Farah Soi - ICR Tom Vellios - Co-Founder, President and CEO Ken Bull - CFO, Secretary and Treasurer

John Heinbockel - Guggenheim Securities Dan Binder - Jefferies & Company Michael Lasser - UBS Christian Buss - Credit Suisse Paul Trussell - Deutsche Bank Charles Grom - Sterne Agee Jennifer Davis - Buckingham Research Group Matt Nemer - Wells Fargo Patrick McKeever - MKM Partners Jeremy Hamblin - Dougherty & Company

Good day and welcome to the Five Below Fourth Quarter Earnings Conference Call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Farah Soi of ICR. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thanks for joining us today for Five Below's fourth quarter and fiscal year-end 2013 financial results conference call. On today's call are Tom Vellios, Co-Founder and Chief Executive Officer; and Ken Bull, Chief Financial Officer, Secretary and Treasurer. After management has made their formal remarks, we will open the call to questions. I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and Five Below's SEC filings. The forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update our forward-looking statements. Finally, we may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in our press release issued today. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of our Web site at www.fivebelow.com. I will now turn the call over to Five Below's Co-Founder and Chief Executive Officer, Tom Vellios.

Thank you, Farah. And thanks everyone for joining us today for our year-end call. I'll go over Q4 and fiscal 2013 highlights and our plans for 2014. Ken will then discuss the financial results and guidance in more detail, before we open the call up to your questions. I will begin with Q4. As we communicated to you in early January with our post-holiday Q4 guidance update, adverse weather conditions across the majority of our store footprint during the most important pre-Christmas shopping weeks of the year, was a meaningful headwind for us. Given the shortened holiday selling season, Christmas selling period, this was a shortfall we simply did not make up. With that being said, we are pleased to end the quarter with improving trends that enabled us to deliver sales and EPS performance ahead of our revised guidance. January did see adverse weather in certain markets, but on an overall basis. The percent of our comp store days that were impacted by whether in the month of January was significantly less than it was in December. When weather was not as severe our traffic was up. As customers visited our stores and responded favorably to our merchandise offering. The end result was Q4 sales of 212 million, up 22% from last year with a comp of 0.3% and adjusted EPS of $0.47. Given the Q4 comp shortfall versus our original 4% guidance, same-store inventory ended at a level higher than we would like. Like we were aggressive in addressing non-go-forward inventory, so our gross margins were impacted by these actions, we feel good about the overall quality and mix of our inventory, and we are well-positioned for the spring and summer selling seasons. Hopefully you know by now that we set very high standards for ourselves here at Five Below. And whether or not withstanding our team is always focused on doing better. We are driven to deliver better product for our customers, at better values on a consistent basis. We have a unique business, and a significant growth opportunity. Our focus in 2014 is on continuing to strengthen the building blocks of our foundation and to make the necessary investments to take our business to the next level. For fiscal 2013 we delivered top-line growth of 28% and EPS growth of 33%. We ended the year with 304 stores, up from 244 stores at the end of 2012. Our new stores are the key growth driver for our business and generated extremely strong returns with payback periods of less than one year. We are very pleased with the performance of a class of 2013 which came under heels of a very strong performance from a class of 2012. We see the strength in new store performance across both new and existing markets. Our new markets in 2013 were Dallas and Austin, which followed Atlanta, St. Louis and outstate Michigan in 2012. We are excited to announce that we just entered a new market in 2014 with our Tennessee store that opened just last week. Five Below now operates stores in 20 states, six of which are which include markets that we entered with great success over the last three years. The performance of our new stores continues to validate but we’ve always believed that our concept that it has universal appeal and the merchandise offering, store environment and value proposition resonate well with both new and existing customers alike. Comps in 2013 were 4% driven by transactions. We saw sour performance across many worlds and classifications including the loom and rubber band sales particularly in the back half of the year. From a regional standpoint of view, in 2013 outside of weather driven differences in sales performance, we saw relative consistency in performance by both geography and vintage. Strong new store performance combined with a 4% comp drove annual adjusted operating income of 23% and adjusted EPS growth of over 32%. Even as we made investments in infrastructure that included a second distribution center in Olive Branch, Mississippi, the ongoing investment in people and talent development, a new merchandise allocation system, the first phase of an HRIS implementation and IT infrastructure upgrades to our security and network capabilities. By the way, I should mention that Q4 was a true test for our new distribution center in Olive Branch and I am pleased to say, operations there went smoothly. With 2013behind us, we are firmly focused on 2014 and excited about the many opportunities we see this year and beyond for Five Below. For 2014, we plan to deliver a 20% store growth with 62 new store opening this year. Leases for 60 of those new stores have already been signed. Planned opening this year includes new markets like Huston, as we continue to build out Texas after great success with our 2013 entry into Dallas and Austin as well as the recent openings in the state of Tennessee. We will also continue to backfill existing markets by matching key growth area. As in past years, the majority of our 2014 openings will be in existing markets. I should also mention that work towards our 2015 class is well underway. As we’ve done in the past, we continue to look out over the next few years and determine which areas of the business might benefit from investments. As we strive to ensure that our foundation is solid and capable of supporting the tremendous growth that lays ahead for our Company. Merchandising is a key competency of ours and we continue to make the necessary investments in personnel, training and systems to ensure that our promise to our customers of newness, excitement and value is one we continue to deliver against. Last year, we again increased headcount across merchandising, planning, allocation and product development functions. While this is important today, it becomes even more critical as we execute our growth plans over the next three to five years. We will continue to strengthen our capabilities in these areas as we scale the business. Through that, we have recently made two key hires at the GMM level. We will organize our merchandising teams under them and they will report to Jeff Moore, our EVP of Merchandising. This will allow for dedicated expertise and narrower focus that enables us to continue to be nimble, maintain a disciplined control of our inventory and fulfill our promise to our customer to deliver trend right, high quality products of $5 and below. We’re also adding additional talent and segment responsibility across our eight category worlds. This will narrow a span of control on many of our seasoned category leaders and capitalize under unique expertise and experience. These merchandising organization enhancements and investments build upon a product development initiative of 2013 and when combined with the new allocation system we have in place and other merchandising system improvements will position us to continue to successfully scale the business, enhancing our visibility and facilitating faster decision making as we identify and quickly react to business trends. In 2013, we spent $26 million in capital expenditures. The majority of which went towards new store build out, investments in existing stores, our second DC as well as investments in systems and IT infrastructure. For 2014, our CapEx will be $35 million. Capital will be invested in new stores, distribution and upgrade to our ERP system which we expect to implement over the next 18 to 24 months and ongoing investments in the overall IT and systems business. Through a combination of our ongoing investments in people and systems, we will be even more nimble and flexible. This will provide us with ample room to shift and respond to changing trends and customer needs resulting in an even better store presentations and experience, further strengthening our competitive advantage as we continue to scale the business. I mentioned briefly in our last call that we are also starting our distribution footprint as it relates to our current store base and planned openings over the next few years. Given our concentration of the Mid-Atlantic and North East regions of the country and the additional opportunities to densify in this region in the years ahead, we will need additional East Coast distribution capacity. Our stores in this region some of which by the way are over 10 years old now continue to comp and they do so with higher volumes given their location and their age. When you combine this with the very attractive store growth opportunity that still remains for us in this region, increased distribution capacity is going to be necessary in the next year or two to service the comp store and new store growth we expect in these markets in the coming years. We expect to address this need for additional East Coast distribution capacity through either an expansion of our current facility or with a significantly larger new facility. We expect this to take place towards the second half of 2015 or early in 2016. With most of these the selling season is still ahead of us. We feel great about of our positioning and our store sets. There is an abundance of great product that we will be bringing to the stores this year as we look forward to continuing to deliver excitement to our customers with fresh trend right merchandise and great value. With that I will turn the call over to Ken to go over financial results and outlook in more details. Ken?

