Grocery Outlet Focused on Expansion, Talent

Gina Acosta
Executive Editor
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Grocery Outlet Focused on Expansion, Talent
The company opened seven new stores in Q2, ending the quarter with 362 stores in six states. 

Grocery Outlet Holding Corp. is accelerating talent and operational initiatives to drive long-term growth and shareholder value after posting yet another impressive fiscal quarter.

The Emeryville, Calif.-based discounter's second-quarter sales and profit decelerated from the first quarter but still benefited tremendously from coronavirus-fueled buying. For the second quarter ended June 27, net sales increased 24.5% to $803.4 million. Same-store sales increased 16.7%. Net income increased by $40 million to $29.3 million. Adjusted net income increased 189.2% to $41.8 million. And adjusted EBITDA increased 34.7% to $60.6 million.

Grocery Outlet's discounted consumables offering is poised to deliver strong financial performance as a result of the economic recession. In an earnings call with analysts, CEO Eric Lindberg said the company's approach to leveraging this opportunity will be three-pronged: advancing how the company buys to drive a leadership position in secondary markets, advancing how the company sells by attracting the best operator candidates, and continuing to scale the business to support 10% annual unit growth.

“We are very pleased with our strong operational execution in the second quarter," Lindberg said. "Our financial results reflect incredible teamwork across the organization including our independent operators, distribution center teams, and our corporate staff. While the safety of our communities and the entire Grocery Outlet team is our number one priority, we remain committed to delivering exceptional value to our customers while continuing to extend our reach. Consistent with our approach to reinvesting in the business, we are accelerating talent and operational initiatives which we believe will drive long-term growth and shareholder value.”

The company said quarter-to-date same-store sales growth is tracking at approximately 10% driven by an increase in average basket size partially offset by declines in store traffic. The company anticipates that same-store sales growth will continue to moderate as the economy reopens.

The company opened seven new stores ending the quarter with 362 stores in six states. Grocery Outlet currently expects to open between 30 and 32 stores this year with no additional closures planned. The company continues to build its real estate pipeline to support 10% annual unit growth.

Total debt was $460.1 million at the end of the second quarter, compared to $475.5 million at the end of the same period in fiscal 2019. During the second quarter of fiscal 2020, the company repaid in full the $90 million drawn on the revolving credit facility of its First Lien Credit Agreement.

“Our second quarter financial performance reflects the strength of our business model and the incredible dedication of our independent operators and employees," said CFO Charles Bracher. "While we are not providing formal 2020 earnings guidance at this time due to the uncertainty related to COVID-19, our liquidity position is strong and we are actively reinvesting in support of our long-term strategic objectives.”

For its first quarter of fiscal 2020 ended March 18, Grocery Outlet saw dramatic sales lifts, reporting a 25.4% net sales increase to $760.3 million, from $606.3 million in the year-ago period, while same-store sales grew 17.4%, compared to a 4.2% rise last year.

Additionally, the company recently hired Andrea Bortner to the newly created role of chief human resources officer, a role to which the seasoned professional brings 30 years of experience in talent acquisition and development, as well as organizational development.

Emeryville, Calif.-based Grocery Outlet is No. 66 on The PG 100, Progressive Grocer’s list of the top food retailers in North America.