Five Below Courts High Earners With Five Beyond

Specialty discount store Five Below is looking to appeal to a new demographic of customers with its Five Beyond concept, which sells items priced above $5 but “still below the rest,” according to the company website.

The new store prototype officially made its debut during the firm’s investor day as a store-within-a-store concept and has since rolled out to nearly 20% of its store fleet or 250 stores. But Five Below isn’t stopping there. The retailer is looking to go beyond its 250 store conversions and plans to expand its Five Beyond concept by converting 400 more locations.

The move follows its quarterly earnings call on Wednesday (March 15). The retailer finished the quarter with a strong January despite battling macroeconomic headwinds, resulting in a reported fiscal fourth-quarter profit of $171.3 million. Five Below posted revenue of $1.12 billion in the period and reported a profit of $261.5 million for the year. For the current quarter ending in April, Five Below said it expects revenue in the range of $723 million to $735 million.

“New stores, they remain a key growth engine,” Five Below President and Chief Executive Officer Joel D. Anderson said during the call. “We have refocused resources to accelerate our store growth and reach a milestone of 200 new stores this year.”

Anderson also noted that the company opened a total of 150 new Five Below stores in 2022, 48 of them opening in the fourth quarter, ending with a store count of 1,340 stores across 42 states. That said, the retailer plans to expand its physical footprint to at least 3,500+ Five Below locations nationwide.

Anderson also notes that as Five Below aims to grow, the company has revamped its real estate evaluation process to enhance efficiency. Additionally, Five Below has broadened its perspective on the types of centers where it can establish a Five Below store beyond its conventional emphasis on suburban power centers.

“We are now accelerating urban as well as semi-rural stores and are testing alternative venues,” Anderson said.

As Five Below expands its physical footprint into new areas, its Five Beyond concept and target customers will play a significant role.

With Five Beyond, the retailer aims to expand its customer base and providing a differentiated shopping experience, and Five Below is seemingly confident in this venture as it credits its ability to “stay on top of hot trends and swiftly move to capitalize on them,” according to Anderson.

“We have learned a lot in our journey on Five Beyond — what types of items sell, what doesn’t sell, and what kind of quantities to buy,” said Anderson.

Some merchandise Five Below found successful were under licensed products deals with Hello Kitty Funko, Marvel collectibles and Kendall and Kylie merchandise. The latter’s crossover bags specifically were a hit and were noted to fall under both Five Below and Five Beyond price points, with products ranging from $3 to $10 on its website. That said, the retailer’s segue into a variation of goods isn’t far-fetched, as it seems to consist of slightly up-leveled products from its core offerings, which typically fall under the $2 to $3 range, according to the company.

The Five Beyond concept may appeal to high earners, as according to the PYMNTS’ Consumer Inflation Sentiment study, “The False Appeal of Deal-Chasing Consumers,” half of consumers say finding better deals has become a much more important, if not the most important, factor when choosing where to shop. Furthermore, 59% of middle-income retail shoppers say they have shifted toward giving greater importance to better deals.

As Five Below continues to grow its physical footprint, its foray into premium goods could be a promising venture as it looks to appeal to a new demographic.

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