Monday, April 4, 2022

Philly Based Five Below Looks To Triple Its Store Count to 3,500

By Linda Moss CoStar News

Discount retailer Five Below is aggressively ratcheting up its growth plans, looking to triple its store count to 3,500 by the end of 2030 and double its sales by 2025 as it creates a shopping experience that caters to younger customers.

The Philadelphia-based chain, which now has 1,190 stores in 40 states, unveiled its “Triple-Double” strategy Wednesday at the company's first investor day event. The retailer said it aims to open about 1,000 more stores by the end of fiscal 2025 alone. In addition, the company reported its fiscal fourth-quarter earnings and gave Wall Street analysts a tour of its newest store prototype, the latest iteration of what has typically involved increasing the square footage at a typical brick-and-mortar site.

Five Below targets tweens, generally considered those 9 to 12 years old, and teens with an array of toys, candy, tech accessories and gadgets, bedroom decor, sports items and other merchandise that they can play with or “experience,” priced from $1 to $5. The idea is to offer young shoppers a venue where they can “treasure hunt” and spend their allowances, CEO Joel Anderson said. That's something online shopping can't provide.

In addition to its ambitious expansion plans, the company will be offering ear piercing, a more extensive selection of balloons, and pet products at some sites this year, looking to cater to customers that might have gone to Toys R Us before it liquidated, while also adopting the appeal of discount chains like Target. It will also offer buy online, pick up in store service for the first time, according to Anderson. The CEO, and all the Five Below executives who spoke at the investor event, wore blue T-shirts that said “2025: Ignite the Vision.”

The rise of e-commerce and the pandemic’s blow winnowed out many weak retailers and left a pool of survivors that came out stronger and are opening more stores, particularly discounters and off-price chains such as Burlington Stores, T.J. Maxx and Target. Five Below is part of this group.

Philadelphia, New York Openings

Company officials on Wednesday said part of their strategy is to open more locations in urban areas, not only its home base of Philadelphia but also in New York City, including one in Times Square. The chain recently debuted a store in Manhattan’s Union Square neighborhood at 40 E. 14th St., and 11 of its 15 urban store openings this year will be in the Big Apple. Five Below is seeking to double its stores in Philadelphia, to 120 from 60, as well.

Back in December during a third-quarter earnings call, Anderson said Five Below was targeting more than doubling its number of stores, to 2,500. But that long-term goal has been ramped up, to a fleet of 3,500 or more stores by the end of fiscal 2030, Anderson said. Five Below is also looking to double both its sales — $2.85 billion in fiscal 2021, up 45% compared with the prior year — and its earnings per share by the end of fiscal 2025.

That will entail debuting 375 to 400 new stores over the next two fiscal years and 550 to 600 new stores over fiscal years 2024 and 2025. For the year ending Jan. 29, Five Below opened 170 net new stores compared to 120 net new stores in fiscal 2020.

Five Below now has a portfolio of five distribution centers that it owns and operates, including one that is about to open in Indianapolis. That network as it stands now can handle inventory for 2,000 stores, and those existing sites can be expanded by 1 million square feet to serve Five Below’s brick-and-mortar fleet as its growth continues, according to officials.

Five Below has even opened up a store at its distribution center located in Buckeye, Arizona. The chain has found success in not only that experiment, but with opening stores in suburban, urban and even semi-rural areas such as Flowood, Mississippi, which is among the company’s top five stores overall in terms of volume.

In some ways, Five Below is seeking to fill the Toys R Us gap. While that toy retailer is aiming for a revival under new ownership, with a flagship at the American Dream mega-mall and store-within-store sites at Macy’s. But Toys R Us is essentially starting out again and doesn’t have the national footprint it once did. Five Below looks to cater to the tweens and teens that Toys R Us once served.

Five Below looks to help its young shoppers celebrate “the rituals of life and the milestones of growing up,” said Michael Romanko, the retailer’s chief merchandising officer. In line with that, Five Below will pilot offering ear piercing at 150 stores this year. It will also offer an expanded selection of balloons at 250 stores in a test. And the retailer will be selling more accessories for pets, as well as offering items for first-time drivers and car owners, products like steering wheel covers, according to Romanko.

The new store prototype is located at Pembroke Commons at 450 N. University Drive in Pembroke Pines, Florida. The prototype includes a new upgraded technology department and a store-within-store layout for Five Beyond, the select merchandise that costs more than $5 that the retailer is now selling at some stores. That prototype also offers ear piercing and the expanded selection of balloons.

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