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Factors Likely to Shape Grocery Outlet's (GO) Q1 Earnings

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Grocery Outlet Holding Corp. (GO - Free Report) is scheduled to release first-quarter 2021 results on May 11. Although the Zacks Consensus Estimate for its first-quarter earnings has been stable at 22 cents over the past 30 days, the same suggests a decline of 39% from the year-ago quarter’s tally. Moreover, the consensus estimate for quarterly revenues is pegged at $760 million, which indicates a 0.1% decline from the year-ago period.

In the last reported quarter, the company delivered an earnings surprise of 4.4%. The Emeryville, CA-based company has a trailing four-quarter earnings surprise of nearly 54.2%, on average.

Key Factors to Note

Grocery Outlet’s flexible sourcing and distribution business model that helps it offer quality, name-brand consumables and fresh products at an exceptional value is commendable. Further, management’s efforts to refresh its brand image by updating the website, modernizing the logo and adopting the new marketing campaign bode well. Also, its compelling value proposition is expected to have encouraged customers to revisit stores and increase basket sizes. These are likely to have aided the company’s first quarter results.

Moreover, expanded product offerings, better deals and increased focus on Natural, Organic, Specialty and Healthy or “NOSH” products might have provided some cushion to the top line. Markedly, Grocery Outlet’s digital marketing efforts should have favored first-quarter results. Apart from these, aggressive store openings along with strategic investments including enhanced point of sale, warehouse management, vendor tracking, store communications, real estate lease management, and financial planning and analysis might have contributed to the performance in the quarter under review.

Despite January comp sales rising in the mid-single digits and February comp sales improving in low-single digits, management in its last earnings call noted that its first-quarter 2021 comparable sales are likely to decline in high-single digits. This can be attributable to the impact of cycling the initial demand surge witnessed in March 2020, due to the COVID-19 pandemic. Further, incremental expenses related to the pandemic such as additional employee payments and benefits, along with investments undertaken to preserve the safety and health of customers and team members might have weighed on the company’s profitability.

Grocery Outlet Holding Corp. Price and EPS Surprise

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Grocery Outlet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Grocery Outlet carries a Zacks Rank #2 but an Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Sanderson Farms, Inc. (SAFM - Free Report) has an Earnings ESP of +3.13% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flower Foods, Inc. (FLO - Free Report) has an Earnings ESP of +5.41% and a Zacks Rank #3, at present.

The J. M. Smucker Company (SJM - Free Report) currently has an Earnings ESP of +1.49% and a Zacks Rank #3.

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