How Grocery Outlet is Winning the Grocery Game

Gina Acosta
Executive Editor
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How Grocery Outlet is Winning the Grocery Game
Grocery Outlet launched its initial public offering in June

Grocery Outlet is continuing to accelerate sales and profit growth by attracting scores of shoppers to its stores chock full of fresh food and other groceries at value prices.

The Emeryville, Calif.-based deep discounter reported another impressive quarter of financial results for the three-month fiscal period ended Sept. 28.

For its third quarter, Grocery Outlet increased same-store sales by an astonishing 5.8%  as the retailer cashes in on the American consumer's unrelenting desire to save money on food.

Net sales at Grocery Outlet increased by 13.1% to $652.5 million, from $576.8 million in the third quarter of fiscal 2018.

“We were pleased with our third-quarter performance, as customers continued to respond to the unbeatable values and treasure-hunt experience delivered by local independent operators,” said Eric Lindberg, CEO of Emeryville, Calif.-based Grocery Outlet. “The increase in comparable-store sales was once again attributable to broad-based strength across product categories, regions and vintages, while new stores continued to perform well. In addition, we made strategic enhancements in our business to support our long-term growth objectives.”

Grocery Outlet, which went public in June, has been rapidly expanding its chain of more than 300 privately owned supermarkets. According to the company, its stores are generating higher-than-industry-average margins, averaging more than $140,000 in revenue per store per week.

On its website, Grocery Outlet detailed five main reasons for its success in today’s ultra-competitive grocery landscape:

  1. Meeting the bargain shopping mentality (bargain shopping is now a mainstream trend among food shoppers)
  2. Satisfying the thrill of unusual bargains (shoppers love to discover hard-to-find groceries at bargain prices, distinguishing Grocery Outlet from other food retailers)
  3. Adjusting to the shift in consumer shopping behavior (consumers no longer consider supermarkets or supercenters as their one-stop shop for produce and household items)
  4. Operating on a unique business model (company has bargaining power to purchase excess inventory from CPG companies, and then pass the savings to its customers)
  5. Catering to local customer demands (Grocery Outlet’s independent operators have the flexibility to select merchandise based on what their customers need)

During the quarter, the company opened eight new stores and closed one, ending the quarter with 337 stores in six states.

Net income for the third quarter was $12.4 million, or 13 cents per diluted share, compared with net income of $7.7 million, or 11 cents per diluted share, in the third quarter of fiscal 2018.

“We look forward to driving continued comparable-sales growth by providing our customers deep value and a unique treasure-hunt shopping experience," added Lindberg. "We remain committed to reinvesting in our business to support our network of independent operators, optimize and expand our supplier base, and drive brand awareness and engagement. We are excited about the opportunities ahead as we maintain our focus on delivering measured and consistent growth while building the business for long-term success."

Grocery Outlet is No. 38 on Progressive Grocer's 2019 Super 50 list of top grocers in the United States