Why Is Grocery Outlet (GO) Down 8.2% Since Last Earnings Report?

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].