Why Grocery Outlet (GO) Shares Are Plunging Today
What Happened:
Shares of discount grocery store chain Grocery Outlet (NASDAQ:GO) fell 8.6% in the pre-market session after the company reported third quarter results with revenue falling short of Wall Street's estimates, driven by worse-than-expected same-store sales. The company also lowered its full-year adjusted EBITDA and EPS guidance, partly because of investments in new technology platforms to synchronize its operations. On the other hand, Grocery Outlet exceeded analysts' adjusted EBITDA and EPS expectations during the quarter. Overall, this was a mixed quarter for Grocery Outlet.
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What is the market telling us:
Grocery Outlet's shares are not very volatile than the market average and over the last year have had only one move greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was three months ago, when the stock gained 5.4% on the news that the company reported a "beat and raise" quarter. Second quarter results surpassed analysts' expectations for comparable store sales, revenue, and earnings per share (EPS). Comparable store sales, which measures in the increase in sales in stores that have been open for a year or more (to exclude newly-opened stores), grew over 9% in the quarter, smashing expectations of slightly under 6%. Also, EPS beat by 29%, driven by the comparable stores sales growth but also improved gross margin and strong expense control. Looking ahead, the company raised its comparable store sales, revenue, gross margin, adjusted EBITDA, and EPS guidance for the full year. Overall, it was a great quarter for the company.
Grocery Outlet is down 6.8% since the beginning of the year, and at $26.75 per share it is trading 22.9% below its 52-week high of $34.68 from August 2023. Investors who bought $1,000 worth of Grocery Outlet's shares at the IPO in June 2019 would now be looking at an investment worth $938.27.
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