A team of Bank of America analysts went to a New Jersey mall for a back-to-school tour. These were their 6 biggest takeaways.
Five Below “appears to be targeting a slightly older teen”
Five Below, the value retailer, has more items geared towards consumers in middle school through college, according to BAML.
"This included more room and technology products in the front of the store, as well as many back to school items," the analysts wrote.
The unique products offered at Five Below, paired with their low prices, will continue to drive store traffic for the chain, according to the analysts. They have a price objective of $150 for Five Below, and expect consistent low-to-mid single digit comp growth and 20% square footage growth on average on the year.
The biggest risk to Five Below's growth going forward is further China tariff increases, the analysts wrote. In addition, the chain could struggle if it has to raise its low prices or is unable to keep up with ever-shifting consumer trends.
Analysts also note that Five Below has very limited ecommerce potential, something that's increasingly important for all retailers that compete with Amazon.
Five Below's Ten Below or JustWow section also drives traffic
The store the analysts visited included both a Ten Below or JustWow section. Only 25 Five Below locations have the section, which includes items that are more expensive than the rest of the store — meaning that they cost more than $5.
The JustWow section in The Garden Plaza Five Below was previously a storage area that was converted about a year ago, the analysts wrote. Now, the extra 750 square feet boasts extra technology and room items that drives increased traffic to the store.
The Children's Place is now competing in a more "rational environment"
The analysts visited The Children's Place, a clothing store for kids aged newborn to pre-teen. They noted that the store at the Garden Plaza used to be next door to a Gymboree, but since the store has closed traffic to The Children's Place has been boosted.
Gymboree filed for bankruptcy in January, and shut more than 800 stores in the process, Business Insider's Haley Peterson reported. Now, The Children's Place is looking to fill any gap left by the Gymboree closures, and will even launch Gymboree branded products in stores in the first quarter of 2020.
The Children’s Place is well positioned to fill the gap that Gymboree left
The analysts noted that The Tiny Collection, a line developed specifically to compete with Gymboree, "was limited but looked good."
In addition, they said that response from prior Gymboree customers remains positive.
"We think PLCE's ability to successfully take pricing is a key focus of investors now that GYMB is out of the marketplace," wrote the analysts. The Children's Place has recently increased its assortment of denim, but analysts noted that stretch denim is much more expensive than non-stretch denim, as items are $14.99 and $7.99 respectively.
The analysts have a price objective of $115 for The Children's Place and think that while the liquidation of a competitor has been helpful in some ways, it could also contrib ue to a tough earnings season for the store.
Urban Outfitters has successfully mixed small trending brands with traditional labels
Urban Outfitters has a mix of brands in its back-to-school floorset, analysts wrote, mean to cater to consumers looking for a broad range of styles and trends.
"Store managers discussed a focus on throwback brands like Fila and adidas, but also partnerships with emerging brands like Chinatown Market," wrote the Bank of America analysts. "On the owned brand side, UO is bringing back Kimchee Blue in a bigger way to fit with its customer's interest in early 2000 styles."
In addition, intimates continue to have a larger presence in the store. Denim is also a main driver, and new silhouettes are prominently displayed.
Anthropologie launched plus sizes and ship to store, which shows the company is back on track with consumers' tastes
Anthropologie, part of Urban Outfitter's, launched two important initiatives, the analysts wrote.
"The Spring launch of plus was sufficiently successful to warrant an in-store test and is driving incremental sales," the analysts said. In addition, ship to store will be rolled out to all Anthropologie stores during the holiday season after driving strong traffic in test stores.
For the company, the analysts have a price objective of $33, reflecting positives such as a strong store base, high ecommerce penetration, and strong customer loyalty. The risks associated with Urban and Anthropologie are the company's "spotty track record of executing on all brands at once," the analysts wrote.
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