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Grocery Outlet Holding Corp (GO)
NASDAQ:GO
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Grocery Outlet Holding
(NASDAQ:GO)
57Neutral
Positive Factors
Leadership Changes
Encouraging new CEO, CFO, and CIO leadership changes with highly relevant experiences in strategic turnarounds.
Long-term Outlook
Despite near-term uncertainties, Grocery Outlet has a positive long-term outlook supported by its unique model and strong customer value proposition.
Valuation
Despite the disappointing update, the stock is seen as cheap with potential value in eventual recovery.
Negative Factors
Guidance and Expectations
'25 guidance below expectations with significantly cut unit growth and margin expectations, raising cynicism given recent history.
Restructuring Costs
An additional $36-45 million in restructuring costs is expected in 2025, with most costs incurred in the first half.
Systems Issues
Unexpected systems issues, which held back GO's performance, are persisting and affecting the business.
Grocery Outlet Holding (GO) vs. S&P 500 (SPY)
Market Cap
$1.23B
Dividend YieldN/A
Average Volume (3M)3.13M
Price to Earnings (P/E)32.3
Beta (1Y)0.68
Revenue Growth10.13%
EPS Growth-50.29%
CountryUS
Employees1,692
SectorConsumer Defensive
Sector Strength68
IndustryGrocery Stores
Share Statistics
EPS (TTM)0.40
Shares Outstanding97,357,940
10 Day Avg. Volume2,571,449
30 Day Avg. Volume3,128,894
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.28
Price to Cash Flow (P/CF)7.80
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$13.78Price Target Upside7.49% Upside
Rating ConsensusHold
Number of Analyst Covering10
Grocery Outlet Holding Business Overview & Revenue Model
Company DescriptionGrocery Outlet Holding Corp. (GO) operates as a high-growth, extreme value retailer in the United States. The company offers a wide range of name-brand consumables and fresh products through a network of independently operated stores. Its unique business model focuses on providing deeply discounted products by acquiring excess inventory from brand manufacturers, distributors, and other retailers, thereby offering significant savings to its customers.
How the Company Makes MoneyGrocery Outlet Holding Corp. makes money primarily through the sale of discounted grocery products across its network of stores. The company sources its inventory at reduced prices by purchasing overstock and closeout goods from manufacturers and suppliers, which allows them to sell products at a lower cost compared to traditional retailers. Revenue is generated from the sales made by independent operators who manage individual store locations. These operators pay a share of their gross profits to Grocery Outlet as part of their partnership agreement. Additionally, the company benefits from economies of scale and strategic partnerships with suppliers, enabling it to maintain a robust and diverse product offering that attracts cost-conscious consumers.
Grocery Outlet Holding Financial Statement Overview
Summary
Grocery Outlet Holding shows growth in revenue but faces challenges in profitability and cash flow management. The balance sheet remains stable, with manageable leverage. However, consistent negative free cash flow growth and declining profit margins highlight the need for strategic adjustments to enhance operational efficiency and cash generation.Income Statement
Grocery Outlet Holding has demonstrated steady revenue growth, with a notable increase from $3.98 billion to $4.37 billion in the latest year. However, profitability metrics show some weaknesses, with a declining EBIT margin from 3.17% to 1.79% and a net profit margin dropping from 2.00% to 0.90%, indicating pressure on operational efficiency and cost management.65
Positive
Balance Sheet
The company's balance sheet is relatively stable with a consistent debt-to-equity ratio of approximately 1.00, indicating balanced leverage. The equity ratio shows a healthy 37.73%, reflecting solid asset backing by equity. However, maintaining this balance amidst fluctuating net debt levels remains a challenge.70
Positive
Cash Flow
Cash flow metrics reveal a challenging year, with free cash flow turning negative at -$74.65 million, primarily due to higher capital expenditures. The operating cash flow to net income ratio remains healthy at 2.84, but the decline in free cash flow growth signals potential issues in cash generation and capital allocation strategies.55
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.37B | 3.97B | 3.58B | 3.08B | 3.13B | Gross Profit |
| 1.32B | 1.24B | 1.09B | 948.79M | 973.35M | EBIT |
| 78.33M | 125.78M | 94.99M | 89.09M | 107.38M | EBITDA |
| 192.35M | 214.97M | 173.24M | 160.22M | 165.43M | Net Income Common Stockholders |
| 39.47M | 79.44M | 65.05M | 62.31M | 106.71M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 62.83M | 114.99M | 102.73M | 140.09M | 105.33M | Total Assets |
| 3.17B | 2.97B | 2.77B | 2.67B | 2.49B | Total Debt |
| 1.19B | 1.39B | 1.41B | 1.46B | 1.38B | Net Debt |
| 1.13B | 1.28B | 1.31B | 1.32B | 1.27B | Total Liabilities |
| 1.98B | 1.75B | 1.66B | 1.66B | 1.56B | Stockholders Equity |
| 1.20B | 1.22B | 1.11B | 1.01B | 922.31M |
| Cash Flow | Free Cash Flow | |||
| -74.65M | 111.46M | 38.44M | 32.43M | 50.46M | Operating Cash Flow |
| 111.96M | 303.45M | 185.51M | 165.59M | 181.24M | Investing Cash Flow |
| -274.03M | -194.16M | -149.93M | -136.71M | -133.79M | Financing Cash Flow |
| 109.91M | -97.02M | -72.94M | 5.88M | 29.77M |
Grocery Outlet Holding Technical Analysis
Neutral
12.82
Price Trends
14.82
Negative
16.20
Negative
17.54
Negative
Market Momentum
-0.63
Negative
44.70
Neutral
60.68
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GO, the sentiment is Neutral. The current price of 12.82 is above the 20-day moving average (MA) of 12.43, below the 50-day MA of 14.82, and below the 200-day MA of 17.54, indicating a neutral trend. The MACD of -0.63 indicates Negative momentum. The RSI at 44.70 is Neutral, neither overbought nor oversold. The STOCH value of 60.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for GO.
