11/07/2023

Grocery Outlet's Net Sales Reach $1B in Q3

Value retailer achieved strong earning results even as it ran into operational disruptions

Digital Editor

Grocery Outlet's comparable-store sales increased 6.4% in its third quarter.

Grocery Outlet Holding Corp.’s net income soared 55.1% to $27.1 million in its third quarter, ended Sept. 30. The retailer’s net sales rose by 9.3% to $1 billion, primarily due to comparable-store sales growth of 6.4% and the impact of new stores.

Transaction growth remains strong, with an increase of 8.6%, partly offset by a 1.9% decrease in average transaction size.

Also very strong is Grocery Outlet’s gross margin, which grew 31.4%, 80 basis points over the third quarter of last year.

Adjusted EBITDA increased by 20.0% to $68.1 million, or 6.8% of net sales.

It wasn’t all good news for the extreme discounter, though. The company implemented new technology platforms in late August, including upgrades to products, inventory, financial and reporting platforms. This includes a new store portal to provide operators with access to data aimed at improving operations. However, with the new implementation, Grocery Outlet experienced operational disruptions that are estimated to have negatively affected comps by approximately 150 basis points and gross margin by 50 basis points in the third quarter.

"We are pleased with our third-quarter performance and the underlying trends in our business," noted RJ Sheedy, CEO of Grocery Outlet. "During the third quarter, we implemented new systems to improve capabilities and drive efficiencies as we scale for future growth. Despite operational challenges during the transition, we delivered strong results, including same-store sales growth, gross margin expansion, and bottom-line leverage. Our value proposition continues to resonate with consumers, and we are gaining market share."

The company opened eight new stores in Q3, including its first store in Las Vegas, ending the quarter with 455 stores in eight states. Grocery Outlet is on track to open 27 stores in fiscal 2023, including its first store in Ohio.

Meanwhile, Grocery Outlet recently published its first annual ESG report, which “showcases the positive impact that we have on our communities, our people and our planet. Our mission of Touching Lives for the Better has always been at the heart of our business, and fulfilling this purpose has resulted in positive environmental and social impact throughout our 77-year history," said Sheedy.

Emeryville, Calif.-based Grocery Outlet offers products sold through a network of independently operated stores at more than 450 locations in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, Maryland and New Jersey. The company is No. 66 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.