At extreme value chain Five Below Inc., most items at its 750 doors are still $5 or lower, but prices for some items are creeping above its namesake threshold.
Most of the increase was incremental, such as $3.00 to $3.25 and $5.00 to $5.55. And the test of its $10 and Below concept now has $10 as the starting price at all stores for items such as gaming headphones.
“Five Below raised prices on Friday,” Gabriella Santaniello, retail consultant and founder of research firm A Line Partners, said. “They put in new signs [then] and are pushing themselves to be $10 and Below.”
One new sign now in the stores says $1 to $5 to $10. According to Santaniello, the first category–and only one so far–to get the $10 tag is technology, one of Five Below’s strongest categories.
“They thought they could raise prices. Also, some of the items seeing higher prices–at $5.55–are licensed merchandise from [Disney’s] Frozen. Last year, 70 percent of the merchandise was $5 and 30 percent was $1, $2, $3 and $4. Now 90 percent is $5, and for Frozen merchandise, they know people still will buy it at the higher price because it’s still cheaper than anywhere else,” Santaniello said.
Even though most customers have noticed, there’s been “zero pushback” because the increased prices are still below that of competitors, she added.
Back in June, Five Below said it planned to raise some prices on select items to help mitigate the impact on profits, thanks to higher tariffs on goods imported from China.
Many retailers have said they don’t plan to raise prices to pass along the costs of the added tariffs on to the consumer, or at least not for the holiday season. Target Corp. has pushed its suppliers to absorb the increases, while American Eagle Outfitters has said it will review the matter come spring 2020 when it gets ready to flow new items into its stores.
Retailers such as Five Below and rivals in the dollar store category are in a more difficult position. With their already low prices, they have far less room to adjust for margin compression.
Five Below president and CEO Joel Anderson told Wall Street analysts during a conference call after the company posted first-quarter results, “With the current $250 billion of products imported from China subject to tariffs, about 15 percent of our total receipts for 2019 are impacted, including both directly and indirectly imported products.”
Telsey Advisory Group’s equity analyst Joseph Feldman estimates that 70 percent of Five Below’s products are from China.