Grocery Outlet Holding Risk Analysis
Grocery Outlet Holding disclosed 45 risk factors in its most recent earnings report. Grocery Outlet Holding reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Grocery Outlet Holding Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $12.25B | 11.88 | 35.20% | 2.41% | 0.97% | -24.43% | |
73 Outperform | $47.32B | 17.82 | 26.64% | 1.91% | -1.94% | 24.13% | |
71 Outperform | $689.29B | 35.75 | 22.23% | 0.96% | 5.07% | 25.86% | |
71 Outperform | $14.04B | 37.92 | 30.81% | ― | 12.90% | 50.20% | |
64 Neutral | $403.42B | 53.08 | 32.89% | 0.51% | 6.13% | 12.14% | |
62 Neutral | $20.49B | 13.68 | -10.76% | 7.35% | 1.61% | 5.91% | |
57 Neutral | $1.23B | 32.28 | 3.27% | ― | 10.13% | -50.29% |
* Consumer Defensive Sector Average
Performance Comparison
GO
Grocery Outlet Holding
12.82
-14.88
-53.72%
COST
Costco
926.04
199.06
27.38%
KR
Kroger Company
65.40
10.64
19.43%
WMT
Walmart
87.49
27.60
46.08%
SFM
Sprouts Farmers
145.42
81.99
129.26%
ACI
Albertsons Companies
20.80
0.29
1.41%
Grocery Outlet Holding Earnings Call Summary
Earnings Call Date: Feb 25, 2025 | % Change Since: -18.55% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted positive aspects such as growth in comparable store sales and net sales, new leadership appointments, and strategic distribution center expansion. However, these were counterbalanced by significant challenges, including declining gross margins, restructuring charges, and ongoing systems issues affecting operations.Highlights
Comparable Store Sales Increase
Comparable store sales increased by 2.9% in Q4, driven by a 3% growth in customer count.
Net Sales Growth
Net sales increased by 10.9% to $1.1 billion for the fourth quarter.
New Distribution Center
Opened a new 680,000 square foot distribution center in Vancouver, Washington, expected to increase efficiencies and lower distribution costs in the region.
Leadership Appointments
Appointment of Jason Potter as CEO and Chris Miller as CFO, both bringing extensive experience to drive company growth.
Lowlights
Gross Margin Decline
Gross margin declined by 70 basis points year-over-year, impacted by supply issues and inventory shrinkage.
Restructuring Charges
Incurred $15.9 million in restructuring charges related to exiting store leases and supply chain expansion projects.
Higher Interest Expense
Net interest expense increased to $7 million, driven by higher average principal debt.
Systems Implementation Challenges
Ongoing issues with systems implementation and inventory management tools affecting efficiency and margins.
Company Guidance
During the call, Grocery Outlet provided several metrics and guidance for fiscal 2025. They expect comparable store sales growth between 2% to 3%, with a total net sales range of $4.7 to $4.8 billion, including approximately $75 million from a 53rd week. The company plans to open 33 to 35 net new stores, focusing more on existing and adjacent markets to improve productivity and return on invested capital. Gross margins are anticipated to be around 30% to 30.5% for the year. Adjusted EBITDA is projected between $260 million and $270 million, while adjusted earnings per share (EPS) is expected to be in the range of $0.70 to $0.75. They also mentioned the impact of restructuring charges in the range of $36 million to $45 million, with the majority expected in the first half of the year.Grocery Outlet Holding Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Grocery Outlet Holding Appoints New CEO Jason Potter
Positive
Jan 22, 2025
On January 22, 2025, Grocery Outlet Holding Corp. announced the appointment of Jason Potter as its new President and Chief Executive Officer, effective February 3, 2025. Mr. Potter, who brings over 30 years of experience in the grocery retail industry and has previously led The Fresh Market, is expected to drive the company’s next phase of growth and enhance shareholder value. Eric J. Lindberg, Jr., the interim President and CEO, will continue as Chairman of the Board, ensuring a smooth transition and alignment with Grocery Outlet’s strategic goals.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.