As the cost of living continues to rise across the US, low-cost retailers like Five Below are feeling the impact on their sales. Despite initial success with Squishmallows, the retailer purchased an oversupply of these soft toys that customers are no longer interested in due to price sensitivity. With customers prioritizing essential items like food, candy, and drinks over discretionary items like Squishmallows, Five Below is now facing challenges in selling these products.
CEO Joel Anderson reported that the decline in sales is not only due to outdated inventory but also rising inflation. The company has cut its forecasts for the year and experienced a 38% decline in its stock year-to-date. Other low-cost retailers are also seeing a slowdown in non-essential spending as consumers prioritize essential purchases.
Fast-food chains like McDonald’s, Burger King, and Wendy’s have responded to this economic climate by offering meals priced at $5 or under. This move aims to win back price-sensitive customers who are more conscious of their spending. However, it remains to be seen whether this strategy will be enough to attract customers and improve sales for Five Below and other low-cost retailers facing similar challenges.