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Grocery Outlet stock surged more than 11 percent after the discount grocery chain posted second-quarter results that beat expectations and raised its full-year profit forecast. The company demonstrated strong execution despite continued pressure in the retail food market, with improved earnings and steady traffic growth helping boost investor confidence.
Adjusted earnings came in at 23 cents per share, well ahead of the 17 cents expected by Wall Street. Revenue rose 4.5 percent year-over-year to $1.18 billion, just slightly under the consensus estimate of $1.19 billion. Comparable store sales increased 1.1 percent, driven by a 1.5 percent gain in customer traffic, although average transaction size dipped slightly by 0.4 percent.
Based on its performance, Grocery Outlet raised its full-year adjusted earnings guidance to a range of 75 to 80 cents per share, up from its previous range of 70 to 75 cents. This is above analyst estimates of 74 cents. However, the company kept its revenue projection unchanged at $4.7 to $4.8 billion.
CEO Jason Potter said the company’s strong execution and clear value proposition helped drive better-than-expected results. He noted that ongoing store initiatives are leading to higher traffic and that improved margin management and cost discipline are contributing to sustainable profit growth.
Gross margin narrowed by 30 basis points to 30.6 percent, mainly due to lower pricing on core staples aimed at reinforcing the brand’s value offering. The margin pressure was partly offset by better inventory control and internal efficiencies.
The company opened 11 new stores and closed two during the quarter, ending with 552 total locations across 16 states. It still plans to open a net 33 to 35 new stores in 2025. Operating income was $12.8 million, which includes $11.2 million in restructuring charges tied to a cost optimisation strategy. The full cost of that plan is expected to total about $63 million.
For the full year, Grocery Outlet expects same-store sales to grow between 1.0 and 2.0 percent. Adjusted EBITDA is projected to fall within the $260 to $270 million range. With strong earnings momentum and a disciplined cost structure, the company appears to be navigating a difficult industry landscape while still driving steady growth.