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Five Below fights back on theft by reducing self-checkout

Five Below has "now evolved" to associate-assisted checkout across its over 1,500 locations, CEO Joel Anderson said Wednesday during the company’s fourth-quarter earnings call.

Five Below is reducing self-checkout at stores in an effort to prevent theft from cutting further into its bottom line.

The company has "now evolved" to associate-assisted checkout across its over 1,500 locations, CEO Joel Anderson said Wednesday during the company’s fourth-quarter earnings call.

He said Five Below locations susceptible to more "shrink" are mostly offering cashier-run checkouts. The retailer is also adding receipt checking, extra employees and more security guards at such stores, according to Anderson.

"We expect to have 75% of our transactions chain-wide assisted by an associate with a goal of 100% in our highest-shrink, highest-risk stores to be fully transacted by an associate," Anderson said.

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Anderson said Five Below had earlier "tested many shrink mitigation initiatives late in Q3, into Q4, including product-related tests, front-end initiatives and guard programs." 

It reduced the self-checkout registers available at a given time and put employees at the front of the stores but moved to the "additional mitigation efforts," like associate-assisted checkout, after seeing still-high shrink in January, according to the CEO.

Shrink is a term used in the retail industry to describe theft and other inventory loss. Other retailers have also been grappling with the issue lately.

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Five Below reported diluted earnings per share of $3.65 for the fourth quarter, which Anderson said "was at the low end of our internal expectations and can be fully attributed to higher-than-planned shrink." Meanwhile, net sales grew $1.34 billion, or 19.1%, from the same period a year ago.

Anderson said that Five Below’s tactics to curb theft will help the company "over time" and that it "intend[s] to aggressively pursue returning to pre-pandemic levels of shrink or offsetting the impact over the next few years."

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Five Below’s update on theft comes just days after another discount retailer, Dollar General, said it was cutting down on its use of self-checkout.

That company, which has 20,000 stores, plans to lean more into checkout options involving employees and self-checkout item limits.

Retailers saw $112.1 billion in losses from shrink in 2022, according to the National Retail Federation.

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