Grocery Outlet Q1 Earnings Beat Estimates Despite Weak Comps

Grocery Outlet Holding Corp. GO reported first-quarter 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While net sales increased year over year, earnings declined from the year-ago period. Results reflected improving traffic trends and progress in restoring the company’s opportunistic product mix, though comparable-store sales remained soft amid continued pressure on customer basket sizes. Shares of Grocery Outlet rose 16.4% during the after-market trading session yesterday, as investors appeared encouraged by the company’s better-than-expected results. Adjusted EBITDA came in at the high end of management’s guidance range, and management reaffirmed the fiscal 2026 outlook despite ongoing margin and basket-size pressures.GO’s Quarterly Performance: Key InsightsGrocery Outlet delivered adjusted earnings of 5 cents a share for the first quarter of fiscal 2026, beating the Zacks Consensus Estimate of 2 cents by 150%. The figure declined from adjusted earnings of 13 cents reported in the year-ago quarter.Net sales increased 3.6% year over year to $1,166.4 million and edged past the consensus mark of $1,153 million by 1.2%. The increase was primarily driven by contributions from new store openings, partially offset by lower comparable-store sales.Comparable-store sales declined 1% in the quarter compared to growth of 0.3% in the prior-year period. The drop stemmed from a 3.1% decrease in average transaction size, partly offset by a 2.1% increase in the number of transactions. Management noted that traffic trends improved sequentially throughout the quarter, with weekly traffic growth in March ranging between 2% and 5%.Management highlighted meaningful progress in increasing the mix of opportunistic products, which rose by nearly 2 percentage points since the start of the year. Grocery Outlet stated that these higher-value branded deals continue to resonate strongly with customers and support traffic recovery.Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. QuoteGO’s Margin Profile Softens on Restructuring-Related HitsGross profit increased modestly to $345.2 million from $342.4 million in the year-ago quarter. However, gross margin contracted 80 basis points year over year to 29.6%. Management attributed 50 basis points of the decline to inventory markdowns and write-offs to store closures under the Optimization Plan, along with promotional investments aimed at driving traffic and restoring value perception, partly offset by improvements in inventory management.Selling, general and administrative expenses rose 4.8% year over year to $347 million. As a percentage of net sales, SG&A expenses increased 40 basis points to 29.8%, primarily due to higher professional fees, commissions and growth-related expenses, partly offset by lower incentive compensation.Adjusted EBITDA declined 16.9% year over year to $43.1 million. Adjusted EBITDA margin contracted 90 basis points to 3.7% of net sales.The company posted an operating loss of $178 million, including a non-cash goodwill impairment charge of $158 million and restructuring charges of $18.2 million related to store optimization actions. Net loss came in at $180.3 million, or $1.83 per share, compared with a net loss of $23.3 million, or 24 cents per share, in the prior-year quarter.GO’s Store UpdateGrocery Outlet opened seven new stores and closed 28 stores during the quarter, including 27 closures related to its Optimization Plan, ending the period with 549 stores across 16 states.Under the Optimization Plan, Grocery Outlet is closing 36 financially underperforming stores to improve long-term profitability, cash flow generation and store-fleet productivity. The company completed 27 of these closures during the first quarter and closed the remaining nine stores in April.Management also continues to take a more disciplined approach to new store growth, focusing on stronger site selection, core markets and higher return thresholds. For fiscal 2026, Grocery Outlet continues to expect 30-33 net new store openings, excluding closures tied to the Optimization Plan.Grocery Outlet’s Financial Health SnapshotGrocery Outlet ended the quarter with cash and cash equivalents of $59 million compared with $69.6 million at fiscal 2025-end. Long-term debt totaled $474.3 million, while stockholders’ equity stood at $807.1 million.The company generated $52.6 million in operating cash flow during the quarter compared with $58.9 million in the prior-year period. Capital expenditures, net of tenant improvement allowances, were $53.9 million.Management reiterated that it expects fiscal 2026 capital expenditures of about $170 million, net of tenant improvement allowances.Grocery Outlet Reaffirms Key Fiscal 2026 TargetsManagement reaffirmed its fiscal 2026 outlook, signaling confidence in the year’s execution priorities despite a choppy consumer environment. The company continues to expect net sales of $4.60-$4.72 billion, with comparable store sales ranging from flat to down 2%.For profitability, Grocery Outlet still anticipates a gross margin of 29.7%-30% and adjusted EBITDA of $220-$235 million. The company also maintained adjusted earnings per share guidance of 45-55 cents a share.For the second quarter, management expects comparable-store sales to decline between 1.5% and 2%, including an estimated 50-basis-point headwind from the Easter calendar shift. Gross margin is projected between 29.8% and 30%, while adjusted EBITDA is expected between $55 million and $58 million. Adjusted earnings per share are anticipated in the range of 11-13 cents.Shares of this Zacks Rank #4 (Sell) company have fallen 24.7% over the past three months compared with the industry’s decline of 13.7%.Stocks to ConsiderThe Chef's Warehouse, Inc. CHEF, a specialty food distributor serving restaurants, hotels and hospitality customers, carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for The Chef's Warehouse’s current financial-year sales and earnings indicates growth of 8.3% and 24.7%, respectively, from the prior-year reported levels. CHEF delivered a trailing four-quarter earnings surprise of 28.9%, on average. Darling Ingredients Inc. DAR transforms food and animal byproducts into sustainable ingredients for essential uses. DAR carries a Zacks Rank #2. The consensus estimate for Darling Ingredients’ current fiscal-year sales and earnings implies growth of 10.3% and 575%, respectively, from the year-ago reported figures. DAR delivered a trailing four-quarter earnings surprise of 16.1%, on average. Tyson Foods, Inc. TSN operates as a leading protein company producing chicken, beef, pork and prepared food products. TSN currently carries a Zacks Rank #2. The Zacks Consensus Estimate for Tyson Foods’ current fiscal-year sales calls for growth of 4.5%, while the consensus mark for earnings indicates a 0.5% increase from the year-ago reported figures. TSN delivered a trailing four-quarter earnings surprise of 18.1%, on average.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks