Grocery Outlet Faces $110M Impairment Charges and Lawsuit Over 36 Store Closures
Grocery Outlet Holding Corp. shares plunged 27.9%, falling $2.45 to $6.34 after the company disclosed plans to close 36 stores and take $110 million in impairment charges. A class action alleges management misrepresented rapid store expansion that masked 0.5% comparable sales growth and led to a $149 million goodwill write-down.
1. Class Action Lawsuit Filed
A class action complaint was filed on May 7 on behalf of shareholders who purchased between August 5, 2025 and March 4, 2026, alleging management misrepresented the sustainability of rapid store expansion and inflated reported growth. Applications to serve as lead plaintiff must be submitted by May 15, 2026.
2. Store Expansion and Closures
The discount grocery chain opened 11 new locations in Q2 and 13 more in Q3 of fiscal 2025, then disclosed it would close 36 stores deemed unprofitable, including 24 in the Eastern region representing 30% of that fleet.
3. Impairment Charges Recorded
In its audited fiscal 2025 results, the company recorded $110 million of non-cash long-lived asset impairments and an additional $149 million goodwill write-down to reflect the diminished value of closed and underperforming locations.
4. Market Reaction and Growth Metrics
Following the disclosures, shares fell $2.45 per share, a 27.9% decline to $6.34, while comparable store sales grew only 0.5% on a 52-week basis, missing the low end of guidance on major financial metrics.