Thanks Tom and good afternoon everyone. I will begin my remarks with a review of our fourth quarter and fiscal year results and then discuss our outlook for fiscal 2014. As a reminder, the fourth quarter of 2013 was a 13 week quarter and fiscal 2013 was a 52 week year as compared to the fourth quarter of 2012, which was a 14 week quarter and fiscal 2012 which was a 53 week year. The impact of the extra week to 2012 was $5 million of additional sales and less than a penny of EPS. Our sales in the fourth quarter of 2013 were $212 million, up 22.1% from the $173.6 million we reported in the fourth quarter of 2012. Excluding the impact of the 53rd week, sales for the fourth quarter of fiscal 2013 increased approximately 26%. We ended the year with 304 stores, an increase of 60 net new stores or 24.6% versus the 244 stores at the end of 2012. As Tom mentioned, we continue to be very pleased with the performance of our new stores. With the class of 2013 on track to exceed our new store model expectations including the important new market of Texas, which had delivered strong performance in line with the rest of the class of 2013. Comparable store sales, which are stated on the 13 week basis, increased by three tenths of a percent for the fourth quarter as compared to 4.4% increase in the fourth quarter of last year. After a weather impacted holiday season, comp trends improved in January enabling us to deliver results slightly ahead of our revised guidance provided in early January. Gross profit increased 18.3% in the fourth quarter to $84.2 million from the $71.1 million reported in the fourth quarter of fiscal 2012. Gross margin decreased by 127 basis points to 39.7%, driven by lower merchandise margins and the de-leverage of fixed costs like occupancy and distribution associated with the lower than planned comp. As a percentage of sales SG&A for the fourth quarter of fiscal 2013 decreased to 20.7% from 21.9% reported in the fourth quarter of fiscal 2012, due primarily to lower incentive compensation expense as we fell short of plan in Q4. Excluding $1 million in expenses related to a secondary offering that occurred in Q4 2012, as well as the founder’s stock compensation expense in both periods. Adjusted SG&A was $42.3 million in the fourth quarter of 2013 or 20% of sales, as compared to $35.6 million or 20.5% of sales for the fourth quarter of last year. GAAP operating income was $40.3 million for the fourth quarter of 2013. On an adjusted basis operating income was $41.9 million, an increase of 17.7% from adjusted operating income in the fourth quarter of 2012. As a percentage of sales adjusted operating margin was 19.7% compared to 20.5% for the same period last year. Our effective tax rate for the fourth quarter of 2013 was 38% compared to 41.2% in the fourth quarter of 2012. With the decrease due to lower effective state tax rates resulting from our business restructuring. Before I discuss net income, I want to point out that for the quarter-to-date and year-to-date periods I will be referring to adjusted net income and EPS that excludes the impact of the founder’s transaction in both periods, and costs associated with our secondary offering in Q4 2012. When I refer to EPS it is EPS based on adjusted net income using an adjusted diluted weighted average shares calculation for the period. A reconciliation of GAAP net income and net income per share to these adjusted numbers on an adjusted weighted share basis can be found on the financial tables included in our earnings press release issued today. The adjusted diluted weighted average share outstanding assumes among other things the IPO transaction and a conversion of our preferred stock took place at the beginning of fiscal 2012. As a result of the factors I just described, adjusted net income for the fourth quarter of 2013 was $25.8 million or $0.47 per share based on 54.6 million adjusted diluted weighted average common shares outstanding. As compared to $21.4 million or $0.39 per share based on 54.4 million adjusted diluted weighted average common shares outstanding in the fourth quarter of last year. This represents a 20.6% increase in adjusted net income over the fourth quarter of 2012. For fiscal 2013 which was a 52 week year as compared to a 53 week year in 2012. Total net sales increased by 27.8% to $535.4 million. Comparable store sales increased 4% on a 52 week basis as compared to a 7.1% comp store sales increase in fiscal 2012. GAAP operating income was $53.7 million, excluding the impact of the founder’s transaction and cost associated with our secondary offering in both periods. Adjusted operating income increased by 22.9% to $60.8 million, while adjusted operating