Visa Embedded Lending June 2024 Banner

Five Below: Comparable Sales Slip as Consumers Feel Inflation’s Impact

Five Below store

A pullback in spending by lower-income consumers led to a decline in comparable sales during the first quarter for Five Below.

The value retailer’s comparable sales decreased 2.3% during the quarter ended May 4, compared to the same period a year earlier, Five Below said in a Wednesday (June 5) earnings release.

At the same time, the firm’s net sales rose 11.8% year over year because it opened 61 new stores during the quarter, contributing to a 17.4% increase in the number of locations over the same quarter in 2023, according to the release.

Joel Anderson, president and CEO of Five Below, said Wednesday during the company’s quarterly earnings call that he attributed the decline in comparable sales in part to consumers being “more discerning with their dollars, increasingly buying to need.”

“We achieved positive comps in our higher-income cohorts, suggesting some trade-down of these customers seeking value at our stores,” Anderson said during the call. “However, we saw underperformance in the lower-income demographic that more than offset these results.”

“The quarter solidified that consumers are feeling the impact of multiple years of inflation across many key categories such as food, fuel and rent and are therefore far more deliberate with their discretionary dollars,” Anderson added.

Five Below sells primarily items priced between $1 and $5, while also offering some priced above $5 in its Five Beyond Shop, according to its investor relations website. Its product selection includes eight categories, which it dubs Style, Room, Sports, Tech, Create, Party, Candy and New & Now.

As it works to drive sales, Five Below will focus on quickly identifying and capitalizing on trends, communicating the value it provides via social media channels, measuring the impact of price reductions on sales, and optimizing its cost structure across the entire organization, Anderson said during the call.

The retailer is also working to mitigate shrink. One of the biggest changes it has made has been a shift from self-checkout to associate-led checkout, Anderson said during the call. Customer feedback regarding this change has been “overwhelmingly positive,” he added.

Looking ahead, Five Below expects to see a mid-single digit decrease in comparable sales in the current quarter and a 3% to 5% decrease in comparable sales for the full year of fiscal 2024, according to the earnings release.

The company expects to open about 230 new stores by the end of 2024. It currently has 1,605 locations in 43 states, per the release.

Longer term, Five Below aims to have 3,500 stores nationwide by the end of 2030, Anderson said during the call.

“While there is a larger macro consumer backdrop dynamic, we always play offense at Five Below and will not sit back idly waiting for the consumer economics to improve on their own,” Anderson said.