Five Below is ready to pounce on “dislocations”

Sandwiched between aggressive, cut-price rivals like Dollar Tree, Dollar General and Ollie’s on one side, and increasingly cash-strapped consumers on the other, Philadelphia-based Five Below says that is moving forward with its “Triple-Double” growth plan which will triple its number of stores to 3,500 while doubling sales and profits over the next four years.

While the company’s first-quarter results, which were just released, were “weaker than expected” and saw sales at its model stores fall 4%, the discount retailer said that it was well positioned to take advantage of several macroeconomic factors that are currently upsetting the entire industry. .

“As the pressures some of our customers are facing due to the reduction in stimulus and the current inflationary environment weigh on our near-term results, history has taught us that consumers will seek even more value. when times get tough,” said the CEO of Five Below. Joel Anderson assured investors during the company’s conference call after the market closed on Wednesday June 8, adding that his company was uniquely positioned to “deliver fun at a great price.”

Much like the rest of retail, the challenge Five Below faces right now in delivering the value customers want is that their own shipping, labor and inventory costs are also rising. . Where most retailers would simply deploy a combination of price increases and cost reductions, in the case of an “extreme value” player that markets itself as a place where goods are “at such a low price, you can always say ‘Yes’” by passing price increases is even more difficult.

Clearance is coming

Even so, the former Walmart.com CEO, who led Five Below for the past seven years, told investors the retailer’s in-stock inventory was the best it’s been since joining. the company.

“It sets us up well for the second half and allows us to take advantage of the one-off special buys and liquidations that have already started to emerge,” Anderson said, adding that Five Below was “poised to take advantage of market upheaval.” , including goods and real estate.

Just as rival Ollie’s Bargain Warehouse told investors earlier this week it was keeping “dry powder” on hand to recover from an expected spike in closures and liquidations as retailers such as Target scramble to aggressively reducing unsold inventory, Five Below shoppers will be ready to pounce.

“We will aggressively pursue the opportunities we see, and expect them to develop, given the current environment,” Anderson said ahead of the expected upside.

The $5 Necklace

As these macro trends unfold over the summer, Five Below also told investors that it opened 35 new stores in 23 states during the first quarter, including its 1,200th location in bustling Manhattan. Union Square in Manhattan.

At the same time, and in the face of unprecedented pricing pressure, the retailer said it is expanding its in-store Five Beyond concept to more than 200 locations this year, a move that not only allows it to exceed the $5 price level. but will also see it double the SKUs sold at this level.

“We plan to convert over 750 of our current stores to this latest format over the next four years,” Anderson said. “Our mission is to bring Five Beyond everywhere,” he added, noting that the store-within-a-store concept will also allow it to reinvent and showcase key categories such as technology and home furnishings, he calls Room.

Additionally, the retailer said it is also working to deepen its digital connection and consumer insights through better data collection, while moving forward with plans to enable customers to experience the brand wherever and whenever they want, including rolling out their first online purchase. , in-store withdrawal offer (BOPIS) this summer.

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