Five Below Inc (FIVE)

Five Below Inc's liquidity ratios show a mixed performance over the past few years. The current ratio has been relatively stable, ranging from 1.38 to 1.79, indicating the company has sufficient current assets to cover its current liabilities. However, a downward trend is observed in the current ratio from October 2024 (1.38) to January 2025 (1.79).

In contrast, the quick ratio, which provides a more conservative measure of liquidity excluding inventory, shows more variability. The quick ratio fluctuates from 0.18 to 0.70, with the lowest values in October 2022 and the highest in January 2025. This indicates that the company's ability to meet its short-term obligations without relying on inventory has improved over time.

The cash ratio, which is the most stringent measure of liquidity as it includes only cash and cash equivalents, follows a similar pattern to the quick ratio. It ranges from 0.18 to 0.70, with the lowest values in October 2022 and the highest in January 2025.

Overall, while the current ratio suggests a stable liquidity position for Five Below Inc, the quick and cash ratios indicate a notable improvement in the company's ability to meet its short-term obligations using more liquid assets. Keep monitoring these ratios to assess the company's ongoing liquidity position and financial health.

---

Additional liquidity measure

The cash conversion cycle of Five Below Inc, a measure of the company's efficiency in managing its working capital, has exhibited fluctuations over the reported period.

On January 31, 2022, the cash conversion cycle was 68.33 days, indicating that it took approximately 68 days for Five Below to convert its investments in inventory into cash inflows from sales and then further convert that cash into cash outflows for payables.

The cycle increased substantially by April 30, 2022, to 80.39 days, suggesting a slower conversion process during that period. However, by July 30, 2022, the cycle decreased significantly to 44.31 days, reflecting an improvement in the company's management of its working capital.

Nevertheless, by January 31, 2023, the cash conversion cycle increased again to 72.19 days, indicating challenges in converting its resources efficiently. The cycle further fluctuated in the subsequent quarters, with variations in performance seen in April 29, 2023 (39.70 days), July 31, 2023 (82.70 days), and October 31, 2023 (114.72 days).

The cycle improved slightly by February 3, 2024, at 39.28 days but increased again by April 30, 2024, to 78.85 days. The trend continued, with fluctuations in the later quarters, including July 31, 2024 (77.79 days), and October 31, 2024 (107.96 days).

As of January 31, 2025, the cash conversion cycle stood at 92.63 days, indicating that Five Below Inc may be facing challenges in managing its working capital efficiently during this period. It is crucial for the company to focus on optimizing its cash conversion cycle to ensure a healthy balance between inventory turnover, accounts receivable collection, and accounts payable management.