Cuộc họp công bố kết quả kinh doanh Q2 năm tài chính 2026 của Five Below (FIVE): Doanh số cửa hàng tương đương tăng 14%, nâng triển vọng

Thông tin trọng tâm

• Five Below đã báo cáo doanh thu thuần quý 2 năm tài chính 2026 đạt 1,3 tỷ USD, tăng 23% so với cùng kỳ năm ngoái, nhờ tăng trưởng doanh thu cửa hàng cũ (comparable sales) đạt hơn 14% một chút và số lượng cửa hàng tăng khoảng 9%.
• EPS pha loãng đã điều chỉnh tăng hơn gấp đôi lên 1,68 USD. Biên lợi nhuận hoạt động đã điều chỉnh tăng khoảng 360 điểm cơ bản lên 9,0%, phản ánh biên lợi nhuận hàng hóa được mở rộng và đòn bẩy chi phí cố định.
• Doanh thu cửa hàng cũ tăng ở mức hai chữ số trong quý thứ năm liên tiếp. Mức tăng doanh thu cửa hàng cũ gộp 2 năm đạt 26,5%, với đà tăng trưởng chủ yếu đến từ số lượng giao dịch và lượng khách đến cửa hàng.
• Five Below đã mở ròng 52 cửa hàng mới và kết thúc quý với 2.022 điểm bán. Ban lãnh đạo ghi nhận năng suất hoạt động mạnh mẽ từ nhóm cửa hàng mở trong năm tài chính 2025 và 2026.
• Ban lãnh đạo đã nâng triển vọng cho năm tài chính 2026. Doanh thu thuần hiện dự kiến đạt từ 5,63 tỷ USD đến 5,71 tỷ USD, với mức tăng trưởng doanh thu cửa hàng cũ từ 10% đến 12% và EPS pha loãng đã điều chỉnh đạt khoảng 10,07 USD ở mức trung vị.
• Hội đồng quản trị đã phê duyệt chương trình mua lại cổ phiếu mới trị giá 600 triệu USD không có thời hạn hết hạn. Công ty kết thúc quý 2 với khoảng 1,2 tỷ USD tiền, các khoản tương đương tiền và khoản đầu tư, bao gồm 170 triệu USD tiền hoàn thuế thuế quan IEEPA trước thuế.

Dữ liệu tài chính cốt lõi

Biên lợi nhuận gộp đã điều chỉnh hưởng lợi từ việc mở rộng biên lợi nhuận hàng hóa, đòn bẩy chi phí cố định và tỷ lệ dự phòng thất thoát hàng hóa được cải thiện. Chi phí nhiên liệu vận chuyển tăng là yếu tố bù trừ. Đòn bẩy chi phí SG&A đã điều chỉnh bị bù trừ một phần bởi các khoản đầu tư tiếp thị theo kế hoạch và chi phí nhân công phát sinh liên quan đến việc kiểm kê hàng tồn kho thực tế.

Kết quả kinh doanh và hoạt động

Lượng khách ghé thăm và số lượng giao dịch là những động lực chính thúc đẩy doanh thu cửa hàng cũ. Ban lãnh đạo cho biết sự tăng trưởng diễn ra trên diện rộng ở các nhóm khách hàng, khu vực địa lý và danh mục sản phẩm, bao gồm đồ trang trí phòng, đồ chơi, công nghệ và đồ ăn vặt. Cả nhóm khách hàng mới và khách hàng quay lại đều tăng trưởng nhanh hơn mức lịch sử.

Chiến lược của Five Below tập trung vào việc phối hợp chặt chẽ hơn giữa các khâu bán hàng, tiếp thị, chuỗi cung ứng và cửa hàng. Công ty đang chuyển từ việc bán các sản phẩm riêng lẻ sang các câu chuyện sản phẩm được tuyển chọn, nhờ sự hỗ trợ của việc phát hiện xu hướng nhanh hơn và tăng cường tiếp thị trên mạng xã hội cũng như nền tảng kỹ thuật số.

