Farah Soi - ICR Joel Anderson - CEO Ken Bull - CFO

John Heinbockel - Guggenheim Dan Binder - Jefferies Michael Lasser - UBS Meredith Adler - Barclays Matt Nemer - Wells Fargo Securities Jeremy Hamblin - Dougherty & Company Christian Buss - Credit Suisse Paul Trussell - Deutsche Bank Charles Grom - Sterne, Agee Vincent Sinisi - Morgan Stanley Tom Filandro - SIG Scott Krasik - Buckingham Research Group

Good day and welcome to the Five Below's Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Farah Soi with ICR. Please go ahead.

Thank you, operator, good afternoon, everyone and thanks for joining us today for Five Below's third quarter 2015 financial results conference call. On today's call are Joel Anderson, President and Chief Executive Officer; and Ken Bull, Chief Financial Officer. 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 in 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 fivebelow.com. I will now turn the call over to Joel.

Thank you, Farah. And thanks everyone for joining us for our third quarter earnings call. I will review the highlights of the quarter before handing it over to Ken to discuss our financials and our outlook and then we will open the call up for questions. We are very pleased with our Q3 financial performance. Sales increased 23% to nearly a 170 million and we delivered and EPS increase of approximately 33% to $0.08 both ahead of our guidance. We saw a strong new source results as well as above planned comp performance driven by our compelling and trend right merchandize assortment. We opened 17 net new stores and entered the State of Mississippi, our 27th state in Q3 to end the quarter with 434 stores representing store growth of 19% from Q3 last year. Year-to-date we have opened 68 net new stores in six new states and our new store performance remains very strong, illustrating our broad appeal as our concept resonates with customers across a wide range of markets with varying population densities, age and income demographics. A great recent example of the type of success we see in smaller more suburban markets is one of our October openings in Mississippi which was among the strongest initial performances this year. Our Q3 comp increase was 4.8% making this our 38th consecutive quarter of positive comps and was above the upper end of our expectations. Customers clearly responded to the fresh, exciting and trend-right assortment in our stores throughout the quarter. We saw strong performance in our tech and candy worlds as well as our games and toy categories including licenses like Shopkins and Minions. And while back-to-school and Halloween are not large businesses for us in Q3 they both provide newness for our customer and we saw solid sell-throughs over all. I'm pleased with the progress we've made so far this year and we're now fully focused on delivering the fourth quarter. Before I turn it over to Ken, I'd like to take a moment to touch on a few of our key strategic initiatives from this year. First and foremost, store growth. As I've said before we have a strong -- we've a store growth opportunity that is the most compelling that I have ever seen and I’ve been in retail a long time. Our stores continue to open very strong and we enjoy payback periods on our new store investment of under one year. We see this strength and consistency in new store performance across new and existing markets, large and small markets, high income and low income markets. All of this reinforces our conviction in the 2,000 plus U.S. store opportunity we've always believed existed for the Five Below concept. We're on track to deliver the 85 new stores planned for 2016 and our strong and consistent new store results give us confidence to pursue the significant remaining white space of the U.S. market which remains untapped for Five Below. It is important to remember that while our merchandise offering targets the pre-teen and teen demographics, our stores enjoy universal appeal as evidenced by the multiple customer studies we have done over the years. With only 434 stores today and not having fully penetrated any of our markets including the greater Philadelphia market which we have operated in since our inception in 2002, we believe the runway for store growth is long and the associated earnings potential is large. Second, merchandising, as evidenced by our third quarter sales results, we believe our merchandising initiatives are beginning to take hold with customers responding positively to the newness they've seen in our stores this year. The strong top line performance we saw this quarter was fueled by the merchandising trends and newness our merchants are infusing across our assortment. Third, marketing, as part of our overarching digital strategy and cohesive marketing plans for Q4, we recently kicked off another TV test. You will recall, we ran our first TV test last holiday season, ran another one in Q2 of this year and given those results we're running an expanded test in Q4 this year which will cover about 25% of our store base. This test will accompany our print messages, our growing email campaigns and social and mobile efforts during our most important season of the year. We look forward to sharing our learning's with you on our next call, as well as discussing our broader digital strategy. Finally, infrastructure, our Pedricktown DC is up and running and ready for the peak holiday weeks. Our large infrastructure initiatives for this year are behind us and we are looking forward to putting these assets to work as we head into 2016. So in summary, Q2 -- Q3 was a very good quarter and our teams delivered on all fronts. Our stores continue to perform extremely well and comps came in ahead of plan. This sales performance accompanied by our characteristically steady gross margins and disciplined expense management drove a 33% increase in earnings per share. We are now a month into the all-important fourth quarter and have been preparing all year for this holiday season. We believe our assortment looks great, our marketing message is compelling and our operating teams are ready for the peak shopping weeks of the year. Now to discuss our financial performance and outlook in more detail, I'll hand it over to Ken. Ken?

