Growth Strategies Propel Grocery Outlet (GO) Toward Success
Grocery Outlet Holding Corp. GO possesses a distinctive business model that revolves around adaptable sourcing and distribution, enabling it to furnish top-notch, name-brand merchandise at remarkable prices. Its constantly evolving product lineup, featuring exclusive bargains and everyday essentials, distinguishes it from conventional retailers.
By delivering an average savings of 40% compared with regular grocery stores and impressive WOW! items with savings exceeding 70%, the company significantly benefits customers.
Grocery Outlet's business strategy is centered around providing a "WOW!" experience to customers through a powerful customer value proposition. This is supported by a flexible sourcing and distribution model that is difficult to replicate, and a "small business at scale" model that leverages independent operators.
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The company's dedication to convenience is evident through its partnerships with Instacart, DoorDash and Uber Eats, offering same-day delivery options, attracting savvy shoppers and nurturing repeat business. In response to the growing demand for fresh and healthy choices, Grocery Outlet has expanded its inventory to include Natural, Organic, Specialty and Healthy products, underscoring its commitment to meeting evolving customer preferences.
The company thrives in a challenging business climate, owing to its growth initiatives and robust product offerings. Its aptitude for seizing supply opportunities, maintaining a diverse product range, expanding its store network, and effectively engaging customers are key strengths that underline its success.
Widening Reach
Grocery Outlet's ability to seize opportunities in purchasing, run effective marketing campaigns, continually expand its store presence and enhance the online shopping experience is commendable. These actions bode well for the company's efforts to attract customers. Grocery Outlet takes a proactive approach by opening stores and optimizing its operational capabilities.
In the second quarter of 2023, the company achieved an impressive 12.5% year-over-year growth in net sales, reaching $1.01 billion. This outstanding performance was primarily fueled by a notable 9.2% increase in comparable store sales, bolstered by the positive contributions from store openings since the second quarter of 2022.
Grocery Outlet believes that there is potential to establish more than 4,000 locations nationally. The company inaugurated four stores and closed one, concluding the second quarter with 447 stores in eight states. GO anticipates the pace of store openings to accelerate to a 10% annual growth rate and aims to open 25-28 stores in 2023. Strategic investments in technology and operational enhancements further underscore the company's commitment to sustainable expansion.
Wrapping Up
These strategies have resulted in a positive financial outcome for Grocery Outlet. In the second quarter of 2023, the company surpassed projections, achieving year-over-year growth in revenues and profits. The impressive performance of comparable store sales in this quarter highlights the resilience of Grocery Outlet's current store locations and its capacity to attract customers and boost sales. (Read More: Grocery Outlet Q2 Earnings Beat, FY23 Outlook Raised)
Following the impressive performance, management raised its 2023 view. It anticipates net sales of $3.95 billion, accompanied by comparable store sales growth of 7-8%. The company earlier projected 2023 net sales of $3.90 billion and comparable store sales growth between 5% and 6%.
The Zacks Rank #2 (Buy) stock has lost 3.5% in the past six months compared with the industry’s decline of 26.1%.
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.
Ollie's Bargain Outlet is a value retailer of brand-name merchandise at drastically reduced prices. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ollie's Bargain Outlet’s current fiscal-year sales and EPS suggests growth of 14.1% and 67.3%, 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 company currently flaunts a Zacks Rank #1.
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, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings suggests growth of 5% and 2.2%, 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
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
