A month has gone by since the last earnings report for Grocery Outlet Holding Corp. (GO Quick QuoteGO - Free Report) . Shares have added about 22.8% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Grocery Outlet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

Grocery Outlet Q1 Earnings Beat Estimates Despite Weak Comps

Grocery Outlet Holding Corp. reported first-quarter 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While net sales increased year over year, earnings declined from the year-ago period. Results reflected improving traffic trends and progress in restoring the company’s opportunistic product mix, though comparable-store sales remained soft amid continued pressure on customer basket sizes. 

Adjusted EBITDA came in at the high end of management’s guidance range, and management reaffirmed the fiscal 2026 outlook despite ongoing margin and basket-size pressures.

GO’s Quarterly Performance: Key Insights

Grocery Outlet delivered adjusted earnings of 5 cents a share for the first quarter of fiscal 2026, beating the Zacks Consensus Estimate of 2 cents by 150%. The figure declined from adjusted earnings of 13 cents reported in the year-ago quarter.

Net sales increased 3.6% year over year to $1,166.4 million and edged past the consensus mark of $1,153 million by 1.2%. The increase was primarily driven by contributions from new store openings, partially offset by lower comparable-store sales.

Comparable-store sales declined 1% in the quarter compared to growth of 0.3% in the prior-year period. The drop stemmed from a 3.1% decrease in average transaction size, partly offset by a 2.1% increase in the number of transactions. Management noted that traffic trends improved sequentially throughout the quarter, with weekly traffic growth in March ranging between 2% and 5%.

Management highlighted meaningful progress in increasing the mix of opportunistic products, which rose by nearly 2 percentage points since the start of the year. Grocery Outlet stated that these higher-value branded deals continue to resonate strongly with customers and support traffic recovery.

GO’s Margin Profile Softens on Restructuring-Related Hits

Gross profit increased modestly to $345.2 million from $342.4 million in the year-ago quarter. However, gross margin contracted 80 basis points year over year to 29.6%. Management attributed 50 basis points of the decline to inventory markdowns and write-offs to store closures under the Optimization Plan, along with promotional investments aimed at driving traffic and restoring value perception, partly offset by improvements in inventory management.

Selling, general and administrative expenses rose 4.8% year over year to $347 million. As a percentage of net sales, SG&A expenses increased 40 basis points to 29.8%, primarily due to higher professional fees, commissions and growth-related expenses, partly offset by lower incentive compensation.
Adjusted EBITDA declined 16.9% year over year to $43.1 million. Adjusted EBITDA margin contracted 90 basis points to 3.7% of net sales.

The company posted an operating loss of $178 million, including a non-cash goodwill impairment charge of $158 million and restructuring charges of $18.2 million related to store optimization actions. Net loss came in at $180.3 million, or $1.83 per share, compared with a net loss of $23.3 million, or 24 cents per share, in the prior-year quarter.

GO’s Store Update

Grocery Outlet opened seven new stores and closed 28 stores during the quarter, including 27 closures related to its Optimization Plan, ending the period with 549 stores across 16 states.

Under the Optimization Plan, Grocery Outlet is closing 36 financially underperforming stores to improve long-term profitability, cash flow generation and store-fleet productivity. The company completed 27 of these closures during the first quarter and closed the remaining nine stores in April.

Management also continues to take a more disciplined approach to new store growth, focusing on stronger site selection, core markets and higher return thresholds. For fiscal 2026, Grocery Outlet continues to expect 30-33 net new store openings, excluding closures tied to the Optimization Plan.

Grocery Outlet’s Financial Health Snapshot

Grocery Outlet ended the quarter with cash and cash equivalents of $59 million compared with $69.6 million at fiscal 2025-end. Long-term debt totaled $474.3 million, while stockholders’ equity stood at $807.1 million.

The company generated $52.6 million in operating cash flow during the quarter compared with $58.9 million in the prior-year period. Capital expenditures, net of tenant improvement allowances, were $53.9 million.

Management reiterated that it expects fiscal 2026 capital expenditures of about $170 million, net of tenant improvement allowances.

Grocery Outlet Reaffirms Key Fiscal 2026 Targets

Management reaffirmed its fiscal 2026 outlook, signaling confidence in the year’s execution priorities despite a choppy consumer environment. The company continues to expect net sales of $4.60-$4.72 billion, with comparable store sales ranging from flat to down 2%.

For profitability, Grocery Outlet still anticipates a gross margin of 29.7%-30% and adjusted EBITDA of $220-$235 million. The company also maintained adjusted earnings per share guidance of 45-55 cents a share.

For the second quarter, management expects comparable-store sales to decline between 1.5% and 2%, including an estimated 50-basis-point headwind from the Easter calendar shift. Gross margin is projected between 29.8% and 30%, while adjusted EBITDA is expected between $55 million and $58 million. Adjusted earnings per share are anticipated in the range of 11-13 cents.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -23.61% due to these changes.

VGM Scores

Currently, Grocery Outlet has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has 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 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. Notably, 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, Newell Brands (NWL Quick QuoteNWL - Free Report) , a stock from the same industry, has gained 17%. The company reported its results for the quarter ended March 2026 more than a month ago.

Newell Brands reported revenues of $1.55 billion in the last reported quarter, representing a year-over-year change of -1.1%. EPS of -$0.05 for the same period compares with -$0.01 a year ago.

Newell Brands is expected to post earnings of $0.19 per share for the current quarter, representing a year-over-year change of -20.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.5%.

Newell Brands has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.