Why Grocery Outlet Stock Gained Today
Key Points
Grocery Outlet's turnaround strategy is taking hold.
Same-store sales are edging toward positive.
- 10 stocks we like better than Grocery Outlet ›
Shares of Grocery Outlet (NASDAQ: GO) rose on Thursday after the discount retailer raised its full-year sales and profit forecast.
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Optimizing the store base
Grocery Outlet's net sales inched up 1.1% to $1.2 billion in its fiscal second quarter, which ended on July 4.
The gains were driven by sales at the company's new stores. Grocery Outlet opened 10 new locations during the quarter. It also closed 12 underperforming stores as part of its optimization plan, which is designed to bolster its long-term profitability and free cash flow production.
In all, Grocery Outlet ended the second quarter with 547 stores across 16 states.
All told, Grocery Outlet's adjusted net income checked in at $20.3 million, or $0.20 per share. That's down from $22.8 million, or $0.23 per share, in the year-ago period. But it's well above Wall Street's estimates, which had called for per-share profits of $0.12.
"We delivered second-quarter results ahead of our outlook, as efforts to strengthen our opportunistic offering and value perception gained traction," CEO Jason Potter said.
Comps are stabilizing
Grocery Outlet raised the lower end of its full-year net sales forecast to $4.7 billion from $4.6 billion. It also lifted its projection for comparable-store sales, which include revenue from locations open at least 13 months, to negative 0.25% at the low end, up from negative 2%.
"Comparable-store sales trends improved over the first quarter, driven by sequential improvement in our basket with traffic remaining positive," Potter said.
Grocery Outlet also confirmed that it completed the closure of the 36 underperforming stores it identified as part of its optimization plan in the first half of 2026. Restructuring charges should thus abate after the first quarter of fiscal 2027.
For fiscal 2026, management expects adjusted earnings per share of $0.51 to $0.55.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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