Grocery Outlet's (GO) Q2 Earnings Beat, Comps Jump 2.9% Y/Y

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]