Value-Minded Shoppers Lift Grocery Outlet in Q1

Discount grocer reports solid results and revises guidance upward for the year
Lynn Petrak
Senior Editor
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Grocery Outlet opened its fiscal year on solid footing, with growth in net and comp sales and an expanded customer base.

At a time when consumers are hunting for value, Grocery Outlet Holding Corp. reported that its net sales and sales comps rose by double digits during the first quarter of its fiscal year. According to the company's latest financial report, net sales grew by 16.1% to reach $965 million while comps went up 12.1% in the period and adjusted EBITDA climbed by 36.9% to top $63.1 million.

“Our results exceeded our expectations, driven by strong sustained store sales growth, margin expansion and bottom-line leverage,” summed up President and CEO R.J. Sheedy in a May 9 earnings call.

[Read more: "The Upside, Downside of Inflation on Grocers: Report"]

The strong first quarter led Grocery Outlet to lift its outlook for the rest of the fiscal year. Company CFO Charles Bracher reported that sales comps are projected grow at a rate of 5%-6% compared to the previous estimate of 4.5%-5.5%, while net sales are pegged to land at $3.90 billion, compared to the previous lower end of $3.85 billion. Anticipated adjusted EBITDA is now between $240 -$256 million, versus the earlier projection of $237-$243 million.

A deeper dive into the numbers shows that it’s not just overall inflation that’s fueling sales growth at Grocery Outlet, as the number of transactions and average transaction sizes increased during the first few months of the year. “Our comp sales growth continue to be led by strong customer count, which increased 8% versus last year, while our average basket size increased 4%,” explained Sheedy. He noted that internal survey data shows that strength is evident across all customer types and income levels, including shoppers with a higher average income.

Grocery Outlet is building for the future in a number of ways. The company completed refinancing in February to lower borrowing costs and increase liquidity and continues to invest in expansion. During Q1, the extreme value retailer opened three new stores and reported that it is on track to open 25 to 29 new stores yet this year.  

“Evolving our business is about introducing new capabilities to increase our relevancy and improve how we operate,” added Sheedy. “Primary opportunities include enhancing our assortment, investing in technology to drive efficiencies and using data and analytics to improve all aspects of our business.”

The company is also bolstering support of its independent operators to elevate their respective store performance. “Independent operators are at the heart of what makes Grocery Outlet so unique and successful. Our IO’s are energized by the current sales moment and the healthy mix of variety and amazing deals from our supplier partners. We remain focused on supporting operators to drive sales and improve margins,” shared Sheedy. He cited the deployment of technologies to modernize and simplify store processes, such as handheld devices that reduce manual product receiving work and ongoing enhancements to ordering platforms.

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. 70 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America.

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