Grocery Outlet(GO) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 13.1% increase in top-line growth for Q3 2019, reaching $652.5 million, driven by new store openings and a 5.8% increase in comparable store sales [10][44] - Adjusted EBITDA increased by 13.2% to $44.2 million, despite incurring $1.8 million in public company costs not present in the same period last year [10][11] - GAAP net income for the quarter was $12.4 million, or $0.13 per diluted share, compared to $7.7 million, or $0.11 per diluted share in the prior year [51] Business Line Data and Key Metrics Changes - The company opened eight new stores during the quarter, bringing the year-to-date total to 24 new locations, with strong performance across both mature and developing markets [16][34] - The gross margin dollars rose to $201.1 million, a 14.5% increase compared to the same period last year, with a gross margin rate expansion of 40 basis points to 30.8% [46] Market Data and Key Metrics Changes - Comparable store sales growth was broad-based, driven by customer traffic and average ticket increases across various store regions and vintages [45] - The company expects to maintain a long-term comp store sales growth of 1% to 3% annually, primarily through its three growth drivers [18] Company Strategy and Development Direction - The company remains focused on a differentiated business model that combines opportunistic sourcing with local independent operators to enhance customer experience and drive sales [17][19] - The company plans to strategically reinvest productivity savings back into the business to support future growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed excitement about future opportunities and commitment to delivering consistent growth while operating for long-term success [18] - The company raised its full-year 2019 earnings guidance, expecting net sales to be slightly above $2.55 billion and comparable store sales growth of approximately 4.9% for the full year [57][61] Other Important Information - The company has begun a network optimization study to evaluate its supply chain for long-term growth [32] - The company has filled a newly created leadership position for the Executive Vice President of the East Region to support growth plans in the Mid-Atlantic market [19][38] Q&A Session Summary Question: Continuous improvement and dashboard productivity - Management discussed significant investments in core operating systems over the past six years, enhancing productivity through tools like the real-time order guide and business intelligence dashboards [67][72] Question: Marketing strategy for awareness and engagement - Management highlighted the evolution of marketing strategies from traditional methods to modern digital platforms, emphasizing local operator engagement and community involvement [75][78] Question: Long-term comp guidance and gross margin sustainability - Management reiterated that the long-term comp guidance of 1% to 3% is a disciplined approach to ensure financial consistency, while gross margin improvements are expected to stabilize moving forward [82][86] Question: Investment of incremental gross profit dollars - Management indicated that reinvestment opportunities include specialization in buying processes, supply chain enhancements, and marketing initiatives to support long-term growth [89][93] Question: New store productivity and regional growth plans - Management expressed satisfaction with new store performance, which aligns with underwriting expectations, and outlined plans for continued expansion in both mature and developing markets [120][123]