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Grocery Outlet Holding Corp. (GO - Free Report) sustained its upbeat performance in fourth-quarter 2020, with the top and the bottom line surpassing the Zacks Consensus Estimate. Both the metrics improved on a year-over-year basis.
Growth in comparable store sales aided the company’s performance in the reported quarter. Additionally, the company’s flexible business model provided support to its strategic growth investments. Going ahead, despite persistent challenges emerging from the pandemic, management continues to invest in growth opportunities. In particular, this Zacks Rank #2 (Buy) company is on track with plans to broaden store base.
Q4 Insights
The owner and operator of grocery store chains delivered adjusted earnings of 24 cents a share that beat the Zacks Consensus Estimate of 23 cents and increased from 18 cents (based on revised definition) reported in the prior-year quarter. This was the seventh straight quarter of positive earnings surprise.
Net sales of $806.8 million surged 23.1% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate of $788 million. The top line includes sales worth $53.3 million from the 53rd week. Growth in comparable sales and contribution from 33 net additional stores opened since the end of the fourth quarter last year drove the top line in the reported quarter.
Notably, this Emeryville, CA-based company registered comparable-store sales growth of 7.9% during the quarter under review. This followed an increase of 9.1% in the preceding quarter. We note that the company’s comparable-store sales rose 5.1% during fourth-quarter last year.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
We note that gross profit improved 22% year over year to $244.4 million. However, gross margin contracted 30 basis points (bps) to 30.3% due to impacts from holiday product mix. During the quarter, adjusted EBITDA surged 24.7% to $51.2 million.
Selling, general and administrative (SG&A) expenses rose 17.7% to $197.6 million due to increased variable commissions to independent operators, higher investments in personnel and infrastructure, higher store occupancy costs emerging from store expansions as well as expenses related to COVID-19. As a percentage of net sales, the SG&A expenses dropped 110 bps to 24.5%.
Store Update
Grocery Outlet opened eight new stores during the fourth quarter, taking the total count to 380 stores in six states. The company opened 35 stores during 2020. The company intends to open 36-38 stores during 2021. Management plans to hit the 400-store mark by summer this year.
Other Financial Aspects
Grocery Outlet ended fourth-quarter 2020 with cash and cash equivalents of $105.3 million. Total long-term debt was $449.2 million, while stockholders’ equity amounted to $922.3 million.
Net cash provided by operating activities were $181.2 million during 2020.
The company incurred capital expenditures (excluding the impact of tenant improvement allowances) of $39.1 million during the quarter under review. Management envisions capital expenditures (net of tenant improvement allowances) to be about $130 million in 2021.
Outlook
Management expects first-quarter 2021 comparable store sales to decline in the negative high-single digits. This is largely due to the impact of cycling the initial demand surge witnessed in March 2020, due to the COVID-19 pandemic.
Additionally, the company anticipates gross margin in 2021 to be in line with the pre-pandemic levels, as the company returns to its normalized levels of inventory shrink.
Price Performance
Shares of the company have declined 3.6% in the past three months compared with the industry’s drop of 1.2%.
Diageo plc (DEO - Free Report) has a long-term earnings growth rate of 8.3% and a Zacks Rank #2.
The Estee Lauder Companies Inc. (EL - Free Report) , also with a Zacks Rank #2, has a long-term earnings growth rate of 10.7%.
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Grocery Outlet's (GO) Q4 Earnings Beat Estimates, Comps Rise
Grocery Outlet Holding Corp. (GO - Free Report) sustained its upbeat performance in fourth-quarter 2020, with the top and the bottom line surpassing the Zacks Consensus Estimate. Both the metrics improved on a year-over-year basis.
Growth in comparable store sales aided the company’s performance in the reported quarter. Additionally, the company’s flexible business model provided support to its strategic growth investments. Going ahead, despite persistent challenges emerging from the pandemic, management continues to invest in growth opportunities. In particular, this Zacks Rank #2 (Buy) company is on track with plans to broaden store base.
Q4 Insights
The owner and operator of grocery store chains delivered adjusted earnings of 24 cents a share that beat the Zacks Consensus Estimate of 23 cents and increased from 18 cents (based on revised definition) reported in the prior-year quarter. This was the seventh straight quarter of positive earnings surprise.
Net sales of $806.8 million surged 23.1% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate of $788 million. The top line includes sales worth $53.3 million from the 53rd week. Growth in comparable sales and contribution from 33 net additional stores opened since the end of the fourth quarter last year drove the top line in the reported quarter.
Notably, this Emeryville, CA-based company registered comparable-store sales growth of 7.9% during the quarter under review. This followed an increase of 9.1% in the preceding quarter. We note that the company’s comparable-store sales rose 5.1% during fourth-quarter last year.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. Quote
Margins & Costs
We note that gross profit improved 22% year over year to $244.4 million. However, gross margin contracted 30 basis points (bps) to 30.3% due to impacts from holiday product mix. During the quarter, adjusted EBITDA surged 24.7% to $51.2 million.
Selling, general and administrative (SG&A) expenses rose 17.7% to $197.6 million due to increased variable commissions to independent operators, higher investments in personnel and infrastructure, higher store occupancy costs emerging from store expansions as well as expenses related to COVID-19. As a percentage of net sales, the SG&A expenses dropped 110 bps to 24.5%.
Store Update
Grocery Outlet opened eight new stores during the fourth quarter, taking the total count to 380 stores in six states. The company opened 35 stores during 2020. The company intends to open 36-38 stores during 2021. Management plans to hit the 400-store mark by summer this year.
Other Financial Aspects
Grocery Outlet ended fourth-quarter 2020 with cash and cash equivalents of $105.3 million. Total long-term debt was $449.2 million, while stockholders’ equity amounted to $922.3 million.
Net cash provided by operating activities were $181.2 million during 2020.
The company incurred capital expenditures (excluding the impact of tenant improvement allowances) of $39.1 million during the quarter under review. Management envisions capital expenditures (net of tenant improvement allowances) to be about $130 million in 2021.
Outlook
Management expects first-quarter 2021 comparable store sales to decline in the negative high-single digits. This is largely due to the impact of cycling the initial demand surge witnessed in March 2020, due to the COVID-19 pandemic.
Additionally, the company anticipates gross margin in 2021 to be in line with the pre-pandemic levels, as the company returns to its normalized levels of inventory shrink.
Price Performance
Shares of the company have declined 3.6% in the past three months compared with the industry’s drop of 1.2%.
Looking for Consumer Staples Picks? Check These
The J. M. Smucker Company (SJM - Free Report) with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 1.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Diageo plc (DEO - Free Report) has a long-term earnings growth rate of 8.3% and a Zacks Rank #2.
The Estee Lauder Companies Inc. (EL - Free Report) , also with a Zacks Rank #2, has a long-term earnings growth rate of 10.7%.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
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