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EMERYVILLE, Calif. - Grocery Outlet Holding Corp. (NASDAQ:GO) shares surged 11.2% after the discount grocery retailer reported better-than-expected second-quarter earnings and raised its full-year profit guidance, despite ongoing challenges in the retail food sector.
The company posted adjusted earnings of $0.23 per share for the second quarter, significantly beating analyst estimates of $0.17. Revenue increased 4.5% YoY to $1.18 billion, slightly below the consensus estimate of $1.19 billion. Comparable store sales rose 1.1%, driven by a 1.5% increase in transaction count, partially offset by a 0.4% decrease in average transaction size.
Grocery Outlet’s strong performance prompted management to raise its full-year adjusted earnings guidance to $0.75-$0.80 per share, up from its previous forecast of $0.70-$0.75 and above analyst expectations of $0.74. The company maintained its revenue outlook of $4.7-$4.8 billion.
"Our focus on execution is beginning to deliver results, enabling us to outperform our outlook for the second quarter," said Jason Potter, President and CEO of Grocery Outlet. "Our resonant value proposition and store initiatives continued to drive growth in traffic, while our margin drivers and spending discipline are yielding sustainable gains in profitability."
Gross margin declined 30 basis points YoY to 30.6%, primarily due to pricing adjustments on everyday staples designed to support the company’s value proposition. However, improvements in inventory management partially offset this decline.
The company opened 11 new stores and closed two during the quarter, ending with 552 locations across 16 states. Grocery Outlet continues to expect 33 to 35 net new store openings for fiscal 2025.
Operating income for the quarter was $12.8 million, which included $11.2 million in restructuring charges as part of the company’s plan to improve long-term profitability and optimize its footprint. The restructuring plan, which was substantially completed in the second quarter, is expected to cost approximately $63 million in total.
Looking ahead, Grocery Outlet expects comparable store sales growth of 1.0% to 2.0% for the full year, with adjusted EBITDA projected at $260-$270 million.
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