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Grocery Outlet Q2 Earnings Beat Estimates, 2026 View Raised
Grocery Outlet Holding Corp. GO reported second-quarter 2026 results, with both top and bottom lines surpassing the Zacks Consensus Estimate. While net sales increased year over year, adjusted earnings per share declined from the year-ago period. Results reflected sequential improvement in comparable-store sales and customer basket trends, along with continued traction from efforts to strengthen the company’s opportunistic offering and value perception.
Management also raised several key components of its fiscal 2026 outlook following second-quarter results that came in ahead of its expectations. The company improved its comparable-store sales forecast and increased the lower ends of its net sales, adjusted EBITDA and adjusted earnings-per-share guidance ranges.
GO’s Quarterly Performance: Key Insights
Grocery Outlet delivered adjusted earnings of 20 cents a share for the second quarter, beating the Zacks Consensus Estimate of 12 cents by 66.7%. The figure declined from adjusted earnings of 23 cents reported in the year-ago quarter.
Net sales increased 1.1% year over year to $1,192.8 million, surpassing the consensus mark of $1,167 million by 2.2%. The improvement was driven by sales from new stores, partially offset by lower sales stemming from store closures under the Optimization Plan and a decline in comparable-store sales.
Comparable-store sales declined 0.3% in the quarter, improving from the 1% drop registered in the first quarter. The second-quarter decrease reflected a 2.1% decline in average transaction size, partly offset by a 1.8% increase in the number of transactions. Management highlighted sequential improvement in the basket while traffic remained positive, signaling progress in its efforts to strengthen value perception and restore the core strengths of the business.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. Quote
GO’s Margin Profile Remains Under Pressure
Gross profit was relatively unchanged year over year at $360.7 million. Gross margin contracted 40 basis points to 30.2% from 30.6% in the prior-year quarter. The contraction primarily reflected product promotions aimed at driving sales and inventory markdowns and write-offs associated with Optimization Plan store closures, partly offset by improvements in inventory management.
Selling, general and administrative expenses increased slightly to $339.5 million from $336.8 million in the year-ago period. As a percentage of net sales, SG&A expenses were relatively flat year over year at 28.5%.
Adjusted EBITDA declined 3.1% year over year to $65.7 million from $67.7 million. Adjusted EBITDA margin of 5.5% contracted 20 basis points year over year.
The company posted operating income of $15.8 million, up from $12.8 million in the year-ago quarter. The latest quarter included $5.4 million in net restructuring charges related to the Optimization Plan.
GO’s Store Update
Grocery Outlet opened 10 new stores and closed 12 stores during the quarter, including nine closures related to its Optimization Plan, ending the period with 547 stores across 16 states.
The company completed the closure of all 36 financially underperforming stores identified under the Optimization Plan during the first half of fiscal 2026. For fiscal 2026, Grocery OutletGO-- continues to expect 30-33 net new store openings, excluding closures related to the Optimization Plan.
Grocery Outlet’s Financial Health Snapshot
Grocery Outlet ended the quarter with cash and cash equivalents of $74.2 million compared with $69.6 million at fiscal 2025-end. Long-term debt, net, totaled $490.6 million, while stockholders’ equity stood at $816.6 million.
This Zacks Rank #4 (Sell) company generated $43.2 million in operating cash flow during the second quarter compared with $73.6 million in the prior-year period. The decline primarily reflected the timing of accrued and other liabilities, lower operating lease liabilities stemming from the Optimization Plan and lower net income after adjusting for non-cash charges.
Capital expenditures, net of tenant improvement allowances, were $38.7 million compared with $58.3 million in the year-ago quarter. Management continues to expect fiscal 2026 capital expenditures of about $170 million, net of tenant improvement allowances.
Grocery Outlet Raises Key Fiscal 2026 Targets
Management raised several components of its fiscal 2026 outlook, reflecting improved operating trends and second-quarter results that came in ahead of its expectations.
Grocery Outlet now expects net sales of $4.70-$4.72 billion, raising the lower end from the previous guidance of $4.60-$4.72 billion. Comparable-store sales are projected to be between flat and down 0.5%, a substantial narrowing from the previous range of flat to down 2%.
The company now anticipates a gross margin of 29.8%-30% compared with the prior forecast of 29.7%-30%. Adjusted EBITDA is expected in the range of $225-$235 million versus the previous $220-$235 million projection.
Grocery Outlet also raised its fiscal 2026 adjusted earnings-per-share guidance to 51-55 cents from 45-55 cents previously.
The improved outlook follows sequential progress in Grocery Outlet’s comparable-store sales trajectory, with management pointing to a better customer basket and continued positive traffic. The company remains focused on strengthening its opportunistic assortment and value proposition while better supporting independent operators to establish a stronger foundation for sustainable, profitable long-term growth.
Shares of Grocery Outlet have rallied 32.6% over the past three months compared with the industry’s rise of 5%.
Stocks to Consider
The Vita Coco Company, Inc. COCO, a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages, currently sports a Zacks Rank #1 (Strong Buy). COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings calls for growth of 31.6% and 64.7%, respectively, from the year-ago figures.
Target Corporation TGT, which operates as a general merchandise retailer, carries a Zacks Rank #2 (Buy) at present. TGT delivered a trailing four-quarter earnings surprise of 8.2%, on average.
The Zacks Consensus Estimate for Target’s current financial-year sales and earnings indicates growth of 3.9% and 10.6%, respectively, from the prior-year reported levels.
US Foods Holding Corp. USFD engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. USFD currently carries a Zacks Rank #2. US Foods Holding delivered a trailing four-quarter earnings surprise of 1.5%, on average.
The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings implies growth of 5.1% and 16.3%, respectively, from the year-ago figures.
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Grocery Outlet Holding Corp. (GO): Free Stock Analysis Report
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