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Factors Likely to Impact Grocery Outlet's (GO) Q2 Earnings

Zacks Equity Research
·4 mins read

Grocery Outlet Holding Corp. GO is scheduled to release second-quarter 2020 results on Aug 10, after market close. The Zacks Consensus Estimate for second-quarter earnings is pegged at 22 cents, which has been stable over the past 30 days and suggests growth of 10% from the year-ago quarter’s reported figure. Moreover, the consensus estimate for quarterly revenues is pegged at $760.9 million, which indicates an improvement of 17.9% from the year-ago period.

The EmeryVille, CA-based company has delivered a trailing four-quarter earnings surprise of nearly 26.4%, on average.

Key Factors to Note

Being a grocery-store chain, we expect Grocery Outlet’s second-quarter results to have benefited from coronavirus-led stockpiling. Moreover, its flexible sourcing and distribution business model that helps it offer quality, name-brand consumables and fresh products at exceptional values are commendable. The company has also been focused on store-growth endeavors alongside making strategic investments to improve functionality and scalability.

Aforementioned strengths have aided the company to deliver an impressive comparable-store sales growth trend. Also, increases in both the number of customer transactions and average transaction size have been boosting the metric. This might have continued in the soon-to-reported quarter. Management on its first-quarter earnings call on May 11 notified that through the first five weeks of second quarter, comparable-store sales growth tracked in the mid-teens. Grocery Outlet’s compelling value proposition,  strength in product offerings and “WOW!” deals have been driving sales. Comparable-store sales growth is projected to be 11.5%  in the soon-to-be-reported quarter.

However, any deleverage in SG&A expenses may show on the company’s profits in the second quarter. On first-quarter earnings call, management anticipated SG&A expenses, as a percentage of sales, to increase in the second quarter thanks to incremental costs associated with the ongoing pandemic. It also cautioned that a number of COVID-19-related factors such as increased distribution and supply-chain costs, product-mix shifts and potential rise in commodity prices may impact gross margin in the near future.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Grocery Outlet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Grocery Outlet Holding Corp. Price and EPS Surprise

Grocery Outlet Holding Corp. Price and EPS Surprise
Grocery Outlet Holding Corp. Price and EPS Surprise

Grocery Outlet Holding Corp. price-eps-surprise | Grocery Outlet Holding Corp. Quote

Grocery Outlet has an Earnings ESP of 0.00% and carries a Zacks Rank #3.

Stocks With a Favorable Combination

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

TreeHouse Foods THS has an Earnings ESP of +4.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowers Foods FLO currently has an Earnings ESP of +4.49% and a Zacks Rank #2.

Inter Parfums IPAR currently has an Earnings ESP of +30.26% and a Zacks Rank #3.

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