Grocery Outlet 2025 Q1 Earnings Misses Targets as Net Loss Widens 2175%

Grocery Outlet (GO) reported its fiscal 2025 Q1 earnings on May 06th, 2025. The company missed expectations with a deepening net loss of $23.32 million, significantly wider than last year's $1.02 million loss. Despite an 8.5% increase in revenue to $1.13 billion, comparable store sales growth was modest, and the average transaction size declined. Grocery Outlet maintained its guidance, projecting adjusted EPS of $0.16 to $0.18 for the next quarter, amid ongoing macroeconomic uncertainties.

Revenue

The total revenue for Grocery Outlet saw an 8.5% increase, reaching $1.13 billion in 2025 Q1 compared to $1.04 billion in 2024 Q1.

Earnings/Net Income

Grocery Outlet's losses deepened significantly, with EPS dropping to $0.24 per share in 2025 Q1 from a $0.01 loss per share in 2024 Q1, marking a 2300% wider loss. The net loss expanded to $23.32 million in 2025 Q1, up by 2174.8% from the previous year's $1.02 million loss. This indicates a concerning trend in profitability.

Price Action

The stock price of Grocery Outlet edged up 0.80% during the latest trading day, declined 2.33% over the most recent week, and surged 17.57% month-to-date.

Post-Earnings Price Action Review

A strategy involving the purchase of Grocery Outlet shares following a revenue decline quarter-over-quarter and holding these shares for 30 days has historically yielded poor results over the past five years. The strategy returned -2.51%, significantly underperforming the benchmark return of 86.27%. This led to an excess return of -88.78% and a compound annual growth rate (CAGR) of -0.51%, indicating substantial losses. Furthermore, the strategy experienced a high maximum drawdown of -21.44% and a low Sharpe ratio of -0.04, suggesting elevated risk and negative returns.

CEO Commentary

Jason Potter, President & CEO, emphasized that Grocery Outlet's performance exceeded expectations, attributing $1.13 billion in net sales to improved comparable store sales and new store openings. He stressed the importance of enhancing execution and store experiences while strengthening supplier relationships. Potter outlined four strategic priorities: boosting new store performance, securing top talent, closing execution gaps, and improving operational scalability. He expressed optimism, stating, "I believe with the right focus on execution, this business can be much larger and much more profitable in the future."

Guidance

Grocery Outlet projects comparable store sales growth between 1% and 2% for the year, considering current trends and macroeconomic uncertainties. The company reiterated its guidance for total net sales, gross margin, adjusted EBITDA, and adjusted EPS, forecasting the latter to be $0.16 to $0.18 per share for the second quarter. Restructuring charges are expected between $59 million and $61 million, with net interest expense approximately $32 million for the year. The second-quarter gross margin is forecasted to be between 30% and 30.5%.

Additional News

Raymond James Financial Inc. recently acquired new holdings in Grocery Outlet, highlighting potential investor interest amid restructuring efforts. Meanwhile, Grocery Outlet continues to implement its restructuring plan, aiming to reduce costs and improve profitability, with significant investments and operational changes expected to be completed by mid-2025. Additionally, the company introduced Jason Potter as the new CEO earlier this year, succeeding RJ Sheedy, who resigned following poor performance. Potter brings a focus on execution and customer experience from his previous role at The Fresh Market.