Grocery Outlet (GO) Rides on Business Model, Customer Reach
In a dynamic business landscape, Grocery Outlet Holding Corp. GO thrives by leveraging its growth initiatives and robust product offerings. Notably, the company's proficiency in seizing supply opportunities, delivering a diverse product range, extending its store network and fostering effective customer engagement drives its achievements.
Grocery Outlet's adeptness in impactful marketing campaigns, consistently expanding its retail footprint and enhancing the online shopping experience is truly commendable. These proactive actions are pivotal in the company's customer acquisition efforts.
In the second quarter of 2023, GO achieved remarkable 12.5% year-over-year growth in net sales totaling $1.01 billion. This exceptional performance was predominantly driven by a substantial 9.2% rise in comparable store sales, amplified by the favorable contributions from store openings since the second quarter of 2022.
Grocery Outlet envisions establishing more than 4,000 locations nationwide. In the second quarter, the company inaugurated four stores and shuttered one, concluding the period with a network of 447 stores across eight states. Grocery Outlet anticipates an acceleration in the pace of store openings, targeting a 10% annual growth rate, with plans to launch 25-28 stores in 2023. Furthermore, the company's strategic investments in technology and operational enhancements underscore its steadfast commitment to sustainable expansion.
Customer-Centric Approach Bodes Well
Grocery Outlet boasts a unique business model founded on adaptable sourcing and distribution, allowing it to furnish high-quality, brand-name products at exceptional prices. What sets it apart from traditional retailers is its ever-evolving product selection, featuring exclusive deals and everyday necessities. With average savings of 40% than regular grocery stores and WOW! items that offer savings of more than 70%, Grocery Outlet delivers substantial benefits to its customers.
At the heart of GO's business strategy is the commitment to providing customers with a "WOW!" experience through a compelling customer value proposition. This is reinforced by a sourcing and distribution model that is challenging to replicate, and a "small business at scale" approach that harnesses the strengths of independent operators.
The company's dedication to convenience is evident through its partnerships with Instacart, DoorDash and Uber Eats, offering same-day delivery options that appeal to savvy shoppers and foster repeat business. In response to the growing demand for fresh and healthy options, Grocery Outlet has broadened its product range to include Natural, Organic, Specialty and Healthy products, underscoring its commitment to meeting the evolving preferences of its customers.
Wrapping Up
As a result of these strategies, Grocery Outlet has achieved a positive financial outcome. In the second quarter of 2023, the company exceeded expectations by registering year-over-year growth in revenues and profits. The outstanding performance of comparable store sales in second quarter underscores the resilience of Grocery Outlet's existing store locations and its ability to attract customers and drive sales.
Following this impressive performance, the management revised its outlook for 2023. It anticipates net sales of $3.95 billion, accompanied by 7-8% growth in comparable store sales. This represents an upgrade from the company's earlier projections of 2023 net sales of $3.90 billion and a comparable store sales growth rate of 5-6%. GO aims for a higher full-year gross margin of 31.3%, suggesting a rise from the 30.5% reported in 2022.
The Zacks Rank #2 (Buy) stock has lost 6.4% in the past six months compared with the industry’s decline of 27.6%.
3 Other Promising Stocks
We have highlighted three other top-ranked stocks, namely Ollie's Bargain Outlet Holdings, Inc. OLLI, Ross Stores Inc. ROST and Walmart Inc. WMT. These three companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ollie's Bargain Outlet is a value retailer of brand-name merchandise at drastically reduced prices.
The Zacks Consensus Estimate for Ollie's Bargain Outlet’s current fiscal-year sales and EPS suggests growth of 14.2% and 67.9%, respectively, from the year-ago reported figures. OLLI has a trailing four-quarter earnings surprise of 1.3%, on average.
Ross Stores is an off-price retailer of apparel and home accessories.
The Zacks Consensus Estimate for Ross Stores’ current fiscal-year sales and EPS suggests growth of 7.1% and 19.4%, respectively, from the year-ago reported figures. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart operates a chain of hypermarkets, discount department stores and grocery stores
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings suggests growth of 5% and 2.4%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
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Walmart Inc. (WMT) : Free Stock Analysis Report
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Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