Xu hướng đồ chơi xốp dẻo (squishy) tiếp tục là động lực quan trọng thu hút lượng khách và độ nhận diện, nhưng ban lãnh đạo cho biết sản phẩm bánh bao squishy chỉ đóng góp ở mức một chữ số thấp vào mức tăng trưởng doanh thu cửa hàng cũ. Những khách hàng bị thu hút bởi xu hướng này cũng mua sắm nhiều danh mục sản phẩm khác.

Năng suất cửa hàng mới tiếp tục vượt kế hoạch lịch sử của công ty. Ban lãnh đạo cho rằng sự cải thiện này nhờ vào đà phát triển thương hiệu trên diện rộng và quy trình bất động sản kỷ luật hơn, bao gồm việc lựa chọn vị trí, điều khoản thuê, thâm nhập thị trường và tổ chức khai trương.

Five Below đã tiến vào Idaho, bang thứ 47 của công ty, vào tháng 8. Công ty cũng dự kiến tiến vào Puerto Rico trong nửa cuối năm 2027 với một vài cửa hàng ban đầu, tùy thuộc vào lộ trình triển khai thận trọng.

Công ty đã bắt đầu cải tạo các khu vực Five Beyond trước đây thành không gian bán hàng mở và linh hoạt hơn, bao gồm “thế giới vui chơi” dành cho đồ chơi, trò chơi, đồ sưu tầm và đồ thủ công. Ban lãnh đạo ước tính chi phí vốn khoảng 40.000 USD đến 45.000 USD cho mỗi cửa hàng cho chương trình này.

Dự báo của Ban lãnh đạo

Triển vọng của ban lãnh đạo không bao gồm tiền hoàn thuế thuế quan IEEPA và không tính đến các đợt mua lại cổ phiếu trong tương lai.

Biên lợi nhuận hoạt động đã điều chỉnh quý 3 dự kiến tăng khoảng 160 điểm cơ bản so với cùng kỳ năm ngoái. Ban lãnh đạo kỳ vọng biên lợi nhuận gộp sẽ mở rộng khoảng 100 điểm cơ bản nhờ đòn bẩy chi phí cố định và biên lợi nhuận hàng hóa cao hơn, bị bù trừ một phần bởi chi phí nhiên liệu tăng và mức so sánh thất thoát hàng hóa không thuận lợi.

Ở mức trung vị cả năm, biên lợi nhuận hoạt động đã điều chỉnh dự kiến sẽ tăng 250 điểm cơ bản, với khoảng ba phần tư mức cải thiện đến từ việc mở rộng biên lợi nhuận gộp và một phần tư đến từ đòn bẩy chi phí SG&A. EPS pha loãng đã điều chỉnh đạt 10,07 USD sẽ tương ứng với mức tăng trưởng 51% so với năm tài chính 2025.

Rủi ro và các điểm cần lưu ý

• Ban lãnh đạo dự kiến chi phí nhiên liệu tăng sẽ bù trừ phần lớn lợi ích trong nửa cuối năm từ việc chi phí thuế quan giảm.
• Mức thuế quan theo Mục 301 dự kiến cho năm 2027 cao hơn một chút so với mức thuế tạm thời theo Mục 122, mặc dù ban lãnh đạo cho biết các biện pháp xử lý chi phí có thể giúp giảm nhẹ tác động này.
• Mức so sánh biên lợi nhuận gộp quý 3 bao gồm tác động thất thoát hàng hóa không thuận lợi so với đợt quyết toán điều chỉnh của năm trước.
• Triển vọng cả năm của ban lãnh đạo ngụ ý mức tăng trưởng doanh thu cửa hàng cũ trong quý 4 khoảng 3%. Công ty đưa ra lý do là mức so sánh đầy thách thức so với mức tăng trưởng 15% trong quý cùng kỳ năm trước, sự cạnh tranh trong mùa lễ hội và các yêu cầu vận hành để xử lý khối lượng bán hàng lớn trong thời gian ngắn.
• Tốc độ mở rộng cửa hàng phụ thuộc vào việc duy trì các tiêu chuẩn thực thi và tìm kiếm các vị trí phù hợp; ban lãnh đạo tuyên bố sẽ không hạ thấp tiêu chuẩn bất động sản để đẩy nhanh tiến độ mở cửa hàng.

