On Wednesday, Five Below (NASDAQ:FIVE) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Five Below reported a 23% increase in sales to $1.3 billion for Q2 2026, with adjusted diluted EPS of $1.68, more than doubling from last year.
The company opened 52 new stores, reaching a total of 2,022 stores, and celebrated the opening of its 2,000th store.
Strong performance was driven by comparable sales growth of 14% and new store unit growth of 9%.
The company announced plans to enter Puerto Rico in 2027, highlighting its growth strategy.
Five Below’s strategy includes focusing on customer-centric merchandising, social and digital marketing, and enhancing store experiences.
The company raised its full-year outlook due to strong first-half performance and expects full-year sales between $5.63 billion and $5.71 billion, with a comparable sales growth of 10% to 12%.
Management highlighted a ‘flywheel’ strategy that integrates merchandising, marketing, and store operations to drive growth.
Adjusted operating income more than doubled to $113 million, with gross margin increasing by 220 basis points to 35.6% despite higher fuel costs.
The company plans to invest in customer experience enhancements and digital platforms, leveraging tariff refunds for these initiatives.
Management expressed confidence in the company’s long-term growth prospects, supported by continued strong performance and strategic initiatives.
Full Transcript
OPERATOR
Good day and welcome to the Five Below second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. Please note today’s event is being recorded. I’d now like to turn the conference over to Christiana Peltz, VP, Investor Relations.
Please go ahead.
Christiana Peltz, VP Investor Relations
Thank you. Good afternoon everyone and thanks for joining us today for Five Below’s second quarter 2026 financial results conference call. On today’s call are Winnie Park, Chief Executive Officer, and Dan Sullivan, Chief Financial Officer and Treasurer. After management has made their formal remarks, we will open the call to questions. Certain comments made during this call may constitute forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements, including those described in the press release and our SEC filings.
In this presentation we will refer to our SG&A expenses, which for us includes depreciation and amortization. Additionally, we will be discussing certain non-GAAP financial measures. Please review today’s press release, which is posted on our investor relations website, for a reconciliation of these items to the most directly comparable U.S. GAAP measure and a cautionary statement regarding forward-looking statements. I will now turn the call over to Winnie.
Winnie Park, Chief Executive Officer
Thank you Christiana and hello all. I want to start by thanking our amazing Five Below crew. They continue to deliver tremendous energy, fun and executional excellence in service of our customer, the boss. Their focus, collaboration and drive are what truly delivered our exceptional Q2 results. We are so excited to welcome two new leaders, Robby Lassinger, our Chief Retail Officer, and Christos Utrakis, our Chief Legal Officer, both of whom joined us during the second quarter.
Our leadership team is now complete and I’m looking forward to seeing the impact we can continue to make on our customer and the crew experience. The results in the quarter exceeded our expectations and reinforced the progress we are making in transforming the business, strengthening the brand and deepening Five Below’s position as the destination for the kid and the kid in all of us. With our strong first half performance and increased outlook for the second half, we are again raising our full year outlook which Dan will discuss shortly.
The second quarter results further demonstrate that our customer-centric strategy and the foundational enhancements we made to our operating model are working. The strategy is focused on clarifying who our customer is and what we can uniquely offer them, moving from a more item-focused merchandising approach to an assortment and product storytelling approach, redirecting marketing spend towards social and digital, simplifying pricing and improving the store experience.
The key to our success is speed to market and close collaboration between merchandising, marketing, supply chain and stores to deliver compelling new product stories. Together these are driving our operating flywheel which serves as the basis for our durable top line growth. Now onto the second quarter results: sales surpassed our expectations, delivering $1.3 billion, up 23% versus last year, with adjusted diluted EPS of $1.68, more than double last year’s second quarter.
Sales growth was driven by both comparable sales growth of 14% and continued unit growth of approximately 9%. Notably, we lapped last year’s double-digit comps with double-digit comps and a 26.5% two-year stack. These results give us even greater conviction in the power of our model. This growth was driven by transactions with robust traffic growth and increased customer engagement from both new and returning customers. We saw broad-based growth across customer cohorts, geographies and product categories.
The breadth of the worlds that grew is a testament to our assortment strategy, from Room to Toys to Tech to Snacks, and we saw amazing response to newness and trends across price points. We have deployed a repeatable operating capability that enables us to detect customer trends early, amplify these trends with our emerging marketing muscles and execute consistently across the store experience. New stores also continue to deliver strong performance.
We opened 52 net new stores across 26 states, including four stores that made our all-time spring and summer grand opening list. The success and productivity of our new stores is a testament to the strength of our brand and the unique place we occupy in retail as a kid-focused, value-driven destination where newness and trend drive visits and loyalty. We have a long runway to bring Five Below to more customers and more communities, and new stores continue to fuel our growth.
In July we celebrated the opening of our 2000th store, an important milestone for Five Below and our crew. In August we entered our 47th state with our first store in Idaho, and we continue to explore fill-in opportunities to support our successful launch in the Pacific Northwest less than 12 months ago, and we are super excited to announce that we plan to enter the market of Puerto Rico in the back half of 2027. This U.S. territory represents a highly attractive opportunity for our brand with a strong customer fit and desirable real estate opportunities.
There’s currently no retail concept in the market that delivers the same combination of kid-focused fun and value that are hallmarks of Five Below. We expect to open a handful of stores as part of the initial launch, and we’ll remain thoughtful and disciplined in how we build our presence in the market over time. We’re excited to see our flywheel driving these results. As our merchants identify trend-right product, our marketing team amplifies the story in real time, creating excitement for our customers and driving trips to our stores where we provide a fun and easy experience that converts interest into transactions and repeat visits.
As our capabilities grow, the flywheel becomes more powerful, driving continued customer engagement and durable growth. We are still in the early innings of unlocking the full potential of each capability, and while each stands on its own in terms of importance to the model, the relationship and connectivity between all three is key to unleashing the full power of the Five Below brand and driving durable growth. With respect to merchandising, our teams remain focused on what Five Below does well: listening to customers and social, spotting emerging trends and delivering compelling newness at great value through product stories that feel fresh, fun and relevant. Our ability to identify, pursue and scale trends is a meaningful competitive advantage. It brings new customers into the brand and, when they experience the breadth, value and fun of Five Below, it gives them reasons to come back. During the second quarter, our teams delivered a rolling thunder of newness across the store. We amplified numerous trends from Asian food and snacks to the return of slime, and we continue to build the overall squishy trend with new collections and fresh drops.
