Grocery Outlet returned to positive comparable store sales in its fiscal third quarter, with comps up 0.5 percent and net sales rising 0.9 percent to $1.18 billion for the quarter ended Oct. 3.
The comp gain was driven by a 2.4 percent increase in transactions, partially offset by a 1.9 percent decrease in average transaction size, as the extreme-value grocer’s shoppers came more often but spent less per trip. The Emeryville, California-based company opened 14 stores in the quarter, ending with 561 stores in 16 states.
“In the third quarter we returned to positive comparable store sales, driven by continued improvements to the execution of our opportunistic product offering,” said Jason Potter, president and CEO.
“Traffic accelerated and basket trends again improved sequentially as we enhanced our value proposition,” he added. “In partnership with our operators and suppliers, we will continue to build on this progress with a focus on driving sustainable sales growth and improved profitability over time.”
Margins pressured by promotions, freight and produce dip
Gross margin declined 40 basis points to 30 percent, which the company attributed to product promotions, higher transportation expenses and a broad reduction in consumer demand for produce resulting from the Cyclospora outbreak associated with certain fresh produce items, partially offset by a favorable mix shift toward opportunistic products. Operating income was $24 million – including $3.6 million in net restructuring credits – and net income rose to $13.3 million from $11.6 million a year ago.
For the 39-week year-to-date period, net sales rose 1.8 percent to $3.54 billion with comps down 0.2 percent; the year-to-date operating loss of $138.2 million reflects a $158 million non-cash goodwill impairment taken in the first quarter after a stock price decline, along with restructuring charges.
Optimization Plan nears completion
Under the Optimization Plan launched early this year, Grocery Outlet closed 36 underperforming stores in March and April and has substantially completed terminating the related independent operator agreements. The company now estimates total net restructuring charges of $22 million to $29 million, a raised range reflecting updated lease termination and idle property costs, with the plan substantially complete by the fourth quarter of fiscal 2027.
For fiscal 2026, the company raised its comparable store sales guidance to growth of 0.2 to 0.4 percent, from a prior range of down 0.5 percent to flat, while trimming the top of its adjusted EBITDA range to $225 million to $229 million and narrowing expected net new store openings to 30 to 31. The net sales outlook holds at $4.70 billion to $4.72 billion.
Related: Grocery Outlet Q2 Sales Rise As Turnaround Efforts Gain Traction