Grocery Outlet’s third quarter results were met with a significant negative market response, as the company missed Wall Street’s revenue expectations and reported a notable year-over-year decline in operating margin. Management attributed the underperformance in same-store sales to late-quarter changes in promotional activity and a less effective marketing mix, which led to a slowdown in customer traffic. CEO Jason Potter described the impact of these decisions as "net negative," and emphasized the company’s focus on course correction, noting, “we’ve seen a return to weekly comp growth” after adjustments to marketing and promotions.
Is now the time to buy GO? Find out in our full research report (it’s free for active Edge members).
Grocery Outlet (GO) Q3 CY2025 Highlights:
- Revenue: $1.17 billion vs analyst estimates of $1.18 billion (5.4% year-on-year growth, 0.8% miss)
- Adjusted EPS: $0.21 vs analyst estimates of $0.19 (11.5% beat)
- Adjusted EBITDA: $66.67 million vs analyst estimates of $67.47 million (5.7% margin, 1.2% miss)
- The company dropped its revenue guidance for the full year to $4.71 billion at the midpoint from $4.75 billion, a 0.8% decrease
- Management raised its full-year Adjusted EPS guidance to $0.79 at the midpoint, a 1.9% increase
- EBITDA guidance for the full year is $260 million at the midpoint, below analyst estimates of $264.7 million
- Operating Margin: 2%, down from 3.6% in the same quarter last year
- Locations: 563 at quarter end, up from 529 in the same quarter last year
- Same-Store Sales rose 1.2% year on year, in line with the same quarter last year
- Market Capitalization: $1.14 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Grocery Outlet’s Q3 Earnings Call
- Jeremy Hamblin (Craig-Hallum): Asked how late-quarter marketing and promotional changes impacted comp sales. CEO Jason Potter explained that traffic slowed as a result but has improved since reverting to prior strategies.
- Corey Tarlowe (Jefferies): Inquired about lessons from marketing tests and SG&A leverage points. Potter detailed that social-focused marketing underperformed, while CFO Chris Miller projected modest cost leverage if comp growth accelerates.
- John Heinbockel (Guggenheim Partners): Probed the clustering strategy for store refresh and potential disruption during execution. Potter confirmed store clustering in core markets with a typical five-week implementation timeframe that temporarily pressures sales.
- Edward Kelly (Wells Fargo): Asked if comp weakness was tied to marketing and whether SNAP trends are already impacting results. Potter linked the slowdown to marketing mix changes and noted that prior SNAP reductions altered tender types but not overall sales.
- Leah Jordan (Goldman Sachs): Questioned the confidence behind scaling the store refresh after limited testing. Potter responded that pilot stores’ results and retail fundamentals give the team confidence to expand quickly while continuing to adjust as needed.
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will closely monitor (1) the pace and sales impact of the store refresh rollout across diverse markets, (2) sustained improvements in inventory management and in-stock levels enabled by new order guide tools, and (3) any effects on sales from changes in SNAP benefits or broader macroeconomic pressures. Continued execution on cost discipline and successful integration of new leadership will also be crucial signposts.
Grocery Outlet currently trades at $11.65, down from $14.19 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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