Five Below will test its value proposition and offer more items above the $5 threshold.
This, as a the Philadelphia-based discount retailer long favored by teens and tweens reported its third-quarter 2022 earnings Wednesday (Nov. 30), telling analysts and investors that key aspects of its “Triple-Double” strategy — to triple its store count to 3,500 and double its sales and earnings by 2025 — unveiled in March is showing positive results.
Five Below President and CEO Joel Anderson said the chain’s focus on new store-within-a-store concepts like Five Beyond that break with its $5 or less foundation, as well as digital investments to expand buy online, pickup in-store (BOPIS) helped drive strength in the quarter.
“We invested heavily in digital, specifically in paid search and social media,” Anderson said during an earnings call, with efforts weighted toward the end of Q3 to grab holiday sales earlier in a retail environment of deep discounting from Amazon to Walmart to discount competitors like Dollar General.
To get a better understanding of its customer, the retailer leaned more heavily on data in the second half. Anderson said, “with increasing knowledge about our customers, gained through tokenization, we are leveraging data to target both new and existing customers more effectively.”
“For eCommerce, we enhanced our offering by rolling out buy online, pick up in store, chain-wide in September,” he said.
Along with BOPIS, Anderson said self-checkout is now available in approximately 70% of Five Below stores, “which improves throughput and the customer experience during the busy holiday shopping season.”
See also: Five Below Unveils Threefold Growth Plan
The ‘Triple-Double’ Double Down
Five Below opened 40 new stores nationwide in Q3 with a total of 102 new stores opened year-to-date. Roughly 250 stores have been converted to the new Five Beyond prototype in 2022, focusing on items priced above its traditional $5 ceiling.
Anderson pointed to a greater emphasis on “product experience” as punching up Q3 numbers, saying concepts such as The Candy World “once again outperformed, featuring novelty candy like Slime Liquors, snacks from great brands like Hershey and Rochelle, as well as our salty business featuring the One Chip Challenge and Talkies.”
Games and toys were also popular in Q3, he added.
The Five Beyond concept is proving out, Anderson noted, telling investors that customers who bought Five Beyond products spent about twice as much as those who did not.
“With approximately 20% of our chain in the new Five Beyond format that we unveiled earlier this year, we are on track and marching toward our goal for over 80% of the chain to be in this format by 2025,” he said.
Read also: Five Below Is Ready to Pounce on ‘Merchandise and Real Estate Dislocations’
Licensed and social influencer products played a part, with sales of brands like Anime, Funko and Hello Kitty growing, as well as “items such as Disney’s, Lilo & Stitch and Marvel Action figures” performing well and a Halloween that was “more normalized” than the past two years contributing. It also scored with affordable fashion items like $5 kendall + kylie crossbody bags.
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