We also leaned into cultural events and curtain-up moments that matter to our customers, from World Cup madness to blockbuster movie releases to music and entertainment trends. Our teams moved quickly to bring relevant products to market, including licensed items like FIFA and the NBA, as well as Toy Story and Spider-Man movies and Netflix K-pop Demon Hunter series. With both the summer and Back to School curtain-up moments falling during the second quarter, we had lots to celebrate.
We helped kick off summer with a full lineup of products for the pool and beach, from inflatables to craft kits and all things squishy. For Back to School, we offered strong value across the assortment that featured both need-to-have pencils and notebooks to must-have novelty giant calculators. We brought the season to life through a series of trend-forward destinations designed to inspire both our Gen Alpha and Gen Z customers. For Gen Z, for example, we launched our first ever Dorm Glow Up where trend met value, making it easy to create a stylish, personalized dorm room without stretching the budget.
We curated two collections grounded in pink, gold and leopard print. With washable rugs, full-length mirrors and amazing storage solutions like our plush storage ottomans, the response to this collection has fueled continued interest in Five Below as a destination for room decor and accessories. On the marketing front, we continue to focus on creating a connected customer journey which often starts in digital and ends in a store visit. Our customers are social natives and meeting them where they are strengthens our connection with them and improves the relevance of the Five Below brand.
Beyond social, we are also growing our customer database to further develop a relationship with the customer and inspire repeat visits. This is an emerging capability for Five Below. Below and one that we are excited to develop. Our marketing efforts are helping to drive brand awareness while deepening engagement with new and existing customers. Both customer cohorts grew faster than we had historically experienced and we were pleased to see new customers gained in 2025 return to Five Below throughout the first half of 2026. We are still early in our journey to fully unlock the potential for our marketing strategy and the capabilities we are developing will become increasingly important drivers of customer acquisition, retention and brand strength.
Turning to the Store Experience, we are focused on making our stores easier to shop and more engaging for customers. We aim to make shopping fun for kids and easy for their parents to say yes. Our customers thrive on newness, value and novelty, and we are all about the treat and the treasure hunt. We are continuing to evolve the Five Below store experience. The first step began last year as we move Five Beyond items in line with their associated departments.
Rather than merchandising them on the back of the store, we have an opportunity to re-merchandise this space which was walled off in the balance of the store. By opening up the space and merchandising a world of play in this area, co-locating toys, games, collectibles and craft, we believe we can make our aspiration to be America’s greatest little toy store come to life. Similarly, we believe that Gen Z customers will appreciate shopping a world of style, beauty and room that are co-located in the store and offer an immersive and engaging experience tailored to this important customer cohort.
We believe that creating these immersive worlds in the store with intuitive product adjacencies, clearer and more inspiring signage and improved sightlines from the front to the back of stores will bring our assortment to life and provide inspiration and excitement for our customers as they build their baskets. The store environment combined with our trend-right product assortment, an exceptional value is what makes Five Below a 101 concept and a destination for discovery.
Our stores have also become an increasingly important element of how we are able to amplify trends. Our merchants, marketers and store teams are working together to amplify trends and activate them with impactful in-store events. A great example from the quarter was our Golden Ticket Squishy Dumpling event in May. This one-day event created excitement for our customers and communities and was flawlessly executed across the chain. It was a great example of building an engaging community at the local store level with a viral trend that has swept across multiple generations from parents to kids and young adults.
After the event, our marketing team continued the story in social media by taking Goldie, our exclusive golden dumpling, on the road with her friends, introducing new exclusive dumpling drops through social storytelling and keeping customers connected to our brand. Together, the product, social engagement and store execution has helped us to continue capitalizing on the squishy trend, driving traffic to our stores and leading a cultural zeitgeist.
In summary, we are very pleased with our second quarter performance and are encouraged by the strength we are seeing in the business driven by the continued progress across merchandising, marketing and store experience. As we move through the rest of the year and into 2027, we will remain maniacally focused on our customer, the boss, and on continued growth and executing our strategy at a consistently high level. The scale of our growth opportunity across the business and the brand is exciting and we believe the effectiveness of our flywheel positions us well for the future.
With that said, I’d like to turn it over to Dan for a deeper discussion of our financial results and our updated outlook for 2026. Take it away, Dan.
Dan Sullivan, Chief Financial Officer
Thanks, Winnie. Good afternoon, everyone. I’d like to start by adding my sincere thanks to the Five Below team for another outstanding quarter. The organization’s continued collaboration and relentless focus on our customer is reflected in the results we’re sharing today. I’ll begin my remarks with a review of our second quarter results and then discuss our updated outlook for the third quarter and full year fiscal 2026. My comments will refer to results on an adjusted or non-GAAP basis and therefore exclude the P&L impact of the tariff refunds, amongst other items.
Overall, we were extremely pleased with the results in the quarter, highlighted by further execution against our strategies, outsized sales and profit gains, and strong free cash flow generation. As we drove transactions in our stores and meaningfully grew comp sales, the fundamental elements of our business model were widely visible: gross margin accretion, a healthy combination of disciplined investments and productivity gains, and broad deployment of capital that was prioritized in support of growth.
For the second quarter, net sales increased 23% to $1.3 billion, driven by a strong comparable sales increase of just over 14%, primarily due to an increase in comp transactions and new store unit growth of 9%. This was our fifth straight quarter of double-digit comp growth with two-year stacked growth of 26.5%. We opened 52 net new stores compared to 32 net new stores in the second quarter last year, ending the quarter with 2,022 stores. New store productivity again outperformed and the strong results from our 2025 and 2026 vintages reinforced the benefits of our disciplined real estate strategy.
Adjusted gross profit increased 31% to $449 million. As a percentage of sales, gross margin increased approximately 220 basis points year over year to 35.6% despite meaningfully higher fuel costs. These gains were primarily driven by merch margin expansion, fixed cost leverage on the strong comp sales, and an improved shrink reserve rate based on 2025 physical inventory results. Adjusted SG&A expenses totaled $336 million, or 26.6% in rate of sale, or 140 basis points lower than the second quarter last year.
This was largely due to fixed cost leverage on the strong comp sales partially offset by planned higher marketing investments and incremental labor costs associated with the timing of physical inventory counts. Importantly, despite these timing headwinds, we leveraged labor costs year over year. Adjusted operating income more than doubled to $113 million and adjusted operating margin increased approximately 360 basis points to 9%. Adjusted net interest income was about $9 million, or $4 million higher than last year, due primarily to a higher average cash balance throughout the quarter.
