Five Below CEO says low-end consumers are being stretched.

• Joel Anderson, CEO of Five Below, stated on Wednesday that lower-income U.S. consumers are finding it challenging to manage their expenditures.
• The company's revenue for the first quarter of fiscal 2024 was lower than anticipated, and it issued weak revenue projections.
• Despite some progress on inflation, consumer sentiment has been lagging, and his comments reflect this.

Despite inflation showing signs of easing, consumers in the country may still feel its effects for a while, according to Joel Anderson, CEO of discount retailer. The executive believes that underperformance is particularly evident in the lower-income demographic.

"Anderson stated on an earnings call with analysts that the lower-end customer is being stretched. He emphasized the need to deliver value and show it in the way they market and present their products in stores. However, these changes are currently in progress and are expected to improve by the back half of the year."

The second quarter and full-year revenue guidance from Five Below was soft, and the first quarter's revenue also fell short of expectations.

The retailer's stock price dropped by 11% on Thursday, reaching a new 52-week low during trading. In 2024, the retailer's stock has fallen more than 45%.

Anderson stated that consumers became more selective with their spending, opting to buy only what they truly needed. This is evident in the types of products they purchased, as they tended to focus more on consumable categories such as candy, food and beverages, beauty and health, and beauty aids.

The CEO pointed out that Five Beyond, the company's in-store shop selling products priced over $5, outperformed its lower-income household stores. This suggests that when consumers recognize the worth of products, they are more likely to "stretch their dollar."

Despite some signs of improvement in the U.S. economy, consumer sentiment has been lagging. In May, consumer sentiment dropped more than 10%, according to the University of Michigan Survey of Consumers. Additionally, over half of Americans incorrectly believe the country is in an economic recession.

Anderson stated that consumers are becoming more cautious with their discretionary spending due to the impact of multiple years of inflation on key categories such as food, fuel, and rent.