Nội dung nổi bật phần Hỏi & Đáp với chuyên gia phân tích

Tính bền vững của tăng trưởng doanh thu cửa hàng cũ: Ban lãnh đạo nhấn mạnh rằng kết quả hoạt động quý 2 được thúc đẩy bởi sự phong phú của danh mục sản phẩm chứ không phải từ một mặt hàng duy nhất. Ban lãnh đạo kỳ vọng tăng trưởng doanh thu cửa hàng cũ quý 3 sẽ tiếp tục chủ yếu do số lượng giao dịch dẫn dắt.

Thu hút khách hàng và tiếp thị: Five Below đã chuyển dịch ngân sách truyền thông trực tiếp (working media) từ các quảng cáo truyền thống sang các kênh mạng xã hội và kỹ thuật số. Công ty cũng đang mở rộng việc thu thập dữ liệu khách hàng và tiếp thị qua email, nhưng ban lãnh đạo mô tả các năng lực tiếp thị cá nhân hóa mới chỉ ở giai đoạn đầu.

Mở rộng cửa hàng mới: Ban lãnh đạo cho biết nguồn vốn không phải là rào cản. Việc mở rộng sẽ cân bằng giữa tỷ suất lợi nhuận hấp dẫn của cửa hàng với năng lực thực thi, nguồn cung bất động sản và các tiêu chuẩn vị trí có kỷ luật.

Phân bổ vốn: Trải nghiệm khách hàng, năng lực kỹ thuật số, sự đổi mới sản phẩm và giá trị tiếp tục là các ưu tiên đầu tư. Công ty cũng có kế hoạch hoàn trả phần thanh khoản thặng dư khi thích hợp theo ủy quyền mua lại cổ phiếu trị giá 600 triệu USD mới.

Tái thiết kế cửa hàng: Việc dỡ bỏ các khu vực Five Beyond khép kín nhằm mục đích cải thiện tầm nhìn, vị trí sắp xếp sản phẩm liền kề, năng suất không gian bán hàng và khả năng gia tăng giá trị giỏ hàng. Triển vọng chi phí đầu tư vốn cao hơn trong năm tài chính 2026 phản ánh một phần việc bắt đầu chương trình này.

Bán hàng đa kênh: Ban lãnh đạo báo cáo kết quả tích cực từ dịch vụ mua hàng trực tuyến nhận tại cửa hàng (BOPIS) và giao hàng qua bên thứ ba. Công ty vẫn đang xác định cách thức toàn bộ mô hình bán hàng đa kênh sẽ vận hành trong mùa lễ hội.

Toàn văn biên bản cuộc họp công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and welcome to the Five Below Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I'd now like to turn the conference over to Christiane Pelz, VP, Investor Relations. Please go ahead.

Christiane Pelz

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.

Winifred Park

Thank you, Christiane, and hello all. I want to start by thanking our main Five Below crew. They continue to deliver tremendous energy, fun and executional excellence in service of our customers, the box. Their focused collaboration and drive are what truly delivered are exceptional Q2 results. We are so excited to welcome 2 new leaders, Rabi Lastinger, our Chief Retail Officer; and Krista Yatrakis, 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 and 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 more item-focused merchandising approach to an assortment and product storytelling approach. Redirecting marketing spend for 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 and supply chain and stores to deliver compelling new product stories Together, these are driving our operating flywheel, which serves as a basis for our durable top line growth.

