Grocery Outlet Reports 9.9% Revenue Growth, Net Income Decline in 39-Week Period Ended September 28, 2024

Grocery Outlet Holding Corp. reported its financial results for the 39 weeks ended September 28, 2024, showing significant changes in revenue and profitability compared to the previous fiscal period. The company achieved net sales of $3,273.6 million, a 9.9% increase from $2,979.6 million in the same period of 2023. For the third quarter alone, net sales reached $1,108.2 million, up 10.4% from $1,003.9 million in Q3 2023. This growth was driven by the addition of 74 new stores and a 2.0% increase in transaction volume, although average transaction size decreased by 0.7%.

Gross profit for the 39 weeks was $998.1 million, reflecting a 5.9% increase from $942.8 million in the prior year. However, gross margin decreased from 31.6% to 30.5%, attributed to inventory management challenges following system upgrades. Operating income for the 39 weeks fell to $66.9 million from $106.9 million in 2023, while net income dropped significantly to $37.2 million from $65.3 million, marking a 43.1% decline. Basic earnings per share for the period decreased from $0.66 to $0.37.

The company’s total assets increased to $3,138.5 million as of September 28, 2024, up from $2,969.6 million at the end of 2023. Long-term debt rose sharply to $419.9 million from $287.1 million, primarily due to borrowings under a new credit agreement to support growth initiatives, including the acquisition of United Grocery Outlet, which added 40 stores across six southeastern states. The acquisition, completed on April 1, 2024, involved a total purchase consideration of $62.5 million.

Cash and cash equivalents decreased to $68.7 million from $114.9 million at the end of 2023, while net cash provided by operating activities fell to $72.5 million, down 73.8% from $276.2 million in the previous year. The company also reported increased selling, general, and administrative (SG&A) expenses, which rose by $77.7 million due to higher store-related costs and corporate expenses related to the acquisition and system upgrades.

In terms of corporate governance, Grocery Outlet experienced leadership changes, with the CEO stepping down in late October 2024 and an interim CEO appointed. The company is actively seeking to fill key executive positions amid competitive market conditions for management talent. Additionally, the company has initiated a new share repurchase program, authorizing up to $100 million in stock buybacks, replacing the previous program.