Comps, Transaction Growth Drive Grocery Outlet's Q1 Sales

It was a strong second quarter at Grocery Outlet as solid comparable store sales and growth in the number of transactions gave revenue a boost.

For the quarter ended July 1, net sales were $1.01 billion, up 12.5% over the comparable quarter the previous year. Net income was up 21.8% to $24.5 million, or $0.24 per diluted share. Comparable store sales were up 9.2%, which was driven by a 9.1% increase in the number of transactions. Average transaction size was flat.

"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."

For the year’s first half, net sales were up 14.3% to $1.98 billion. Net income increased 20.6% to $38.2 million, or $0.38 per diluted share. Comparable store sales increased by 10.6%, driven by a 8.6% increase in the number of transactions and a 1.9% increase in average transaction size.

Sheedy said the discount grocer continues to see positive momentum in its newer markets, particularly in the East, where the company is increasing awareness in its customer base through targeted marketing investments, strong IO execution, and expanding store count. 

Grocery Outlet has restated guidance for the remainder of the year. It is now forecasting net sales of approximately 3.95 billion, up from previous guidance of approximately $3.9 billion. Comparable store sales are now expected to increase between 7% and 8%, an increase over previous guidance of between 5% and 6%. 

The grocery, which currently has 447 stores across eight states, is bullish about future growth. During an investor conference call, Sheedy said the company has “tremendous white space” with the potential to operate more than 4,000 stores in the U.S. 

“We are continuing to invest in real estate and construction resources to fulfill our future store potential,” he said. “We've recently hired new people to the team, and we are expanding strategic relationships with external partners, including large property owners. We are also considering opportunistic real estate and small regional acquisition opportunities that align with our geographic expansion and store growth strategies.”