margin decreased 40 basis points to 11.4% from 11.8% in 2012. This decline was due to the de-leverage associated with the addition of our second distribution center in Olive Branch, Mississippi. Adjusted net income increased by 34.4% to $36.9 million or $0.68 per share based on 54.5 million adjusted diluted weighted average common shares outstanding, versus $27.4 million in adjusted net income or $0.51 per share based on 54.2 million adjusted diluted weighted average common shares outstanding in fiscal 2012. We ended the year with $50.2 million in cash and cash equivalents on our balance sheet, $19.5 million in outstanding borrowings under our term loan and full availability under our $20 million revolver facility. Subsequent to the end of fiscal 2013 we paid off our term loan in full. Inventory year-end was $89.4 million as compared to $60.8 million at the end of 2012. As Tom noted we feel good about the quality of our year-end inventory after having taken the necessary action to write-down excess in slow moving merchandise prior to the end of Q4. Ending total inventory on a per store basis increased 17.9% year-over-year. Half of this per store increase relates to imported merchandise where we have increased our penetration and where we saw a timing shift due to the earlier Chinese New Year. These was also impacted by the comp shortfall in Q4. Now I would like to turn to our outlook. For the first quarter ending May 3, 2014, net sales are expected to be between $120 million and $122 million assuming a 3% to 4% comparable store sales increase and the opening of approximately 14 new stores. GAAP earnings per share is expected to be $0.04 to $0.05 and adjusted earnings per share is expected to be $0.05 to $0.06. Our first quarter guidance assumes a less than 100 basis point decline in adjusted operating margin due primarily to the increase in headcount on the merchandising side as a result of the talent investments we made in 2013 and thus far in 2014 that Tom spoke to and this shows up in our gross margin line. Also on the gross margin line, I would like to note that while we expect slight leverage on distribution expense year-over-year in Q1, the magnitude is small as we continue to ramp the new facility and fill-in the surrounding markets with stores. Also impacting adjusted operating margin is higher SG&A expense for depreciation on our Olive Branch distribution center assets put into service in Q2 of fiscal 2013. For the full fiscal year 2014, sales are expected to be in the range of $672 million to $678 million with a comparable store sales increase of 4%. This compares to net sales of $535.4 million for fiscal 2013, representing a growth rate range of 25.5% to 26.6%. We expect to open 62 new stores in 2014 with approximately 75% of these openings planned for the first half of the year. As a result, we expect to end fiscal 2014 with a store count of 366 as compared to our 2013 ending store count of 304. GAAP net income is expected to be in the range of $46.4 million to $48 million with GAAP diluted earnings per share of $0.85 to $0.88. Adjusted net income is expected to be in the range of $46.9 million to $48.5 million or an approximately 27% to 32% increase over fiscal 2013 with adjusted earnings per share expected to be $0.86 to $0.89. Embedded in our fiscal 2014 outlook is an expectation for adjusted operating margins to be flat to up slightly. While we expect to improve gross margins for the full year, we anticipate a slight deleveraging in adjusted SG&A due to compensation that relates to anticipated new hires. In addition, given we repay the entire $19.5 million outstanding borrowings onto our term loan facility subsequent to the end of Q4, we expect net interest in 2014 including the write-off of deferred financing fees to be in the $400,000 range with the majority of this expense occurring in Q1. With respect to CapEx, we plan to spend approximately $35 million in capital expenditures in fiscal 2014. We will be constructing and opening 62 new stores and investing in existing stores. In addition, we will be making improvements to our distribution centers including the continued fit-out of Olive Branch. We will also incur initial spend for the planned expansion of our Northeast distribution facility that we expect to take place towards the second half of 2015 or early in 2016. And we will continue to invest in corporate infrastructure and systems upgrade as Tom mentioned. For all other details related to our first quarter and full year 2014 guidance, please refer to our earnings press release. With that I would like to turn the call back over to Tom to provide some closing comments before we open it up for questions. Tom?

