| --- | --- | --- | |------------------------------------|-------|-------| | | | | | | | | | Grocery Outlet Business Overview | | | | | | | | March 2021 | | | Disclaimer This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management's current views and estimates regarding the prosp ...

Financial Data and Key Metrics Changes - Revenue for Q3 2020 increased by 17.1% to $764.1 million compared to the same period last year, driven by a 9.1% increase in comparable store sales and the contribution from 35 net new stores [44][51] - Gross profit rose by 18.4% to $238.2 million, with gross margin increasing by 40 basis points to 31.2% due to reduced markdowns and faster inventory turns [46][51] - Adjusted EBITDA increased by 25.1% to $55.3 million from $44.2 million last year, while adjusted net income surged by 142% to $49.9 million or $0.50 per diluted share [51][59] Business Line Data and Key Metrics Changes - The company opened 10 new stores in Q3, bringing the total to 372 locations, with an additional 7 stores expected to open in Q4 [45][58] - Sales productivity trends in new stores remain healthy, reflecting elevated demand compared to last year [45] Market Data and Key Metrics Changes - The company experienced broad-based performance across all regions, vintages, and categories, with strong customer loyalty and satisfaction levels [93] - Traffic trends remained stable, while average basket size moderated as food away from home spending increased [44][51] Company Strategy and Development Direction - The company aims for 10% annual unit growth, with significant whitespace for expansion in existing states and neighboring markets, targeting over 1,500 new stores [16][15] - The focus remains on maintaining high standards in product assortment, merchandising, cleanliness, and safety as the company expands [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential, particularly in the Mid-Atlantic region, with plans to open 3 to 5 stores next year [17][19] - The company remains committed to reinvesting in talent and infrastructure to support long-term growth strategies [21][59] Other Important Information - The company has added a new Chief Information Officer, Harrison Lewis, to enhance digital platforms and operational capabilities [22] - The company is focused on digital marketing initiatives to increase brand awareness and customer engagement [35][38] Q&A Session Summary Question: CapEx and Store Builds - Inquiry about favorable terms on store builds and insights from Brian McAndrews regarding real estate opportunities [62] - Response indicated strong real estate pipeline and flexibility in site selection [63][64] Question: Basket Size and Shopping Frequency - Question about potential for increased basket size and shopping frequency post-COVID [68] - Management confirmed that customers are consolidating trips and buying more per visit [71] Question: Volatility in Food Away from Home - Inquiry about expected volatility in food away from home spending [75] - Management noted uncertainty but emphasized focus on delivering value [76] Question: Inventory Growth - Question regarding high inventory growth relative to comp guidance for Q4 [120] - Response indicated healthy inventory levels built for holiday demand [121] Question: E-commerce Strategy - Inquiry about the company's approach to e-commerce given increased penetration in the grocery sector [113] - Management reiterated that e-commerce is not a current priority but emphasized digital marketing efforts [114][118]

Financial Data and Key Metrics Changes - Revenue for Q2 2020 increased by 24.5% to $803.4 million compared to the same period last year, driven by a 16.7% increase in comparable store sales and contributions from 32 new store openings [41][46] - Adjusted EBITDA grew 34.7% to $60.6 million from $45 million in the previous year, reflecting gross margin expansion [9][46] - GAAP net income for the quarter increased to $29.3 million or $0.30 per diluted share, compared to a net loss of $10.6 million or $0.15 per diluted share in the prior year [46] Business Line Data and Key Metrics Changes - Comparable store sales growth was attributed to an increase in average transaction size, partially offset by a decline in traffic [42] - Gross profit increased by 27.7% to $253.8 million, with a gross margin rate of 31.6%, largely due to reduced markdowns and faster inventory turnover [43][44] - SG&A expenses grew 25.6% to $198 million, primarily due to higher variable commissions and COVID-related costs [44] Market Data and Key Metrics Changes - The company opened 7 new stores in Q2, bringing the total to 362 locations, with new stores performing well due to elevated food-at-home spending [42][18] - New customer acquisition is strong, particularly in developing markets like Los Angeles and Pennsylvania, contributing to overall growth [69] Company Strategy and Development Direction - The company plans to reinvest productivity savings to drive long-term growth, focusing on improving purchasing, selling, and scaling operations to support 10% annual unit growth [10][19] - Investments in training and development for independent operators (IOs) are being enhanced through a hybrid approach of in-store and virtual training [15][16] - The company is committed to addressing food insecurity and has raised $4 million through its "Independence from Hunger" campaign [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the challenges posed by COVID-19 and emphasized the importance of community support and operational flexibility [8][25] - The company anticipates comp sales growth to moderate as the economy reopens, with expectations for gross margin rates to align with prior year results [50][53] - Management remains focused on long-term growth and strategic investments despite ongoing uncertainties related to COVID-19 [54][58] Other Important Information - The company has increased its focus on diversity, equity, and inclusion initiatives, establishing measurable goals and educational resources [21][22] - Stock-based compensation expense for Q2 was $10.2 million, influenced by the full vesting of performance-based stock options [45] Q&A Session Summary Question: Availability of goods and performance breakdown between everyday and opportunistic items - Management noted ample supply from partners and a healthy inventory, emphasizing the importance of diversified supplier relationships [62][64] Question: Metrics on new customer count and new store productivity - New customer levels are healthy, particularly in developing markets, and new stores are performing well, benefiting from increased customer acquisition [69][72] Question: Background on expanding the supplier base during the pandemic - The supplier base has grown significantly, with a focus on establishing long-term strategic partnerships rather than transactional relationships [76][79] Question: Sequential slowdown in comp sales and category performance - The slowdown is attributed to customers consolidating trips, with average basket size remaining elevated but moderating as the economy reopens [88] Question: COVID-19 costs and support for independent operators - The company is absorbing some COVID-related costs to support operators, including PPE and cleaning expenses [89]