Core Viewpoint - Grocery Outlet Holding Corp. reported mixed results for Q2 2024, with earnings declining year-over-year despite surpassing revenue expectations, indicating challenges ahead due to technology disruptions and a downward trend in estimates [2][3][12]. Financial Performance - Adjusted earnings were 25 cents per share, beating the Zacks Consensus Estimate of 20 cents but down from 32 cents in the previous year [3]. - Net sales reached $1,128.5 million, exceeding the Zacks Consensus Estimate of $1,109 million, representing an 11.7% year-over-year growth [3]. - Comparable store sales increased by 2.9%, driven by a 5.1% rise in transactions, partially offset by a 2.1% decline in average transaction size [4]. Margins and Costs - Gross profit rose 6.9% year-over-year to $349.2 million, but gross margin contracted by 140 basis points to 30.9% due to technology disruptions [5]. - Adjusted EBITDA was $67.9 million, down from $70.5 million in the prior year, with an adjusted EBITDA margin shrinking to 6% [5]. - SG&A expenses increased by 11.4% to $323.1 million, while as a percentage of net sales, they decreased by 10 basis points to 28.6% [6]. Store Expansion - The company opened 11 new stores during the quarter, bringing the total to 524 stores across 16 states, with plans to open 62-64 net new stores in 2024 [7]. Financial Outlook - Management projects 2024 net sales between $4.30 billion and $4.35 billion, compared to $3.97 billion in 2023, with expected comparable store sales growth of 3.5% [9]. - The company anticipates adjusted EBITDA between $252 million and $260 million for 2024, with adjusted earnings projected in the range of 89-95 cents per share [10]. - For Q3 2024, comparable store sales growth is expected to be approximately 1.5%, with a gross margin forecast of around 31% [11]. Estimate Trends - Consensus estimates have trended downward, with a significant shift of -20.88% noted over the past month [12]. - The stock currently holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [14]. Industry Comparison - Grocery Outlet operates within the Zacks Consumer Products - Staples industry, where competitor Kimberly-Clark reported a revenue decline of 2.1% year-over-year [15].

Investment Overview - Grocery Outlet Holding (NASDAQ:GO) has been rated as a sell due to uncertainty regarding same-store sales (SSS) performance and potential misses on FY24 guidance, leading to a decline in share price [2] - The company is expected to continue facing poor SSS growth in the near term as the trade-down motion has ended and competition in the industry is intensifying [2] 2Q24 Earnings - In 2Q24, GO reported net sales of $1.128 billion, reflecting an 11.7% year-over-year growth, with SSS growth at 2.9% [3] - Gross profit increased by 6.9% to $349.2 million, resulting in a gross margin of 30.9%, which is a 140 basis points decline from 2Q23 [3] - The EBIT margin decreased by 80 basis points from 3.9% in 2Q23 to 3.1% in 2Q24, influenced by a high tax rate of 32.5% compared to 30.7% in the previous year, leading to a net income decline of 17% from $24.1 million to $20 million [3] SSS Growth Challenges - SSS growth in 2Q24 was supported by lower pricing, which contributed negatively by -2.1%, while consumer traffic contributed positively by 5.1% [4] - The macroeconomic environment is less favorable for GO, with food at home inflation at only 1% year-to-date and real wage growth at 4-5%, reducing the incentive for consumers to trade down [4] - Management indicated a slowdown in traffic starting in June, with guidance for 3Q24 SSS growth at approximately 1.5%, indicating further deceleration [4] Competitive Environment - The end of the trade-down motion has led to increased competition, with competitors ramping up promotions, which negatively impacts GO's margins [5] - GO's management noted heightened promotional pressure from competitors throughout 2Q24, which is expected to continue [5] - GO's revenue of approximately $4.2 billion is significantly smaller compared to competitors like Kroger ($150 billion) and Walmart ($665 billion), limiting its ability to compete on pricing [5] Valuation - If GO continues to report poor SSS growth, its valuation is likely to face further pressure, with the forward PE ratio declining from approximately 27x to 18x over the past year [7] - Comparatively, Kroger and Albertsons Cos are valued at around 12x and 9x respectively, indicating potential for GO's valuation to decrease further [7] Conclusion - A sell rating is maintained for GO as the trade-down motion has largely ended and the demand environment is becoming more promotional [9] - SSS growth is expected to continue slowing, and the company's smaller scale relative to larger competitors puts profit margins at risk [9] - There is significant room for valuation decline, especially with ongoing earnings pressure anticipated [9]

