Grocery Outlet (GO) Q3 2024 earnings summary

Executive summary

• Q3 net sales rose 10.4% year-over-year to $1.11 billion, with comparable store sales up 1.2% driven by higher transactions but lower average ticket size.

• Net income for Q3 was $24.2 million ($0.24 per diluted share), down from $27.1 million in Q3 2023; adjusted EBITDA increased 6.0% to $72.3 million.

• Five new stores opened in Q3, bringing the total to 529 across 16 states; United Grocery Outlet acquisition added 40 stores in April 2024.

• Leadership transition with the CEO stepping down and the Chairman returning as interim CEO; a search for a permanent CEO is underway.

• System conversion challenges and related operator support costs impacted margins and earnings.

Financial highlights

• Gross profit increased 9.2% to $344.9 million; Q3 gross margin was 31.1%, down 30 bps year-over-year due to inventory management impacts from system upgrades.

• SG&A expense increased 9.5% to $304.6 million (27.5% of net sales), reflecting higher store occupancy and personnel costs.

• Adjusted EBITDA margin was 6.5% in Q3 2024, up from 6.4% in Q3 2023.

• Net interest expense rose 52.4% to $6.4 million, mainly from higher average debt post-acquisition and share repurchases.

• Net cash from operating activities for the first 39 weeks was $72.5 million, down 73.8% year-over-year, mainly due to changes in payables, lower net income, and inventory levels.

Outlook and guidance

• Fiscal 2024 net sales expected slightly above $4.35 billion; comparable store sales growth expected at ~2.4%.

• Gross margin for the year forecast at ~30.4%; adjusted EBITDA guidance lowered to $237–$242 million.

• Adjusted EPS for the year expected at $0.77–$0.80.

• 66 net new stores expected in 2024, including 40 acquired and 26 organic openings.

• Capital expenditures for 2024 projected at ~$200 million, net of tenant improvement allowances.