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Summary of Significant Accounting Policies
 9 Months Ended
Oct. 30, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting PoliciesDescription of Business
Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as the "Company") is a specialty value retailer offering merchandise targeted at the tween and teen demographic. 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 October 30, 2021, operated in 40 states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California, Arkansas, Iowa, Nebraska, Arizona, Nevada, Colorado, Utah and New Mexico. As of October 30, 2021 and October 31, 2020, the Company operated 1,173 stores and 1,018 stores, respectively, each operating under the name “Five Below,” and sells merchandise on the internet, through the Company's fivebelow.com e-commerce website.
As a result of the COVID-19 pandemic, the Company's business operations and results of operations, including its net sales, earnings and cash flows, were materially impacted in fiscal 2020 as a result of the temporary closures of its stores in the first half of 2020, and decreased customer traffic in stores, as the result of limitations on the number of persons permitted in stores at one time by certain local and state regulations.
The Company's ability to operate improved beginning in the second half of fiscal 2020 and extending into fiscal 2021. However, the ultimate health, economic and regulatory impact of the COVID-19 pandemic remains uncertain, especially in light of the latest surge due to the Delta variant. If the pandemic were to worsen once again, the Company's business operations, including net sales, earnings and cash flows, may be materially impacted. Further, the Company may determine to reinstate any of the mitigation measures implemented in fiscal 2020 that have since been modified or terminated, or take any additional steps that we consider necessary or as required by local, state or federal authorities.
The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2021" or "fiscal 2021" refer to the period from January 31, 2021 to January 29, 2022, which is a 52-week fiscal year. References to "fiscal year 2020" or "fiscal 2020" refer to the period from February 2, 2020 to January 30, 2021, which is a 52-week fiscal year. The fiscal quarters ended October 30, 2021 and October 31, 2020 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended October 30, 2021 and October 31, 2020 refer to the thirty-nine weeks ended as of those dates. The consolidated balance sheets as of October 30, 2021 and October 31, 2020, the consolidated statements of operations for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020, the consolidated statements of shareholders’ equity for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 and the consolidated statements of cash flows for the thirty-nine weeks ended October 30, 2021 and October 31, 2020 have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the aforementioned financial statements include all known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions that impact the financial statements) necessary to present fairly the financial position at the balance sheet dates and the results of operations and cash flows for the periods ended October 30, 2021 and October 31, 2020. The balance sheet as of January 30, 2021, presented herein, has been derived from the audited balance sheet included in the Company's Annual Report on Form 10-K for fiscal 2020 as filed with the Securities and Exchange Commission on March 18, 2021 and referred to herein as the “Annual Report,” but does not include all annual disclosures required by U.S. GAAP. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended January 30, 2021 and footnotes thereto included in the Annual Report. The consolidated results of operations for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 are not necessarily indicative of the consolidated operating results for the year ending January 29, 2022 or any other period. The Company's business is seasonal and as a result, the Company's net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The impact of the adoption of ASU 2020-04 is not expected to be significant to the Company's consolidated financial statements.The preparation of the 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, the incremental borrowing rate utilized in operating lease liabilities,
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.
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, borrowings, if any, under a line of credit, equity method investments and notes receivable. 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 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 October 30, 2021, January 30, 2021, and October 31, 2020, the Company had cash equivalents of $60.8 million, $250.7 million and $104.7 million, respectively. The Company’s cash equivalents consist of credit and debit card receivables, money market funds, and corporate bonds with original maturities of 90 days or less. Fair value for cash equivalents was determined based on Level 1 inputs.
As of October 30, 2021, January 30, 2021, and October 31, 2020, 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 October 30, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$190,700 $6 $82 $190,624 
Municipal bonds33,863 — 11 33,852 
Total$224,563 $6 $93 $224,476 
As of January 30, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$95,530 $— $53 $95,477 
Municipal bonds45,398 — 7 45,391 
Total$140,928 $— $60 $140,868 
As of October 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$78,516 $— $43 $78,473 
Municipal bonds18,233 — 7 18,226 
Total$96,749 $— $50 $96,699 
Short-term investment securities as of October 30, 2021, January 30, 2021, and October 31, 2020 all mature in one year or less.
Prepaid expenses as of October 30, 2021, January 30, 2021, and October 31, 2020 were $26.5 million, $19.0 million, and $17.7 million, respectively. Other current assets as of October 30, 2021, January 30, 2021, and October 31, 2020 were $51.0 million, $39.1 million, and $32.5 million, respectively.Other accrued expenses include accrued capital expenditures of $42.0 million, $29.2 million, and $18.6 million as of October 30, 2021, January 30, 2021, and October 31, 2020, respectively.The Company approved and adopted the Five Below, Inc. Nonqualified Deferred Compensation Plan (the "Plan") and a related, irrevocable grantor trust (the "Trust") during the thirteen weeks ended July 31, 2021. The Plan provides eligible key employees 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 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.