Thank you, Ken. In closing, a lot’s been accomplished in 2013 including the consistency and strength of our new store openings, the great additions we’ve made to the team and the investments we have made in our distribution infrastructure and systems. With 62 planned openings for 2014, we look forward to another year of strong new store growth and performance. Albeit this is unique and the future growth opportunity is significant, our constantly improving merchandise capabilities and our ongoing investment in people, technology and infrastructure will enable us to continue to fulfill our promise to our customers to deliver trend-right products, at great values and a fun and differentiated shopping environment and we will do so with our characteristic discipline as we continue to realize the exceptional store growth opportunity that exists for Five Below. Thank you for your support. And at this point I would like to turn it over to the Operator and we will be taking your questions.

Thank you. (Operator Instructions) We will go first to John Heinbockel of Guggenheim Securities.

So Tom let me start with the new merchandizing organization. What do you think of the two or three things where that will be most impactful particularly what the customer might see in the store differently than they do today? Guggenheim Securities: So Tom let me start with the new merchandizing organization. What do you think of the two or three things where that will be most impactful particularly what the customer might see in the store differently than they do today?

Yes I think, John, as what’s enabled us to deliver the results that we have today we believe is the constant investment that we’ve been making to people particularly in merchandizing since inception. And as it’s been scaling and it’s growing as you look at the number of stores that we’re adding, the eight category worlds that we have the opportunity within each of those as we scale and as our business is getting bigger what we’ve realized that there is so much potential if only we have the resources in place to really be able to manage it properly to capitalize I know if it’s out there. So I think you can expect that the team falls in place and as everybody gets acclimated to how we do things at Five Below that we will be able to really harness opportunities within each of the worlds and each of the classifications. So it’s conceivable that you will be able to see not only improvements but newness and excitement as we look ahead across every one of the categories. Not to mention the fact that there may be opportunities obviously which not to discuss at this point in maybe categories or classification that maybe aren’t even in the store today that we want to be always be looking at.

And then I guess the follow-up today is one of my favorite questions the -- what you’ve just described, what is that mean for store size like as if you’re talking about maybe more items per world and maybe more worlds? Do we gravitate higher overtime in terms of size? Guggenheim Securities: And then I guess the follow-up today is one of my favorite questions the -- what you’ve just described, what is that mean for store size like as if you’re talking about maybe more items per world and maybe more worlds? Do we gravitate higher overtime in terms of size?

That’s a great question. What has and what continues to drive repeat customers to our stores and why we believe that our growth continues to be driven by transaction and traffic is the ability to constantly engage the customer to the newness aspect of our model. New product all the time getting front of the customers, make it a replace for the customer to visit over and over again. So I am more inclined to say, how do we continue to make the box that has served us so well since 2006. And as we look forward by continuing to challenge and raise the bar of every one of the thousands of SKUs that’s in the store. I think that will make us a much better company. Could the size at some point down the road be considered? Absolutely. No plans for the foreseeable future. We have plenty of opportunity to invigorator all that is in the store already.

Okay, thank you. Guggenheim Securities: Okay, thank you.

You are welcome John.

And we will take our next question from Dan Binder of Jefferies Group.

Hi. Good afternoon, it’s Dan Binder. My question was just around what’s in the guidance, given sort of the unusual things that were up against in Q4 and then lapping, I think you outlined sort of the color around the flapping the DC expansion last year, but I’m just curious within your guidance are you making a assumption that Q4 is considerably better or above average in the coming year given what you’ve faced? Jefferies & Company: Hi. Good afternoon, it’s Dan Binder. My question was just around what’s in the guidance, given sort of the unusual things that were up against in Q4 and then lapping, I think you outlined sort of the color around the flapping the DC expansion last year, but I’m just curious within your guidance are you making a assumption that Q4 is considerably better or above average in the coming year given what you’ve faced?

Yes, Dan, I think you can see from our guidance we came out with a 3 to 4 comp Q1 and 4 comp for the full year and I think as you kind of navigate through the quarters as you know based on our performance last year in Q3 and then the performance in Q4, I think it will be safe to say that Q4 -- the 4% comp is for the full year. Q3, we would probably expect to be slightly below that in Q4 above that.

Okay and I noticed that the store growth was right on target with the 20% that you outlined when you went public, although you’ve been growing a bit faster than that in recent years. I’m just curious is that a pretty solid number or do you think there could be some upside to that if you find some additional opportunities? Jefferies & Company: Okay and I noticed that the store growth was right on target with the 20% that you outlined when you went public, although you’ve been growing a bit faster than that in recent years. I’m just curious is that a pretty solid number or do you think there could be some upside to that if you find some additional opportunities?

While we certainly won’t pass on an opportunity if it became available if we felt that it was the right decision. But I think it’s impotent to know that we feel really good about that the range of a number, because if you look at the existing stores and to come in with 62 new stores, we feel good about that number. We think that landed itself what we need and where we need to be in order to continue deliver the top-line and bottom-line growth that have been pretty consistent over the years. So I would say that’s a good number, again borrowing some unforeseen opportunity that may become available, which we would always consider. And just to reiterate again, the class is basically done, so we feel very good about 2014 and we’re already on our way to working of the 2015 class of stores.

Great, thank you. Jefferies & Company: Great, thank you.

Thanks, Dan.

And we will take our next question from Michael Lasser of UBS.

Good afternoon. Thanks a lot for taking my questions, two actually. First on the cadence of the quarter and into the first quarter, should we infer that based on your guidance of 3% to 4% and how you’ve talked about the business and guided us in the past that you’ve seen some of the improvement in January continuing into current quarter despite weather continuing to be pretty nasty? UBS: Good afternoon. Thanks a lot for taking my questions, two actually. First on the cadence of the quarter and into the first quarter, should we infer that based on your guidance of 3% to 4% and how you’ve talked about the business and guided us in the past that you’ve seen some of the improvement in January continuing into current quarter despite weather continuing to be pretty nasty?

And I’ll probably have the same answer as I think we’ve had in the past. We really would not want to get into actual results quarter-to-date. But I think it’s fair to say that, I would say two things, one it’s been pretty consistent that when the weather is favorable the response by our customer has been strong and very consistent. What’s also true is that when weather severally impacts our stores, we’ve seen the opposite and by the way I should mention that January had some tough weather, February and especially the early part of February had some even tougher weather. So, as we’ve done in the past, I think if you look at where we are we need to also remind everyone that Easter -- there is a shift in Easter so the majority of the Easter selling is still ahead of us. So, we make assumptions around that and we came up with our guidance of 3% to 4%.

