Here's How Grocery Outlets (GO) is Staying Ahead of the Curve
Grocery Outlet Holding Corp. GO has exhibited a decent run on the bourses in the past six months. Thanks to its unique business model, strength in product offerings and store growth endeavors, the stock has outpaced the industry over time.
This Zacks Rank #3 (Hold) stock has rallied 9.3% in the past three months against the industry’s decline of 3.3%. This leading extreme-value retailer in the United States has also outpaced the Consumer Staples sector’s rise of 0.4%.
The Zacks Consensus Estimate for the company’s 2023 and 2024 sales is pegged at $3.91 billion and $4.27 billion, respectively, suggesting a year-over-year increase of 9.3% for both periods. Moreover, the Zacks Consensus Estimate for 2023 and 2024 earnings has moved northward by two cents and four cents to 99 cents and $1.14, respectively, over the past 60 days.
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Let’s Delve Deeper
Grocery Outlet’s well-crafted and agile business model is characterized by a flexible sourcing and distribution approach. The model enables the company to procure products from various sources, capitalizing on opportune deals and securing goods at competitive prices.
Additionally, the company employs an opportunistic purchasing strategy, leveraging favorable market conditions to acquire products at advantageous prices. By capitalizing on these opportunities, Grocery Outlet can offer cost savings to its customers, enhancing the value proposition of its offerings.
Recognizing the significance of e-commerce in today's retail landscape, Grocery Outlet has implemented initiatives to deepen its customer reach through digital channels. By embracing e-commerce, the company can cater to the preferences of modern consumers and expand its market penetration beyond traditional brick-and-mortar stores.
The company is offering same-day delivery of everyday essentials and staples from all its stores in collaboration with Instacart and DoorDash. It has also teamed up with Uber Technologies for grocery delivery.
These strategies have translated into a favorable financial performance for Grocery Outlet. In the first quarter of 2023, the company exceeded expectations, with its top and bottom-line figures seeing year-over-year growth. The solid comparable store sales performance in the quarter reflects the strength of Grocery Outlet's existing store network, and its ability to drive customer traffic and sales. (Read More: Grocery Outlet Beats on Q1 Earnings, Raises FY23 View)
Following these positive results, management expressed confidence in the resilience of Grocery Outlet's grocery business and its effective execution of strategies. This outlook led management to raise its full-year view, projecting net sales of $3.90 billion for 2023, accompanied by comparable store sales growth of 5-6%. Notably, the company earlier projected 2023 net sales between $3.85 billion and $3.90 billion, and comparable store sales between 4.5% and 5.5%.
Wrapping Up
Grocery Outlet appears promising for the long term, with its unique sourcing and distribution model setting it apart from traditional retailers. The company offers quality name-brand consumables and fresh products at exceptional value, often purchased at significant discounts. Their dynamic product rotation, including "WOW!" deals, attracts customers seeking bargains.
Refreshing the brand image and empowering Independent Operators enhance customer engagement. However, potential challenges may arise from fluctuating product offerings and maintaining brand consistency across different store locations.
3 Promising Stocks
Here we have highlighted three better-ranked stocks, namely Nomad Foods NOMD, Celsius Holdings CELH and Walmart WMT.
Nomad Foods, a frozen food product company, currently sports a Zacks Rank #1 (Strong Buy). NOMD has a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales suggests growth of 8% from the year-ago reported figure.
Celsius Holdings, which offers functional drinks and liquid supplements, currently sports a Zacks Rank #1. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 69.6% and 154.4%, respectively, from the year-ago reported numbers.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period. WMT has a trailing four-quarter earnings surprise of 12%, on average.
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Celsius Holdings Inc. (CELH) : Free Stock Analysis Report