Adjusted net income and adjusted earnings per share for the second quarter each more than doubled to $93 million and $1.68 per share, respectively. During the second quarter, we repurchased approximately 311,000 shares at a total cost of about $60 million as part of the $100 million repurchase authorization from November 2023. Subsequently, our Board approved a new $600 million repurchase authorization without an expiration date. This new authorization offers an attractive alternative for the deployment of excess liquidity and reflects our confidence in the underlying strength of our business and ability to continue to generate healthy free cash flow while self-funding our store growth and delivering industry-leading paybacks on our new stores. We ended the second quarter in a strong cash position with approximately $1.2 billion in cash, cash equivalents and investments, inclusive of $170 million in pre-tax IEEPA refunds. For the first six months of fiscal 2026, CapEx levels were just over $110 million and 36% above the same period last year as we continue to disproportionately invest in new unit growth where returns on invested capital are most attractive.
Inventory was $941 million at the end of the second quarter, an increase of 18% on an average per store basis. Inventory dollars were up 8% with units slightly down. In summary, as our strategy gains further traction and enterprise execution levels continue to strengthen, we have increased confidence in the long-term value drivers of our business. We are on strong footing entering the second half of the year with clear momentum, a healthy balance sheet and ample liquidity.
As such, we are raising our outlook for the back half of the year. As a reminder, our outlook excludes the IEEPA tariff refunds and does not contemplate future share repurchases. For the third quarter, we expect total sales in the range of $1.21 to $1.23 billion, or growth of about 18% at the midpoint versus last year’s third quarter, with comparable sales growth between 8% and 10%. We expect to open approximately 40 net new stores in the third quarter compared to 49 net new stores last year.
Adjusted operating margin at the midpoint is expected to be about 6%, an increase of 160 basis points versus last year, driven by both gross margin expansion and SG&A leverage. Adjusted gross margin at the midpoint is expected to increase about 100 basis points, reflective of leverage on fixed costs and higher merch margins, in part due to lower tariff costs. This is partially offset by higher fuel costs on outbound transportation and an unfavorable shrink comparison against last year’s true-up.
Adjusted SG&A for the third quarter is expected to leverage fixed costs on the 9% comp at the midpoint while funding increased marketing investment. Net interest income is expected to be approximately $8 million for the third quarter and the effective tax rate is expected to be approximately 25%. Adjusted net income is expected to be $59 million at the midpoint, or an increase of 57% versus Q3 last year. Adjusted diluted earnings per share at the midpoint is expected to be $1.07 compared to $0.68 in Q3 last year.
Turning to the full year, sales are expected to be in the range of $5.63 to $5.71 billion, an increase of 19% at the midpoint versus last year, and comparable sales growth is expected to be between 10% and 12%, or 24% at the midpoint on a two-year stack basis. Adjusted operating margin for the year is now expected to increase 250 basis points to approximately 12.5% at the midpoint, with three quarters of it driven by gross margin expansion and a quarter by leverage over SG&A. We expect adjusted net interest income of approximately $36 million and a full-year effective tax rate of approximately 25%. Adjusted diluted earnings per share is expected to be $10.07 at the midpoint on 55.5 million shares outstanding, or growth of 51% versus 2025. Capital expenditures are now expected to be between $250 and $260 million, or 4.5% of net sales at the midpoint. Excluding the impact of tenant allowances, this reflects 150 net new store openings and investments in our store experience, infrastructure and technology.
In summary, we are pleased with the continued strong performance of the business. We are increasingly confident that our strategy for merchandising, marketing and in-store experience will drive durable top- and bottom-line growth. And with that, I’ll hand the call back over to the operator to start the Q&A session.
OPERATOR
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please limit yourself to one question. If you have further questions, you may re-enter the question queue. At this time, we will pause for just a moment to assemble our roster. And today’s first question comes from Randy Koenig at Jefferies. Please go ahead.
Randy Koenig, Analyst at Jefferies
Hey, good afternoon everybody. I guess, Winnie, first to you. And I’ve been doing this for 26 years. I’ve only seen three transformational changes like this very rarely in my career. So congratulations to you guys. I guess what I want to kind of unpack is the word flywheel and the different kind of ingredients that go into that flywheel. Let’s say let’s kind of focus on two of them in product and marketing. And if you think about the outperformance of your quarter on the top line, maybe kind of give us some perspective and get a little deeper on, you know, how much of it you thought came from the strides you’re making in product and what you know in the balance in marketing.
And then really kind of give us some perspective on your journey on how you’re thinking about the evolution of product and marketing into 27, 28 and 29, 2029 and how you’re kind of thinking about that journey and how that kind of leads to, you know, more customers coming into the business and then your existing customer cohorts, how they continue to kind of drive more frequency of shop to the, to the box as well. That’d be very helpful. Thank you.
Winnie Park, Chief Executive Officer
Thanks so much, Randy, and thank you for the congratulations. I just want to one more time thank the crew here at Five Below for a tremendous quarter. And it’s actually our fifth consecutive double-digit comp quarter, which makes us all incredibly proud. But what it really reinforces for me is that the strategy that we put into place last year is working and that the customers are really responding. And so there’s nothing more gratifying than to see as a merchant and a marketer that things are really, really working.
And I would say that we’ve got this amazing operating flywheel and it’s grounded in a strategy. And thank you for acknowledging that the transformation happened quickly. I think that it’s a testament to our overall value proposition in the marketplace. We are a one-of-one concept that is a destination for kids and the kid in all of us at extreme value. There’s really no one like Five Below. And what we did last year was first put that maniacal focus on the customer—who is our customer—and got really intimate with what it means to be Gen Alpha, Gen Z, and a millennial parent and what their needs are.
And with that we re-merchandised and we really kind of took a step back and up and thought about not just merchandising items and chasing great one-off ideas, but how do we do our jobs telling really great stories and curated product stories that are grounded in what’s happening out there, especially in social media. And we’ve always been a business of trend. But it’s exciting to see that products that we’ve had in the line for five years, like the Squishy Dumpling, when it gets acknowledged in social, we now can not only build it from a product perspective, but also meet customers where they are from a marketing perspective.
And last year we worked hard to move our working media spend away from traditional commercials and into social media. And with that, at the end of last year we could really amplify those trends as well as create our own content on those trends. And we saw a lot of goodness come with that, including better brand awareness. And then right now we’re hard at work and in the very early innings of trying to capture customers at the till and capture their records.