That’s helpful and the other question I had is on the new store productivity and maybe this just relates to the timing of the new store openings but it looks like to get into your sales number for the year, one have to assume close to nearly 100% new store productivity. Is there something that you’re expecting either about the new markets or those stores that have yet to fall into the comp base that will be driving such a high level productivity? Thanks. UBS: That’s helpful and the other question I had is on the new store productivity and maybe this just relates to the timing of the new store openings but it looks like to get into your sales number for the year, one have to assume close to nearly 100% new store productivity. Is there something that you’re expecting either about the new markets or those stores that have yet to fall into the comp base that will be driving such a high level productivity? Thanks.

Yes Michael, you’re right. I mean if the productivity assumes and the guidance we’re providing is in that 100% range. It always depends year-on-year in terms of the mix of those stores if we have stores in -- I think as Tom mentioned some of the higher metro areas and the more dense areas that have a higher productivity. But you’re correct in that assumption in terms of the productivity implied in our guidance.

Okay. Thank you very much and good luck with the year. UBS: Okay. Thank you very much and good luck with the year.

Thanks. There are some stores as Ken mentioned in the mix, we should note that for the class of 2013 that would be -- I'm sorry for the 2014 ’13 is gone, that what we consider to be more urban higher volume stores. So, when you average those into the entire class, obviously that improves a little bit.

And we will take our next question from Christian Buss of Credit Suisse.

Yes. Hello, congratulations on a nice recovery in the quarter. I was wondering if you could talk a little bit about the product classifications that had some challenges coming out of the holiday period and how you feel about this now. If you could talk a little bit about what changes you made there? Credit Suisse: Yes. Hello, congratulations on a nice recovery in the quarter. I was wondering if you could talk a little bit about the product classifications that had some challenges coming out of the holiday period and how you feel about this now. If you could talk a little bit about what changes you made there?

Sure. You know I think the great thing about Five Below is that we have eight category worlds and even better is that within those worlds we probably have an enormous amount of departments and classifications and I think it’s the flexibility and the ability to shift from one underperforming to over performing that has given us I believe that consistency and performance and the consistency in response from our customer over the years. So, we’ve always have classes and departments that over perform and underperform and that was the case in for Q4 of this past year. However, I think as I’ve said in the past, I think we set certain guidelines and plans and expectations internally around each of the departments in the worlds and it was within some of those areas that we weren’t as pleased maybe with some of the results. So, I would quite say that they were totally underperforming worlds but I think we have opportunity in some of them and it’s specific, I think it’s fair to say that we see a fair amount of opportunity around our beauty category and carts of our fashion accessory business and we’re excited to capitalize on them.

That’s helpful. And then could you talk about your expectations from merchandise margins go forward. You mentioned in the early part of the call that you had some inventories that you weren’t quite happy with the levels of. How should we think about development of your merch margins in light of that over the course of the quarter and the year? Credit Suisse: That’s helpful. And then could you talk about your expectations from merchandise margins go forward. You mentioned in the early part of the call that you had some inventories that you weren’t quite happy with the levels of. How should we think about development of your merch margins in light of that over the course of the quarter and the year?

Yes. We’ve said in the past question that not to look for significant improvements in our overall merch margins and I think that’s going to remain the same for us as we go into 2014 and we’ve taken a consideration in our guidance any -- and we spoke about the end of the year inventory that we feel good about the overall quality that we’ve taken the appropriate mark downs and reserves and if any those are going into the beginning of 2014 that’s been taken into consideration in our guidance but on an overall basis, I wouldn’t expect to see significant movement in the merch margins.

That’s very helpful. Thank you very much and best of luck. Credit Suisse: That’s very helpful. Thank you very much and best of luck.

Thanks Christian.

Thanks Christian.

And we will take our next question from Paul Trussell of Deutsche Bank.

Good afternoon. And just on the merchandise and again I know you don’t like to give much color on category performance but just a follow-up is there any detail that you can provide regarding the categories that you’ve seen bounce back here in the year in the first quarter, whether it’s Saint Patrick Day T-shirts or funky finger nail polish. Just any color at all would be helpful on how we should think about the categories that are resonating the most mature customers? Deutsche Bank: Good afternoon. And just on the merchandise and again I know you don’t like to give much color on category performance but just a follow-up is there any detail that you can provide regarding the categories that you’ve seen bounce back here in the year in the first quarter, whether it’s Saint Patrick Day T-shirts or funky finger nail polish. Just any color at all would be helpful on how we should think about the categories that are resonating the most mature customers?

And I think Paul, it’s a really good question, I think we’ve always been careful about getting into a lot of category specific results, trends or performance. I will tell you this though if -- when we looked at the trend and as we look at the trend that we saw in January and the improvement I think it’s fair to say it was primarily across the board and it was more of a weather issue that held us back when it did more than individual category. So again to reiterate I think it’s important to know that sometimes we have categories that we are very concerned about or worry about I believe that as we set plans and expectations internally I think we have some opportunity in some of the categories that we believe should have performed a little bit better but what we see in our trends today it’s pretty consistent amongst the categories.

