On August 6, 2024, Grocery Outlet Holding Corp (GO, Financial) released its 8-K filing for the second quarter of fiscal 2024, ending June 29, 2024. Grocery Outlet Holding Corp is a grocery store operator in the United States, known for its flexible buying model that offers quality, name-brand products at significant discounts. The company operates through a network of independently operated stores, creating a localized shopping experience.
Performance Overview
Grocery Outlet Holding Corp reported a net sales increase of 11.7% to $1.13 billion for Q2 fiscal 2024, surpassing the analyst estimate of $1.103 billion. Comparable store sales grew by 2.9%, driven by a 5.1% increase in transactions, although this was partially offset by a 2.1% decrease in average transaction size. Despite these gains, the company faced challenges with a gross margin decrease of 140 basis points to 30.9%, attributed to disruptions from new technology platform implementations.
Financial Achievements and Challenges
Grocery Outlet Holding Corp's net income decreased by 42.8% to $14.0 million, or $0.14 per share, falling short of the analyst estimate of $0.17 per share. Adjusted EBITDA also saw a decline of 3.7% to $67.9 million, or 6.0% of net sales. The company opened 11 new stores and closed one, ending the quarter with 524 stores across 16 states.
We are pleased with our second quarter performance with gross margins and earnings coming in better than our expectations," said RJ Sheedy, President and CEO of Grocery Outlet. "We also continue to make good progress with our systems transition work and are happy to now have the material negative P&L impact behind us."
Key Financial Metrics
| Metric | Q2 Fiscal 2024 | Q2 Fiscal 2023 |
|---|---|---|
| Net Sales | $1.13 billion | $1.01 billion |
| Gross Profit | $349.2 million | $326.6 million |
| Net Income | $14.0 million | $24.5 million |
| Adjusted EBITDA | $67.9 million | $70.5 million |
Balance Sheet and Cash Flow
As of June 29, 2024, Grocery Outlet Holding Corp reported cash and cash equivalents of $67.1 million and total debt of $379.2 million. The company generated $41.6 million in net cash from operating activities during the quarter. Capital expenditures were $42.4 million before tenant improvement allowances.
Updated Fiscal 2024 Guidance
The company updated its key guidance figures for fiscal 2024:
| Metric | Previous Guidance | Current Guidance |
|---|---|---|
| New Store Openings (net) | 58 to 62 | 62 to 64 |
| Net Sales | $4.30 billion to $4.35 billion | $4.30 billion to $4.35 billion |
| Comparable Store Sales Increase | 3.5% to 4.5% | ~3.5% |
| Gross Margin | ~30.5% | ~30.5% |
| Adjusted EBITDA | $252 million to $260 million | $252 million to $260 million |
| Adjusted EPS (diluted) | $0.89 to $0.95 | $0.89 to $0.95 |
| Capital Expenditures (net of tenant improvement allowances) | ~$175 million | ~$200 million |
Analysis
Grocery Outlet Holding Corp's performance in Q2 fiscal 2024 highlights both strengths and areas for improvement. The significant increase in net sales and comparable store sales indicates strong consumer demand and effective store operations. However, the decrease in net income and gross margin underscores the challenges posed by technology disruptions and increased operating expenses.
Value investors may find the company's strategic initiatives, such as the acquisition of United Grocery Outlet and the opening of new stores, promising for long-term growth. The updated fiscal 2024 guidance reflects cautious optimism, balancing growth opportunities with operational challenges.
For more detailed insights and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Grocery Outlet Holding Corp for further details.