Thanks Joel and good afternoon everyone. I will begin my remarks with a review of our third quarter results and then discuss our outlook for the fourth quarter and full year. Our sales in the third quarter of 2015 were $169.7 million, up 23% from the $138 million reported in the third quarter of 2014. We ended the quarter with 434 stores an increase of 69 net new stores or 18.9% versus the 365 stores at the end of the third quarter of 2014. Comparable store sales increase by 4.8% for the third quarter of fiscal 2015, as compared to 1.5% comp increase in the third quarter of 2014. This comp increase was driven primarily by an increase in comp transactions, whereas profit increased 26.8% of $52.8 million from the $41.6 million reported in the third quarter of fiscal 2014. Gross margin increased by approximately 90 basis points to 31.1% in line with our expectations and driven primarily by lower freight cost versus last year as we anniversaried the impact of the West Coast port issues. As the percentage of sales SG&A for the third quarter of fiscal 2015 increase to 27% from 26.2% in the third quarter of fiscal 2014 due primarily to increased compensation cost and higher depreciation expense associated with our new Pedricktown distribution center. Our operating income increased to 27.7% to $7 million or 4.1% of sales from $5.5 million or 4% of sales last year. Our effective tax rate for the third quarter of 2015 was 38.2% compared to 39.5% in the third quarter of 2014, net income increased 31% of $4.3 million or $0.08 per diluted share from $3.3 million or $0.06 per diluted share last year. We ended the third quarter of fiscal 2015 with $18.1 million in cash and cash equivalent, availability of $20 million under our revolving credit facility and no debt. Inventory at the end of the third quarter was $213.6 million as compared to $167.2 million at the end of the third quarter of last year. Average per store inventory at the end of the third quarter of fiscal 2015 increased approximately 7%, as compared to the end of the third quarter last year. This increase was driven entirely by higher in transit inventory due to higher import penetration versus last year. And as a remainder we take ownership of these direct imported goods earlier as we record in transit inventory on our balance sheet when the goods leave the overseas ports. Now I would like to turn to our guidance. For the fourth quarter ending January 30, 2016, net sales are expected to be between $318 million and $323 million, assuming at 2% to 3% comparable stores sales increase and the opening of approximately two net new stores. We expect operating margins in Q4 to increase by approximately 50 basis points driven primarily by leverage on certain fixed cost components in both cost of goods sold and SG&A. Earnings per share are expected to be $0.74 to $0.76. For the full year 2015 we are raising the low end of our expected net sales range and narrowing our earnings outlook. Sales are expected to be in the range of $823 million to $828 million with the comparable store sales increase of approximately 3% and EPS is expected to be in the range of $1.03 to $1.05. This full year sales guidance compared to net sales of $680.2 million for fiscal 2014, representing a growth rate of 21% to 22%. For the full year 2015, we planned to open 70 net new stores and expect to end the year with a store count of 436 as compared to our 2014 ending store count of 366. For the full year, our EPS guidance assumes operating margins will down slightly versus 2014, given the new distribution center and leadership investments that we have made since mid-2014. Both of these investments will be partially offset by leverage in other areas of gross margin and SG&A. We now estimate the total impact of the new DC to approximately 40 basis points to operating margins, of which approximately half will impact SG&A in the form of depreciation and the remaining impact will be in gross margin. That’s equates to an approximate $0.04 EPS drag for fiscal 2015. We expect the full year effective tax rate to be approximately 37.8% and GAAP net income is expected to be in the range of $56.4 million to $57.5 million or an approximate 17% to 20% increase over 2014. Net income is expected to increase by approximately 16% to 18% over fiscal 2014 adjusted net income. We are planning CapEx at approximately $55 million for the year, reflecting the opening of 70 net new stores, investing in distribution centers including approximately $20 million for the Pedricktown DC that we opened this year and also a system's upgrade and corporate infrastructure. For more details related to our results and guidance please refer to our earnings press release. And with that, I would like to turn the call back over to Joel to provide some closing comments before we open it up for questions. Joel?

