Grocery Outlet Posts $1.17B Q1 Sales, $0.05 Adjusted EPS Beat
Net sales rose 3.6% to $1.17B in Q1, while comparable store sales fell 1.0% and gross margin narrowed 80bp to 29.6% due to markdowns. The company posted a $180.3M loss including a $158M goodwill impairment but earned $0.05 adjusted EPS (vs. $0.02 estimate) and plans to close 36 underperforming stores.
1. First Quarter Sales and Margin Performance
Net sales increased 3.6% to $1.17 billion driven by new store openings, partially offset by a 1.0% decline in comparable store sales. Gross margin contracted by 80 basis points to 29.6% due to inventory markdowns, write-offs and promotional activity.
2. Net Loss Driven by Goodwill Impairment
The company recorded a $180.3 million net loss, reflecting a $158.0 million non-cash goodwill impairment and $18.2 million in restructuring charges tied to its Optimization Plan. Excluding these charges, operating results improved sequentially.
3. Adjusted Earnings Beat Estimates
Adjusted net income was $4.6 million, or $0.05 per diluted share, surpassing consensus estimates of $0.02. Adjusted EBITDA reached $43.1 million, representing 3.7% of net sales, down from 4.6% last year.
4. Store Optimization Strategy
Management unveiled an Optimization Plan to close 36 underperforming stores and exit select leases, aiming to optimize the existing footprint, reduce costs and focus on higher-margin product mix to support future profitability.