The low-end consumer “is really being squeezed,” says Five Below’s CEO

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A customer browses a selection of bodyboards outside a Five Below store in Bloomington, Illinois, on July 25, 2018.

Daniel Acker | Bloomberg | Getty Images

While inflation is showing signs of easing, consumers in the country could feel the impact for some time to come, discount retailer CEO Joel Anderson said. Five below. The manager sees underperformance, especially in the lower income group.

“The lower end customer is really being squeezed,” Anderson said during an earnings call with analysts on Wednesday. “We have to deliver value, and we really have to demonstrate that in the way we go to market, and when you walk through the store, what you see. But all of that is in flux right now, and [we] I expect some of these changes to improve by mid-year.”

Five Below issued soft revenue guidance for the second quarter and full year. Turnover for the first quarter also fell below expectations.

Shares tumbled about 11% on Thursday, hitting a new 52-week low during the trading session. The retailer is down more than 45% in 2024.

“Consumers became more discerning with their dollars and bought more and more because they needed them,” Anderson added. The types of products they purchased reflect this, he added, noting that consumers were buying more in the company’s “consumption” categories such as sweets, food and drink, beauty and health and beauty aids.

The CEO also noted that Five Beyond — the company’s store that sells some products for more than $5 — performed best among lower-income household stores. According to him, this indicates that when consumers see the value of products, they have to sacrifice their money more.

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While there are some indications that certain aspects of the US economy are improving, consumer confidence is lagging. Basically consumer sentiment fell by more than 10% in May, according to the University of Michigan Survey of Consumers. Not only that, more than half of Americans incorrectly believe the country is in an economic recession.

“The quarter made it clear that consumers are feeling the impact of several years of inflation in many key categories, such as food, fuel and rent, and are therefore being much more conscious with their discretionary dollars,” Anderson said.

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