Five Below is struggling with an excess inventory of Squishmallows and price-sensitive customers, as mentioned by CEO Joel Anderson. The decline in the popularity of Squishmallows has led to outdated inventory issues for the company. This is due to the impact of inflation on key categories like food, fuel, and rent, causing a slowdown in discretionary spending for low-cost retailers.
Five Below’s shares were down nearly 4% at closing time, with a 38% year-to-date decrease. Despite initially being listed as a strong performer, Squishmallows are now contributing to the company’s struggles. Other low-cost retailers are also facing challenges due to the rise in the cost of living, leading to a decrease in non-essential spending among consumers.
In response to this trend, fast food chains like McDonald’s, Burger King, and Wendy’s are offering meals priced at $5 or less to attract budget-conscious customers. The personal savings rate fell to 3.2% in March from 5.2% the previous year due to increased expenses. Americans are saving less because of these expenses and this trend is affecting not only Five Below but also other companies that rely on consumer spending patterns.