Core Insights - Grocery Outlet Holding Corp. reported second-quarter 2024 results with both net sales and adjusted earnings exceeding Zacks Consensus Estimates, although earnings declined year-over-year [1][2][8] Financial Performance - Adjusted earnings were 25 cents per share, surpassing the Zacks Consensus Estimate of 20 cents but down from 32 cents in the same quarter last year [2] - Net sales reached $1,128.5 million, exceeding the Zacks Consensus Estimate of $1,109 million, representing an 11.7% year-over-year growth [2] - Comparable store sales increased by 2.9%, driven by a 5.1% rise in transaction numbers, partially offset by a 2.1% decline in average transaction size [3] Margins & Costs - Gross profit rose 6.9% year-over-year to $349.2 million, but gross margin contracted by 140 basis points to 30.9% due to technology implementation disruptions [4] - Adjusted EBITDA was $67.9 million, down from $70.5 million in the previous year, with an adjusted EBITDA margin shrinking by 100 basis points to 6% [4][5] - SG&A expenses increased by 11.4% to $323.1 million, while as a percentage of net sales, they decreased by 10 basis points to 28.6% [5] Store Expansion - The company opened 11 new stores during the quarter, alongside the acquisition of 40 stores from United Grocery Outlet, bringing the total to 524 stores across 16 states [6] - Grocery Outlet plans to open 62-64 net new stores in 2024, including 40 from the United Grocery Outlet acquisition and 22 to 24 new stores in existing markets [6] Other Financial Aspects - At the end of the quarter, Grocery Outlet had cash and cash equivalents of $67.1 million, long-term debt of $373.6 million, and stockholders' equity of $1,220.8 million [7] - Net cash provided by operating activities was $41.6 million, with capital expenditures of $40.2 million, and management anticipates capital expenditures of about $200 million for 2024 [7] Outlook - Management projects 2024 net sales between $4.30 billion and $4.35 billion, compared to $3.97 billion in 2023, with expected comparable store sales growth of 3.5% [8] - The company anticipates a full-year gross margin of 30.5%, down from a previous guidance of 31.3%, indicating an 80-basis point contraction from the prior year [8] - Adjusted EBITDA is expected to be between $252 million and $260 million, with adjusted earnings projected in the range of 89-95 cents per share [9]

Grocery Outlet Holding Corp. (GO) reported $1.13 billion in revenue for the quarter ended June 2024, representing a year-over-year increase of 11.7%. EPS of $0.25 for the same period compares to $0.32 a year ago. The reported revenue represents a surprise of +1.75% over the Zacks Consensus Estimate of $1.11 billion. With the consensus EPS estimate being $0.20, the EPS surprise was +25.00%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectatio ...

Grocery Outlet Holding Corp. (GO) came out with quarterly earnings of $0.25 per share, beating the Zacks Consensus Estimate of $0.20 per share. This compares to earnings of $0.32 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 25%. A quarter ago, it was expected that this supermarket company selling discount, overstocked and closeout products would post earnings of $0.18 per share when it actually produced earnings of $0.09, ...

EMERYVILLE, Calif., June 26, 2024 (GLOBE NEWSWIRE) -- Grocery Outlet Holding Corp. (NASDAQ:GO) ("Grocery Outlet" or the "Company") today launched its 14th consecutive Independence from Hunger Food Drive to combat food insecurity. From June 26 – July 31, the campaign will collect cash donations and pre-made bags of nonperishable foods at Grocery Outlet's 470+ locations that will be distributed to local food agency partners. In addition, online donations made at GroceryOutlet.com/Donate will support Grocery O ...

A month has gone by since the last earnings report for Grocery Outlet Holding Corp. (GO) . Shares have added about 1.9% in that time frame, underperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Grocery Outlet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Grocery Outlet's Q1 Earnings Mis ...

On May 7, 2024, Grocery Outlet issued a press release announcing its financial results for the first quarter of 2024. Among other items, Grocery Outlet reported non-GAAP earnings per share of $0.09, missing consensus estimates by $0.09. The Company disclosed that "[g]ross margin decreased by 180 basis points to 29.3%", stating that "the Company experienced disruptions as a result of the implementation of new technology platforms in late August 2023" and that "[s]uch disruptions are estimated to have negativ ...

NEW YORK, May 16, 2024 /PRNewswire/ -- Pomerantz LLP is investigating claims on behalf of investors of Grocery Outlet Holding Corp. ("Grocery Outlet" or the "Company") (NASDAQ: GO). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, ext. 7980. The investigation concerns whether Grocery Outlet and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. [Click here for information about joining the class action] O ...

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key ...