Last week, discount retailer, Five Below, reported their dismal performance this quarter to investors. And, how did the company account for it? Brand leadership says it all comes down to buying too many Squishmallow toys. Believe it or not, that is not as crazy as it seems…
Five Below’s Adorably BAD Bet…
Ridiculous as it sounds, Five Below buying such a large inventory of these stuffed animals could have paid off…
The Squishmallow plush toys have gone viral thanks to TikTok and other social media platforms. There are entire communities that “report” when and where the trendiest ones can be found…
In short, there is a demand there.
Nonetheless, Five Below CEO, Joel Anderson cut the retailer’s sales forecast on June 5th. Additionally, their shares are down 38% from this time last year.
So, where did it all go wrong?
The Risk of Leaning into Viral Products
The issue with going all-in on trendy offerings is well… Trends come and go.
Like the viral Snoopy toy from last Christmas that people paid 5X its original price for, you probably don’t remember it.
Squishmallows have a similar cycle for which ones are popular. And therein lies the problem…
MOST OF FIVE BELOW’S SQUISHY INVENTORY ARE OLDER RELEASES TO KEEP THE STORE’S DISCOUNT PRICES.
So, the demand from the toy’s hype becomes a moot point. More importantly, as consumers have weathered inflation, discretionary spending is dying off…
Anderson addressed this phenomenon when speaking about the downward sales trend:
“The quarter solidified that consumers are feeling the impact of multiple years of inflation across many key categories, such as food, fuel, and rent, and are therefore far more deliberate with their discretionary dollars.”
All of which is to say that the chubby, animal doll biz ain’t what it used to be. But, they are pretty darn cute…
Who could blame them for trying?
Be Great,
GCTV Staff
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