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05/12/2021

Why Grocery Outlet Is Focused on Fresh

Profit up, comps down in Q1
Gina Acosta
Executive Editor
Gina Acosta profile picture
Why Grocery Outlet Is Focused on Fresh
Grocery Outlet is experimenting with layout and fixturing updates to enhance the customer experience and support merchandising. 

Grocery Outlet says its value proposition focused on fresh food, value and the treasure hunt remains strong despite a mixed first quarter earnings report.

The company says it expects to open as many as 38 new stores in fiscal 2021. Three to five of these stores will be in the east, including two that have opened already year to date.

The grocer says its value proposition is as strong as ever, and that its ability to deliver extreme savings, a treasure hunt experience and a locally curated assortment in a friendly environment continues to resonate with customers.

Grocery Outlet is experimenting with layout and fixturing updates to enhance the customer experience and support merchandising. 

"Some recent tests include moving our produce section to the front of store and moving NOSH, one of our highest-performing categories, into the first aisle," said CEO Eric Lindberg during an earnings call. "We also continue to make in-store fixture investments to support purchasing and basket growth, including produce scales, new freestanding refrigerated fixtures and new produce tables that will enable IOs to better highlight our fresh offering. Ultimately, we want our stores to provide the optimal experience for customers, and this evolution is just one of the many ways we look to, to continuously enhance the customer shopping environment."

For the first quarter ended April 3, Grocery Outlet said net sales decreased by 1% to $752.5 million. Same-store sales decreased by 8.2% compared to a 17.4% increase in the same period last year. Net income increased 49.4% to $18.9 million, or 19 cents per diluted share.
Adjusted EBITDA decreased 13.7% to $48.8 million. Adjusted net income decreased 19.6% to $23.1 million, or $0.23 per non-GAAP diluted share.

Cash and cash equivalents totaled $95.3 million at the end of the first quarter of fiscal 2021.
Total debt was $449.7 million at the end of the first quarter of fiscal 2021, net of unamortized debt discounts and debt issuance costs. Net cash provided by operating activities during the first quarter of fiscal 2021 was $26.4 million. Capital expenditures for the first quarter of fiscal 2021, excluding the impact of tenant improvement allowances, were $36.6 million.

The company forecasts that same-store sales for the second quarter will be in the negative low double digits. Capital expenditures, net of tenant improvement allowances, are estimated to be approximately $130 million for fiscal 2021.

"The core drivers of our business remain strong across opportunistic supply, customer excitement, and the engagement of our independent operators," said CFO Charles Bracher. "As we navigate the transitory impact of reopening and peak-COVID comparisons from 2020, we continue to anchor ourselves in absolute performance metrics which remain stable. While it remains difficult to forecast the near term environment, we remain bullish for the future and continue to expand our footprint and invest in the business to deliver on our long-term algorithm."

Based in Emeryville, California, Grocery Outlet has more than 300 stores in California, Washington, Oregon, Pennsylvania, Idaho and Nevada. The company is No. 66 on The PG 100, Progressive Grocer’s list of the top food and consumables retailers in North America.