Five Below, Inc. Reports Strong Q4 2023 Earnings with Sales Growth of 19%

Five Below, Inc. has recently announced its impressive financial results for the fourth quarter of 2023. With total sales reaching $1.34 billion, the company achieved a growth rate of over 19% and a comparable sales increase of 3.1%. However, despite these positive figures, earnings per share were affected by higher-than-planned shrink, resulting in a lower-than-expected value of $3.65. Five Below’s strategic pillars for success include store expansion, store potential, product and brand strategy, inventory optimization, and crew innovation. The company is determined to pursue its aggressive growth plans of opening more stores, both domestically and globally, with a goal of reaching 3,500-plus stores nationwide by 2030. To enhance collaboration and innovation, Five Below has established its first-ever global sourcing office in India. Moving forward, the company intends to leverage AI-powered tools for inventory management and is committed to hiring exceptional crew members while improving overall engagement scores.

Q4 2023 Earnings Report

Five Below, Inc. (FIVE) recently held its Q4 2023 Earnings Conference Call on March 20, 2024, where the key participants, Joel Anderson (President and CEO) and Kristy Chipman (CFO and Treasurer), discussed the company’s financial performance for the fourth quarter.

Total fourth-quarter sales of $1.34 billion

During the fourth quarter, Five Below reported total sales amounting to an impressive $1.34 billion. This figure represents a significant increase of over 19% compared to the same period last year. This robust growth is a testament to the company’s strong business strategies and customer demand for its products.

Sales growth of over 19%

Five Below experienced excellent sales growth in the fourth quarter, exceeding expectations. The company’s ability to drive sales demonstrates its effective marketing and customer engagement strategies. By continuously attracting and retaining customers, Five Below has positioned itself as a leader in the market and has seen impressive growth year after year.

Comparable sales increase of 3.1%

In addition to overall sales growth, Five Below also achieved a notable increase in comparable sales. Comparable sales, which measure the performance of established stores and exclude the impact of new store openings, increased by 3.1% during the fourth quarter. This growth indicates that Five Below’s existing stores are experiencing healthy levels of customer traffic and sales.

Earnings per share at $3.65

While Five Below’s sales performance was strong, the company reported earnings per share at $3.65 for the fourth quarter. While this figure is still impressive, it falls at the low end of expectations. Factors such as higher-than-planned shrink impacted the company’s earnings. However, Five Below remains committed to addressing these challenges and implementing strategies to improve profitability moving forward.

Earnings per share at the low end of expectations due to higher-than-planned shrink

The lower-than-expected earnings per share can be attributed to higher-than-planned shrink. Shrink refers to the loss of inventory due to theft, damage, or other issues. While efforts are made to minimize shrink, unexpected factors can impact a company’s bottom line. Despite this challenge, Five Below is aware of the issue and is taking steps to mitigate shrink and optimize its earnings in the future.

Strategic Pillars

Five Below has identified five key strategic pillars that underpin its business operations and drive its success.

Store expansion

Store expansion is a crucial component of Five Below’s growth strategy. The company opened a record-breaking 205 new stores in 2023, demonstrating its commitment to meeting the needs of its expanding customer base. By strategically selecting new locations, Five Below aims to increase its market presence and make its products more accessible to consumers.

Store potential

In addition to expanding its physical footprint, Five Below recognizes the potential for growth within its existing stores. The company has implemented initiatives to optimize store layouts, improve customer experiences, and drive sales. By continually evaluating and investing in its existing stores, Five Below aims to enhance its overall performance.

Product and brand strategy

Five Below takes pride in offering unique, on-trend products at affordable prices. To maintain its competitive edge, the company focuses on developing a robust product and brand strategy. By staying up-to-date with the latest trends and offering a diverse range of high-quality products, Five Below can attract and retain customers who value both value and innovation.

Inventory optimization

Effective inventory management is crucial for any retail business. Five Below recognizes the importance of optimizing its inventory to meet customer demand while minimizing unnecessary costs. By utilizing data, analytics, and technology, the company can forecast demand accurately, ensure product availability, and minimize out-of-stock situations, leading to a more efficient supply chain and improved customer satisfaction.

Crew innovation

Five Below understands that its success is dependent on its dedicated and innovative employees. The company focuses on fostering a culture of creativity and collaboration among its crew members. By empowering and supporting its employees, Five Below encourages them to contribute fresh ideas, continuously improve processes, and provide exceptional customer service. Through crew innovation, the company aims to differentiate itself and drive continued success.

Store Expansion

Five Below’s store expansion efforts have been instrumental in its growth and market penetration.

