Fueled by higher transactions and baskets, Grocery Outlet turned in a strong second quarter.
It was a milestone second quarter for Grocery Outlet Bargain Market, which hit $1 billion in quarterly net sales for the first time in its history. For the three-month period ending July 1, the extreme discounter posted a 12.5% gain in net sales and a 9.2% spike in comp sales on a year-over-year basis.
Numbers went in the right direction in other financial performances. Net income jumped 21.8% compared to the second quarter of 2022 to reach $24.5 million, while adjusted EBITDA also scored healthy-double digit increases, up 22.7% to $70.5 million.
"Our second quarter results came in ahead of our expectations and were driven by strong same-store sales growth and gross margin expansion. Our differentiated model and compelling value proposition are resonating with both new and existing customers, and our performance is being driven by strong transaction growth," summed up CEO RJ Sheedy. "Looking forward, we are pleased to be raising guidance for the year and we are well positioned for future growth."
To Sheedy’s point, Grocery Outlet is lifting its outlook for the remainder of fiscal 2023. Net sales were revised upwards to approximately $3.95 billion from the previous estimate of $3.90 billion and comparable store sales increases were adjusted from 7% to 8%.
Taking stock at the midpoint of the year, Grocery Outlet reported that net sales climbed 14.3% to $1.98 billion for the first 26 weeks of the fiscal year. Robust lifts in transaction numbers and transaction sizes helped boost sales comps by 10.6% for the first half of FY2023.
While measuring its financial performance, the retailer also recapped recent investments. Grocery Outlet opened four new stores during the quarter and shuttered one location and anticipates adding 25 to 28 locations by the end of fiscal 2023. “We continue to work on growing the future store count,” said Sheedy, noting that the company is exploring organic growth, opportunistic real estate and potential regional acquisitions.
During the earnings webcast, Sheedy emphasized the work of Grocery Outlet’s independent operators and noted that the company is committed to investing in capital to upgrade fixtures, implement new technologies and other tools to help operators grow sales and profits. “Interest in becoming an operator is at an all-time high. We received nearly 30,000 leads over the last year, which is up 50% over the last four years,” he added.
While Grocery Outlet is faring well at a time when consumers are seeking value, the company is also reaching out to those who have been affected by ongoing challenges. Sheedy shared that the company’s recently completed Independence from Hunger campaign, conducted in tandem with its operators and supplier partners, raised a record $4 million this year and benefited more than 500 nonprofit organizations.
Emeryville, Calif.-based Grocery Outlet offers products sold through a network of independently operated stores at more than 400 locations in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, New Jersey and Maryland. The company is No. 66 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.