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Grocery Outlet (GO) Rides High on Growth Efforts: Apt to Hold
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Grocery Outlet Holding Corp. (GO - Free Report) seems well-poised with its unique business model, strength in product offerings and store-growth endeavors. Management is focused on efficient marketing strategies to bolster sales and overall profitability. GO’s opportunistic purchasing strategy and e-commerce initiatives to deepen its customer reach appear encouraging as well.
Let’s delve deeper.
Strategic Details
Grocery Outlet’s flexible sourcing and distribution business model, which differentiates it from traditional retailers, poises the company well for sustainable growth. This helps it offer quality, branded consumables and fresh products at an exceptional value. The company’s product offering is ever-changing, with a constant rotation of opportunistic products, complemented by everyday staple products. In addition, GO’s “WOW!” deals, coupled with an updated website and marketing campaigns, look impressive. These factors help drive consumers and boost traffic and sales.
Image Source: Zacks Investment Research
Regarding store-growth opportunities, Grocery Outlet has been undertaking strategic investments to improve functionality and scalability. These include enhanced point of sale, warehouse management, vendor tracking, store communications, real estate lease management, and financial planning and analysis. Management believes that there is room to establish 4,800 locations nationally in the long term.
The company opened three new stores in the first quarter of 2023, thereby taking the total count to 444 stores in eight states. The company expects the pace of store openings to accelerate in the second half of 2023 to a 10% annualized new unit growth rate. It intends to open 25 to 28 stores in 2023. The company plans to open 47 new stores in 2024.
In addition, Grocery Outlet is building on the underlying business strength across areas, such as opportunistic supply, product assortments as well as engagement with customers and independent operators. Moreover, GO is offering the same-day delivery of everyday essentials and staples from all its stores in collaboration with Instacart and DoorDash.
It has also teamed up with Uber Technologies for grocery delivery. Additionally, Grocery Outlet has tested a mobile app in Washington State, whereby customers can view trending and top items in stores on a real-time basis and access curated product recommendations based on their preferences.
What’s More?
For 2023, management expects net sales of $3.90 billion, up from $3.58 billion delivered in 2022. It guided comparable store sales growth of 5% to 6%, compared with an 11.8% increase registered in 2022. Grocery Outlet guided a full-year gross margin of 30.7%, compared with the 30.5% reported in 2022.
The company projected adjusted EBITDA between $240 million and $246 million in 2023. The company had reported an adjusted EBITDA of $214.7 million in 2022. Grocery Outlet now envisions adjusted earnings in the band of 96 cents-$1.00 per share for 2023, compared with the 94 cents per share reported in 2022. Management expects second-quarter 2023 comparable store sales to be approximately 5%, compared with the 11.2% growth registered in the year-ago period.
Analysts look optimistic about the company. The Zacks Consensus Estimate for 2023 sales presently stands at $3.91 billion, reflecting an increase of 9.3% year over year. For 2024, the consensus estimate for Grocery Outlet’s sales and earnings per share (EPS) is currently pegged at $4.27 billion and $1.14, respectively. These estimates suggest respective growth of 9.3% and 14.8% from the year-ago period’s corresponding figures.
Shares of this grocery retailer have gained 4.8% against the industry’s 3% decline. A VGM Score of A coupled with an expected long-term earnings growth rate of 10.7% for this current Zacks Rank #3 (Hold) company further speaks volumes.
Eye These Solid Picks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Lamb Weston (LW - Free Report) .
KHC has a trailing four-quarter earnings surprise of 10.7%, on average. The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and EPS suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank of 2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and EPS suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank of 2. LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The consensus estimate for Lamb Weston’s current fiscal-year sales and EPS suggests growth of 30% and 117.3%, respectively, from the year-ago reported numbers.
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Grocery Outlet (GO) Rides High on Growth Efforts: Apt to Hold
Grocery Outlet Holding Corp. (GO - Free Report) seems well-poised with its unique business model, strength in product offerings and store-growth endeavors. Management is focused on efficient marketing strategies to bolster sales and overall profitability. GO’s opportunistic purchasing strategy and e-commerce initiatives to deepen its customer reach appear encouraging as well.
Let’s delve deeper.
Strategic Details
Grocery Outlet’s flexible sourcing and distribution business model, which differentiates it from traditional retailers, poises the company well for sustainable growth. This helps it offer quality, branded consumables and fresh products at an exceptional value. The company’s product offering is ever-changing, with a constant rotation of opportunistic products, complemented by everyday staple products. In addition, GO’s “WOW!” deals, coupled with an updated website and marketing campaigns, look impressive. These factors help drive consumers and boost traffic and sales.
Image Source: Zacks Investment Research
Regarding store-growth opportunities, Grocery Outlet has been undertaking strategic investments to improve functionality and scalability. These include enhanced point of sale, warehouse management, vendor tracking, store communications, real estate lease management, and financial planning and analysis. Management believes that there is room to establish 4,800 locations nationally in the long term.
The company opened three new stores in the first quarter of 2023, thereby taking the total count to 444 stores in eight states. The company expects the pace of store openings to accelerate in the second half of 2023 to a 10% annualized new unit growth rate. It intends to open 25 to 28 stores in 2023. The company plans to open 47 new stores in 2024.
In addition, Grocery Outlet is building on the underlying business strength across areas, such as opportunistic supply, product assortments as well as engagement with customers and independent operators. Moreover, GO is offering the same-day delivery of everyday essentials and staples from all its stores in collaboration with Instacart and DoorDash.
It has also teamed up with Uber Technologies for grocery delivery. Additionally, Grocery Outlet has tested a mobile app in Washington State, whereby customers can view trending and top items in stores on a real-time basis and access curated product recommendations based on their preferences.
What’s More?
For 2023, management expects net sales of $3.90 billion, up from $3.58 billion delivered in 2022. It guided comparable store sales growth of 5% to 6%, compared with an 11.8% increase registered in 2022. Grocery Outlet guided a full-year gross margin of 30.7%, compared with the 30.5% reported in 2022.
The company projected adjusted EBITDA between $240 million and $246 million in 2023. The company had reported an adjusted EBITDA of $214.7 million in 2022. Grocery Outlet now envisions adjusted earnings in the band of 96 cents-$1.00 per share for 2023, compared with the 94 cents per share reported in 2022. Management expects second-quarter 2023 comparable store sales to be approximately 5%, compared with the 11.2% growth registered in the year-ago period.
Analysts look optimistic about the company. The Zacks Consensus Estimate for 2023 sales presently stands at $3.91 billion, reflecting an increase of 9.3% year over year. For 2024, the consensus estimate for Grocery Outlet’s sales and earnings per share (EPS) is currently pegged at $4.27 billion and $1.14, respectively. These estimates suggest respective growth of 9.3% and 14.8% from the year-ago period’s corresponding figures.
Shares of this grocery retailer have gained 4.8% against the industry’s 3% decline. A VGM Score of A coupled with an expected long-term earnings growth rate of 10.7% for this current Zacks Rank #3 (Hold) company further speaks volumes.
Eye These Solid Picks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Lamb Weston (LW - Free Report) .
The Kraft Heinz Company, a food and beverage product company, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
KHC has a trailing four-quarter earnings surprise of 10.7%, on average. The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and EPS suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank of 2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and EPS suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank of 2. LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The consensus estimate for Lamb Weston’s current fiscal-year sales and EPS suggests growth of 30% and 117.3%, respectively, from the year-ago reported numbers.