Why Is Grocery Outlet (GO) Down 13.2% Since Last Earnings Report?

Core Viewpoint - Grocery Outlet Holding Corp. reported mixed results for Q3 2025, with earnings exceeding estimates but declining year-over-year, while net sales fell short of expectations despite a year-over-year increase [3][4][5]. Financial Performance - Adjusted earnings were 21 cents per share, beating the Zacks Consensus Estimate of 19 cents but down from 28 cents in the previous year [4]. - Net sales reached $1,168.2 million, missing the Zacks Consensus Estimate of $1,182 million, but reflecting a 5.4% year-over-year growth [5]. - Comparable-store sales increased by 1.2%, driven by a 1.8% rise in transactions, offset by a 0.6% decrease in average transaction size [5]. Margin and Cost Analysis - Gross profit grew 3% year-over-year to $355.1 million, with a gross margin contraction of 70 basis points to 30.4% [6]. - SG&A expenses rose 8.7% to $331 million, representing 28.3% of net sales, primarily due to new store costs and higher incentive compensation [7]. - Adjusted EBITDA was $66.7 million, down 7.7% year-over-year, with a margin decrease of 80 basis points to 5.7% [7]. Store Expansion and Strategy - The company added 13 new stores and closed two, totaling 563 stores across 16 states, with plans to open 37 net new stores in 2025 [8]. - A store refresh program was initiated in select pilot stores, with plans to expand to 20 stores by year-end 2025 and at least 150 stores by the end of 2026 [8]. Financial Health - Cash and cash equivalents stood at $52.1 million, with long-term debt of $481.5 million and stockholders' equity of $1,198.6 million [9]. - The company had $175 million remaining borrowing capacity under its revolving credit facility, with a net leverage ratio of 1.8x adjusted EBITDA [9]. 2025 Outlook - Management revised fiscal 2025 guidance, expecting net sales between $4.70 billion and $4.72 billion, and comparable-store sales growth of 0.6-0.9% [11]. - Adjusted EBITDA is projected between $258 million and $262 million, with adjusted earnings expected to be 78 to 80 cents per share [12]. Industry Context - Grocery Outlet is part of the Zacks Consumer Products - Staples industry, which has seen mixed performance, with Procter & Gamble reporting a 3% year-over-year revenue increase [18].