And then just stores on a long-term basis, I mean you outlined on the near-term you still expect to see 20% square footage growth as a reasonable estimate for us to assume. But just looking out longer term do you still remain comfortable with the 2,000 store outline has what you’ve seen in moving a new markets maybe tick that target up a bit any color just on long-term growth prospects will be helpful? Deutsche Bank: And then just stores on a long-term basis, I mean you outlined on the near-term you still expect to see 20% square footage growth as a reasonable estimate for us to assume. But just looking out longer term do you still remain comfortable with the 2,000 store outline has what you’ve seen in moving a new markets maybe tick that target up a bit any color just on long-term growth prospects will be helpful?

I think we feel just as confident and strong today about the opportunity that lies ahead in store growth as ever. If anything as we continue to densify markets we feel we are very bullish about the future of store growth for Five Below. The key for us in the number of store is that we are opening and planning to open what’s important for us is to deliver consistent performance to make sure that our customer gets the experience the store, the environment, the product and the people in true Five Below fashion and while the team of Five Below here if they had to tomorrow I know they could open a lot more stores in any given year. And what’s important to us is that we execute well and for that matter I think we’ll continue to real careful as to how many stores we put in each of the classes going forward but very bullish on the opportunity, long-term opportunity for store growth.

Thank you. Deutsche Bank: Thank you.

You’re welcome.

And we will take our next question from Charles Grom of Sterne Agee.

Hi. Good afternoon guys. When you take a look at 2013 Ken or Tom could you remind us what the drag was from the new distribution center down in Mississippi and also what the one-time public company cost that you incurred in the front half of the organization just trying to get a sense of what you’re cycling? Sterne Agee: Hi. Good afternoon guys. When you take a look at 2013 Ken or Tom could you remind us what the drag was from the new distribution center down in Mississippi and also what the one-time public company cost that you incurred in the front half of the organization just trying to get a sense of what you’re cycling?

Sure Chuck.

Yes. In ’13 on a full year basis the DC drag I think we spoke about before we had anticipated about 50 basis points came in slightly higher than that based on the underperformance in Q4 and then the public company cost we actually lapped in I guess it was Q3 of 2013.

Okay. So it evens out? Sterne Agee: Okay. So it evens out?

Correct, yes.

Okay, great. And then historically there has been as such no real comp waterfall because your new stores open up at essentially 100% productivity. But I am wondering when you look at the class of 2013 and you look at the overall comp of 4% how the stores that opened up say three years ago look versus stores four, six, eight years ago, are they all consistently roughly 4%? Sterne Agee: Okay, great. And then historically there has been as such no real comp waterfall because your new stores open up at essentially 100% productivity. But I am wondering when you look at the class of 2013 and you look at the overall comp of 4% how the stores that opened up say three years ago look versus stores four, six, eight years ago, are they all consistently roughly 4%?

Yes, Chuck we’re still seeing that same consistency across those various vintages. I mean the one thing I’ll say and I think Tom mentioned in his section we did see for that 2012 class that came on and started comping late in 2014 they were impacted by the Q4 weather. So except for that class and the regions related to that class we still saw consistency even amongst the older vintages of stores.

Okay. And then finally if I could just sneak one more and what is your thoughts currently around developing an e-commerce platform to complement the stores? It just seems like with your customer base being younger that would be a nice way to attract more customers than build brand loyalty allow the customers to do their due diligence. And I am just kind of wondering what’s holding you back from building more of an Internet platform? Thanks. Sterne Agee: Okay. And then finally if I could just sneak one more and what is your thoughts currently around developing an e-commerce platform to complement the stores? It just seems like with your customer base being younger that would be a nice way to attract more customers than build brand loyalty allow the customers to do their due diligence. And I am just kind of wondering what’s holding you back from building more of an Internet platform? Thanks.

That’s a great question. We believe there is a terrific opportunity to create an e-commerce platform for Five Below and it’s something that we’ve talked about continue to talk about it it’s constantly under review we have such an opportunity and at least to-date as we look at our business and as we look at it for the foreseeable future we have such an opportunity to build out new stores and we have a model that’s it has such low investment, and you have a payback of less than a year great returns and with still the interest year growth on the brick side of the business we made it, it was a decision that if we made as a company to focus around store growth first and foremost at some point to no question about it I think we will look at that and we truly believe that there is a viable and exciting opportunity to supplement, complement and support the brick side of the business for the foreseeable future with sticking with source.

Great. Good luck. Thank you. Sterne Agee: Great. Good luck. Thank you.

Thank you.

Thanks.

And we will take our next question from Jennifer Davis of Buckingham Research Group.

Congratulations on really bucking the trends in the broader, or the broader retail trends in the fourth quarter and sounds like so far in the first quarter. You've said that your comps are driven by transactions, I was wondering if you have even just anecdotally any sense of in your older stores. How much traffic or how many transactions are being driven by new customers and how much is by your repeat customer? Buckingham Research Group: Congratulations on really bucking the trends in the broader, or the broader retail trends in the fourth quarter and sounds like so far in the first quarter. You've said that your comps are driven by transactions, I was wondering if you have even just anecdotally any sense of in your older stores. How much traffic or how many transactions are being driven by new customers and how much is by your repeat customer?

We don’t really have any visibility to that, aside from just the mere fact that the older vintages of stores continue to comp in line with the rest of the chain, that may imply obviously that there could be an increase in frequency versus new customers there. But we don’t have any specific data to be able to support that.

All right and then I guess as a follow up to a prior question, is there kind of a limit on how many stores you would feel comfortable opening in a year -- as your base gets larger that 20% is going to be a little more difficult to get to? Buckingham Research Group: All right and then I guess as a follow up to a prior question, is there kind of a limit on how many stores you would feel comfortable opening in a year -- as your base gets larger that 20% is going to be a little more difficult to get to?

