Joel Anderson, CEO of Five Below, emphasized that while inflation is easing, its effects continue to significantly impact consumers, particularly those in lower-income demographics. During a recent earnings call, Anderson highlighted the ongoing financial strain on these consumers, stating, “The lower-end customer is really being stretched.” He stressed the importance of delivering value and ensuring that this is reflected in the company’s market strategy and in-store experience. Anderson expects to see improvements in these areas by the latter half of the year.
Five Below’s financial performance has been underwhelming, with the company issuing soft revenue guidance for both the second quarter and the full year. First-quarter revenue also fell short of expectations. As a result, the company’s shares dropped nearly 11% on Thursday, hitting a new 52-week low, and are down more than 44% in 2024.
Anderson noted that consumers have become more selective with their spending, focusing on essential items. This shift is evident in increased purchases within the company’s “consumable” categories, such as candy, food and beverage, and health and beauty products. Interestingly, Five Beyond, the retailer’s in-store shop offering products priced above $5, performed best in stores serving lower-income households. Anderson suggested that this indicates consumers are willing to spend more when they perceive strong value.
Despite some signs of economic improvement, consumer sentiment remains weak, with a notable decline of over 10% in May, according to the University of Michigan Survey of Consumers. Anderson concluded, “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.”
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