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Today in the Market (6/9/2022)

Good Evening. Stocks in the United States fell sharply on Thursday, as Wall Street fretted about critical inflation data due out on Friday.

The S&P 500 was down 2.38%, and the Dow Jones was down 1.94%. The Nasdaq Composite Index dropped by 2.75%. The majority of the losses occurred in the final hour of trading, as selling intensified as the session came to a close.

EARNINGS

Following the company’s first-quarter fiscal 2022 results, shares of Five Below, Inc. (FIVE) plummeted 8.3% in after-market trading hours on June 8. Investors were concerned about lower-than-expected sales and a gloomy outlook for the fiscal year. Despite the fact that diligent spending control helped the company achieve better-than-expected bottom-line performance, it was a significant drop from the previous year.

  • Earnings per share: $0.59 vs. $0.58 estimate
  • Revenue: $639.6 million vs. $653.2 million estimate

In fiscal 2022, Five Below expects gross capital expenditures of over $225 million, excluding tenant allowances. This includes about 160 new store openings, more than 200 conversions to the Five Beyond format, the development of a new distribution facility in Indiana, and system and infrastructure investments.

At closing, FIVE finished under by 1.37% at $133.51 per share

SHRINKFLATION

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Shrinkflation, or the phenomenon of corporations reducing the size of their items while maintaining (or even increasing) their prices, is on the rise all across the world. Inflation is causing items like toilet paper, Gatorade, and even restaurant serving sizes to lose mass in waves.

Some examples are Gatorade went from 32-ounce bottles to 28-ounce bottles, Kleenex reduced the number of tissues in a small box from 65 to 60 in an effort to save money, and Folgers reduced the size of its packages from 51 to 43.5 ounces.

Shrinkflation is based on the assumption that customers will prefer a slightly shrunken product to a slightly embiggened tab (or won’t notice at all). While shrinkflation is a tried and true means of dealing with wholesale price changes. The recent quick and broad increase in the cost of raw materials, shipping, and food has prompted a tidal wave of shrinkflation to reach the shelves, affecting a wide range of products at once.

Other food bills match the trend: Domino’s wings and Burger King nuggets have both reduced from ten to eight pieces in the last year as restaurant charges have risen 7.20%.

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