Grocery Outlet 2025 Q2 Earnings Misses Targets as Net Income Dives 64.6%

Grocery Outlet reported mixed results for fiscal 2025 Q2, with revenue rising 4.5% year-over-year but earnings sharply declining. The company missed expectations with a significant drop in net income and EPS. However, it raised its full-year adjusted EPS guidance and reaffirmed optimistic outlooks for growth and margin expansion.

Revenue
The total revenue of Grocery Outlet increased by 4.5% to $1.18 billion in 2025 Q2, up from $1.13 billion in 2024 Q2.

Earnings/Net Income
Grocery Outlet's EPS fell 64.3% to $0.05 in 2025 Q2, compared to $0.14 in 2024 Q2. The company’s net income declined to $4.96 million, a 64.6% drop from $14 million in the prior year, marking a significant underperformance in profitability.

Price Action
The stock price of Grocery Outlet has edged down 2.69% during the latest trading day, has dropped 3.20% during the most recent full trading week, and has edged down 2.76% month-to-date.

Post-Earnings Price Action Review
The strategy of buying Grocery Outlet shares on earnings days and holding for 30 days historically delivered favorable returns over the past three years, generating a cumulative return of 26.5% compared to 18.5% for the S&P 500 (SPY). Notably, the stock posted strong 30-day returns of 12.5%, 9.8%, and 4.2% following its 2022, 2023, and 2024 earnings reports, respectively. However, the strategy was marked by periods of volatility, with peak-to-trough declines as high as 10% observed after certain earnings reports. The success of the strategy hinged largely on favorable market reactions to earnings beats, rather than long-term price appreciation.

CEO Commentary
CEO Jason Potter highlighted strong Q2 performance with $1.18 billion in net sales, 4.5% year-over-year growth, and 1.1% comp sales growth. He emphasized disciplined cost management and a 30.6% gross margin exceeding guidance. Potter outlined strategic priorities, including optimizing new store performance, hiring top talent, and upgrading systems for improved operations. He expressed optimism about future growth, stating the company believes it has a clear path to stronger organic growth, margin improvement, and better returns on capital.

Guidance
Grocery Outlet reaffirmed full-year 2025 guidance, including comp store sales growth of 1%–2%, 33–35 net new stores, gross margins of 30%–30.5%, and adjusted EBITDA of $260–270 million. Adjusted EPS guidance was raised to $0.75–$0.80 from $0.70–$0.75, driven by favorable interest expense. For Q3, the company expects comp sales of 1.5%–2%, 9 net new stores, gross margins of 30%–30.5%, and adjusted EBITDA of $63–$67 million.

Additional News
On August 6, 2025, it was reported that Grocery Outlet's stock surged 11% following its Q2 earnings announcement, driven by performance that exceeded expectations and a positive outlook from management. Investors reacted favorably to the company’s raised EPS guidance and plans for operational improvements. The strong share price movement came amid broader optimism about the company’s long-term growth trajectory and margin expansion. No major M&A activity, leadership changes, or dividend/buyback announcements were disclosed in the reported news.