Opened a record 205 new stores in 2023

In 2023, Five Below celebrated a significant milestone by opening a record-breaking 205 new stores. This expansion not only increases the company’s physical presence but also allows it to reach new customers and expand its market share. By strategically selecting locations and tailoring its product offerings to local preferences, Five Below can effectively meet the needs of diverse communities.

Converted over 450 existing stores to the Five Beyond format

In addition to opening new stores, Five Below has been focusing on converting existing stores to the Five Beyond format. This format offers an expanded assortment of products, including higher-priced items, catering to customers seeking a broader range of choices. By converting over 450 stores, Five Below aims to capture additional revenue streams and provide a more comprehensive shopping experience for its customers.

Aims to achieve 3,500-plus stores nationwide by 2030

Five Below has set ambitious goals for its store expansion. The company aims to have over 3,500 stores nationwide by 2030. This expansion plan showcases Five Below’s confidence in its business model and its commitment to reaching a wide customer base. By strategically expanding its physical footprint, Five Below can continue to drive growth and increase its market share.

Global Sourcing Office

Five Below opened its first global sourcing office in India, which has had a positive impact on its operations.

Opened first global sourcing office in India

Recognizing the benefits of global sourcing, Five Below established its first global sourcing office in India. This move allows the company to tap into a diverse and cost-effective supply chain and establish partnerships with international suppliers. By managing its sourcing operations in-house, Five Below can maintain quality control and ensure that its products meet its high standards.

Increased collaboration and innovation

The establishment of the global sourcing office has also fostered increased collaboration and innovation within Five Below. By working closely with international suppliers, the company can leverage expertise and insights from different markets. This collaboration encourages the exchange of ideas and promotes ongoing improvement in product offerings, supply chain efficiency, and cost optimization.

Plans for 2024

Looking ahead to 2024, Five Below has outlined its strategic plans to fuel further growth and improve operational efficiency.

Open between 225 and 235 new stores

Five Below aims to continue its store expansion efforts in 2024 by opening between 225 and 235 new stores. This expansion plan demonstrates the company’s confidence in its business model and its commitment to meeting customer demand. By strategically selecting new locations and tailoring its product offerings, Five Below can capitalize on new market opportunities and drive future sales growth.

Convert approximately 200 stores to the Five Beyond format

Building on the success of its Five Beyond format, Five Below plans to convert approximately 200 existing stores in 2024. By transitioning these stores to the Five Beyond format, the company can provide customers with an expanded assortment of products, catering to a broader range of preferences. This strategy allows Five Below to capture additional market share and enhance customer loyalty.

Focus on improved inventory forecasting and ordering replenishment

Five Below recognizes the importance of efficient inventory management in optimizing its operations. As part of its plans for 2024, the company will focus on improving inventory forecasting and ordering replenishment. By leveraging data and analytics, Five Below aims to accurately predict customer demand, reduce out-of-stock situations, and optimize its inventory levels, leading to improved sales and customer satisfaction.

Leverage AI-powered tools for inventory management

To further enhance its inventory management capabilities, Five Below plans to leverage AI-powered tools in 2024. These advanced technologies can analyze vast amounts of data, identify trends, and make data-driven recommendations. By utilizing AI-powered tools, Five Below can optimize its inventory management processes, reduce costs, and improve overall operational efficiency.

Crew Engagement

Five Below understands that its dedicated and engaged team members are vital to its success.

Focus on hiring outstanding crew members

In order to provide exceptional customer service and drive its business forward, Five Below places a strong emphasis on hiring outstanding crew members. The company recognizes that its employees are its most valuable asset and diligently seeks individuals who align with its values and culture. By attracting talented and dedicated individuals, Five Below can create a positive and dynamic work environment.

Improving overall engagement scores

Five Below is committed to fostering a culture of employee engagement and satisfaction. The company understands that engaged employees are more likely to provide exceptional customer service and contribute positively to the organization’s overall success. By implementing initiatives to improve overall engagement scores, Five Below aims to create a motivating and supportive workplace that encourages its employees to perform at their best.

In conclusion, Five Below’s Q4 2023 Earnings Report highlights the company’s impressive sales growth and strong financial performance. Despite lower-than-expected earnings per share, Five Below remains committed to its strategic pillars of store expansion, store potential, product and brand strategy, inventory optimization, and crew innovation. With plans to open new stores, convert existing stores to the Five Beyond format, and focus on inventory management, Five Below is well-positioned for continued success in the years to come. Additionally, the establishment of the global sourcing office in India and the emphasis on crew engagement further demonstrate the company’s commitment to innovation and creating a positive work environment. By executing its plans for 2024 and beyond, Five Below aims to drive growth, enhance customer satisfaction, and maintain its position as a leader in the market.