Now on to 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% 2-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 world 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 continued to deliver strong performance. we opened 52 net new stores across 26 states, including 4 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 in more communities and new stores continue to fuel our growth. In July, we celebrated the opening of our 2,000th store an important milestone for Five Below in 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 fund and value that are hallmarks of Five Below. We expect to open a handful of stores as part of the initial launch and will remain thoughtful and disciplined in how we build our presence in the market over time.

We're excited to see our flywell 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 3 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 in 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 Setefi Five Below, it gives some reasons to come back.

During the second quarter, our teams delivered a rolling center of newness across the store. We amplified numerous trends from Asian food and snacks to the return of slime and create and we continue to build the overall squishy trend with new collections and fresh drops. We also leaned into cultural events and current net 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 license items like FIFA and the NBA as well as the Toy Story in Spider-Man movies and Netflix K-pop Demon Hunter series. With both the summer and back-to-school current net moments following 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 future both need to have pencils and notebooks to must-have novelty giant calculators. We brought the season to like there are series of trend 4 destinations designed to inspire both our gen Alpha and Gen Z customers. For Gen Z, for example, we launched our first ever dorm blowup where trend met value, making it easy to create a stylish personalized dorm room without stretching the budget. We curated 2 collections rounded in pink, gold and lever print with wash bull rugs, full lent mirrors and amazing storage solutions like our plastorge atmos, 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 store visit. Our customers are social native 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 and 1 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 returned to Five Below throughout the first half of 2026.

We are still early in our journey to fully unlock the potential of 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 moved FiBeyond items in line with their associated departments rather than merchandising them on the back of the store. We have an opportunity to remerchandise 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 clear and more inspiring signage and improved sight lines 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 and 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 were 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 dumping event in May. This 1-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 is swept across multiple generations from parents to kids and young adults. After the event, our marketing team continued the story in social by taking Goldie, our exclusive golden dumpling on the road with their friends, introducing new exclusive dumping 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.

Daniel Sullivan

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 2-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 2022 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 pretax IEEPA refunds.

For the first 6 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 billion 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 billion 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 2-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 3/4 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 million 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

[Operator Instructions] And today's first question comes from Randy Konik at Jefferies.

Phần hỏi đáp

Randal Konik

I guess when you first to you -- and I've been doing this for 26 years, I've only seen 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, what's kind of focusing on 2 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 how much of it you thought came from the strides you're making in product and 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 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 box as well. That would be very helpful.

Winifred Park

Thanks so much, Andy, and thank you for the congratulations. I just want to 1 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 is 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 that was reset. 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 1 of 1 concept that is a destination for kids the kit and all of us at extreme value. There's really no 1 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 in a millennial parent and what their needs are. And with that, we remerchandised 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 job 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 5 years like the squishy dumpling when it gets acknowledged in social, we now cannot 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 commercial 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 then 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 e-mail 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 though that we gained new in the first quarter of '26 are coming back in the second quarter of '26. So really great stuff.

And I would say that if you've 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 are 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 6 Curtin 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, spiking. And it is, again, that's 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.

Daniel Sullivan

Randy, you asked about the over-delivery against our outlook for Q2. Remember, when we spoke back in June, we had 1 month in the books essentially for the quarter. We were also looking out trying to anticipate and predict a couple of unknowns, 1 around what would happen as we cycled and anniversaried the pricing of a year ago. And then second was, of course, the trend profile, particularly school would be letting out and trying to be thoughtful about that. So that was the backdrop. I would point to 3 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 for the 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 overdelivery and we're heading into the back half of the year with clear momentum.

Operator

And our next question today comes from Krisztina Katai with Deutsche Bank.

Krisztina Katai

Congratulations on yet another very strong quarter. I wanted to ask about the composition of the better-than-expected traffic growth a bit more. guess Winnie or Dan, can you unpack sort of like the categories and product stories that were the biggest traffic drivers -- are you seeing traffic increasingly concentrated around major trend 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 are you seeing that continue?