Thanks, Ken. In conclusion as you can tell we are very pleased with our third quarter performance and focused on executing this holiday season. We have made progress against all of our strategic priorities this year and that has reflected in the readiness of the organization for our most important season of the year. We are coming off November when we anniversaried last year's peak Frozen weeks, but the critical holiday weeks lie ahead and we believe we are well positioned to deliver on our holiday plans. We are relentless about merchandizing, delivering the trend-right product with ample well [ph] and newness at outstanding values. I believe that when you shop our stores this season you will agree that the assortment looks great. We are leaning in on the marketing front to make sure people know that what they find -- that they can find this great merchandize at unbeatable prices at Five Below. Before I end I want to thank all of our associates for the awesome job they do day in and day out. They truly are the hard and soul of Five Below. They have driven our success to date and will enable our success going forward. And finally I'm sure you all saw the announcement that David Schlessinger is stepping down from his position as a Director on the Board of Five Below. On behalf of the entire Five Below team I would like to express our deep gratitude to David for his invaluable contribution since co-founding the company with Tom 13 years ago. He was instrumental in both creating and realizing the vision for Five Below and we will be forever grateful for his leadership. He has been an invaluable resource to so many including me personally and I feel privileged to have benefitted from his council. David is leaving us in a strong position to build upon our success and execute on the substantial growth opportunity that exist for this very unique concept. We wish him the very best with all of his future endeavors. And with that I'd like to turn the call back over to the operator for questions. Operator?

Yes, sir. Thank you. Ladies and gentlemen [Operator Instructions] and will take our first question from John Heinbockel with Guggenheim.

So Joel couple of things. Can you maybe talk a little bit your thoughts on Share-a-voice this holiday and making sure that you are competitive with lot of your bigger competitors and I’m particularly interested in this epic deal program that you've had here for the last few weeks. The role that that plays and the idea you want to hit people every couple of days with something new to stay top of mind, your thoughts on that?

Thanks John. I think I had you frame that up really nice. Share-of-voice is probably the way we think about it as well and I think what you are going to see from Five Below is we've really balanced our share-of-voice to come at our customer from many different aspects and you specifically mentioned Epic deal and but I would add circulars which we plan to anniversary basically the same cadence as last year. We've added in a TV which will represent about 25% of our stores as well as a stronger presence with social mobile this year. So this share-of-voice I'd really characterize is touching on all aspects both to digital and traditional and the Epic is just the great way to bring to life this great merchandize that our merchants have been finding and sourcing for Five Below this holiday season.

And then just as a follow up to that. What are your thoughts on doing anything differently in terms of operational throughput in -- over the next couple of weeks, whether its number of registers open or I don’t know, you can do mobile -- mobile registers or -- do you think that's an opportunity?

No, the operating teams are very focused on throughput for this year. We had some operating sessions that are on holiday meetings this fall about throughput that includes line busters and people bagging in the back. We won't be adding mobile registers this year, it's really tight in there. But the team believes that our throughput capabilities are much stronger than they were a year ago.

Next question comes from Dan Binder with Jefferies.

