Five Below Stock Plummets on Squishmallows Decline

Five Below

Five Below Inc. (NASDAQ:FIVE) saw its stock plunge by the most since the pandemic began after announcing weaker-than-expected results and lowering its sales forecast for the year. The retailer attributed the slump to an oversupply of Squishmallows, which customers were less inclined to purchase.

During an earnings call on Wednesday, CEO Joel Anderson noted a shift in consumer spending towards essential categories such as food, beverages, candy, and beauty products. “Consumers were more discerning with their dollars, increasingly buying to need,” Anderson explained.

The decline in Squishmallows’ demand led to an unexpected drop in same-store sales for the first quarter, which ended on May 4. The slowdown started around Easter and has continued into the current quarter. As a result, Five Below revised its full-year revenue outlook to a range of $3.79 billion to $3.87 billion, falling short of analysts’ expectations of approximately $4 billion.

On Thursday, the company’s shares fell as much as 20% in New York trading. This added to an already substantial decline of 38% for the year up to Wednesday’s close.

Truist Securities analyst Scot Ciccarelli described the earnings and guidance as “painful,” while Bloomberg Intelligence analysts Jennifer Bartashus and Jibril Lawal commented that Five Below “is feeling the pinch as consumers pare back discretionary spending.” They further noted that the report reflects a “bleaker outlook” for the company’s low-income consumers, highlighting that “historically, pulling back spending on kids is a last resort.”

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