Five Below is the leading value retailer of discretionary goods targeted specifically at tweens and teen customers in the U.S. Most items are priced in the $1-$4 range (60% of items sold) and as the name suggests, below $5 (though that number has moved higher to $5.55 recently). The company operates over 1k stores in 38 states.
If the store ROI is 160%, why are they only expanding 20% a year? Why not expand 100% a year? or Why not use debt to expand more quickly and pay off the entire debt in a year?
Great effort! Thank you.
Hey I have been doing a bunch of work on 5 below and found your piece helpful. Let me know if you are free to chat sometime please!
Here are my questions:
- How many stores can FIVE open? Framework for thinking about this.
- Are they opening stores too fast? Confidence in real-estate team?
- How has cannibalization drag trended? What does new store productivity look like?
- Are stores being run too hot? (increased price at expense of value prop? OR overly optimized stores?)
If the store ROI is 160%, why are they only expanding 20% a year? Why not expand 100% a year? or Why not use debt to expand more quickly and pay off the entire debt in a year?