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Five Below (FIVE) Prioritizes Actions Amid Coronavirus Woes

Zacks Equity Research

COVID-19 has crippled the global economy. Retailers have been severely impacted by this outbreak. In response to the pandemic, they are either shutting down stores or trimming work hours. Incidentally, several retailers have also chosen to call-off their guidance owing to difficulty in ascertaining the impact of the deadly virus on their performance. Moreover, some of the companies are even slashing pays and furloughing employees.

Considering the current scenario, Five Below, Inc. FIVE recently announced certain additional measures to navigate through tough times. This specialty value retailer is leaving no stone unturned to contain costs, minimize expenditures and manage liquidity.

Last month, the company extended the temporary closures of its stores. It announced that stores will be reopened following a go-ahead from federal, state and local authorities, targeting May 1, 2020. Most store and distribution center associates were furloughed due to extended store closures. However, it had earlier informed that the company will support furloughed employees with health benefits costs during April. Management also said “We look forward to welcoming our crew and customers back to our stores as soon as we can do so safely.”



To mitigate the financial implications of this pandemic, Five Below has undertaken certain strategic measures, which involve a voluntary reduction of 50% in the base salary of the company’s CEO, Joel Anderson, for a temporary period. The company also announced a 25% base salary reduction for the remainder of the executive leadership team. Additionally, the company’s board of directors has also decided to forgo cash retainers for first-quarter fiscal 2020. Further, annual pay increment for corporate associates has been delayed.

The company is also looking to cut non-payroll expenses significantly. These are advertising, occupancy and other store operating expenses, distribution and corporate office operating expenses, and professional and consulting fees. Moreover, it is also monitoring inventory levels. The company is also curtailing its capital expenditure budget for the current financial year. This includes delaying purchase and construction of a new Midwest distribution center.

Meanwhile, Five Below informed shoppers that they can continue purchasing the company’s products online at www.fivebelow.com. Notably, the company has been undertaking digital endeavors to strengthen its online business. In this regard, it acquired e-commerce platform, fulfillment operation and certain other assets of Hollar.com. Also, Five Below is working on digitizing vendor transactions, implementing core merchandizing platform and rolling out cloud-based data and analytics platform to analyze demand and accordingly optimize inventory.

We note that shares of this Zacks Rank #5 (Strong Sell) company have slumped 29.5% in the past three months compared with the industry’s decline of 27%.
      
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