Yahoo Finance Grocery Outlet (GO) Q4 Earnings Beat, Comps Increase 15.1%
Grocery Outlet Holding Corp. GO came up with fourth-quarter 2022 results, wherein the top line not only beat the Zacks Consensus Estimate but also improved year over year. The company registered a solid comparable store sales performance in the quarter. The bottom line also beat the consensus mark and improved from the year-ago period.
This California-based company continues to navigate through the challenging operating environment with strategic growth efforts. Grocery Outlet’s flexible sourcing and distribution business model, which helps it offer products at an exceptional value and excellent service from independent operators, bodes well.
The company’s opportunistic purchasing strategy, marketing efforts, store-growth endeavors and e-commerce initiatives to deepen the customer reach appear encouraging.
Q4 Insights
From this quarter, Grocery Outlet has revised its definition for adjusted EBITDA and adjusted earnings per share. Under the revised definition, the company reported adjusted earnings of 22 cents a share compared with the 17 cents posted in the year-ago period.
Adjusted earnings under the prior definition came in at 25 cents and surpassed the Zacks Consensus Estimate of 23 cents. The bottom line improved from the 20 cents reported in the prior-year quarter.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. Quote
Net sales of $930.8 million beat the Zacks Consensus Estimate of $904 million and grew 18.9% year over year. The outperformance was driven by the stellar comparable store sales performance and contributions from the new stores opened since the fourth quarter of 2021.
Comparable store sales increased 15.1% in the fourth quarter against a decline of 1.2% in the year-ago period. This was driven by a 10% increase in the number of transactions, combined with a 4.6% jump in the average transaction size.
Margins & Costs
The gross profit jumped 16.2% year over year to $281.2 million. However, the gross margin contracted 70 basis points to 30.2% due to cost pressures on commodity items.
Adjusted EBITDA, per the revised definition, came in at $54.3 million compared with $43.7 million in the year-ago period. Based on the prior definition, the company reported adjusted EBITDA of $57.4 million compared with $47.4 million.
SG&A expenses jumped 14.8% to $230.2 million due to higher store-related expenses and store occupancy costs. As a percentage of net sales, SG&A expenses decreased 90 basis points to 24.7%.
Store Update
During the quarter, Grocery Outlet opened 10 new stores, thereby taking the total count to 441 stores in eight states. The company expects the pace of store openings to accelerate in the second half of 2023 to a 10% annualized new unit growth rate. It intends to open 25 to 28 stores in 2023. The company plans to open 47 new stores in 2024.
Other Financial Aspects
Grocery Outlet, which carries a Zacks Rank #3 (Hold), ended the quarter with cash and cash equivalents of $102.7 million, long-term debt of $379.7 million and stockholders’ equity of $1,110.2 million.
Net cash provided by operating activities during 2022 was $185.5 million. The company incurred capital expenditures of $129.2 million (net of tenant improvement allowances). Management envisions capital expenditures (net of tenant improvement allowances) of about $155 million for 2023.
Outlook
Management expects 2023 net sales between $3.85 billion and $3.90 billion compared with $3.58 billion in 2022. It guided comparable store sales growth of 4.5% to 5.5% compared with an 11.8% increase registered in 2022.
Grocery Outlet guided a full-year gross margin of 30.6% compared with the 30.5% reported in 2022. It projected adjusted EBITDA (under revised definition) between $237 million and $243 million in 2023. The company reported adjusted EBITDA of $214.7 million in 2022 under the revised definition.
The company now envisions adjusted earnings under the revised definition in the band of 94 cents-99 cents a share for 2023 compared with the 94 cents reported in 2022 under the revised definition.
Management expects first-quarter 2023 comparable store sales to be approximately 10% compared with the 5.2% growth registered in the year-ago period. Grocery Outlet foresees the first-quarter 2023 gross margin to be approximately 30.6% compared with the 30.2% reported in the year-ago period. The company estimates first-quarter adjusted EBITDA to be roughly 6% of sales.
Shares of this extreme value retailer of quality, name-brand consumables and fresh products have declined 11.7% in the past three months compared with the industry’s decline of 6.7%.
Stocks Hogging the Limelight
Here we have highlighted three better-ranked stocks, namely Costco COST, Arhaus ARHS and Albertsons Companies ACI.
Costco, which operates membership warehouses, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Costco’s current financial-year revenues and EPS suggests growth of 7.3% and 8.6%, respectively, from the year-ago reported figure. Costco has a trailing four-quarter earnings surprise of 3.7%, on average.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Albertsons Companies, which operates food and drug stores in the United States, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 5.4%.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year revenues and EPS suggests growth of 7.8% and 6.5%, respectively, from the year-ago reported figure. Albertsons Companies has a trailing four-quarter earnings surprise of 17.2%, on average.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Albertsons Companies, Inc. (ACI) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
Arhaus, Inc. (ARHS) : Free Stock Analysis Report