When I started, we were at roughly 0%. And we’re making great progress in the stores. It’s a concerted effort with everyone involved. But with those records, we’re able to better direct great content to those individuals and start to build a relationship through email marketing. And we’re going to refine that even further. But again, very early innings, and what’s really great to see is the customers we captured in 2025 are coming back in 26. Those that we gained new in 1Q26 are coming back in 2Q26.
So really great stuff. And I would say that if you got the right content and the right value proposition, those messages, when they hit, they drive great visits. The third aspect is really around our stores and the store experience. And again, we’re just getting started here. In some ways we’re so excited to have Rodney lead the troops and our crews. But in terms of store experience, we are beginning a journey of just making it that much more fun, simpler for customers to shop, starting with our price simplification last year, but also just making these product stories come to life.
And these six curtain-up moments really have galvanized the crew to work together. And this is where you see merchandising, you see marketing and stores as well as our wonderful supply chain and distribution crew come together to deliver goodness to the customer to celebrate these magical moments in the year. So you asked the question with regards to how much further can we take this? We are very much in the early innings, and what is really great is we’ve just begun and we are seeing nice resonance in terms of getting that repeat growth up in the double digits, new customer counts up in the double digits, our brand awareness, you know, spiking, and it is again the operating flywheel in effect. And we have a lot more ahead of us. And you add on all the white-space opportunity we’ve got with new stores and it’s a very nice position to be in as a growth brand. And I’m also going to pass it on to Dan to fill in some of the details here.
Dan Sullivan, Chief Financial Officer
Thanks, Winnie. Hey Randy, you asked about the over-delivery against our outlook for Q2. Remember when we spoke back in June, we had one month in the books essentially for the quarter. We were also looking out, trying to anticipate and predict a couple of unknowns. One around what would happen as we cycled and anniversary the pricing of a year ago, and then second was of course the trend profile, particularly as school would be letting out, and trying to be thoughtful about that.
So that was the backdrop. I would point to three things that really were the catalyst for the over-delivery against our expectations. One, transaction growth was simply more robust than we anticipated. We drove significant traffic to the store, that traffic converted, and we saw transaction growth that was above what we had expected. I think secondly, part and parcel to that, the trend demand continued, and so we were excited. We had new products to offer, we had a better in-stock position, we did some really cool stuff in store to activate, and we saw a really, really strong response from the customer.
And then thirdly—and Winnie highlighted some of the special moments—if you look at the quarter that was, there are some moments in time: Fourth of July would be an example, World Cup would be an example, even early back to school, where we knew we would have great new interesting product, we knew we would execute at a high level. And even with that as the inputs, those moments outperformed what we had expected. So super excited obviously about the results and the over-delivery, and we’re heading into the back half of the year with clear momentum.
Thanks so much, Randy.
Randy Koenig, Analyst at Jefferies
Thank you.
OPERATOR
And our next question today comes from Christina Cattel with Deutsche Bank. Please go ahead.
Christina Cattel, Analyst at Deutsche Bank
Hey guys, congratulations on yet another very strong quarter. I wanted to ask about the composition of the better-than-expected traffic growth a bit more, I guess. Winnie or Dan, can you unpack sort of like the categories or product stories that were the biggest traffic drivers? Are you seeing traffic increasingly concentrated around major trends events? Are the visits becoming more broad based across the assortment? If I could just throw in a second one.
Just when we look at obviously quarter to date you gave us an 8 to 10% guidance. Just anything you can comment on as it relates to the exit rate or how maybe August has trended and if anything from a composition perspective might be changing or you’re seeing that continue. Thank you.
Winnie Park, Chief Executive Officer
Thanks so much, Christina. I’ll start and then I’ll let Dan speak. In terms of the guidance, the traffic growth that we saw and that we experienced in the quarter was consistent with the traffic growth we saw in quarter one. And what’s been really great is to see that actually we saw broad-based growth across all of our categories. Certainly we had really, really nice effect of the squishy trend and it did survive quarter in, quarter out, which has been terrific.
And I think you know what’s been very telling about seeing the traffic that’s come from the squishy trend is that those customers have converted into broader Five Below and we’re seeing them buy, you know, across the assortment. We’re also seeing that our aspiration to be America’s greatest little toy store is definitely coming to life. That’s something that I put out as an aspiration last year and we certainly highlighted it in holiday and we’re following up now.
And I think that the squishy trend has made our games, toys, collectibles and even our create and crafting departments really relevant. And so it’s been great. I think the key with any trend now at Five Below is, while there always have been trends, is what we do with them, and I think that we have new ways of managing them. First and foremost, listening to social and seeing what pops up. Secondly, being able to engage with customers really, really fast through social media and amplify and boost those trends.
And then thirdly, provide a product assortment where we’re dropping newness and continuing to engage the customer. And we’re doing that throughout the store. So that’s what’s been really, really exciting. And again, we saw nice growth across our worlds and a lot of resonance. And so I think Five Below is just becoming a brand that’s known for affordable, great fun for the kid and kid in all of us. And I’m going to pass it on to Dan to talk about the quarter.
Dan Sullivan, Chief Financial Officer
Yeah, thanks, Winnie. Thanks for the question, Christina. I’m not going to get into necessarily the in-quarter performance to date or color. What I would say is, you know, just maybe to pivot back as we thought about how we constructed the guide, let me take you through a bit of the thinking. Obviously we started with a very strong underlying growth rate. You’ve heard some of the reasons why here already on the call and some of the points that Winnie has made.
But certainly with an 18% growth half, 1 28% on a two-year stack, we’ve got new store productivity levels that we’re super pleased with. We have real increased proof points that the strategy is resonating and the execution is strong. So that was the basis. We then did factor in of course the impact of trend both on a, let’s say, a direct comp basis but also indirect as it continues to drive traffic and brand awareness. And so you put those elements together for the third quarter.
We have profiled what we think is a thoughtful outlook, 9% at the midpoint, over 20% on a two-year stack. And I would say that we would expect the composition of that comp growth to be very similar to the first two quarters of the year, which means largely driven by transaction growth. Thank you,
OPERATOR
Thank you. And our next question today comes from Matthew Boss at JPMorgan. Please go ahead.
Matthew Boss, Analyst at JPMorgan
Thanks. And congrats on another great quarter.
Winnie Park, Chief Executive Officer
Thanks. Matt.
Matthew Boss, Analyst at JPMorgan
Two questions, two questions. Winnie, could you elaborate on the Rolling Thunder approach to newness across categories that you cited and how you see this impacting traffic frequency and new customer acquisition? And then, Dan, you touched on it, but could you speak to the drivers of this new store performance from the recent cohorts and the new store productivity levels, which, as you said, continue to materially outpace your historical plan?
