Grocery Outlet's Q2 2025: Contradictions in Consumer Behavior, Sales Growth, and Strategic Focus

Strong Second Quarter Performance:
- Grocery Outlet Holding Corp. reported net sales of $1.18 billion for Q2 2025, growing 4.5% over the previous year.
- The company also reported an adjusted EPS of $0.23 and adjusted EBITDA of $68 million, both exceeding their respective guidance ranges.
- The growth was driven by a 1.1% increase in comparable store sales and the opening of 9 net new stores, keeping them on pace to achieve their annual store opening target.

Operational Efficiency and Cost Management:
- Gross margin improved to 30.6%, ahead of outlook, through improved inventory management and merchandising.
- SG&A as a percentage of net sales was reduced by 10 basis points from last year, driven by a decrease in commissions and other corporate costs.
- This performance was supported by disciplined underwriting in store expansion and focused efforts on operating leverage.

Progress on Strategic Imperatives:
- The company is addressing new store performance and execution gaps through improved site selection criteria and piloting key commercial activities.
- Securing top talent, including new hires like Chief Merchandising Officer Matt Delly, was emphasized to drive growth and scale advantages.
- Systems updates have been completed, leading to improved inventory visibility and positive customer feedback on tools like the real-time order guide.

Consumer Value and Market Positioning:
- Grocery Outlet continues to emphasize its value proposition, introducing a new wine label, Second Cheapest, with under $5 bottles to drive sales.
- Efforts to enhance the customer experience in stores, like layout and fresh category changes, have contributed to a lift in comparable store sales.
- The company is refining its approach to communicate its value proposition more effectively to customers.