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Grocery Outlet Holding Corp. (GO) Up 21.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Grocery Outlet Holding Corp. (GO - Free Report) . Shares have added about 21.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Grocery Outlet Holding Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Grocery Outlet Q4 Earnings Meet Estimates, Comps Fall Y/Y
Grocery Outlet Holding Corp. reported fourth-quarter 2021 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line met the same. However, both net sales and earnings per share declined year over year. The company registered soft comparable store sales performance during the quarter under review. Nonetheless, management expects the metric to increase in first-quarter 2022. The company issued upbeat sales and earnings outlook for 2022.
Q4 Insights
The extreme value retailer of quality, name-brand consumables and fresh products reported adjusted earnings of 20 cents a share. However, the bottom line fell from 24 cents reported in the prior-year quarter.
Net sales of $782.7 million beat the Zacks Consensus Estimate of $774.5 million but declined 3% year over year. The fourth quarter of 2020 contained one extra week, which represented $53.3 million in net sales.
On a 13 week-basis, net sales grew 3.9% year over year during the fourth quarter of 2021. This followed an increase of 0.6% in the preceding quarter. Sales contribution from 35 net new stores opened in 2021 favorably impacted the top line. On a 13-week basis, comparable store sales declined 1.2% against a 7.9% jump witnessed in the year-ago period due to lower traffic. Sequentially, traffic trends were stable.
Margins & Costs
Gross profit dropped 1% year over year to $241.9 million. Nevertheless, gross margin expanded 60 basis points (bps) to 30.9%, thanks to a flexible purchasing model that helped offset headwinds such as inflation and higher freight costs. During the quarter, adjusted EBITDA tumbled 7.5% to $47.4 million, while adjusted EBITDA margin shrunk 20 basis points to 6.1%.
SG&A expenses increased 1.5% to $200.6 million owing to increased store occupancy and independent operator commission expenses related to store growth, offset by lower incentive compensation expenses.
Store Update
Grocery Outlet opened eight new stores during the quarter, taking the total count to 415 stores in seven states. The company opened 36 new stores and closed one during 2021. It plans to open 28 net new stores in 2022. During first-quarter 2022, the company plans to open five new stores and close one. It anticipates opening six stores in both second and third quarters and 12 stores in the fourth quarter, with no additional closures planned.
Other Financial Aspects
Grocery Outlet ended the quarter with cash and cash equivalents of $140.1 million, long-term debt of $451.5 million and stockholders’ equity of $1,009.3 million.
Net cash provided by operating activities during 2021 was $165.6 million. The company incurred capital expenditures of $114.2 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $150 million for 2022.
Outlook
Management expects 2022 net sales between $3.33 billion and $3.38 billion (versus $3.08 billion in 2021) as well as comparable store sales growth of 4% to 5% (against a decline of 6% in 2021). It expects ticket and traffic to remain positive throughout the year.
Grocery Outlet guided full-year gross margin of 30.6% compared with 30.8% reported in 2021. It projected adjusted EBITDA to be $210-$217 million compared with $198.5 million in 2021. The company forecast adjusted earnings between 92 cents and 97 cents a share for 2022, suggesting an increase from 90 cents reported in 2021.
Management envisions first-quarter 2022 net sales to be approximately $810 million compared with $752.5 million reported in first-quarter 2021. It guided comparable store sales growth of 3% against a decline of 8.2% witnessed in the prior-year quarter.
It expects first-quarter 2022 gross margin of approximately 30.3% and an adjusted EBITDA margin of about 5.7%. The company had reported a gross margin of 30.8% and an adjusted EBITDA margin of 6.5% in the year-ago period. With respect to first-quarter expenses, Grocery Outlet expects some deleverage owing to higher infrastructure costs, including payroll, insurance and normalized incentive compensation, as well as costs related to the March supplier meeting.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -24.34% due to these changes.
