Eye on Retail: Five Below's aggressive play

Five Below is not backing down from its aggressive expansion even as it warns of the “uncertainty of the macroeconomic” environment.

The tween and teen discount retailer plans to open a record 200 new stores and convert 400 existing locations to its new Five Beyond format, which contains an in-store shop featuring items priced at $6.00 and above, which is higher above the chain's signature threshold.  On the company’s earnings call, executives noted that there hasn’t been any pushback to the higher-priced items.  (To date, almost 20% of the Five Below store fleet has been covered to the new format.)

"We wouldn't be accelerating our conversions into the Five Beyond prototype if we were seeing any concerns whatsoever," president and CEO Joel Anderson told analysts. "Customers who buy a Five Beyond item continue to spend over twice as much as those who buy only Five Below items, illustrating how powerful a driver these store conversions and Five Beyond products are to maximizing the productivity of our stores."

The company has expanded its view regarding the types of centers it can open Five Below stores.

"In addition to our traditional focus on suburban power centers, we are now accelerating urban, as well as semi rural stores, and are testing alternative venues," Anderson said. "We're starting to do more grocery anchored centers, and we opened some of our first outlet stores last year."

Five Below continues to have one of the most aggressive expansion programs in specialty retail. In March 2022, the company said it was increasing its store potential in the U.S. from 2,500-plus to 3,500-plus locations nationwide. (The retailer currently has more than 1,340 stores in 48 states.)  In 2022, the retailer opened 150 new stores, including 48 in the fourth quarter, 

"We are seeing continued strong new [store] performance, demonstrating how effective our model is with an industry-leading less than one-year payback," Anderson said on the call.

In addition to opening new stores and converting existing locations to the new format, Five Beyond is planning to roll out new categories and services, including ear piercing and helium balloons.

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This article first appeared in Chain Store Age, a sister publication of HBSDealer.