generally have vesting periods ranging from less than one year to five years from the date of grant. PSUs that have a performance condition are subject to satisfaction of the applicable performance goals established for the respective grant. The fair value of these PSUs is the market price of the underlying common stock on the date of grant. Compensation is recognized over the vesting period and the Company periodically assesses the probability of achievement of the performance criteria and adjusts the amount of compensation expense accordingly. PSUs that have a market condition based on the Company's total shareholder return relative to a pre-defined peer group are subject to multi-year performance objectives with vesting periods of approximately three years from the date of grant (if the applicable performance objectives are achieved). The fair value of these PSUs is determined using a Monte Carlo simulation model, which utilizes multiple input variables such as (i) total shareholder return from the beginning of the performance cycle through the performance measurement date(s); (ii) volatility; (iii) risk-free interest rates; and (iv) the correlation of the pre-defined peer group's total shareholder return. RSU and PSU activity under the Plan was as follows: Restricted Stock Units Performance-Based Restricted Stock Units Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value Non-vested balance as of January 28, 2023 226,389 $ 142.20 458,062 $ 163.56 Granted 70,858 198.09 129,442 244.95 Vested ( 78,268 ) 135.48 ( 157,192 ) 151.73 Forfeited ( 22,670 ) 152.87 ( 130,918 ) 161.02 Non-vested balance as of February 3, 2024 196,309 163.82 299,394 206.07 Granted 443,967 93.26 214,080 147.04 Vested ( 79,687 ) 144.11 ( 29,075 ) 195.43 Forfeited ( 97,810 ) 139.81 ( 300,535 ) 191.96 Non-vested balance as of February 1, 2025 462,779 104.60 183,864 178.44 Granted 228,713 84.49 211,300 162.07 Vested ( 231,050 ) 99.17 ( 23,545 ) 75.49 Forfeited ( 60,239 ) 91.17 ( 60,217 ) 154.17 Non-vested balance as of January 31, 2026 400,203 $ 98.27 311,402 $ 179.81 In connection with the vesting of RSUs and PSUs during fiscal 2025, the Company withheld 65,085 shares with an aggregate value of $ 9.2 million in satisfaction of minimum tax withholding obligations due upon vesting. In connection with the vesting of RSUs during fiscal 2024, the Company withheld 37,047 shares with an aggregate value of $ 6.9 million in satisfaction of minimum tax withholding obligations due upon vesting. In connection with the vesting of RSUs during fiscal 2023, the Company withheld 85,594 shares with an aggregate value of $ 16.6 million in satisfaction of minimum tax withholding obligations due upon vesting. As of January 31, 2026, there was $ 35.3 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements (including RSUs and PSUs) granted under the Plan. The cost is expected to be recognized over a weighted average vesting period of 2.0 years. Share Repurchase Program On November 27, 2023, the Company's Board of Directors approved a new share repurchase program for up to $ 100 million of the Company's common stock through November 27, 2026. In fiscal 2024, the Company repurchased 266,997 shares at an aggregate cost of approximately $ 40.0 million, or an average price of $ 149.79 per share. There were no repurchases in fiscal 2025. 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. 66 Since approval of the share repurchase program in March 2018, the Company has purchased approximately 1.9 million shares for an aggregate cost of approximately $ 270 million. (9) Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. As of January 31, 2026, there were no material valuation allowances that have been provided for net deferred tax assets as management believes that it is more likely than not that the Company will realize all material deferred tax assets before any expirations as of January 31, 2026. The components of the income tax expense are as follows (in thousands): Fiscal Year 2025 2024 2023 Current: Federal $ 103,202 $ 73,565 $ 70,615 State 28,404 18,341 21,788 131,606 91,906 92,403 Deferred: Federal ( 7,238 ) ( 7,312 ) 8,052 State ( 2,638 ) 460 ( 460 ) ( 9,876 ) ( 6,852 ) 7,592 Income tax expense $ 121,730 $ 85,054 $ 99,995 The reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows (dollars in thousands): Fiscal 2025 Amount Percent Statutory federal tax rate $ 100,878 21.0 % State and local income taxes, net of federal income tax effect (1) 19,264 4.0 % Foreign tax effects 32 — % Tax credits ( 3,274 ) ( 0.7 ) % Nontaxable or non-deductible items Non-deductible compensation 5,281 1.1 % Other ( 1,802 ) ( 0.4 ) % Changes in unrecognized tax benefits 1,088 0.2 % Other 263 0.1 % $ 121,730 25.3 % (1) State and Local Taxes in California, New York, Illinois, Texas, New York City, and New Jersey make up the majority of this category. 