VGM Scores
Currently, Grocery Outlet Holding Corp. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Grocery Outlet Holding Corp. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Grocery Outlet Holding Corp. (GO) Up 21.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Grocery Outlet Holding Corp. (GO - Free Report) . Shares have added about 21.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Grocery Outlet Holding Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Grocery Outlet Q4 Earnings Meet Estimates, Comps Fall Y/Y
Grocery Outlet Holding Corp. reported fourth-quarter 2021 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line met the same. However, both net sales and earnings per share declined year over year. The company registered soft comparable store sales performance during the quarter under review. Nonetheless, management expects the metric to increase in first-quarter 2022. The company issued upbeat sales and earnings outlook for 2022.
Q4 Insights
The extreme value retailer of quality, name-brand consumables and fresh products reported adjusted earnings of 20 cents a share. However, the bottom line fell from 24 cents reported in the prior-year quarter.
Net sales of $782.7 million beat the Zacks Consensus Estimate of $774.5 million but declined 3% year over year. The fourth quarter of 2020 contained one extra week, which represented $53.3 million in net sales.
On a 13 week-basis, net sales grew 3.9% year over year during the fourth quarter of 2021. This followed an increase of 0.6% in the preceding quarter. Sales contribution from 35 net new stores opened in 2021 favorably impacted the top line. On a 13-week basis, comparable store sales declined 1.2% against a 7.9% jump witnessed in the year-ago period due to lower traffic. Sequentially, traffic trends were stable.
Margins & Costs
Gross profit dropped 1% year over year to $241.9 million. Nevertheless, gross margin expanded 60 basis points (bps) to 30.9%, thanks to a flexible purchasing model that helped offset headwinds such as inflation and higher freight costs. During the quarter, adjusted EBITDA tumbled 7.5% to $47.4 million, while adjusted EBITDA margin shrunk 20 basis points to 6.1%.
SG&A expenses increased 1.5% to $200.6 million owing to increased store occupancy and independent operator commission expenses related to store growth, offset by lower incentive compensation expenses.
Store Update
Grocery Outlet opened eight new stores during the quarter, taking the total count to 415 stores in seven states. The company opened 36 new stores and closed one during 2021. It plans to open 28 net new stores in 2022. During first-quarter 2022, the company plans to open five new stores and close one. It anticipates opening six stores in both second and third quarters and 12 stores in the fourth quarter, with no additional closures planned.
Other Financial Aspects
Grocery Outlet ended the quarter with cash and cash equivalents of $140.1 million, long-term debt of $451.5 million and stockholders’ equity of $1,009.3 million.
Net cash provided by operating activities during 2021 was $165.6 million. The company incurred capital expenditures of $114.2 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $150 million for 2022.
Outlook
Management expects 2022 net sales between $3.33 billion and $3.38 billion (versus $3.08 billion in 2021) as well as comparable store sales growth of 4% to 5% (against a decline of 6% in 2021). It expects ticket and traffic to remain positive throughout the year.
Grocery Outlet guided full-year gross margin of 30.6% compared with 30.8% reported in 2021. It projected adjusted EBITDA to be $210-$217 million compared with $198.5 million in 2021. The company forecast adjusted earnings between 92 cents and 97 cents a share for 2022, suggesting an increase from 90 cents reported in 2021.
Management envisions first-quarter 2022 net sales to be approximately $810 million compared with $752.5 million reported in first-quarter 2021. It guided comparable store sales growth of 3% against a decline of 8.2% witnessed in the prior-year quarter.
It expects first-quarter 2022 gross margin of approximately 30.3% and an adjusted EBITDA margin of about 5.7%. The company had reported a gross margin of 30.8% and an adjusted EBITDA margin of 6.5% in the year-ago period. With respect to first-quarter expenses, Grocery Outlet expects some deleverage owing to higher infrastructure costs, including payroll, insurance and normalized incentive compensation, as well as costs related to the March supplier meeting.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -24.34% due to these changes.
VGM Scores
Currently, Grocery Outlet Holding Corp. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Grocery Outlet Holding Corp. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.