Yes, it’s something we talk about all the time. We want to make sure that the number of stores we open we’re able to merchandise property to support properly and to staff properly. I mean it’s important that we export the culture. I know this, I know it feels really good about the number of stores, we're looking at 50 - 60 plus or minus range. We’ve been able to do that consistently and we feel very comfortable about that and around that number we continue to look at it and we’ll at some point figure out. I think there will come a point in time that the 20% number maybe just too high of a number, and may not be necessary to have it out there but we haven’t hit that point in time yet.

Alright, thanks and best of luck. Buckingham Research Group: Alright, thanks and best of luck.

And we will take our next question from Matt Nemer of Wells Fargo.

Thanks so much. Just a couple of housekeeping questions. First, can you talk to the gross margin pressure in the fourth quarter related to mark downs just so that we can kind of model that out for the current year? And then also how much did the merchandize talent acquisitions impact gross margin this year? Is it consistent quarter or will it be a little lumpy? Wells Fargo: Thanks so much. Just a couple of housekeeping questions. First, can you talk to the gross margin pressure in the fourth quarter related to mark downs just so that we can kind of model that out for the current year? And then also how much did the merchandize talent acquisitions impact gross margin this year? Is it consistent quarter or will it be a little lumpy?

Your first question around the merch margins in Q4, really that was a piece of the gross margin decline that we talked about. And just thinking about it was probably about a third of the -- little less than third of the total of that gross margin decline if that helps and the other piece being the deleverage on the fixed components of occupancy in the DC. And then on the -- you mentioned in Q1 and the drag for the new merchandise talent, that should just be from what we can see right now really in Q1 from how we’re viewing it.

And then secondly from the inventory standpoint, how much -- can you give us any sense for how much inventory you may have packed away from the holiday season and what you’re planning to redeploy next year or some of that inventory growth numbers that we have? Wells Fargo: And then secondly from the inventory standpoint, how much -- can you give us any sense for how much inventory you may have packed away from the holiday season and what you’re planning to redeploy next year or some of that inventory growth numbers that we have?

Yes, there is a small amount in that year-end inventory and again we at the end of the season we do this every year we have been doing it for a long time and are pretty disciplined behind. We take a hard look at that remaining inventory and really make that decision as to whether it’s inventory we want to carry forward and we feel good about selling, if not we’re going to move on it. We employ that same discipline at the end of the fourth quarter. So again we probably have a little bit slightly higher than we’ve had in the past, but I think the key there as we feel good about the inventory and its quality inventory that we can sell.

It’s also important to add to that a part of the inventory that carried forward is actually create inventory that we would go out and buy again into Q1 and Q2. So I think the advantage almost make it to Q4 the pure seasonal product aside, a lot of product is actually product that carries forward into Q1. So I think that actually service well and it’s unfortunate that have to take a lot of markdowns the product, and how markdowns are primarily limited to some of the seasonal products, which we do not want to carry forward and lumps that we simply felt had to go away.

That’s helpful. And then lastly the ERP system upgrade that you mentioned that’s on the horizon. Is that primarily something that is sort of on the backend or will it impact anything with customer facing such as CRM or maybe the initial building blocks for e-com or an omni channel model. Wells Fargo: That’s helpful. And then lastly the ERP system upgrade that you mentioned that’s on the horizon. Is that primarily something that is sort of on the backend or will it impact anything with customer facing such as CRM or maybe the initial building blocks for e-com or an omni channel model.

Our ERP system is really our kind of main engine and our operating system, so it’s really on the back end that that will impact and nothing really front facing to the customer.

Great, thanks guys. Wells Fargo: Great, thanks guys.

And we will take our next question from Patrick McKeever of MKM Partners.

I know as the prior analyst mentioned that you don’t like to talk too much about specific products or categories or specific trends. But you did call out the Rainbow, I shouldn’t say Rainbow but rubber band loom as a factor in the back half of last year and it got a fair bit of air time on the third quarter call. So, my question is, what kind of impact did that have on the back half of the year, comp? And could you just remind us when that came into play as a meaningful factor on your sales and then is it, what’s the current status of that particular item? Thanks. MKM Partners: I know as the prior analyst mentioned that you don’t like to talk too much about specific products or categories or specific trends. But you did call out the Rainbow, I shouldn’t say Rainbow but rubber band loom as a factor in the back half of last year and it got a fair bit of air time on the third quarter call. So, my question is, what kind of impact did that have on the back half of the year, comp? And could you just remind us when that came into play as a meaningful factor on your sales and then is it, what’s the current status of that particular item? Thanks.

Yes, I will give you some of the history on that and if Tom wants to jump on after that. If you recall back in the third quarter of 2013 is when our rubber band sales began, so nothing really in Q2 and prior and then as we moved into Q4, we had the loom that we introduced in the beginning of the quarter along with rubber band sales. And I think one of the things we spoke about on one of our calls was that we did see a different impact in terms of a trend item like that on Q3 versus the Q4 given that we felt that there was more of an incremental impact of sales in Q3 and then as went into Q4, because of a different type of shopping that takes place with our customer that it was more of a substitution type item. And from a penetration standpoint on overall basis, it was relatively consistent from Q3 to Q4 but I will tell you though that going into Q4 when you have the loom that’s a $5 item obviously higher price than the rubber band. So, we did see that increase our total sales related to the looms really to the rubber band items and the rubber band items themselves drop off a little bit as we went through Q4.

