Core Viewpoint - Grocery Outlet Holding Corp. has faced significant challenges in 2024, with a year-to-date stock price decline of 37.1%, contrasting with the broader industry and S&P 500 gains of 4.3% and 14.5% respectively [1][10]. Financial Performance - The company's gross margin was negatively impacted by new technology platforms, decreasing by 100 basis points to 30.9% in Q2 2024 [2][6]. - Selling, General and Administrative (SG&A) expenses surged by 11.4% to $323.1 million, primarily due to increased costs related to independent operator commissions, store occupancy, and incentives [7]. - The Zacks Consensus Estimate for earnings has decreased to 92 cents per share for the current fiscal year and $1.13 for the next fiscal year, reflecting a decline of 3.4% [4]. Stock Valuation - Grocery Outlet is currently trading at a forward 12-month Price to Earnings (P/E) ratio of 15.87X, which is lower than the industry average of 18.53X and the median of 28.19X, suggesting potential undervaluation [8]. Business Strategy - The company is enhancing its market presence through diverse product assortments, targeted marketing, and e-commerce strategies, including partnerships with Instacart, DoorDash, and Uber Technologies for same-day delivery [9]. - Grocery Outlet's unique business model focuses on opportunistic sourcing and an Independent Operator structure, providing quality products at significant discounts [8]. Management Outlook - Despite ongoing operational challenges, management remains optimistic about stabilizing performance in the latter half of the year, indicating a potential recovery [10][11].

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 ...