Grocery Outlet (GO) Gains on Value Proposition & Market Growth
Grocery Outlet Holding Corp. GO has crafted a successful business strategy, underpinned by a flexible sourcing and distribution model that allows it to offer products at exceptional values. This approach aligns well with the company's emphasis on customer-centricity, operational efficiency and strategic alliances.
GO's focus on offering significant savings continues to be a unique selling proposition that attracts shoppers and retains existing ones. This strategy has not only enabled the company to increase its market share but also to build a loyal customer base, which is vital in the highly competitive retail sector.
Grocery Outlet emphasized its value proposition, noting 40% average basket savings compared to conventional grocers. This resonates well with the company's continuous efforts to attract customers, particularly those from the middle to higher-income groups.
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Differentiated Business Model
Grocery Outlet’s strengths lie in its opportunistic purchasing model, which allows it to offer high-value products at significantly reduced prices. This strategy involves buying surplus inventory from large CPG (consumer packaged goods) suppliers and offering these products at steep discounts.
The company is also focusing on expanding its product range, with a special emphasis on natural, organic and specialty items. This move aligns with the growing consumer trend toward healthier and more sustainable products.
In the third quarter, Grocery Outlet reported a notable 9% year-over-year increase in sales, a clear indicator of its robust market performance. This growth was underpinned by a significant 6.4% rise in comparable store sales, showcasing the strength and appeal of the company's offerings to its existing customer base.
GO's opportunistic purchasing strategy, marketing initiatives, store-expansion efforts and e-commerce ventures contribute to the encouraging trend of deepening customer reach and market success.
Store Expansion Strategy Bodes Well
Grocery Outlet envisions the potential to establish a national network of more than 4,000 locations. The company strategically plans to inaugurate 27 stores, bringing the total count to 468 by the end of 2023. This expansion is part of its broader strategy to grow organically and through strategic acquisitions in various regions.
Anticipating a return to an annual unit growth rate of 10%, the company is actively exploring real estate deals.
Wrapping Up
Grocery Outlet exhibits resilience with its defensive product mix, value-driven offerings and consistent store expansion, fostering the potential for promising earnings growth. Despite operational disruptions from the systems transition, the third quarter showcased year-over-year improvements in the top and bottom lines. The company has been actively working on resolving these issues, with a focus on streamlining the new systems and ensuring a smooth transition.
The Zacks Rank #3 (Hold) stock has gained 2.1% in the past six months against the industry’s decline of 18.6%.
3 Other Promising Stocks
We have highlighted three better-ranked stocks, namely Ollie's Bargain Outlet Holdings, Inc. OLLI, Freshpet Inc. FRPT and Celsius Holdings, Inc. CELH.
Ollie's Bargain Outlet is a value retailer of brand-name merchandise at drastically reduced prices. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ollie's Bargain Outlet’s current fiscal-year sales and EPS suggests growth of 14.7% and 72.8%, respectively, from the year-ago reported figures. OLLI has a trailing four-quarter earnings surprise of 7%, on average.
Freshpet is a pet food company. The company manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats. The company presently has a Zacks Rank #2.
The Zacks Consensus Estimate for Freshpet’s current fiscal-year sales and EPS suggests growth of 26.8% and 27.1%, respectively, from the year-ago reported figures. FRPT has a trailing four-quarter earnings surprise of 7%, on average.
Celsius Holdings specializes in commercializing healthier, nutritional, functional foods, beverages and dietary supplements. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 185.2%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 110.9%, on average.
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Freshpet, Inc. (FRPT) : Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
Celsius Holdings Inc. (CELH) : Free Stock Analysis Report
