Five Below Investing in New POS and DC to Support Massive Growth

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Five Below Investing in New POS and DC to Support Massive Growth

By Tim Denman - 06/11/2018
Five Below plans to add three state-of-the-art DCs over the next three years.

Five Below is on the rise. The retailer is in full-on growth mode as it looks to reach its stated goal of increasing both its topline and bottom line 20% by 2020.

The key to the retailer’s growth strategy is its physical store network. Five Below continues to expand its store count, adding 33 new stores in Q1 2018, bringing its current physical presence to 658 stores, an increase of 105 stores compared to this time last year. In addition to the new store openings, the retailer plans to remodel around 10 stores this year (double last year’s total), with a wide scale remodel plan in place next year.

While the year-over-year growth in stores is eye opening, it is nothing compared to the retailer’s future growth plans. Five Below’s long-term vision is for more than 2,500 stores across the nation.

“What makes this company so great is that we have a great store experience,” said president and CEO Joel Anderson on a recent earnings call with analysts. “New stores continue to achieve very high levels of productivity, driving our industry leading less than one-year average payback period on our new store investment. Year-to-date, we have now opened 42 stores and are on track for approximately 125 store openings in 2018. With this growth comes increasing benefits of scale throughout many facets of the organization.

As the retailer continues to build out its physical presence it is investing in its supply chain with three new DCs planned. In addition, Five Below will be deploying a new POS solution this year that will not only streamline the checkout experience, but also allow for the implantation of the brand’s first loyalty program.

“This DC, together with our plan for additional new DCs, demonstrates our commitment to supporting our rapidly growing store base through disciplined infrastructure investments.” - Joel Anderson, President and CEO, Five Below

To supply its ever-increasing store count, Five Below plans to open three new DCs over the next three years, with the first of these state-of-the-art facilities set to open in the spring of 2019. The 700,000 square-foot DC will be built just south of Atlanta and will have the capability to flex up to 1 million square feet if needed in the future. The distribution center marks a change in strategic direction in terms of the retailer’s real estate holdings ― the is the first DC that Five Below will own outright, all of its other DCs are leased properties.

“This is the first facility built entirely to our specifications,” said Anderson. “Owning the building will provide us with the control and flexibility as we grow our footprint throughout the Southeast. This DC, together with our plan for additional new DCs, demonstrates our commitment to supporting our rapidly growing store base through disciplined infrastructure investments.”

In conjunction with the supply chain enhancements the retailer must put in place as it looks to scale its physical presence, is a new POS solution that will help facilitate growth and further redefine the retailer’s brick-and-mortar experience.

“The implementation of the new POS system is on track to be deployed in our stores this year,” Anderson said. “This new system delivers the scale needed to support our more than 2,500 U.S.-store opportunity, and provides the functionality and flexibility for future features such as a loyalty program and omnichannel capabilities.”

One of the new capabilities the updated POS solution will offer is the introduction of a Five Below loyalty program. The program will further enhance the shopping experience for consumers, while granting the retailer more intimate knowledge into customer shopping patterns, which will be leveraged throughout the organization.