Offered millions to stay, another leader leaves troubled Five Below

Management turnover has continued at Center City Philadelphia-based Five Below, a 1,500-plus store chain that had gambled on national growth as a way to boost profits.

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

Five Below had offered Romanko millions to stay, according to SEC documents. On July 30, two weeks after veteran CEO Joel D. Anderson left, Romanko was promised a million-dollar stock bonus if he stayed in the job a year and met performance goals.

Romanko was also one of four “key” Five Below executives offered a separate $1.5 million “retention” bonus to stay on for up to two years, SEC documents show, and he got a $50,000 raise in his base annual pay, 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 additional year’s salary and health insurance for helping remaining managers learn his work.

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

Anderson, the company’s chief executive since 2015 and architect of its move in recent years to larger stores and more expensive products, left Five Below in July following two quarters of disappointing profit reports. The company expects lower profits next quarter as it trims products and slows new store openings.

The chain’s shares tumbled from over $200 in March to $76 two days after Anderson announced his departure. The stock fell as low as $65 in August before a partial recovery to just over $100 in mid-September; shares closed Monday at $88.35, down 4.6%.

Five Below boosted sales, profits, and market valuations during the pandemic as other retailers sagged. But more recently, Five Below’s performance has slipped as the rest of the industry recovered. The 77 stocks in Standard & Poor’s Retail Select Industry index are up an aggregate 8% so far this year, while Five Below is down by more than half.

After Anderson’s departure, longtime chief financial officer Kenneth Bull 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 on through the end of fiscal 2024. That’s on top of $825,000 in annual salary — and another $1 million worth of stock if he meets performance goals over the next year, or if the company is sold before then.

Cofounder and board chair Thomas Vellios at the same time took on extra powers as interim executive chairman, with a stock award worth $2 million, if he stays a year or the company is sold before that, plus up to $500,000 to cover his expenses visiting Five Below worksites.

Under the new team, Five Below executives in an August conference call told investors and analysts that the company would slow down 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 preteens and teens, a cool store for kids, and the ‘Yes’ store for parents,” Vellios said during the conference call. But “over the past few years, we lost some of that sharp focus of 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 products “stretched our teams,” Vellios said. He added that the problems are “fixable,” and promised a better shopping experience, to deliver “more wow and value.”

In the same call, Bull said Five Below boosted prices and “overexpanded” its product offerings, but had failed to exercise the “strict editing process of past years” in dropping less-promising items. Antitheft measures, he noted, had also “increased complexity and workload.”

Bull said the company planned to reduce the number of products for sale, reemphasize items sold for $5 and less, and “increase the flow of newness” with novel and seasonal products.

The company plans to open between 150 and 180 new stores over the next year, Bull added. That’s a slowdown, given that Five Below opened 260 new stores during the year ended July 31.

The company also said it was ending work-from-home arrangements for its Philadelphia headquarters employees, and planned unspecified additional cuts.