Grocery Outlet Balances Growth and Execution During Q2
Grocery Outlet, which is rapidly expanding its U.S. footprint, notched some notable gains during its recently-wrapped second quarter. The discount grocer posted a 4.5% increase in net sales for the period ending June 28, with a 1.1% lift in comps and a slight bump in gross margin.
Although the company’s performance exceeded analyst expectations, the financial report did reveal a dip in net income, which reached $5.0 million during Q2, compared to $14.0 million during the same quarter last year. Adjusted income came in at $22.9 million versus $25.1 million in 2024, and restructuring charges led to an operating loss of $9.7 million Adjusted earnings per share (EPS) were at $0.23 for the quarter, above the estimates of $0.17.
To be sure, it was a busy quarter for Grocery Outlet, which made changes as part of its ongoing restructuring plan and opened 11 new stores while closing two locations.
[RELATED: Grocery Outlet Enters Central Ohio]
CEO Jason Potter noted that the company surpassed Q2 projections and is making strides in its efforts to enhance execution across many parts of the business, as consumers still seek value in an uncertain economic climate.
“Our resonant value proposition and store initiatives continued to drive growth in traffic, while our margin drivers and spending discipline are yielding sustainable gains in profitability,” he said. “We also achieved important progress against the key strategic objectives we outlined last quarter. By continuing to strengthen new-store performance, secure top talent, address execution gaps, and improve execution at scale, we will create lasting value for our customers, independent operators, and shareholders.”
The discounter provided an update on its restructuring plan that was launched during the last quarter of FY2024. According to Grocery Outlet, the plan includes the termination of 28 leases for unopened stores in what it seems “suboptimal” locations and the discontinued development of certain future store sides in which leases hadn’t been signed.
Looking ahead, the company is largely sticking to its previous guidance for the 2025 fiscal year. The exception is adjusted EPS, which is expected to increase due to favorable interest expenses.
In the earnings call, Potter said that Grocery Outlet has “significant white space” in its future. “We’re taking deliberate steps to improve performance across our store base. We’re rebalancing store growth towards a healthy mix of core versus new markets, adjusting our internal returns framework, developing more robust site selection criteria and testing several key commercial pilots to drive our performance,” he explained.
He also underscored the commitment to thoughtful growth. “As we drive improvements in our new stores, we are reviewing our store plans, carefully selecting locations with high potential and the ability to generate store economics that meet or exceed our hurdle rates. Slowing down our store expansion will allow us to dial in the model to find the optimal level of sustainable unit growth that generates solid returns on invested capital. As the result of our disciplined underwriting standards and focused execution, we expect returns to steadily improve,” Potter declared.
In addition to its physical store footprint, Grocery Outlet is being more strategic in its assortment, such as introducing more store brand products. During the second quarter, for example, the retailer rolled out a new private label wine.
“Given the current state of oversupply in the wine industry, we recognized a unique window of opportunity here to launch a compelling selection of wines at under $5 a bottle. This item has generated significant buzz and sales,” the CEO reported.
Emeryville, Calif.-based Grocery Outlet offers products sold through a network of independently operated stores at more than 550 locations in California, Washington state, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, North Carolina, New Jersey, Georgia, Ohio, Alabama, Delaware, Kentucky and Virginia. The company is No. 65 on The PG 100, Progressive Grocer’s 2025 list of the top food and consumables retailers in North America.
