Wednesday, December 6

Five Below: Beating Inflation Against All Odds

If you've read basically any of our research, briefs, or newsletters in the past month, you'd know we're pretty obsessed with consumer spending right now. 

Whether or not the Fed nails this 'soft landing' from our inflationary spiral depends entirely on how well consumers continue to weather high prices. If spending stays strong enough, inflation can come down to acceptable levels without us hitting a recession. 

However, lots of brands like Walmart have been very cautious in their more qualitative assessments of Q4 performance. Ad companies are warning of crashing demand in Q4 while most retailers are projecting slower growth at best. 

So, we were almost shocked when we started digging through the Q3 numbers from Five Below ($FIVE) and saw strong projections for increased growth in Q4 and the full year for 2023. 

Five Below is an incredible and extremely specific success story here in the sunset days of our inflationary and supply-side crises. Unlike other discount stores, Five Below didn't need to rely on low-margin essentials to keep revenue growth alive. Instead, middle-income consumers actually started visiting these stores more in order to make more discretionary purchases than they would have usually done in higher-end stores. 

It turns out, that Americans are going to keep shopping no matter what, and Q4 is a moment where discount stores that still offer quality will reign supreme. 

So, let's explore Five Below's moment of relative strength and how they can keep this growth going into 2024.👇

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