Is Grocery Outlet's Store Refresh the Catalyst for a 2026 Turnaround?

Grocery Outlet Holding Corp.’s GO store refresh program, initiated in the third quarter of 2025, is a key lever to enhance in-store execution and boost sales performance in 2026. Management is shifting its focus beyond opportunistic supply and margin actions by prioritizing in-store customer experience. The refresh program aims to strengthen the brand’s value communication amid growing competition.

The refresh targets three key areas: improving store layout, expanding and standardizing the core product assortment, and elevating value messaging in-store. Management noted that shopper response has been impressive. The pilot stores have demonstrated strong performance, delivering a mid-single-digit increase in comparable sales with double-digit growth in fresh categories, such as meat and produce.

Buoyed by these results, management plans to roll out the format to about 20 stores by the end of this year and at least 150 more by the end of 2026. The remaining targeted stores are scheduled for upgrade in 2027. The refresh also supports other operational enhancements the company is implementing, such as better forecasting tools, improved merchandising processes and greater support for independent operators.

The store refresh program positions Grocery Outlet to significantly improve comparable store sales growth next year. With an estimated payback period of 3.5 years, the initiative could serve as a strong, capital-efficient driver of sales and margin growth, as refreshed stores become the model for all new openings. We anticipate comparable store sales growth of approximately 2.5% and an adjusted EBITDA margin expansion of 50 basis points in 2026.

What the Latest Metrics Say About Grocery Outlet

Grocery Outlet, which competes with Dollar General Corporation DG and Target Corporation TGT, has seen its shares plummet 47.5% in the past year compared with the industry’s decline of 17.7%. While shares of Dollar General have rallied 33.9%, Target shares have dropped 33% during the period mentioned above.
 

From a valuation standpoint, Grocery Outlet's forward 12-month price-to-earnings ratio stands at 11.52, below the industry’s ratio of 18.13. GO carries a Value Score of A. Grocery Outlet is trading at a premium to Target (with a forward 12-month P/E ratio of 10.59) but at a discount to Dollar General (15.31). 
 

The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings per share implies year-over-year growth of 7.8% and 2.6%, respectively. 
 

Grocery Outlet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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