Winnie Park, Chief Executive Officer
Thank you so much, Matt. The Rolling Thunder approach is something that We have worked really, really hard on, and it’s across every single world. I think that Five Below has always been about newness and has been about refreshing the assortments at very specific times during the year. I think what’s different about what we’re doing today is, one, we’re acknowledging that newness is what’s driving those visits and that excitement from the customers. And we’re talking about it. So along with the newness drops, we’re actually engaging in marketing.
We’re messaging it, we’re talking about it, and it’s working. Customers acknowledge when we have it; it is driving the visits. We’re able to communicate with them now with the growth of our email file as well. The other piece of the Rolling Thunder approach is being intentional about, again, product storytelling. And instead of just launching a bunch of new stuff, really build out a story with connective tissue and think about things with a collections mindset.
And so this has been a lot of hard work in the background between merchandising, visual merchandising, marketing, stores to get this right. And I really applaud the teams because we see that the customers are picking up on these cues and it’s driving them into the stores. So it’s been terrific.
Dan Sullivan, Chief Financial Officer
Yeah. And Matt, taking up on your second question around new store productivity, look, we’re obviously super pleased with the results and the trend that we’re on. It makes what was already a very exciting investment profile outstanding for us. I would point to two main drivers. One, I think just the acknowledgment, the reality of the breadth and depth of the growth that we are seeing. When you see this type of growth across all geographies, all income cohorts, all demographics, there’s certainly a rising tide element to this that plays out in your NSP.
I think more importantly, though, is I think this is a great reflection of the more disciplined real estate strategy that we put in place about 18 months ago and really applied that strategy not only in white space thinking, which you saw in the Pacific Northwest last year, but also as we thought about fill-in. And this strategy is based upon the notion of much more discipline up front — really engaging from site selection all the way through to grand opening, holding a really high bar on location, on lease terms, on our ability to then activate an execution the minute we open the doors and knowing how to seed the market both ahead of the entry and as part of the execution. I think we are meaningfully better on all elements of that than we were 18 months ago. And those results are playing out in our new store productivity. Thanks for the question.
Matthew Boss, Analyst at JPMorgan
Thank you.
OPERATOR
And our next question today comes from Robbie Owens at Bank of America. Please go ahead.
Robbie Owens, Analyst at Bank of America
Oh hey. Hey Winnie. Hey Dan. Thanks for taking my question. I was hoping this might be more for Dan. Just if you could speak to the tariff refunds and how you think about that cash or how we should think about the back half and sort of investing the tariff refunds as expenses in the back half versus expenses because your traffic is so much higher. So sort of spending into the higher comp trends that you guys keep coming up with and how we should think about that in our models.
Dan Sullivan, Chief Financial Officer
Yeah, sure Robbie, thanks. Thanks for the question. Look, our focus from an investment standpoint has been and is going to continue to be primarily focused against our customers and in support of our growth. That is at the heart of our strategy. That is how we have prioritized and will continue to. Now I think what the IA refunds offer us is an ability to accelerate that and with some optionality. And so the areas that I would expect that we would think to redeploy these funds first is going to be to continuing to invest in the customer experience in store and making sure we are offering our customers the best experience possible.
And Winnie’s talked about that in her prepared remarks around the importance of how we bring our product to life, how we simplify and improve the shopping experience for our customers and really reinforce the treasure hunt aspect of our offering which is so important. I think the second one, sort of following on that, is applying the same thinking and importance to our digital platform as we think about ourselves through the lens of omnichannel and really improving the online shopping experience for our customers and making sure that that experience lives up to our brand and matches the in-store experience.
And then thirdly I would point to we’re going to continue to invest in the product, in our hunt, in our search for newness and in our value proposition. And so I think as you put all three of those together, I would expect that it will disproportionately be seen in capex and it will be seen over time. Thanks, Robbie.
Robbie Owens, Analyst at Bank of America
Thank you.
OPERATOR
And our next question today comes from Michael Lasser at UBS. Please go ahead.
Michael Lasser, Analyst at UBS
Good evening. Thank you so much for taking my question. Last quarter you quantified what the flywheel meant to your business in that the underlying run rate was in the high single-digit range, inclusive of some pricing. Now that you’ve seen the second quarter play out, as well as having some time to reflect on that number, is that still a good way to think about the underlying run rate for the business? As you look to next year and the coming quarters, we take pause if there are any unique factors that we should consider as we model over the next few quarters that are just going to be difficult to repeat and will act as an impediment to Five Below’s ability to sustain a positive comp in the periods ahead. Thank you so much.
Winnie Park, Chief Executive Officer
Thanks, Michael. I’m just going to start in terms of taking a step up and back as we look at what’s coming for the balance of the year. What’s great about the operating flywheel is that the momentum is starting to speed up in Kerry. It’s, and I think the aspects that we’ve been really pleased with are, you know, our disciplined approach of delivering great, relevant newness at extreme value with a very focused intention of being a destination for kids.
And I think that one-of-one concept and that focus on value is going to be even more resonant as we move through the year. We also have the ability this year versus last year, especially as we look forward to holiday, of bringing in product that the tariffs did not allow us to bring in last year. So we have a full assortment of goodness coming through both for Halloween and holiday that we feel really excited about and we think it’s going to be incredibly compelling to the customer.
We’ve seen really nice new customer acquisition both through trend as well as our marketing efforts and that just continues to grow. And I would say that what’s nice is to be able to take those customers and see them repeat with us. And so as we capture more customer records and are able to communicate with those customers and build relationships with them over time, I think that that is going to be a huge tailwind for us in the quarters coming up.
So very, very excited about those elements and again, early innings on those pieces and I’m going to pass it on to Dan to lean in here.
Dan Sullivan, Chief Financial Officer
Thanks, Winnie. Yeah, Michael, I would only add a couple of things. I think the operating flywheel that Winnie talks about, which is really the heart of a winning strategy that is being executed at a really high level — that’s obviously the catalyst here. I point out that the result of this is also reflected in a business that is much more about assortment than it is about item in the quarter itself. Squishy Dumplings as an example was a low single-digit contributor to our comp growth and that’s similar to what we saw in the first quarter.
Now we recognize obviously it had a bigger impact from a halo perspective and from its ability to, to contribute, excuse me, to our traffic gains. But I think the other point I would highlight here is the importance of our ability as an organization to self-amplify this trend. We’ve almost taken now what’s become a commodity item and made it so unique and so compelling and so interesting that it is actually a Five Below item. And so I think these are all examples of durable elements to this, to this growth story.