Winifred Park

Thanks so much, Krisztina. 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 1. 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 what's been very telling about seeing the traffic that's come from the Swiss trend is that those customers have converted to into broader Five Below. And we're seeing them buy across the assortment -- we're also seeing that our aspiration to be America's greatest little choice store has definitely coming to life. That's something that I put out as an aspiration last year.

And we certainly highlighted 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 trends 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 world and a lot of residents. And so I think Five Below is just becoming a brand that's known for affordable, great fun for the kid and kid and all of us, and I'm going to pass it on to Dan to talk about the quarter.

Daniel Sullivan

Yes. Thanks, Winnie. Thanks for the question, Cristina. I'm not going to get into necessarily the in-quarter performance to date or color. What I would say is 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 2-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 2-year stack. And I would say that we would expect the composition of that comp growth to be very similar to the first 2 quarters of the year, which means largely driven by transaction growth.

Operator

And our next question today comes from Matthew Boss at JPMorgan.

Matthew Boss

And congrats on another great quarter. So 2 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.

Winifred Park

So much, Matt. The rolling vendor 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. But 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 e-mail file as well.

The other piece of the rolling vendor 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 the 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 queues, and it's driving them into the stores. So it's been terrific.

Daniel Sullivan

Yes. Matt, picking 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 2 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 disciplined upfront, 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 and execution in 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.

Operator

And our next question today comes from Robbie Ohmes at Bank of America.

Robert Ohmes

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 and -- 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?

Daniel Sullivan

Yes. Sure, Robbie. 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 IEEPA 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 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 and our search for newness and in our value proposition. And so I think as you put all 3 of those together, I would expect that it will disproportionately be seen in CapEx, and it will be seen over time.

Operator

And our question today comes from Michael Lasser at UBS.

Michael Lasser

Do you think make you so much particularly my question last quarter, you quantified what the why we mean 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 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? And as you look to next year and the coming quarters? We take pause that 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.

Winifred Park

Michael. I'm just going to start in terms of taking a step up in 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 and carry itself. And I think the aspects that we've been really pleased with are 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 1 of 1 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 products 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.

Daniel Sullivan

Thanks, Winnie. Yes, 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'd 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 contribute 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 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 or new and growing muscles, which we think also play well into the future. Thanks, Michael.

Operator

And our next question today comes from David Bellinger with Mizuho.

David Bellinger

Two follow-ups on the social media piece. Any data points you can share around the sales uplift maybe from sort of target markets where this has turned on more than others? And then as you look out further, you mentioned being still early innings with the e-mail capture rate. How sophisticated can the marketing program ultimately get? Can we eventually see much more precision on these paid post paid sponsorships on even a household-by-household basis?

Winifred Park

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 color 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 mix -- modify the mix of media in order to optimize our as 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 e-mail capture, and we're able to batch and blast at this point to lock the 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 net value proposition at Five Below and that we capture customers young and we ladder them through their preteen and teen years. And 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 at Five Below is 1 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

And our next question today comes from Joe Feldman at Telsey Advisory Group.

Joseph Feldman

Yes. 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 at the time. I'm just trying to get a better sense of what we should expect to see over the next 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.

Winifred Park

Absolutely. And yes, I'm by 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 products 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, they're 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. 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 adjacencies of the products, so they make sense for the customer and the customer shopping so that they can more effectively build their basket.

I think secondly, we want to make sure that whatever we do keep 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 for 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.

Daniel Sullivan

Yes. Thanks, Winnie Yes, Joe, we think this is a fairly modest level of capital investment per store. It's probably in the range of $40,000 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 million to $260 million is our conviction to start investing in this program. And so that has begun and is the cause for us taking up our guidance.

Operator

And our next question today comes from Scott Ciccarelli with Truist Securities.

Scot Ciccarelli

I 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 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 your -- the momentum of your trends and the ability to bring in products 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?

