Why a Fund Just Added $18.5 Million to Grocery Outlet Despite a 40% One-Year Stock Slide

Core Insights - Rivermont Capital Management has significantly increased its stake in Grocery Outlet by nearly 1.1 million shares, valued at approximately $21.67 million as of September 30, indicating investor confidence despite recent stock performance [1][2]. Company Overview - Grocery Outlet operates a network of independently run stores across 16 states, focusing on offering name-brand products at discounted prices, appealing to value-conscious consumers [4][6]. - The company's market capitalization stands at $1.01 billion, with a trailing twelve months (TTM) revenue of $4.57 billion and a net income of -$4.44 million [4]. Financial Performance - In the third quarter, Grocery Outlet reported a 5.4% increase in net sales to $1.17 billion, driven by new store openings and increased customer traffic, despite a decline in average transaction size and compressed margins [5]. - Adjusted EBITDA for the quarter was $66.7 million, down from $72.3 million the previous year, attributed to increased promotions and restructuring costs [5]. Market Context - Grocery Outlet's stock has decreased nearly 40% over the past year, significantly underperforming the S&P 500, which has risen about 15% [3]. - The company ended the quarter with 563 stores and plans to continue selective expansion, with management optimistic about store refresh initiatives potentially boosting same-store sales by 2026 [8].