And while we don’t underestimate the impact of Squishy Dumplings, the math would tell us it was a low single-digit contributor. And our capabilities here to amplify this trend and drive traffic around the trend are new and growing muscles which we think also play well into the future. Thanks Michael.
Michael Lasser, Analyst at UBS
Thank you.
OPERATOR
And our next question today comes from David Bellinger with Mizuho. Please go ahead.
David Bellinger, Analyst at Mizuho
Hey guys, thank you very much. Two follow-ups on the social media piece. Any data points you can share around the sales uplift maybe from certain target markets where this is turned on more than others? And then as you look out further, you mentioned being still early innings with the email capture rates. How sophisticated can the marketing program ultimately get? Can we eventually see much more precision on these paid posts, paid sponsorships on a even a household by household basis?
Thank you.
Winnie Park, Chief Executive Officer
Thank you so much, David. So on the social media I can’t share exact figures but what I can share with you is that we like the results we’ve seen in terms of pivoting our spend from traditional commercials into social. We really look at the media spend in social and digital by cohort of customer and what’s most applicable. And we’re also seeing some nice results through Connected TV for Gen Alpha through YouTube. So we continue to really modify the mix of media in order to optimize our ROAS but more importantly to capture customer attention and to engage with them in a relevant way.
And yes, I think we are very early innings on email capture and we, you know, we’re able to batch and blast at this point to lots of customers. Our ability to really hone in and personalize and dial in our marketing is early stages. And we will be making those investments over time because we know that they will pay off as we try to grow lifetime value of our customers. We’ve also got a neat value proposition at Five Below in that we capture customers young and we ladder them through their preteen and teen years.
And, you know, we would love to see them beyond that. But certainly as they grow up and out and have their own families, they come back. And so the true lifetime journey of Five Below is one that I think is exceptional. And once we build out our marketing toolkit and our tools, we’ll be able to do a lot more to bridge those moments for the customers. Thank you, David.
OPERATOR
Thank you. And our next question today comes from Joe Feldman at Telsey Advisory Group. Please go ahead.
Joe Feldman, Analyst at Telsey Advisory Group
Yeah. Good afternoon, guys. And also congrats on a strong quarter. Amazing quarter, really. And question I had was you talked a bit about the Five Beyond section in the back of the store and sort of tearing down that wall and allocating some more space. Can you talk a little bit about how that will be rolled out and implemented and like, the cost to do it or the effort or the time? I’m just trying to get a better sense of what we should expect to see over the next, you know, coming months and couple of quarters.
I would assume it’s not going to be an overnight thing, so maybe you could share some thoughts on that. Thank you.
Winnie Park, Chief Executive Officer
Absolutely. Thank you, Joe. And yes, on Five Beyond, this has been a journey for us, and it really started last year as we started moving the product out of the area and customers were receiving the product better in their own departmental homes, which left an open space for us to merchandise and try to make more productive. And so we started the work of looking at what could go back there. How do we literally tear down the signage and get the gondolas that are attached to the wall and a pretty high height down, see what that would do for the stores, see what that would do in terms of productivity and customer acceptance, as well as crew and the crew experience.
Monique
And all of that has been positive. So we’ve just begun that journey of moving through stores to make these adjustments, and we think it’s going to do great things. From a couple of points. One, we do believe we will make a very productive splash with the world of play. It’s part of a broader strategy to, again, really think about our adjacency of products so they make sense for the customer and the customer shopping so that they can more effectively build their baskets.
I think secondly, we want to make sure that whatever we do keeps us incredibly flexible because the business changes all the time. Trends change, needs change for our customers. So we really want to keep it flexible and agile. And then I think the third thing is from an overall experience, being able to see back to front first store is important, especially if you’re shopping as a family and you’ve got young kids, you want line of sight. For our crew, it’s important in terms of being able to track customers and understand what their needs are.
So we think there’s a lot of goodness that’s going to come out of some of these changes. But we’re being very disciplined in terms of how we roll it out, monitor it and move forward that way. So I’ll let Dan talk a little bit more about that.
Dan Sullivan, Chief Financial Officer
Yeah, thanks, Monique. Yeah, Joe, you know, we think this is a fairly modest level of capital investment per store. It’s probably in the range of $40 to $45,000 of capex per store. It is at the heart though of what led to us increasing our capex outlook for the year now in a range of 250 to 260 million. Is our, is our conviction to start investing in this program. And so that has begun and is the cause for us taking up our guidance. Thanks, Joe.
Joe Feldman, Analyst at Telsey Advisory Group
Thank you.
OPERATOR
And our next question today comes from Scott Ciccarelli with Truist Securities. Please go ahead.
Scott Ciccarelli, Analyst at Truist Securities
Hi guys. Appreciate the time. So based on the midpoint of your 3Q guide and the full year outlook, it looks like you’re still embedding a low single digit comp in the fourth, fourth quarter. I think we recognize 4Q always has some pressures because of the amount of volume that has to flow through the box. But just given the momentum of your trends and the ability to bring in product that you couldn’t have last year, why wouldn’t you expect 4Q comps to be quite a bit higher than what seems to be implied in the guide?
And specifically, do you have real concerns around the physical volume limitations of the stores or is this just taking more of a prudent or conservative approach in the outlook? Thanks.
Dan Sullivan, Chief Financial Officer
Yeah. Hey Scott, thanks for the, for the question. Look, as we’ve constructed the guide, certainly run rate momentum of the business factored into that. I think you’re right. We’ve talked about certain opportunities that we left on the cutting room floor last year in the fourth quarter largely as a result of tariff decisions that we had to make around products. We’re certainly super excited about the programs and the products that we’re bringing in for the holidays and the teams have already begun planning for and executing.
So certainly a lot there to like. The way we’ve constructed the fourth quarter, which would position at about a 3% comp growth profile for the quarter. I think to be fair, you also have to look at that on a, on a two year basis given that we have now anniversary the pricing and we are cycling as you know, a fairly big 15% quarter year ago. So on a two year stack this quarter, our biggest quarter of the year profiles had an 18% and just we haven’t tried to be conservative or prudent.
We’ve just been thoughtful here weighing all of the things I just mentioned and also the reality that we’re in in terms of the competitive set in that time period and the amount of business we and others will do over a very, very short period of time. We just, we just wanted to be thoughtful balancing the obvious underlying run rate of this business. Some of the things we’re super excited about and the fact that it is the holiday season. That’s all that went into the guide.
We don’t see it as conservative, we see it as thoughtful. Thanks, Scott.
