It has been about a month since the last earnings report for Grocery Outlet Holding Corp. (GO Quick QuoteGO - Free Report) . Shares have lost about 13.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Grocery Outlet due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Grocery Outlet Holding Corp. before we dive into how investors and analysts have reacted as of late.

Grocery Outlet Beats on Q3 Earnings, Trims Comparable Sales Outlook

Grocery Outlet Holding Corp. reported mixed results for the third quarter of 2025, wherein the top line lagged the Zacks Consensus Estimate but increased year over year. Meanwhile, earnings surpassed the Zacks Consensus Estimate but declined from the same period last year. Comparable-store sales grew year over year but fell short of management’s expectations. The slowdown in the latter part of the quarter stemmed from changes in the promotional strategy and marketing execution that failed to generate desired results.

GO’s Quarterly Performance: Key Insights

Grocery Outlet’s adjusted earnings of 21 cents a share beat the Zacks Consensus Estimate of 19 cents but fell from 28 cents reported in the year-ago quarter. 

Net sales of $1,168.2 million fell short of the Zacks Consensus Estimate of $1,182 million. However, the top line grew 5.4% year over year, driven by contributions from store openings and a modest uptick in comparable-store sales. Comparable-store sales increased 1.2%, supported by a 1.8% rise in the number of transactions, partially offset by a 0.6% decrease in the average transaction size.

Grocery Outlet’s Margin & Cost Details

Gross profit grew 3% year over year to $355.1 million during the quarter. However, the gross margin contracted 70 basis points year over year to 30.4%. Still, the result was consistent with management’s outlook range. The metric shrank 20 basis points on a sequential basis, reflecting higher promotional activity and markdowns related to seasonal inventory. 

SG&A expenses increased 8.7% to $331 million, or 28.3% of net sales (in line with our expectation), up 80 basis points from last year. The rise primarily stemmed from new store costs, software amortization and higher incentive compensation. However, SG&A leveraged 20 basis points on a sequential basis. Adjusted EBITDA of $66.7 million declined 7.7% year over year, with the margin down 80 basis points to 5.7%.

GO’s Store Update

During the quarter, Grocery Outlet added 13 new stores and closed two, bringing its total to 563 stores across 16 states. The company aims to inaugurate 37 net new stores in 2025, compared to 33 to 35 stores projected earlier. During the quarter, the company launched a store refresh program in select pilot stores, featuring improved layouts, expanded core assortments and enhanced in-store messaging. Encouraged by early results, management plans to roll out the program to 20 stores by year-end 2025 and at least 150 stores by the end of 2026.

Grocery Outlet’s Financial Health Snapshot

Grocery Outlet ended the quarter with cash and cash equivalents of $52.1 million, long-term debt of $481.5 million and stockholders’ equity of $1,198.6 million. The company had $175 million remaining borrowing capacity under the revolving credit facility at the end of the quarter. The company’s net leverage ratio stood at 1.8x adjusted EBITDA.

Net cash provided by operating activities was $17.3 million in the quarter. Capital expenditure totaled $39.4 million (net of tenant improvement allowances). Management maintained its capital expenditure outlook of $210 million (net of tenant improvement allowances) for 2025.

GO’s 2025 Outlook

Management revised its fiscal 2025 guidance to reflect softer comparable sales trends and late-quarter promotional headwinds. Grocery Outlet now expects net sales between $4.70 billion and $4.72 billion, slightly narrowing the range from its prior projection of $4.7 billion to $4.8 billion. Comparable-store sales are anticipated to rise 0.6-0.9%, down from the earlier guided range of 1-2%, while the gross margin is now forecast between 30.3% and 30.4% versus 30%-30.5% estimated earlier. 

The company projects adjusted EBITDA in the band of $258 million-$262 million compared with the earlier estimate of $260 million to $270 million. GO guided adjusted earnings of 78 cents to 80 cents a share, tightened from the previous outlook of 75 cents to 80 cents. The company had reported adjusted earnings of 77 cents in 2024.

For the fourth quarter of 2025, Grocery Outlet expects flat to 1% comparable-store sales growth, with the gross margin between 30% and 30.3%. It expects adjusted EBITDA in the range of $72 million-$76 million, and adjusted earnings between 21 cents and 23 cents a share compared with 15 cents reported in the year-ago period. 

Although near-term sales momentum remains modest, management expressed confidence that its ongoing store refresh initiatives, improved inventory visibility tools and strengthened IO execution will set the stage for sustainable comparable-store sales growth and stronger profitability in fiscal 2026.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -12.5% due to these changes.

VGM Scores

At this time, Grocery Outlet has a subpar Growth Score of D, a score with the same score on the momentum front. However, the stock has a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. Interestingly, Grocery Outlet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Grocery Outlet is part of the Zacks Consumer Products - Staples industry. Over the past month, Procter & Gamble (PG Quick QuotePG - Free Report) , a stock from the same industry, has gained 0.6%. The company reported its results for the quarter ended September 2025 more than a month ago.

P&G reported revenues of $22.39 billion in the last reported quarter, representing a year-over-year change of +3%. EPS of $1.99 for the same period compares with $1.93 a year ago.

P&G is expected to post earnings of $1.88 per share for the current quarter, representing no change from the year-ago quarter. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.

P&G has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.