Grocery Outlet has its first billion-dollar quarter

Grocery Outlet Holding Co. reported a strong second quarter that included a sales milestone as consumers flocked to its stores for deals. 

The fast-growing extreme discount grocer said its net income increased 21.8% to $24.5 million, or $0.24 per diluted share, in the quarter ended July 1, compared with net income of $20.1 million, or $0.20 a share, in the year-ago quarter.  Adjusted net income increased 18.5% to $31.9 million, or $0.32 per adjusted diluted share. ^.

Net sales rose 12.5% to $1.01 billion — a first for the company. Analysts had expected sales of $980.2 million. 

Comparable store sales 9.2%, driven by a 9.1%% increase in the number of transactions. The average transaction size was flat. 

Adjusted EBITDA increased by 22.7% to $70.5 million, or 7.0% of net sales.

“Our second quarter results came in ahead of our expectations and were driven by strong same store sales growth and gross margin expansion, said RJ Sheedy, CEO of Grocery Outlet. “Our differentiated model and compelling value proposition are resonating with both new and existing customers, and our performance is being driven by strong transaction growth.”

Grocery Outlet said it continues to expect to open between 25 and 28 net new stores for the year.  

During the company’s earnings call, Sheedy called attention to the work of Grocery Outlet’s independent operators and said the company is committed to investing in capital to upgrade fixtures, implement new technologies and other tools to help them grow sales and profits.

“Interest in becoming an operator is at all-time high,” he said. “We received nearly 30,000 leads over the last year, which is up 50% over the last four years.”

Looking ahead, Grocery Outlet raised its guidance for the year, and said it is “well positioned for future growth." 

The company now expects comparable store sales to increase 7%-8% instead of its previous 5%-6% guidance. It also raised the range of its adjusted earnings forecast to between $254 million and $260 million.

Based in Emeryville, Calif., Grocery Outlet operates 447 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, Maryland and New Jersey.