Scott Ciccarelli, Analyst at Truist Securities
Thank you.
OPERATOR
And our next question today comes from Chuck Grom at Gordon Haskett. Please go ahead.
Chuck Grom, Analyst at Gordon Haskett
Great. Thanks a lot. When you look at your store fleet and overall sales per store this year, which is going to be about 2.7 million, is it possible to speak to maybe your top 10 to 20% of the store base and I guess any common themes between those locations, whether it be brand awareness or others that you can apply to the rest of the fleet. I’m trying to sort of approach the comping the Comp question for 2027 from, from a slightly different angle.
Winnie Park, Chief Executive Officer
So in terms of the store fleet, it’s a great question, Chuck, and it’s a great way of thinking through it. We don’t see a meaningful variance. It is amazing in terms of the performance across the fleet regardless of vintage or geography. We’ve seen lift throughout and we don’t see a huge meaningful swing between the top percentile versus the bottom either in terms of brand awareness or any other factors. It’s been kind of like good throughout the system. I think the bigger piece around comping the comp as we look at 2027 is thinking through how we take these new customers that we look to forward and bring them back and then how we continue to acquire new both through new store openings but also in existing because we’re increasing our brand awareness and that can be through marketing, but it also can be through a trend and relevance.
And I think that’s where we’re winning currently.
Chuck Grom, Analyst at Gordon Haskett
Thank you.
OPERATOR
Thank you, Chuck. Thank you. And our next question today comes from Jeremy Hamblin at Craig Hallum Capital. Please go ahead.
Jeremy Hamblin, Analyst at Craig-Hallum Capital
Thanks. And I’ll add my congratulations and you know, especially on your operating margins blowing right past the 11 to 12% legacy level and hitting mid teens this year. I wanted to get into the curtain up moments and kind of those six times of year. I think we recently have kind of seen that for your post back to school and kind of early Halloween set. In terms of the efficiency around doing those sets, it seems like your labor investment is quite a bit more than what you’ve put into it in the past.
And given that it’s kind of a bigger show of the new assortment than what you’ve done from a historical perspective, do you feel like you have the formula down from a labor scheduling perspective perspective of how many people you need and when or you know, is that something that’s a future opportunity as you get more efficient in how to have these wow curtain up moments and still run the business even if you have maybe comp levels that are a little bit lower than what you’re doing currently?
Winnie Park, Chief Executive Officer
Thanks for the question, Jeremy. So overall we have invested more labor in the stores and it started last year and it started in earnest because we had gotten to the point where we weren’t I would say doing the one on one of bringing product from the back to the front in a way that was that allowed us to refill shelves and to really feed the unit throughput business that we’ve got. And so overall that’s kind of where it all started with the curtain up moments we actually have always had now sets in the front of store.
The difference between the current, current nut moment is the coordination between corporate and stores and it’s merchandising, marketing as well as supply chain to get it right, get the right product at the right place at the right time to make sure that the stores are educated about what they’re seeing to give them an idea of what they’re going to see not only in terms of product content but also in terms of marketing and gearing for let’s not wait to set the floor.
Let’s get it done so that when we announce the customer is there and so it really is how we collaborate and how we work has been the biggest piece. And yes, of course I think we’re going to get more efficient over time. But in general we have seen that the visual merchandising approach, product, the movement of product has actually driven a lot of interest and a lot of engagement by customers. And we like those results. Thank you, Jeremy.
OPERATOR
And our next question today comes from Edward Kelly at Wells Fargo. Please go ahead.
Edward Kelly, Analyst at Wells Fargo
Yeah, hi, good afternoon. Maybe just to follow up, to start another question, I was hoping that you could clarify traffic versus ticket. I think when you said something about consistent with Q1, I just didn’t know if you meant proportionately similar. And ticket still up. And then the real question is just around the gross margin. Dan, I was hoping that you could maybe unpack it a little bit. Fuel versus shrink versus tariffs this quarter and then looking out into 27, you know how we start to think about, you know, some of those dynamics, particularly if tariff rates go back up.
Winnie Park, Chief Executive Officer
Great. Okay, Ed, I’m going to start with transactions. So we saw transaction growth in both quarters and both quarters was driven by traffic. And so that was the shape of the transaction growth, which has been terrific to see and terrific to see the consistency kind of week in, week out. And I’ll pass it on to Dan.
Dan Sullivan, Chief Financial Officer
Yeah, thanks, Winnie. Yeah, look, the gross margin profile in the second quarter we were super pleased with. We had 220 basis points of accretion. Obviously leverage played a role there, but it was really led by merch margin expansion. So here you saw the benefit of pricing that we hadn’t yet anniversaried and lower tariff costs. And shrink was solid. It was slightly below year over year which was helpful. And higher fuel cost was absolutely an offset in the quarter. So you put all of those elements together and obviously pleased with the profile as we look forward into the tariff environment. And I think we would expect some level of tailwinds moving into the back half of the year. Just based on the simple reality that the new rates under section 301 are lower than the rates we had assumed in our, in our outlook previously.
We would expect that that picture slightly reverses as we head into 2027. Again based on everything that we know because the rates that will be in place under section 301 are actually slightly higher than the rates that have been in place under the temporary section 122. So what does it all mean? Look, I think it’s an evolving picture for sure. We know that I think in the second half of the year, while we do anticipate lower tariffs. We don’t anticipate material flow through to gross margin because fuel costs are likely going to be higher and will likely offset that. And then as we think about next year, it’s obviously way too soon for us to start constructing a plan and talking about that plan. But what I would say is just because we may be operating under a slightly higher tariff environment, I wouldn’t expect that that would necessarily mean a dampening to gross margins.
This organization has shown it knows how to address tariffs head on, largely through the cost lens as well. So I wouldn’t necessarily paint a picture for next year that the negative tariff environment will impact margins. Much more work to do on that. And we’ll certainly talk about that as we talk about 27.
Edward Kelly, Analyst at Wells Fargo
Thank you.
OPERATOR
Thank you. And our next question today comes from Kate McShane with Goldman Sachs. Please go ahead.
Kate McShane, Analyst at Goldman Sachs
Hi, good afternoon. Thanks for taking our question. We always like to ask about licensing. I think I’ve asked about it in the last couple of calls. It’s very obvious that there is a more concerted effort in the stores when it comes to licensing and it’s been an important driver of your product transformation. Just wondered if you could provide any more detail about the role of licensing with regards to the comp in the second quarter. Kind of what the movie slate looked like this summer versus previous summers. And just as you implement more, are you seeing a measurable impact to traffic as a result of this initiative?
