How Five Below Uses AI to Double Stores and Deliver Results

Five Below’s AI Strategy: Four Smart Steps Driving Growth

Five Below, the popular discount retailer known as "the cool store for kids, the yes store for parents," is using AI to sharpen its competitive edge and boost results. Founded in Philadelphia in 2002, the company now operates nearly 1,800 stores across 43 states, generating over $4 billion in revenue. With plans to open 150 new stores in fiscal year 2025 and ambitions to double its footprint soon, Five Below is focused on using AI not just as a tool for efficiency, but as a strategic lever for sustainable growth.

1. Prioritize Strategy Over Scaling

Many companies get lost in operational details or endless scaling discussions without a clear strategy. Five Below keeps its mission front and center to guide AI investments: delivering value to customers and standing out from competitors. This clarity helps avoid distractions and aligns resources where they matter most—improving customer experience and giving store associates more time to engage shoppers. At the corporate level, AI frees staff from routine tasks so they can focus on strategic priorities.

2. Protect Digital Strategists

Five Below teamed up with invent.ai, an AI platform specializing in retail decision-making. Their algorithms forecast sales across millions of SKUs, optimizing inventory to reduce overstock and stockouts while driving sales growth. CEO Winnie Park highlights how smarter inventory selection allows store employees to focus on customers, improving conversion rates and store experience. This operational efficiency translates to increased labor hours dedicated to customer service and simplified processes that make shopping easier and more enjoyable.

3. Fix a Glaring Value Chain Pain Point

Inventory management was Five Below’s biggest bottleneck. Poor forecasting leads to lost sales from stockouts and margin erosion from overstock. Instead of piling on manual work with complex rules and spreadsheets, the company embraced AI to handle the complexity of diverse product categories—from phone chargers to candy and home goods. This shift boosted planner efficiency by 80%, giving high-value employees more time for strategic work and improving job satisfaction. The outcome: better-stocked shelves with trendy products that keep customers coming back.

4. Mandate Accountability With Real Business Metrics

Five Below tracks AI success through direct business outcomes like sales growth, margin improvement, and cash flow. The company boasts a rapid one-year payback on new stores and uses AI to support its aggressive expansion. As the store network grows, AI tools adapt inventory distribution to new markets, ensuring products match local demand. Recent quarterly results reflect this momentum—total sales surged 19.5% to $971 million, with comparable sales up 7.1% despite a tough retail environment. These numbers show customers are responding well to the strategic use of AI.

For executives looking to build effective AI strategies, Five Below’s approach offers clear lessons: keep strategy central, protect your digital experts, target critical pain points, and tie AI investments to measurable business results. This practical framework helps move AI beyond buzzwords to real impact.