67 As previously disclosed for fiscal 2024 and fiscal 2023, prior to the adoption of ASU 2023-09, the reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows: Fiscal Year 2024 2023 Statutory federal tax rate 21.0 % 21.0 % State taxes, net of federal benefit 3.8 % 3.8 % Other 0.3 % 0.1 % 25.1 % 24.9 % The effective tax rate for fiscal 2025 compared to fiscal 2024 was primarily driven by non-deductible expenses, partially offset by discrete items, which includes the impact of share-based accounting. The effective tax rate for fiscal 2024 compared to fiscal 2023 was primarily driven by discrete items, which includes the impact of share-based accounting, partially offset by non-deductible expenses. The amounts of income taxes paid, net of refunds is as follows: Fiscal 2025 Amount U.S federal $ 98,760 U.S state and local (1) 28,853 $ 127,613 (1) No states have met the disclosure requirements outlined in ASU 2023-09 The tax effects of temporary differences that give rise to deferred tax assets and liabilities are (in thousands): January 31, 2026 February 1, 2025 Deferred tax assets: Net operating loss carryforwards $ 61 $ 155 Inventories 26,864 24,259 Deferred revenue 6,251 5,220 Accrued bonus 11,083 2,129 Operating lease liabilities 526,680 513,464 Other 15,758 11,438 Deferred tax assets 586,697 556,665 Valuation allowance ( 1,442 ) ( 1,442 ) Deferred tax assets, net of valuation allowance 585,255 555,223 Deferred tax liabilities: Property and equipment ( 175,695 ) ( 170,871 ) Operating lease assets ( 457,564 ) ( 442,098 ) Other ( 2,011 ) ( 2,145 ) Deferred tax liabilities ( 635,270 ) ( 615,114 ) $ ( 50,015 ) $ ( 59,891 ) The Company had no material accrual for uncertain tax positions or interest or penalties related to income taxes on the Company’s balance sheets as of January 31, 2026 and February 1, 2025, and has not recognized any material uncertain tax positions or interest and/or penalties related to income taxes in the consolidated statements of operations for fiscal 2025, fiscal 2024, or fiscal 2023. The Company files a federal income tax return as well as state tax returns. The Company’s U.S. federal income tax returns for the fiscal years ended January 28, 2023 and thereafter remain subject to examination by the U.S. Internal Revenue Service. State returns are filed in various state jurisdictions, as appropriate, with varying statutes of limitation and remain subject to examination for varying periods up to three years to four years depending on the state. 68 On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA contains numerous amendments to federal income tax provisions and has varying effective dates. The Company has evaluated and incorporated the effects of the legislation in its income tax provision for the fiscal year ended January 31, 2026. The legislation did not have a material impact on the Company's effective tax rate but results in a reduction to the Company's tax liability position for the fiscal year ended January 31, 2026. (10) Employee Benefit Plan The Company has a 401(k) Retirement Savings Plan and crew can contribute up to the maximum amount allowed under law. The Company may make discretionary matching and profit-sharing contributions. During fiscal 2025, fiscal 2024 and fiscal 2023, the Company made matching contributions of $ 7.5 million, $ 6.1 million and $ 5.1 million, respectively. (11) Segment Reporting The Company has one reportable and operating segment, which derives revenue from sales of the Company’s merchandise to customers at our 1,921 brick & mortar store locations, which operate in 46 states, and online at fivebelow.com. No customer accounts for 10% or more of our revenues. The accounting policies of the reportable segment are the same as those described in “Note 1 – Summary of Significant Accounting Policies.” The chief operating decision maker (“CODM”) is the Company’s President and Chief Executive Officer, who assesses and evaluates the performance of the reportable segment. Financial information and data are provided to the CODM on a consolidated basis. The CODM uses consolidated sales and consolidated net income to evaluate performance, make key operating decisions and allocate resources. The Company’s significant segment expenses are included on the “Consolidated Statements of Operations” in Item 8 “Consolidated Financial Statements and Supplementary Data” of this Form 10-K. See “Note 2 – Revenue from Contracts with Customers” for the Company’s disaggregated revenue by groups of products. Identifiable segment assets, including the significant segment assets of cash and cash equivalents, inventory and accounts payable, are included on the “Consolidated Balance Sheets” in Item 8 “Consolidated Financial Statements and Supplementary Data” of this Form 10-K. The following table details segment profit and loss for the Company's one reportable segment: Fiscal Year 2025 2024 2023 Net sales $ 4,764,147 $ 3,876,527 $ 3,559,369 Cost of goods sold 3,049,461 2,523,865 2,285,544 Advertising costs 76,169 64,338 62,466 Store and corporate expenses 988,995 797,060 695,041 Depreciation and amortization 192,123 167,447 130,747 Interest income and other income, net 22,972 14,848 15,530 Income tax expense 121,730 85,054 99,995 Net income $ 358,641 $ 253,611 $ 301,106 (12) Subsequent Events Supreme Court Tariff Ruling In February 2026, the Supreme Court of the U.S. issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. The U.S. presidential administration subsequently invoked additional tariffs under other laws resulting in a rapidly changing tariff environment. At this time the Company cannot reasonably estimate the total financial impact of this ruling, however it, and any additional tariffs, may materially affect the Company’s future results of operations and cash flows. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 69