Winnie Park, Chief Executive Officer
Thanks for your question, Kate. And licensing is definitely of growing importance to us. And I think I mentioned that the big difference for us in terms of How we do licensing is in the past I think we were really great at infusing relevant licenses into relevant products. So Stitch in the toys and games world, for instance, and we definitely saw some tech license kind of IP work for us. Today, we’re taking a slightly different approach in that, one, we have the ability to deliver a 360 experience with a license and a full collection. And, you know, we definitely did that with Toy Story this year. And in fact, the back part of this year, we’re excited because we’re going to have, again, a rolling thunder of great movie titles coming out.
But the other aspect of licensing that we’re excited about is to bring new licenses to market. And you’ll be seeing more of that as we move through it. But we think that there is a wonderful complement to what we’re seeing in terms of toys, games, and collectibles. And if you take an idea that was born really in the world of toys and games, applying it to tech product, and seeing what else we can do with something that really resonates with our customer.
So that’s really the difference in terms of how we work on this. And you’ll see more of that as we roll through this year. And of course, we’ve already started on thinking through ’27 as well. Thanks for your question.
OPERATOR
And our next question today comes from John Heinbockle with Guggenheim. Please go ahead.
John Heinbockle, Analyst at Guggenheim
Hey, Winnie. Do you guys have good insight into how, once you get people in the store, how they shop, the store is changing in terms of how they work their way through the store, how much time they spend, what has happened so far, where do you think that is going, and how does that influence your thoughts operationally?
Winnie Park, Chief Executive Officer
Thanks, John. We, I think, have more learning we can do in terms of insights on how the customer shops the store. Right now, it really is through observation and it’s observation through our own visits as well as what we hear from our crew in the field. And this is one of the areas that I think we’ve got a lot of opportunity with Rodney coming on board is really understanding how the customer engages with the full store. We think there’s a lot of opportunity currently.
And so, like I said, the move towards eliminating Five Beyond is not just so that we can, you know, make that area more productive, but also get those sight lines clear from the front to the back. You know, Five Beyond is actually a walled-in area. So detaching those fixtures from the wall and creating an ability for a customer to snake up and down aisles is the way I like to shop, and I think customers will respond really well to that. Finally, I do think that having adjacencies in the store that make sense and are directed towards a target customer cohort, like a Gen Alpha versus a Gen Z, is going to help them build their basket.
Right now they’re kind of hopping from place to place in the store and we think we can do better there. There are two trip driver categories that we know of that are fairly consistent, which is the world of candy and the world of tech. And so, again, making moves to think about putting them in the front of store and making them really easy to see for the customer, really easy for whoever wants an in-and-out experience. And I think that the last area that I think is opportunity for us is our line queue, just adding those last few items in the basket.
So everything will be in service of making that experience funner, better, easier, but also helping our customers build a basket, but we’re early stages on this. Thanks for your question, John.
John Heinbockle, Analyst at Guggenheim
Thank you.
OPERATOR
And our next question today comes from Zehan Ma with Bernstein. Please go ahead.
Zehan Ma, Analyst at Bernstein
Hi. Thank you for fitting me in. A quick two-part follow-up. One, just on the new store side of things, given the very strong results from the new store openings, what does it take for you to consider re-accelerating the pace of store growth from here? And then a follow-up on the reinvestments of the tariff refunds. How do you think about balancing the reinvestment needs versus returning capital to shareholders? Thank you.
Dan Sullivan, Chief Financial Officer
I’ll take them both. Look, on the new store side, we’re obviously not capital constrained, so that isn’t necessarily a barrier here. I think the balancing act for us is continuing to be able to execute at a really high level, and we are really scaling these muscles in an impactful way, such that we’re even confident now to expand into a white space like Puerto Rico. So you can see the confidence that we have. But also new stores is also a subject of what’s available and what properties and locations are available.
And so we have to balance all of those. We’re going to continue to operate with pace and urgency simply because the returns are too good. But we’re not going to sacrifice the standards that we have set because we’ve seen the results here and we’re quite pleased. So that was the first part. On the second part, look, we’ve demonstrated, I think certainly in this earnings release, our ability to balance capital both ways. Right. One is to lean in and invest in growth and in our customers.
And that is going to continue to be our priority. And you see that in our updated outlook for the year: CapEx moves up, and you’ve heard the reasons why around the store experience and that discussion. At the same time, in the quarter we just completed buying shares on the original authorization and then subsequently launched a $600 million authorization. So what we are showing here in terms of how we will deploy capital is a reflection of our confidence in this business and its ability to continue to grow, throw off significant cash flow.
And it’s a capital allocation strategy that is geared in being able to do both: invest in this business to drive growth and at the same time return excess liquidity to shareholders where those returns warrant it. And we’re quite pleased with that outcome and we’ll begin to execute against it. Thanks for the question.
Zehan Ma, Analyst at Bernstein
Thank you.
OPERATOR
And our final question today comes from Philip Lee with William Blair. Please go ahead.
Philip Lee, Analyst at William Blair
Thanks for the question. Thanks for sneaking me in. So as we just start to think about holiday, I think last year you began to roll out some of your larger omnichannel initiatives like BOPIS, delivery, etc., but maybe had to turn off some of those capabilities due to the high volumes and staffing constraints. So are you planning to have your full suite of omnichannel functions live this holiday? If so, what kind of comp impact do you think that that could have?
And then what are the margin implications there, assuming there’s going to be an uptick in store labor to make that happen. Thank you.
Winnie Park, Chief Executive Officer
Philip, thanks for your question. We are hoping to be able to continue with our omni during this holiday season and we’re still working through the details of what that looks like and how we execute against that. So I really can’t comment with regards to what will happen, cost, et cetera. I will tell you that right now, you know, we’re seeing nice results with BOPIS, but also third-party delivery. So we’ve got a couple of different ways to deliver to the customer their needs and meet them where they are, and we’re still working on the details.
Philip Lee, Analyst at William Blair
Thank you.
OPERATOR
Thank you. That concludes our question and answer session. I’d like to turn the conference back over to Winnie Park for closing remarks.
Winnie Park, Chief Executive Officer
So we want to thank y’all for your continued support of Five Below. I also want to add a last huge thank you to the crew for making this quarter possible. We literally could not do this without you and I would like to invite all of y’all to come shop our fabulous Halloween curtain up. We’ve got some amazing, scary and fun treats, so please come and visit and we look forward to seeing y’all.
OPERATOR
Thank you. Thank you. That concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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