Hi. It's Dan Binder, thanks. I wanted to touch on the on the Epic deals as well. As I watch them maybe hit a little bit earlier in November and even as recently, I think as yesterday and today. I noticed that some of them had what effectively was like type of 20% of type deal. I'm just curious as you think about your promotions and how you structure them, if you -- trying to get somebody out of the house to get a $1 off an item, while it's interesting because it's 20%, in some cases it would seem like the deal should be structured in a way that drives ticket and I'm just curious as you think about your promotions over the next few weeks. If you can just give us a little bit more color on what we should expect and whether or not there're any store events that are planned to help drive traffic, I know there is Period post thanks giving has been a little bit of an issue and just maybe if you could give us a little bit more color about your plans to drive traffic beyond just adding social media, TV, et cetera.

Yeah Dan, thanks. I wouldn't discount your last comment there, we're pretty bullish on TV and let's face it, our customers lives on social media, so that's a great place to be. To your specific question about Epic deals, I think what you highlighted is exactly what we're testing and trying. So, you got a combination of percent off deals, you got a combination of highlighting wild items that we had earlier in the time. And you're going to continue to see us kind of do all aspects of Epic deals so that the customers really knows what we have. And I wouldn't discount to being a $1 off or something like that, customers love hot price points and they combine that with great products and we really see this as a way to talk to our kind of customer base.

And then my follow-up was with regard to expense leverage, not so much, next quarter, but as you look beyond and we are getting closer to the end of the year, I imaginary your budget through next year are coming together a bit more can and I'm curious, I think in your last update you talked about the ability to leverage at lower levels then you have historically, I don’t know if you could add any more color to that on this call, but that would be helpful.

You mentioned it, we're right in the middle of budgeting process at this stage. And we'll obviously share more comprehensive detail on our fourth quarter call. But at this stage of the game, we don't expect any major surprises from what we've spoke about before.

Next question comes from Michael Lasser with UBS.

As you think about fourth quarter, can you frame the upside, downside case for us. So, what's going to drive your comp to be either at the high-end of the range or maybe above it and what's going to drive it to be below it, is it going to be external factors or internal factors. What's within your influence?

Well, certainly, in our guidance, we've contemplated everything from cycling the peaks of Frozen as well as the impact of expanded TV. What's not in our guidance is, massive weather storm that hits the week before Christmas. So, I think that would take it down the other way, but I don't think any retailer forecasts that as well. But we're coming off a solid quarter, I'm outlined for you in my prepared remarks what we're doing in marketing, what we've done in merchandizing, the impact Michael's had with the merchants and I think we're well prepared for it. And as you look through the cadence of the year we've slowly raised our overall top line number and we're still guiding towards approximately three for the year and we feel like that's great and -- set up for two fourth quarters in a row, we’re comping fourth quarter relatively the same as the first three quarters.

That’s helpful, and then on the new store productivity in the third quarter, you mentioned, Jackson was really strong. So, did you see that type of near 100% new store productivity as we calculated across your base or was it more volatile than it's been in the past?

No, as you did the calculating, depending on either way you do it, you see where, right there at close to 100% productivity and I called out our Mississippi store, because I think it highlights for you that this concept is working outside our home base and -- in fact I’d tell you 8 of our 10 top performing stores last week were outside the New York, New Jersey, Pennsylvania Metro and so, we are [technical difficulty], I think it's -- we're seeing it across all regions and all demographics and the performance of new stores. It needs to work in small markets to get to 2,000 and that's an example of a market that is a small market and it's resonating -- Five Below is resonating great with the customer.

And let me sneak one last one in because I know it's been a popular topic as of late, but wage pressure, are you seeing any at this time and do you feel like you might see it next year and is it manageable? Thank you.

Yes, Ken I'll let you comment on that. You have -- saw wage pressure I think?

Yes Michael, yes that’s obviously something we analyze and we look at the wage competitiveness by market on an ongoing basis and we will make adjustments as needed to ensure we can attract and retain the best talent for our brand. I think you asked a little bit about a go forward too. Again as I mentioned before, we are right in middle of our budgeting process and we will be able to share that on our fourth quarter call but we haven't seen any material impact up to this point.

Next question comes from Meredith Adler with Barclays.

Hey guys congrats on a good quarter. I guess I would like to just talk a little bit more about this past weekend -- not this past weekend, but the holiday weekend, I guess it was past weekend, anyway. Maybe you could just talk about kind of what you were seeing and in the past last year there was an issue with traffic been lower at retailers in the same location where you are, what did you see this year?