Yes, I think it’s fair to say rubber band sales very strong Q3, drove not only top-line sales but we believe effect the traffic to an extent. Rubber bands leveled off actually quite a bit as we got into Q4, everybody was in the business. The loom did very well. I would also tell you though that while the loom did very well, the craft category didn’t do as well. So, I think this is maybe what Ken was alluding to. We are very pleased with the sales in the loom but certainly I think it did eat away at some of the sales of the category that was in. So, I think there is some bit of that given substitution that goes on, I think we get them to Q4. And with where we are today there is still some residual selling particularly on the rubber bands but nowhere near I think what the excitement there was back in the Q3.

And then just a really quick one from a quarterly modeling standpoint -- when does the founder’s transaction expense, when does that go away? Does that go through the first half of fiscal ‘14 or how should we think about that? MKM Partners: And then just a really quick one from a quarterly modeling standpoint -- when does the founder’s transaction expense, when does that go away? Does that go through the first half of fiscal ‘14 or how should we think about that?

Yes, on an adjusted basis that’s excluding any of our numbers when we speak about it on an adjusted basis. There is a little, there is a small amount remaining in Q1 of this year.

Okay. Thanks very much. MKM Partners: Okay. Thanks very much.

Yes, thank you.

And we will take our next question from Jeremy Hamblin, Dougherty & Company.

Hey guys, great job and thanks for taking my question. Wanted to just cover two things, one and forgive me if I missed this from before but can you talk a little bit about the impact in Q1 on the change in Easter and whether or not that change is, kind of the timing of your advertising in Q1 and/or into Q2? Dougherty & Company: Hey guys, great job and thanks for taking my question. Wanted to just cover two things, one and forgive me if I missed this from before but can you talk a little bit about the impact in Q1 on the change in Easter and whether or not that change is, kind of the timing of your advertising in Q1 and/or into Q2?

Well, the Easter is three weeks later this year versus last year and because of that shift there's obviously a change in the timing of our marketing and when we drop our ads. But to keep in mind the full effect of Easter selling is still in the first full quarter, so there is no shift from a quarterly basis just really as you go between those months of March and April.

Okay. Because I thought you had maybe done an extra promotion last year in the beginning of Q2 because of having an earlier Easter. Dougherty & Company: Okay. Because I thought you had maybe done an extra promotion last year in the beginning of Q2 because of having an earlier Easter.

I believe you are right that it shifted up from the prior year but not for this year. It will be relatively consistent year-over-year in terms of marketing spending on the quarter.

Okay. And then in terms of looking at the new stores that you're getting and thinking about the lease terms that you are getting, obviously you guys are huge traffic driver in centers that you are located in, are you starting to get any improvement in the terms from man modes that you are working with? Are they -- obviously they are probably seeking you out more, is there any color you can add on that, on your lease terms that you are seeing? Dougherty & Company: Okay. And then in terms of looking at the new stores that you're getting and thinking about the lease terms that you are getting, obviously you guys are huge traffic driver in centers that you are located in, are you starting to get any improvement in the terms from man modes that you are working with? Are they -- obviously they are probably seeking you out more, is there any color you can add on that, on your lease terms that you are seeing?

I think we feel good where we are from an occupancy standpoint of view and I think for us the decision that we made particularly as more and more landlords, I think Jeremy you are correct, I think people do seek us out. We are a great tenant for most of them or if not all of them. But, I think we made our decisions compare to make sure they go off to the best real estate first and foremost. The presence is important. Co-tenancy is important for us. And at times I think what is given if anything, I think we feel good about the occupancy expense, but we feel even better about our ability to see great real estate as we have over the last few years as we see as we go forward to really possession the stores to have great performance. As if we have great sites, great co-tenancy and great visibility, chances of the stores will perform and we try not to play necessarily always the occupancy game. These are long-term place for us and we want to make sure the stores give us great performance and results. Just positioning is actually most important.

Just as a follow-up to that question -- then as you talked about longer term maybe at some point 20% clearly won’t be the number on a square footage growth. Is it really, obviously you guys you’ve said that you can do more than what you’re currently doing, but you want to get these facilitation. Is that the limitation at some point in the future? Is it more about finding locations that are going to be work for you as opposed to simply just cranking out the numbers? Dougherty & Company: Just as a follow-up to that question -- then as you talked about longer term maybe at some point 20% clearly won’t be the number on a square footage growth. Is it really, obviously you guys you’ve said that you can do more than what you’re currently doing, but you want to get these facilitation. Is that the limitation at some point in the future? Is it more about finding locations that are going to be work for you as opposed to simply just cranking out the numbers?

If you look at real estate and development over the last few years, particularly as we go back into that ’08 - ’09 and since, there simply hasn’t been as much new development. And many of our sites obviously come from existing space, so until development really takes almost a new face of growth, there is always that challenge of are there enough opportunities out there for us to build all the stores that we have to. I will tell you that as we’ve seen for the last few years and we’ve seen that class of ’14 and the early REITs on class our class of ’15, given the markets that we’re in, given the universal appeal across geography and socioeconomic profile of this concept. I think those are the driving factors that’s in the appeal that we have both to the broad range of customers and to landlord. I believe that will serve us very well for the foreseeable future. And as a result, I really don’t see or have a concern around our ability to deliver the still account in the foreseeable future.

Thanks for taking my question. Dougherty & Company: Thanks for taking my question.

You're welcome.

Thanks Jeremy.

And this does conclude our question-and-answer session. I will turn the call back to our moderators for closing remarks.

Thanks everyone for joining us and look forward to our call at the end of Q1.

Thank you. This does conclude today’s conference call. Thank again for your participation and have a wonderful day.