Grocery Outlet revises full-year outlook after robust Q1

Dive Brief:

Grocery Outlet is revising its fiscal year 2023 outlook on numerous key metrics after a “strong first quarter performance and continued momentum,” Charles Bracher, the grocery company’s CFO, said in a Tuesday earnings call.
The forecast revision boosts the company’s expected net sales, comp-store sale increases, gross margin, adjusted EBITDA and adjusted earnings per diluted share, according to the grocer’s financial report.
Grocery Outlet’s President and CEO R.J. Sheedy credits strong same-store sales results, gross margin expansion and bottom-line leverage to the company’s Q1 results.

Dive Insight:

Grocery Outlet’s bolstered full-year guidance follows several months of strong comp sales as the discounter benefits from consumers seeking refuge from ongoing high food prices.

Sheedy told investors, according to a Motley Fool transcript, that as consumers feel the strain of inflation, Grocery Outlet is seeing high customer satisfaction levels, with most customers expecting to maintain or increase their spend with the discounter in the future. Bracher said Grocery Outlet is expecting inflation to continue to moderate.

In the revised guidance, Grocery Outlet expects its comp-store sales increase for FY 2023 to range from 5% to 6%, up from the previous estimate of 4.5% to 5.5%. The company also boosted its adjusted EBITDA from $237 million to $243 million up to a range of $240 million to $246 million and revised its gross margin estimate from approximately 30.6% to around 30.7%, according to its earnings report.

Additionally, the discounter is expecting its FY 2023 net sales to come in at approximately $3.9 billion — the top part of its originally estimated range.

However, Grocery Outlet is keeping its capital expenditures estimate at its original $115 million. The company’s new store openings will also remain consistent at a range of 25 to 28 with plans to open two stores and close one in the second quarter. New store openings for the rest of the fiscal year will be split evenly between Q3 and Q4.

For Q1, Grocery Outlet saw net sales increase 16.1% while comp store sales grew 12.1%, mainly fueled by a 7.9% increase in transactions, according to the company’s report. The chain also opened three new stores before the quarter’s end on April 1, bringing its count up to 444 locations across eight states.

Sheedy also noted an increase in customer count, which rose by 8% as compared to last year, as well as a 4% increase in its average basket size.