Five Below (FIVE) is facing lower-than-expected sales, and it's putting the blame on a viral TikTok trend, which appears to be fading, for the loss.
In the company’s first-quarter earnings report for 2024, Five Below revealed that its net sales increased by 11.8% compared to the first quarter in 2023, but its comparable store sales decreased by 2.3%. In the report, the store called its recent sales performance “disappointing” and the result of “the macro environment” disproportionately impacting its lower-income customers.
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During an earnings call discussing the company’s recent quarter, Five Below CEO Joel Anderson revealed that declining sales of the TikTok famous plush toys Squishmallows led to “greater comp headwinds than planned.”
“I think the one change that's happened is it's proven harder for us to lap some of the big trends from last year, namely Squishmallows,” said Anderson.
Squishmallows became popular in 2020 during the COVID-19 pandemic. The social media app TikTok appears to have had a large impact on the popularity of the kids' toy (which is also popular among adults) as it went viral on the platform. The hashtag #squishmallows has garnered over 670,000 posts on the platform, with many generating millions of views.
The decline in Squishmallow sales could be attributed to economic headwinds that are impacting consumers’ wallets.
Anderson claimed on the call that consumers are limiting their spending due to a tight economy with high inflation. Consumer price inflation in the U.S. increased by 19.32% between January 2020 and April 2024, according to NerdWallet.
“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,” said Anderson.
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Shortly after Five Below's earnings report was released, its stock declined by roughly 12%.
Squishmallows isn’t the only consumer product that TikTok has helped to skyrocket in popularity. Last year, drinkware brand Stanley went viral on TikTok after a woman showed that her Stanley cup survived a car fire, and even managed to maintain the ice inside of it. Soon after the video went viral, the Stanley cups began flying off of the shelves at Target leading to chaos amongst consumers as the product would sell out within minutes.
Ironically, the Stanley cup craze is also another TikTok trend that appears to be losing steam. After reports in January revealed that the cups contain a small amount of lead inside of them, which can be toxic to an individual's health, the hype behind the product appears to have declined as the cups are no longer sold out at Target locations across the nation or online as they once were.
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