FIVE

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How FIVE rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

Text kept

82%

of sentences unchanged

Added

new sentences

Dropped

sentences removed

Length

+111

words, now 11,365

New in FY2026

In recent years we've experienced levels of inflation that are generally higher than historical levels, resulting in part from various supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain, monetary policy actions, and other disruptions in economic environment.
We believe we have an opportunity to continue to grow our store base from 1,921 stores in 46 states as of January 31, 2026 to more than 3,500 locations over time.
In particular, tariffs imposed by the U.S. government have increased, and could further increase, the cost to us of certain products, which lowers our margins, increases our import related expenses, causes us to increase our prices to consumers, and reduces consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.
Changes in the prices and flow of the goods we import and source from domestic vendors, for any reason, could continue to have an adverse impact on our operations.
The United States and other countries have occasionally proposed and enacted protectionist trade policies, which may result in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise to a greater extent than presently.
In particular, recent U.S. tariffs imposed or threatened to be imposed on China, Mexico, Canada, and other countries (including after the U.S.
Supreme Court invalidated certain tariffs imposed under the International Emergency Economic Powers Act (the “IEEPA Decision”)) and any retaliatory actions taken by such countries could result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions: negotiate lower product costs with our vendors, purchase products produced in countries with no or lower tariffs or transition away from domestic vendors who source from China or other tariff impacted countries, increase our prices, or alter or cease offering certain products.
Furthermore, in response to tariffs announced by the United States, China and other countries have imposed additional tariffs on certain exports from the United States.
These and any future tariffs that may be imposed by the United States, or other retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses.
Further, following the IEEPA Decision, there remains significant uncertainty regarding the processes that will govern refund claims related to the invalidated tariffs, the timing of any potential refunds, and the ultimate amounts, if any, that we may recover.
From time to time, we may implement price increases in an effort to mitigate some or all of the risks of operational cost increases.
We maintain shipcenters in Pedricktown, New Jersey, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona, and Indianapolis, Indiana.
In August 2019, we acquired land in Conroe, Texas to build an approximately 860,000 square foot shipcenter, which we began operating in July 2020.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022 as well as the e-commerce shipcenter operations in our Pedricktown, New Jersey shipcenter in the first half of fiscal 2023 and in our Buckeye, Arizona shipcenter in the back half of fiscal 2025.
Delays in opening any new shipcenters could adversely affect our future operations by slowing store growth, which could in turn reduce sales growth.
The completion date and ultimate cost of any future projects, including the opening of any new shipcenters could differ significantly from initial expectations due to construction-related or other reasons.
We cannot guarantee that any future projects will be completed on time or within established budgets.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
Our inventory balance represented approximately 17% of our total assets as of January 31, 2026.
We purchase substantial amounts of inventory in the third fiscal quarter (October) and beginning of the fourth fiscal quarter (November and December) and incur higher shipping costs and higher payroll costs in anticipation of the increased sales activity during these time periods.
In years when the selling season is shorter than typical due to the timing of the major holidays, our retail sales could be negatively impacted.
We are continuing to expand, upgrade and develop our information technology capabilities, including, most recently, with the continued investment in our enterprise wide human capital management system, Workday, which was implemented in 2021, the implementation of a new core-enterprise resource planning system (or "ERP"), Oracle Fusion, in fiscal 2024 for use in fiscal 2025, the implementation of our Retail Merchandising System in fiscal 2020, and the launch of our e-commerce website in fiscal 2020.
Military conflicts and wars (such as the ongoing conflict in Iran and the surrounding region, conflicts between Russia and Ukraine, Israel and Hamas, and the Red Sea crisis and its impact on shipping and logistics), terrorist attacks, instability following regime change in Venezuela, other geopolitical events, high inflation, increasing interest rates, bank failures and associated financial instability and crises, and supply chain issues can cause exacerbated volatility and disruptions to various aspects of the global economy.
Our business and reputation may be adversely affected by certain corporate responsibility matters.
In recent years, investor and regulatory focus has intensified with respect to certain corporate responsibility matters.
Additionally, in the retail industry, the materials used in the products we sell as well as where we source our products are of particular importance.
In addition, investment in funds that specialize in companies that perform well in corporate responsibility assessments are increasingly popular, and major institutional investors and advisors have publicly emphasized the importance of corporate responsibility measures to their investment decisions and recommendations.
Investors who are focused on corporate responsibility matters may seek enhanced disclosures or require implementation of policies that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns or other public or private means, for us to take corporate responsibility focused actions on an accelerated timeline.
Additionally, there can be no certainty that we will successfully navigate or manage corporate responsibility issues or that we will successfully meet investors or others' expectations.
As of January 31, 2026, 2.9 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.7 million shares of our common stock are issuable upon the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan.
In particular, these provisions, among other things: • provide that only the chair of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders; • provide for supermajority approval requirements for amending or repealing provisions in our amended and restated articles of incorporation and amended and restated bylaws; • establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and • permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
Any delay or prevention of a change of control transaction or changes in our Board of Directors and management could deter potential acquirers or prevent the completion of a transaction in which our shareholders could receive a substantial premium over the current market price for their shares of our common stock.

