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Why Is Grocery Outlet (GO) Down 8.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Grocery Outlet Holding Corp. (GO - Free Report) . Shares have lost about 8.2% 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? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Grocery Outlet Holding Corp. came up with second-quarter 2024 results. Both the top and bottom lines surpassed the Zacks Consensus Estimate. While net sales improved, earnings declined from the year-ago period. Management did highlight that disruptions due to the implementation of new technology platforms hurt the gross margin in the quarter, but it anticipates no adverse impacts on operations in the second half of 2024.
Q2 Insights
Grocery Outlet’s adjusted earnings of 25 cents a share beat the Zacks Consensus Estimate of 20 cents but declined from 32 cents delivered in the year-ago quarter.
Net sales of $1,128.5 million came ahead of the Zacks Consensus Estimate of $1,109 million. The top line grew 11.7% year over year. The outperformance was driven by decent comparable store sales performance and new stores opened.
Comparable store sales increased 2.9% in the quarter, driven by a 5.1% jump in the number of transactions, partly offset by a 2.1% decline in the average transaction size. In the year-ago period, the company had reported a comparable store sales increase of 9.2%.
Margins & Costs
The gross profit rose 6.9% year over year to $349.2 million. However, the gross margin contracted 140 basis points to 30.9% due to the disruptions as a result of the implementation of new technology platforms that hurt the metric by 100 basis points. Adjusted EBITDA came in at $67.9 million, down from $70.5 million in the year-ago period. The adjusted EBITDA margin shrunk 100 basis points to 6%.
SG&A expenses jumped 11.4% to $323.1 million during the quarter. As a percentage of net sales, SG&A expenses decreased 10 basis points to 28.6%.
Store Update
During the quarter, Grocery Outlet expanded its footprint with the opening of 11 new stores, complementing the 40 stores acquired through the United Grocery Outlet acquisition. However, the company also closed one outlet. This brings the total count to 524 stores in 16 states.
The company aims to inaugurate 62-64 net new stores in 2024. This encompasses the addition of 40 United Grocery Outlet stores, alongside the opening of 22 to 24 new Grocery Outlet stores in its existing markets.
Other Financial Aspects
Grocery Outlet ended the quarter with cash and cash equivalents of $67.1 million, long-term debt of $373.6 million and stockholders’ equity of $1,220.8 million.
Net cash provided by operating activities during the quarter was $41.6 million. The company incurred capital expenditures of $40.2 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $200 million for 2024.
Outlook
Management continues to foresee 2024 net sales between $4.30 billion and $4.35 billion compared with $3.97 billion reported in 2023. The company now expects comparable store sales growth of 3.5%. The company had reported a 7.5% increase registered in 2023. Grocery Outlet guided a full-year gross margin of 30.5%, down from 31.3% guided earlier. The current projection showed an 80-basis point contraction in the gross margin from the year-ago period.
It expects adjusted EBITDA between $252 million and $260 million in 2024. The company had reported adjusted EBITDA of $252.6 million in 2023.
Grocery Outlet envisions adjusted earnings in the band of 89-95 cents. The company reported adjusted earnings of $1.07 per share in 2023.
Management expects third-quarter 2024 comparable store sales growth of approximately 1.5%. Grocery Outlet envisions the gross margin to be approximately 31%, down from 31.4% reported in the year-ago period. It estimates the adjusted EBITDA margin to be roughly 6.4%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -20.88% due to these changes.
VGM Scores
Currently, Grocery Outlet has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 belongs to the Zacks Consumer Products - Staples industry. Another stock from the same industry, Kimberly-Clark (KMB - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Kimberly-Clark reported revenues of $5.03 billion in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $1.96 for the same period compares with $1.65 a year ago.
Kimberly-Clark is expected to post earnings of $1.68 per share for the current quarter, representing a year-over-year change of -3.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.4%.
Kimberly-Clark 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.