Daniel Sullivan

Scott, thanks for the question. Look, as we've constructed the guide, certainly, run rate momentum of the business factored into that. I think you are 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 2-year basis, given that we have now anniversaried the pricing, and we are cycling, as you know, a fairly big 15% quarter a year ago.

So on a 2-year stack, this quarter, our biggest quarter of the year, profiles at an 18%. And just we haven't tried to be conservative. We're prudent. We've just been thoughtful here wing all of the things I just mentioned and also the reality that we're 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 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.

Operator

And our next question today comes from Chuck Grom, Gordon Haske.

Charles Grom

Great -- 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 a slightly different angle.

Winifred Park

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 less throughout and we don't see them 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've acquired and bring them back and then how we continue to acquire new.

Both are 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 in relevance. And I think that's where we're winning currently. Thank you, Chuck.

Operator

And our next question today comes from Jeremy Hamblin at Craig-Hallum Capital.

Jeremy Hamblin

And I'll add my congratulations. And especially on your operating margins flowing 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 6 times a year, I think we recently 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 of how many people you need and when? Or 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?

Winifred Park

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 products 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 current moment. We actually have always had now sets in the front of store. The difference between the current net moment is the coordination between corporate and stores and it's merchandising and marketing 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 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 of product, the movement of product has actually driven a lot of interest and a lot of engagement by customers, and we like those results.

Operator

And our next question today comes from Edward Kelly at Wells Fargo.

Edward Kelly

Maybe just a follow-up to start number 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 tickets still up. And then the real question is just around the gross margin, Dan. I was hoping you could maybe unpack it a little bit, fuel versus shrink versus tariffs this quarter. And then looking out into '27, how we start to think about some of those dynamics, particularly if tariff rates go back up?

Winifred Park

Great. Okay. And I'm going to start with transaction. 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 sure effect to see the consistency kind of weekend like out. And I'll pass it on to Dan.

Daniel Sullivan

Yes. Thanks, Winnie. Yes, 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 the 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 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.

Operator

And our next question today comes from Kate McShane with Goldman Sachs.

Katharine McShane

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.

Winifred Park

Thanks for your question, Kate. And licensing is definitely growing 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 tax 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 in a full collection. And 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 like filers 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 Heinbockel with Guggenheim.

John Heinbockel

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 is that -- how does that influence your thoughts operationally?

Winifred Park

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 its observation through our own visits as well as what we hear from our crew in the field. And this is 1 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 make that area more productive, but also get those site links clear from the front to the back.

Five Beyond is actually a Walden area. So detaching those fixtures from the wall and creating an ability for our customer to sneak 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 makes 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 2 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 the store, and making them really easy to see for the customer really easy for whoever wants an in-and-out experience.

And I think the last area that I think is opportunity for us is our line Q, just adding those last few items in the basket. So everything will be in service of making that experience fretter, easier, but also helping our customers build a basket, but we're early stages on this. Thanks for your question, John.

Operator

And our next question today comes from Sean Ma with Berstein.

Krisztina Katai

A quick 2-part follow-up. Why 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 reaccelerating the pace of store growth from here? And then a follow-up on the reinvestments of the tariff rebounds. How do you think about balancing the reinvestment needs versus returning capital to shareholders?

Daniel Sullivan

In, 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, 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 warranted. And we're quite pleased with that outcome, and we'll begin to execute against it. Thanks for the question.

Operator

And our final question today comes from Philip Lee with William Blair.

Phillip Blee

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, et cetera. But maybe you 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?

Winifred Park

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 metal cost, et cetera. I will tell you that right now, we're seeing nice results with BOPUS, 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. Thank you.

Operator

That concludes our question-and-answer session. I'd like to turn the conference back over to Winnie Park for closing remarks.

Winifred Park

So we want to thank you 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 you all to come shop or fabulous. Halloween cut Kirkup, -- we've got some amazing scary and fun treat -- so please come and visit, and we look forward to seeing you all. Thank you.

Operator

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.