Gone since FY2025

During fiscal 2022, we experienced levels of inflation that are higher than we have experienced in recent years, resulting in part from various supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain, monetary policy actions, and other disruptions caused by the uncertain economic environment.
We believe we have an opportunity to continue to grow our store base from 1,771 stores in 44 states as of February 1, 2025 to more than 3,500 locations over time.
In particular, tariffs imposed by the U.S. government could increase the cost to us of certain products, lower our margins, increase our import related expenses, cause us to increase our prices to consumers, and reduce consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.
Changes in the prices and flow of the goods we import and source from domestic vendors, for any reason could have an adverse impact on our operations.
The United States and other countries have occasionally proposed and enacted protectionist trade policies, which may result in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise.
In particular, recent U.S. tariffs imposed or threatened to be imposed on China, Mexico, Canada, and other countries and any retaliatory actions taken by such countries could result in lower gross margins on impacted products, unless we are able to successfully take any one or more of the following mitigating actions: negotiate lower product costs with our vendors, purchase products produced in countries with no or lower tariffs or transition away from domestic vendors who source from China or other tariff impacted countries, increase our prices, or alter or cease offering certain products.
Furthermore, in response to the recent tariffs announced by the United States, China and other countries have imposed or proposed additional tariffs on certain exports from the United States.
These and any other retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses.
From time to time, we may implement price increases (including beyond $5 per item) in an effort to mitigate some or all of the risks of operational cost increases.
We maintain shipcenters in Pedricktown, New Jersey, Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona, Indianapolis and Indiana.
In August 2019, we acquired land in Conroe, Texas to building an approximately 860,000 square foot shipcenter, which we began operating in July 2020.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022 as well as the e-commerce operations in our Pedricktown, New Jersey shipcenter in the first half of fiscal 2023.
Delays in opening the planned new shipcenters could adversely affect our future operations by slowing store growth, which could in turn reduce sales growth.
The completion date and ultimate cost of future projects, including opening the planned new shipcenters could differ significantly from initial expectations due to construction-related or other reasons.
We cannot guarantee that any project will be completed on time or within established budgets.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
Our inventory balance represented approximately 15% of our total assets as of February 1, 2025.
As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022.
We purchase substantial amounts of inventory in the end of the third fiscal quarter (October) and beginning of the fourth fiscal quarter (November and December) and incur higher shipping costs and higher payroll costs in anticipation of the increased sales activity during these time periods.
In years where the selling season is shorter than typical due to the timing of the major holidays, our retail sales could be negatively impacted.
We are continuing to expand, upgrade and develop our information technology capabilities, including, most recently, with the implementation of a new core-enterprise resource planning system (or "ERP"), Oracle Fusion, in fiscal 2024 for use in fiscal 2025, the implementation of a new enterprise wide human capital management system, Workday, in 2021, the implementation of our Retail Merchandising System in fiscal 2020, and the launch of our e-commerce website in fiscal 2020.
Military conflicts and wars (such as the ongoing conflicts between Russia and Ukraine, Israel and Hamas, and the Red Sea crisis and its impact on shipping and logistics), terrorist attacks, instability in Venezuela, other geopolitical events, high inflation, increasing interest rates, bank failures and associated financial instability and crises, and supply chain issues can cause exacerbated volatility and disruptions to various aspects of the global economy.
Our business and reputation may be adversely affected by environmental, social and governance matters.
Investor and regulatory focus are intensifying with respect to certain environmental, social and governance ("ESG") matters.
Additionally, in the retail industry, the materials used in the products we sell as well as where we source our products is of particular importance.
In addition, investment in funds that specialize in companies that perform well in ESG assessments are increasingly popular, and major institutional investors and advisors have publicly emphasized the importance of ESG measures to their investment decisions and recommendations.
Investors who are focused on ESG matters may seek enhanced disclosures or require implementation of policies that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns or other public or private means, for us to take ESG focused actions on an accelerated timeline.
Additionally, there can be no certainty that we will successfully navigate or manage ESG issues or that we will successfully meet investors or others' expectations.
As of February 1, 2025, 3.2 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.6 million shares of our common stock are issuable upon the exercise of options outstanding, the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan.
In particular, these provisions, among other things: • provide that only the chairman of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders; • classify our Board of Directors into three separate classes with staggered terms; • provide for supermajority approval requirements for amending or repealing provisions in our amended and restated articles of incorporation and amended and restated bylaws; • establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and • permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
Any delay or prevention of a change of control transaction or changes in our Board of Directors and management could deter potential acquirers or prevent the completion of a transaction in which our shareholders could receive a substantial premium over the then current market price for their shares of our common stock.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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