Being the go-to department store for kids has paid off for Five Below.
The Philadelphia-based discount retailer that sells items priced $5 or less has been on an expansion tear, and at 9 a.m. Friday it marked its 601st store opening at 701 Market St. in the historic Lit Bros. Building.
“What’s great about the history of this building is, the Lit brothers built the original discount department store,” said Joel Anderson, Five Below’s CEO since 2014. “It’s almost like the passing of the baton as old generation meets new generation. They were in the discount department store business, and we’re in the discount retail business. It’s about bringing value to your customer.”
The location will also become the retailer’s new corporate headquarters by early 2018, when 350 employees will move into 120,000 square feet on floors 2, 3, and 6.
“Five Below is Philly born and bred. Our two founders are from here and started it in Center City,” Anderson said this week as he gave an inside peek in the store with its dizzying color design and variety of items. “We are proud to call Philly home.”
The concept behind Five Below is to give tweens and teens their own department store with everything $5 or less, such as toys, candy, clothes, cellphone accessories, and bedroom decor.
Last year, the company reached $1 billion in sales for the first time. In 2012, revenue was $420 million.
Five Below now has stores in 32 states, nearly double the 18 when it went public five years ago. It entered Southern California earlier this year, opening 15 stores in the Los Angeles area. Expansions in Texas and Florida are planned.
The 15-year old company launched www.fivebelow.com in fall 2016 to sell products online for the first time.
Five years ago, Five Below’s stock hovered around $27. It closed at $55.63 on Thursday.
To achieve growth in such a challenging retail environment with internet shopping expanding is remarkable, said John Yozzo, managing director at FTI Consulting.
“Five Below has been successfully executing on its growth plan, one that includes growing its store base by about 20 percent annually for the last several years,” he said. “It is one of the very few retailers opening new stores at such a pace. It has tapped into a product niche that has few direct competitors, its store model is highly profitable, and it has little exposure to enclosed malls. The ingredients for continued success are in place.”
Ken Perkins of Retail Metrics, which tracks the industry, said Five Below offered something similar to adult counterparts such as TJMaxx and Burlington.
“Stores like Five Below offer an in-store treasure-hunt experience that is difficult to replicate on the web,” Perkins said. “Fresh, new product is consistently being delivered to stores that provide teens with incentives to return regularly. They also provide teens with the ability to get hands on and try out fun, new products.”
The 701 Market St. store that extends into the concourse is one of more than 100 to open this year.
Anderson maintains his 20/20 goal: 20 percent top-line revenue growth and 20 percent bottom-line profits growth, all the way to 2020. He also wants to double the number of stores to 2,000 by then, tapping deeper into the wants of 60 million Americans ages 5 to 19.
Five Below opened in 2002 under founders Tom Vellios and David Schlessinger. Like a mini-department store, products are grouped in categories, or “eight worlds,” including Style, Room, and Tech. About a third of its products are imported and bought in bulk, which Anderson said allows it to achieve savings that are passed on to its customers.
“Toys R Us taught me to be a kid at heart, and Walmart taught me the value of the dollar and the magic of scale,” Anderson said of his previous employers. “You bring all that together, and that’s what Five Below is meant to be.”
He said all the construction activity along Market Street — particularly the retail sprouting — was exciting, including the East Market project and renovation of the former Gallery into Fashion District Philadelphia.
“With everything else happening, we are part of the solution to really revitalize Market East and bring it back to life again,” Anderson said. “Eventually, we will be the largest tenant in this building, as we will eventually grow to over 200,000 square feet.”
Landlord Brickstone Realty is excited to have Five Below, too.
“They are internet-proof,” Mark Merlini, a partner at Brickstone, said. “They generate a lot of traffic.”
— Tom Gralish (@TomGralish) October 27, 2017