Grocery Outlet Holding Corp. GO reported fourth-quarter 2024 results, wherein the top line exceeded the Zacks Consensus Estimate and increased year over year. Meanwhile, the bottom line fell short of the Zacks Consensus Estimate and declined from the year-ago quarter.

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The company’s net sales growth in the fourth quarter was driven by a strong increase in comparable store sales (comps), exceeding expectations. Key value metrics and strong traffic contributed to comps growth, while strategic initiatives and value assortments continued to support overall performance.

GO’s Quarterly Performance: Key Insights

Grocery Outlet’s adjusted earnings of 15 cents per share missed the Zacks Consensus Estimate of 17 cents per share and declined 16.7% from 18 cents delivered in the year-ago quarter.

Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise

Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. Quote

Net sales of $1.098 billion beat the Zacks Consensus Estimate of $1.086 billion. The top line grew 10.9% year over year. This outperformance was driven by decent comparable store sales performance and new stores opened.

Comps increased 2.9% in the quarter, driven by a 3% improvement in the number of transactions, while average transaction size was flat. In the year-ago period, the company had reported a comparable store sales increase of 2.7%. We anticipated 2% comps growth for the fourth quarter.

Grocery Outlet’s Margin & Cost Details

The gross profit rose 8.4% year over year to $323.9 million. However, the gross margin contracted 70 basis points (bps) to 29.5%. The decline in gross margin was driven by increased inventory losses related primarily to challenges with systems conversion, partly negated by higher sales.

Adjusted EBITDA of $57.2 million increased 12.5% from $50.9 million in the year-ago period. The adjusted EBITDA margin of this Zacks Rank #3 (Hold) company expanded 10 bps to 5.2%. Our model predicted a 50-bps expansion in the adjusted EBITDA margin.

SG&A expenses rose 11.6% to $312.5 million in the quarter. As a percentage of net sales, SG&A expenses increased 20 bps to 28.5%.

GO’s Store Update

In the fourth quarter, Grocery Outlet expanded its footprint with the opening of five new stores and closed one store bringing the total to 533 stores across 16 states. The company aims to inaugurate 33-35 net new stores in 2025.

Grocery Outlet’s Financial Health Snapshot

Grocery Outlet ended 2024 with cash and cash equivalents of $62.8 million, net long-term debt of $462.5 million and stockholders’ equity of $1.2 billion.

Net cash provided by operating activities was $112 million in 2024. Capital expenditures totaled $185.7 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $210 million for 2025.

GO’s 2025 Outlook

Management anticipates 2025 net sales between $4.7 billion and $4.8 billion compared with $4.4 billion reported in 2024. It expects comps growth of 2-3% compared with a 2.7% increase registered in 2024.

Grocery Outlet guided a full-year gross margin to be 30-30.5% compared with 30.2% reported in 2024. It expects adjusted EBITDA of $260-$270 million in 2025. Grocery Outlet reported adjusted EBITDA of $252.6 million in 2024.

Grocery Outlet envisions adjusted earnings per share of 70-75 cents for 2025 compared with the 77 cents reported in 2024.

Management expects first-quarter 2025 comps to be flat due to the timing of Easter and overall economic trends. Grocery Outlet foresees the first-quarter gross margin between 29.5% and 30%.

Shares of this extreme-value retailer of quality, name-brand consumables and fresh products firm have lost 40.1% in the past three months against the industry’s growth of 3.7%.

GO Stock's Past 6 Months Performance

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Key Picks

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

SFM has a trailing four-quarter earnings surprise of 15.1%, on average. The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 12% and 18.9%, respectively, from the year-ago reported numbers.

Tyson Foods, Inc. TSN operates as a food company worldwide. It currently has a Zacks Rank #2 (Buy). TSN delivered a trailing four-quarter earnings surprise of 52%, on average.

The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and earnings indicates growth of 0.9% and 22.6%, respectively, from the prior-year reported levels.

Post Holdings, Inc. POST is a consumer packaged goods holding company in the United States and internationally. It currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings indicates growth of 0.3% and 2.2%, respectively, from the prior-year reported levels. POST delivered a trailing four-quarter earnings surprise of 22.3%, on average.

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Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report

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