Grocery Outlet Q2 Earnings Beat Estimates, Comparable Sales Rise Y/Y

Grocery Outlet Holding Corp. GO reported second-quarter 2025 results, wherein the top line lagged the Zacks Consensus Estimate but increased year over year. Meanwhile, earnings surpassed the Zacks Consensus Estimate but declined from the same period last year. Comparable sales grew year over year. As a result, shares of this company gained 10.4% in the after-hours trading session yesterday.

The company’s strong value proposition and store initiatives drove customer traffic, while disciplined cost management supported improved operating efficiency. The company also made progress on key priorities outlined last quarter, including strengthening new store performance and enhancing operational consistency. These efforts are expected to deliver long-term value for customers, independent operators and shareholders.

GO’s Quarterly Performance: Key Insights

Grocery Outlet’s adjusted earnings of 23 cents per share exceeded the Zacks Consensus Estimate of 17 cents per share but fell 0.1% from 25 cents in the year-ago quarter. 

Net sales of $1.180 billion marginally missed the Zacks Consensus Estimate of $1.183 billion. The top line grew 4.5% year over year. This rise was driven by contributions from store openings and a 1.1% increase in comparable store sales.

Comparable sales growth benefited from the timing shift of the Easter holiday relative to the previous year. This increase was primarily due to a 1.5% rise in transaction volume, partially offset by a 0.4% decline in average transaction value. We anticipated 1% comparable store sales growth for the second quarter.

Grocery Outlet’s Margin & Cost Details

Gross profit rose 3.3% year over year to $360.7 million. However, the gross margin declined 30 basis points to 30.6% due to pricing changes on everyday staples aimed at reinforcing its value proposition and attracting budget-conscious shoppers. This decline was partially offset by enhancements in inventory management, which also helped drive a 20-basis-point improvement in the gross margin from the first quarter of this year.

Selling, general and administrative expenses rose 4.2% to $336.8 million and decreased 10 basis points to 28.5% of net sales. The decline as a percentage of sales was primarily due to lower commission support related to the prior year’s systems conversion, reduced incentive compensation and prior-year acquisition costs for United Grocery Outlet, partially offset by higher store and corporate expenses to support growth.

Adjusted EBITDA of $67.7 million decreased 0.2% from $67.9 million in the year-ago period. The adjusted EBITDA margin of the company declined 30 bps to 5.7%. Our model predicted a 50-bps decline in the adjusted EBITDA margin.

GO’s Store Update

In the second quarter, 11 stores were opened and two were closed, bringing the total store count to 552 across 16 states. Beginning in the second quarter of 2025, comparable store sales figures also include locations acquired through the purchase of United Grocery Outlet on April 1, 2024. The company aims to inaugurate 33-35 net new stores in 2025.

GO Stock Past 3-Month Performance

Grocery Outlet’s Financial Health Snapshot

GO ended the second quarter with cash and cash equivalents of $55.2 million, net long-term debt of $455.2 million, and stockholders’ equity of $1.19 billion.

Net cash provided by operating activities was $73.6 million in the second quarter of 2025. The capital expenditure totaled $58.3 million (net of tenant improvement allowances). Management envisions a capital expenditure (net of tenant improvement allowances) of $210 million for 2025.

GO’s 2025 Outlook

The company’s second-quarter results reflect continued confidence in its fiscal 2025 performance, as management maintains full-year guidance for net sales, net new store openings, comparable store sales, gross margin, adjusted EBITDA and capital expenditure. However, it raised the guidance for adjusted earnings per share.

For fiscal 2025, the Zacks Rank #4 (Sell) company expects net sales between $4.7 billion and $4.8 billion, and comparable store sales growth of 1-2%. The gross margin is projected between 30% and 30.5%. Adjusted EBITDA is forecast between $260 million and $270 million, in line with the prior expectations. Management hiked its outlook for adjusted earnings per share to 75-80 cents from the previously stated 70-75 cents.

For the third quarter of 2025, the company expects comparable store sales growth between 1.5% and 2%. Nine net new stores are anticipated to be added in the quarter. The gross margin is projected between 30% and 30.5%, with adjusted EBITDA of $63-$67 million. Adjusted EPS for the third quarter is expected between 17 cents and 19 cents.

Shares of this extreme-value retailer of quality, name-brand consumables and fresh products firm have lost 15.1% in the past three months compared with the industry’s decline of 4.4%.

Stocks to Consider

Post Holdings POST is a consumer-packaged goods holding company. POST presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current sales and earnings indicates growth of 2.7% and 7.3%, respectively, from the year-ago period’s reported figures. POST delivered a trailing four-quarter earnings surprise of 22.9%, on average.

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently has a Zacks Rank #2 (Buy). 

SFM has a trailing four-quarter earnings surprise of 13.4%, on average. The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 15.7% and 38.7%, respectively, from the year-ago reported numbers.

Ingredion Incorporated INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries. It currently carries a Zacks Rank of 2. INGR delivered a trailing four-quarter average earnings surprise of 11.1%.

The consensus estimate for INGR’s current financial-year sales and earnings indicates growth of 1% and 6.8%, respectively, from the prior-year reported levels.

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This article originally published on Zacks Investment Research (zacks.com).

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