Well, let me go back Meredith and say, thanks for recognizing we just had a great quarter and feel that way too. I try to not get into that specific week-on-week and all that, but what I would just tell you is, no big surprises. I think what you are reading out there is true for all retail and the shifts in that. The Black Friday week is becoming less meaningful overall. And for us it's been all about the holiday readiness and our business is skewed towards December and we -- everything is in line with what our forecast are and we are expecting a great December, that’s why TV is ramping up for us, what we are doing in social mobile is ramping, many commented on the Epic deals, we are all getting prepared for the next few weeks. John asked about customer throughput, everything is focused on that.

Great and then just a follow up on, when you -- the work you are doing or what you’ve seen in terms of the customer mix, my own personal observation is that you really moved well beyond the teen and pre-teen, kid audience. And would just like to know if you could talk about that a little bit more if you really are seeing that trend.

Everything I said in my prepared remarks, what's so unique about this concept and what I’ve really enjoyed since stepping out of the chair is that, its universal appeal. But having said that I think were David and the marketing starts is also with the teen and pre-teen. And then you build from there and so when we go to market social mobile that’s with the teen and pre-teen in mind. Having said that we still know mom has the purse strings and in circulars, when I worked for that segment of the customer, so we are universally appealing but we start with the teen and pre-teen in mind as we go to market.

Next question comes from Matt Nemer with Wells Fargo Securities.

Good afternoon, congrats everybody. My first question was -- I am wondering at your Q3 product success is give us a read on the fourth quarter, did you see better growth in personal consumption items, I guess candy and nail polish or was it more on the giftable side when you think about let's say the remote control helicopters?

Hey Matt, I am not sure that -- anything that happens in the third quarter regardless to what it would have been is a precursor for the fourth quarter, but we always love going into fourth quarter with momentum. I think what we have saw, Matt is I outlined it for you was broad appeal across several worlds and that’s really probably what drove it more than anything, it wasn't consumable versus style or something like that, but there was a pretty universally broad appeal there.

Okay great and then secondly, there has been a lot of discussion about the weak retail traffic that’s kind of happening around your store and how that might be a determent to and I am wondering if you are able to isolate or are store performance based of the types of co-tenants that are around you. I think in the past you have been sort of agnostic to that, but as you opened more stores and as you are in more markets, is it better to have more grocery stores? Is it better to be in hard lines or soft lines just love to get your color on that?

I think for us, we overall see a consistent performance. Any traffic is good traffic for us, so we concentrate more on the health of center we go into rather than the grocery versus big box versus something else, it's more looked at the overall health of the centers that has a bigger outlook and impact.

Next we move to Jeremy Hamblin with Dougherty & Company.

Hey I would like to add my congratulations too on terrific results and thanks for taking my question. I wanted to see if I could just get a little more granular on thinking about current trends and guidance. As we look back to last year you had some softness towards the end of November and certainly the beginning of December, and then I think as I recall Ken things picked up right around the holiday, the last couple of weeks of December. If I look at your guidance does that imply that you've seen trends thus far quarter-to-date that are maybe tracking a little bit above your guidance and that you are assuming as you come against or lap more difficult compares that it softens a little bit or is that offset by the increase in TV as we look forward?

Well Jeremy as you know do our -- when we look at our guidance we look at our quarter-to-date results and then we balanced that with the any impact of go forward initiatives or readiness on an overall basis. And really it’s all of that of what you said is baked into our guidance numbers, I think Joel alluded to it in his remarks, we went through in the month of November. We anniversaried a tough Frozen comparison in there and that's behind us right, and go forward for us is the larger part of the holiday season so we take that all into consideration as we put the guidance together.

And then I just want to add a follow up on the TV and the advertising generally speaking as you've role this out in a nice progression it seems as though you are very pleased with the results and that's why you are expanding the test. Is there a limitation to how quickly you can go, you are going to be in 25% of your markets could be you at 50% or 60% of markets at this time next year or is there a limitation based on the density of stores in your various geographies that inherently makes you have to go slow in doing that?