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Why Is Grocery Outlet (GO) Down 8.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Grocery Outlet Holding Corp. (GO - Free Report) . Shares have lost about 8.2% 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? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Grocery Outlet’s Q2 Earnings Beat, Comps Jump 2.9% Y/Y
Grocery Outlet Holding Corp. came up with second-quarter 2024 results. Both the top and bottom lines surpassed the Zacks Consensus Estimate. While net sales improved, earnings declined from the year-ago period. Management did highlight that disruptions due to the implementation of new technology platforms hurt the gross margin in the quarter, but it anticipates no adverse impacts on operations in the second half of 2024.
Q2 Insights
Grocery Outlet’s adjusted earnings of 25 cents a share beat the Zacks Consensus Estimate of 20 cents but declined from 32 cents delivered in the year-ago quarter.
Net sales of $1,128.5 million came ahead of the Zacks Consensus Estimate of $1,109 million. The top line grew 11.7% year over year. The outperformance was driven by decent comparable store sales performance and new stores opened.
Comparable store sales increased 2.9% in the quarter, driven by a 5.1% jump in the number of transactions, partly offset by a 2.1% decline in the average transaction size. In the year-ago period, the company had reported a comparable store sales increase of 9.2%.
Margins & Costs
The gross profit rose 6.9% year over year to $349.2 million. However, the gross margin contracted 140 basis points to 30.9% due to the disruptions as a result of the implementation of new technology platforms that hurt the metric by 100 basis points. Adjusted EBITDA came in at $67.9 million, down from $70.5 million in the year-ago period. The adjusted EBITDA margin shrunk 100 basis points to 6%.
SG&A expenses jumped 11.4% to $323.1 million during the quarter. As a percentage of net sales, SG&A expenses decreased 10 basis points to 28.6%.
Store Update
During the quarter, Grocery Outlet expanded its footprint with the opening of 11 new stores, complementing the 40 stores acquired through the United Grocery Outlet acquisition. However, the company also closed one outlet. This brings the total count to 524 stores in 16 states.
The company aims to inaugurate 62-64 net new stores in 2024. This encompasses the addition of 40 United Grocery Outlet stores, alongside the opening of 22 to 24 new Grocery Outlet stores in its existing markets.
Other Financial Aspects
Grocery Outlet ended the quarter with cash and cash equivalents of $67.1 million, long-term debt of $373.6 million and stockholders’ equity of $1,220.8 million.
Net cash provided by operating activities during the quarter was $41.6 million. The company incurred capital expenditures of $40.2 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $200 million for 2024.
Outlook
Management continues to foresee 2024 net sales between $4.30 billion and $4.35 billion compared with $3.97 billion reported in 2023. The company now expects comparable store sales growth of 3.5%. The company had reported a 7.5% increase registered in 2023. Grocery Outlet guided a full-year gross margin of 30.5%, down from 31.3% guided earlier. The current projection showed an 80-basis point contraction in the gross margin from the year-ago period.
It expects adjusted EBITDA between $252 million and $260 million in 2024. The company had reported adjusted EBITDA of $252.6 million in 2023.
Grocery Outlet envisions adjusted earnings in the band of 89-95 cents. The company reported adjusted earnings of $1.07 per share in 2023.
Management expects third-quarter 2024 comparable store sales growth of approximately 1.5%. Grocery Outlet envisions the gross margin to be approximately 31%, down from 31.4% reported in the year-ago period. It estimates the adjusted EBITDA margin to be roughly 6.4%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -20.88% due to these changes.
VGM Scores
Currently, Grocery Outlet has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 belongs to the Zacks Consumer Products - Staples industry. Another stock from the same industry, Kimberly-Clark (KMB - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Kimberly-Clark reported revenues of $5.03 billion in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $1.96 for the same period compares with $1.65 a year ago.
Kimberly-Clark is expected to post earnings of $1.68 per share for the current quarter, representing a year-over-year change of -3.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.4%.
Kimberly-Clark 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.