Five Below loses another leader as it seeks to return to its roots

Executive turnover continued at Five Below, a 1,500-plus store chain based in Philadelphia’s Center City that had been banking on national growth to boost profits.

The latest departure from Wow Town, as the company calls its headquarters, is Michael Romanko, who as chief merchandising officer had overseen Five Below’s rapidly evolving product lines since 2015.

Five Below had offered Romanko millions to stay, according to SEC documents. On July 30, two weeks after the departure of veteran CEO Joel D. Anderson, Romanko was promised a $1 million stock bonus if he stayed on for a year and met his performance goals.

Romanko was also one of four “key” Five Below executives who were offered a separate $1.5 million “retention” bonus to stay on for up to two years, according to SEC documents , and he got a $50,000 increase in his annual base salary, to $800,000.

But despite those incentives, Romanko will retire by mid-November, Five Below said in a more recent SEC filing. He will receive an extra year of salary and health insurance to help other managers learn his job.

The company did not give a reason for Romanko’s change. He and other Five Below executives did not return calls seeking comment.

Anderson, the company’s chief executive since 2015 and the architect of its move in recent years toward larger stores and more expensive products, left Five Below in July after two quarters of disappointing results. The company expects earnings to decline next quarter due to product reductions and slower new store openings.

The chain’s shares fell from more than $200 in March to $76 two days after Anderson’s departure was announced. The stock fell as low as $65 in August before partially recovering to just over $100 in mid-September; stocks slipped early afternoon, at $89.22, down 3.64% for the day Monday.

Five Below boosted its sales, profits and stock valuations during the pandemic while other retailers faltered. But more recently, Five Below’s performance has fallen as the rest of the industry has recovered. The 77 stocks in Standard & Poor’s Retail Select Industry Index are up 8% overall year to date, while Five Below is down more than half.

After longtime CFO Anderson leaves Kenneth Bull has agreed to step in as interim CEO. For Bull, that came with a special retention bonus of $1.6 million in stock over the next four years, plus $400,000 in cash if he stays until the end of the year. fiscal year 2024. That’s on top of $825,000 in annual salary — and another $1 million. of shares if it achieves its performance objectives during the following year or if the company is sold before this date.

Co-founder and Chairman of the Board Thomas Vellios has at the same time assumed additional powers as interim executive chairman, with a stock grant worth $2 million, if one remains. year or if the company is sold before that, plus up to $500,000 to cover expenses visiting Five. Below the construction sites.

Under the new team, Five Below executives in an August conference call told investors and analysts that the company would slow new store openings and find ways to cut costs.

Vellios promised to return Five Below to its roots.

“When David (Schlessinger) and I founded Five Below, our vision was clear: to be the go-to destination for tweens and teens, a cool store for kids, and the ‘Yes’ store for parents,” said Vellios during the conference call. But “over the last few years, we’ve lost some of that special focus on our core customers,” Vellios said.

Schlessinger, who also founded the now-defunct Encore Books and Zany Brainy store chains, retired in 2015, the year the company hired Anderson and Romanko.

Anderson’s shift since 2022 to a larger store format selling more product “has stretched our teams,” Vellios said. He added that the issues are “fixable” and promised a better shopping experience, to deliver “more impact and value.”

In the same call, Bull said Five Below had raised its prices and “over-expanded” its product offerings, but had failed to follow the “strict editing process of years past” by removing less promising items. Anti-theft measures, he noted, have also “increased complexity and workload.”

Bull said the company plans to reduce the number of products for sale, re-emphasize items sold for $5 and less and “increase the flow of new releases” with new and seasonal products.

The company plans to open between 150 and 180 new stores over the next year, Bull added. This is a slowdown, given that Five Below opened 260 new stores in the fiscal year ended July 31.

The company also announced it was ending work from home for its Philadelphia headquarters employees and planned additional unspecified reductions.