Yes. We are pleased with it and that is why we continue to roll it out. The limitation does eventually turn into density, but that density is something we look at market-by-market not in total whereas our U.S. density, it’s a very targeted approach. One of the markets we’re in market now, as I said within the call before we wanted to test larger markets and we’re in Philadelphia this holiday season, it's a very large market with relative density. We won't be in New York next year as an example because our density is very low there, but ramping it up will not be hard to do as soon as we continue to like the results we see because we are able to do it market-by-market, with the very targeted approach.

Next will move to Christian Buss with Credit Suisse.

I was wondering if you could talk a little bit on the merchandizing side of the equation how many more initiative do you have to roll out. Is the merchandizing strategy where you want it to be right now, and then if you could provide details that would be helpful.

As I said on either the last call or the call before, Michael just joined us earlier this year and it takes a good year at Five Below to fully get your feet under it and I think even as Michael goes through his first holiday season here he is already seeing ideas and opportunities for next year and I think any great merchant like Michael is going to always believe they can do better and we will always continue to chase new trends like the emergence of adult coloring hair recently. So I don’t know that we’re ever done, but I can safely tell you that there has been a positive impact on nearly every world this 2015.

That's very helpful. And can I read between the lines there that you guys are seeing a pickup in conversion. If you could provide some color on sort of the traffic versus conversion dynamic, and that transaction increase that would be helpful.

I think traffic conversion is -- we can roughly half and half, I believe is where the third quarter came in.

Yes, well it was the comp, accretion was driven by transactions but we did have an average ticket increase too for Q3.

Next question comes from Paul Trussell with Deutsche Bank. Please go ahead.

The third quarter gross margins were up a bunch and I believe Ken you notice the cycling of some of the West Coast port issues, if you could just maybe kind of quantify that for us and as we move to the fourth quarter just help us understand the drivers of margins in this upcoming period?

Sure, for Q3 you mentioned it Paul, when you look at gross margin the key driver was the reduction in freight cost as we anniversaried that West Coast port issue from last year. That was -- again the majority of that we had some other slight leverage in some of the fixed cost components in cost of goods sold and then as you move forward into Q4 we're really looking and seeing various leverage in the fixed components in those cost of goods sold and down in SG&A and we're still seeing some slight depreciation in leadership investments that we spoke about before but that's very small, the key driver for operating margin improvement was really the leverage that we expect in Q4 on these fixed components in both cost of goods sold and SG&A.

Thank you, and then I apologize if I missed it, but could you just walk through a bit of the cadence in the third quarter itself, just the September period into October and Halloween comment specifically?

Well, I think it's, where the comp like is 4.8, all three of our months were positive, it was pretty steady performance across the quarter as we went through the entire quarter and we feel really positive for what that sets up for going into the fourth quarter.

Next question comes from Charles Grom with Sterne, Agee.

Just on the fourth quarter guidance, all year along you guys have been saying that you were going to do a 3% comp and now you're guiding to 2% to 3%. So, can you connect the odds with why you expect it to be lower and then if all months were consistent in the third quarter, it sounds like November did see a step down, can you just shed some light on that for us?

I think what we said all year long, is that for the year we expected approximately 3% and if you do the math on 2% to 3% for the fourth quarter that lands at about approximately 3%. So, we tried to give a range there that is consistent with what we believe for the full year and nothing has changed for us, so that's where we believe we're going to be for the year. Obviously, the initiatives we've put in place, we feel great about and they’re in front of us in the next few weeks, and we'll build -- obviously, report back from here, what plays out. But I think November as you allude to was, it was our toughest Frozen comparison and that's now behind us. And all the initiatives I talked about on every call have been setting us up to have a great December.

Can you just remind us last year what Frozen was as a percentage of sales and I guess as Star Wars, how is that trending for you guys and what's your expectation for December?

Charles, we haven't really talked about that and specifically what I would tell you is that, the fourth quarter was our highest Frozen month -- Frozen quarter and November was our highest month. And then as far as Star Wars goes like most movie releases, we expect that to grow as we get closer to the movie launch and continue thereafter which is similar to the pattern we saw with Frozen last year after the movie release.

