As many retailers struggle during the pandemic and against online competition, Five Below Inc. has defied both challenges and has seen sales rise, new stores open and its share price climb back up to pre-pandemic levels.
The Philadelphia-based discount retailer opened a record 63 new stores in the second quarter and by the end of the year expects to have a total of 1,020 stores in its portfolio. That’s up from 900 it had at the beginning of the year.
The company is also spending heavily to remodel some of its older stores to reflect changes brought on by the pandemic, what its target consumer — tweens and teens — wants these days and areas where it sees growth. Think gaming, nesting and “snarky” T-shirts.
The company most recently completed a two-week renovation to its 13,000-square-foot store at 1529 Chestnut St. in Center City, which is its among its largest. The company opened the location in September 2015 and will hold a toned down grand re-opening of the store this Friday.
While the cost of fitting out a new store is about $300,000, company officials declined to divulge how much a remodeling job costs.
In a recent CNBC interview, CEO Joel Anderson said that the retailer “is about being a little snarky, catering to kids and having a great time when you come to store.”
The renovated Chestnut Street store reflects all of that. The store has new graphics that capture its home of Philadelphia, brighter lighting as well as new displays and check out registers that are six-feet apart. A constant drone of up beat music adds to the shopping experience.
The renovated store has expanded several departments that are selling well these says such as T-shirts and beauty. “Casual wear has been great for us and tough for others,” said George Hill, executive vice president of retail operations for the company.
Mainstays such as books, basketballs and other toys remain. It has bulked up on items that cater to school and work from home, such as risers for desks and stay-at-home items such as blankets, room décor, puzzles, games and crafts. There are also other pandemic-related products such as masks and hand sanitizer. Pet items, such as wipes, beds and shampoos, also take up more shelf space than before in a reflection of more people owning pets during the coronavirus outbreak.
While it always had an expansive candy selection, Five Below (NASDAQ: FIVE) is delving deeper into providing a larger line of grocery-related products including snacks items such as cheese balls and pistachios along with grab-and-go food such as ramen and cereals.
While its founding strategy was to sell items for $5 or less, it has expanded that into what it calls “Five Beyond,” which are items sold for $10 or less. It tested the concept out in 25 stores over the last couple of years. Customers suggested that they preferred they didn’t mind paying more than $5 for an item but wanted those products in a separate, designated section.
At the Chestnut Street store, Five Beyond products are on the second floor and part of the company’s expansion into gaming products that also compliment the company’s foray into esports and its partnership with Nerd Street Gamers. Last week, Nerd Street Gamers opened the first of its Localhost locations in Five Below stores in Philadelphia and Texas, with plans for a third near St. Louis.
Localhosts are an esports venue where people can train, compete in tournaments or play video games casually. The Philadelphia location is inside a Five Below store in the Bakers Centre shopping center in East Falls.
Five Below is also launching an exclusive line of what is calling Bugha products that is part of its partnership with Kyle “Bugha” Giersdorf, winner of the Fortnite World Cup. Those products will be available online this week and eventually put in stores nationwide.
The remodels, new stores and products have bolstered its bottomline in spite of the pandemic. When the company reported fiscal second quarter results last month, it saw sales increase by 2.1% to $426.1 million from $417.4 million in the same period a year ago. However, comparable stores sales — locations opened at least a year — decreased by 12.2% as a result of all of its stores closing as part of the pandemic-related shutdown over the spring. Though its shoppers aren’t frequenting its stores as often as they used to, they are buying more items on each trip.
Income rose to 53 cents a share, up from 51 cents in the second quarter of fiscal 2019. The company’s stock closed on Oct. 20 at $134.90 a share. In mid-March, it had been at around $52 a share, having started the year at $127.65.
All of which appears to be an anomaly in these times when retailers are either filing for bankruptcy or shuttering stores.
“This time we’re in right now, parents and families are all living in a different situation and they are looking for a place to save money, have a great experience and be in a safe environment and I think we’re doing all three for them,” Anderson said on CNBC.
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