And then just last quarter, just across regions, any difference in taxes for you guys, it doesn't seem like it puts anything geographically to call out?

No, all regions were very solid, in fact the band in the highs and lows is pretty narrow and Texas was fine.

Next we'll move to Vincent Sinisi with Morgan Stanley.

Wanted to ask around the -- you mentioned the new store productivity, pretty consistent across geographies newer versus existing market. Anything that you're doing differently around grand opening that you can tell us in terms of -- like the new Mississippi store versus some of your more established markets?

No, I'll tell you what, we've got a new store opening package that is very-very consistent, whether we're opening in Philadelphia or in Mississippi. So, it's a pretty consistent package across all stores, no difference there.

And then maybe just sticking on the basic topic, you talked quite a bit around just the opportunities to increase brand awareness, particularly earlier in this year, has there been any updated surveys that you've run or maybe are planning to do, obviously you're comps were very nice this quarter, but just wondering if more of the awareness -- you know that you pointed to that has gone up since?

We certainly did a brand awareness study coming out of the second quarter test and that obviously gave us enough confidence to want to not only repeat it in fourth quarter here but to expand it and then we will do a full market awareness of all our markets in early 2016.

Next we'll move to Tom Filandro with SIG.

I just -- so just to understand the concept of what the Epic deals -- I am a little bit new to this stories, so just can we think about the fourth quarter as more a view that you might trade off a little bit of AUR or ticket meaning in the third quarter you had better ticket or is there is a mixed offsets to that, or do you just trade off a little of AUR for better overall transactions? And then I just have a real specific question about this thanksgiving and I know you don’t want to talk about detail, but up to you, so you guys feel like you got your return on your investment, in putting employees in stores in those center where some of them were dark, just curious on that? Thank you.

No, I tell you we were pleased, there was really no big surprises for us on Black Friday week and we are fine with our strategies. I think those Epic deals are targeted special values, they really highlight the wow product I talked about, they are great for traffic and they are great for excitement about the brand. And I’ve said many times, anytime there is a hot new trend, it's always net-net positive for Five Below as it exposes new customers to the brand and last year it was Frozen and this year Shopkins and adult coloring, they all appeal to a different set of customers and I think our job as merchants and marketers is to bring that to life and let customers know they can get it at Five Below. And we do that through Epic deals, you are going to see us do it through the TV commercials and all those are well intended to reach out to our customers and drive footsteps in our stores.

Next move to Kelly Halsor with Buckingham Research Group.

Yes hi, this is actually Scott Krasik on for Kelly but thanks for taking my question and congrats on good quarter. Two questions first obviously a lot of opportunity across the country as you pointed out even in some of your existing regions but maybe can you talk about how you are prioritizing some of the major new market opportunity over the next 12 months to 24 months? And then second how is your view on the e-commerce opportunity evolving the process, what month you’re spending on, time and money you’re spending on towards that? Thank you.

On real estate Scott, as you get into that -- through that fourth quarter call we will certainly give all the details on that. But strategically you shouldn't expect any surprises there. Every year you see from us a combination of new markets coupled with filling in our existing markets. So this year we opened in six new states as an example, but that strategy is working and you will see us continue to do that as we rolled on to '16 and '17. Scott what was the second question?

How is your view on e-commerce evolving where you’re spending money, time, capital?

Yes e-commerce was something are our outlined at by March call earlier this year. It was part of our two year road map and we are still tracking on that two year road map, there is nobody that likes to do e-commerce more than I would, but at the same time my number one initiative remains fueling our store growth and making sure we’ve got the infrastructure, systems and people processes to support that. But e-commerce is slotted right in still within our two year timeline as we outlined earlier this year.

And ladies gentlemen that’s does conclude today's question and answer session. I’ll turn the conference back over to management for any closing remarks.

Thank you operator. Thanks for joining us today, happy holidays everybody. We had a great quarter and we look forward to speaking with you again on our fourth quarter call, talk to you in 2016. Good night.

That does conclude today's conference. We do thank you for your participation. And you may now disconnect, have a great rest of your day.