Grocery Outlet soars 12% on earnings beat and raised outlook

Grocery Outlet Holding Corp. (NASDAQ:GO) experienced a significant boost in its stock price after delivering second-quarter earnings that surpassed analysts' expectations and raising its full-year guidance. The discount grocery retailer reported adjusted earnings per share of $0.20, outpacing the consensus estimate of $0.12 by $0.08.

Revenue for the quarter grew by 1.1% year-over-year to $1.19 billion, exceeding the estimated $1.17 billion. Grocery Outlet also announced an expanded fiscal 2026 revenue forecast, ranging from $4.70 to $4.72 billion, up from the previous range of $4.60 to $4.72 billion. The company's CEO, Jason Potter, attributed the positive results to the success of initiatives aimed at enhancing the retailer's value proposition.

Comparable-store sales trends showed improvement over the first quarter, bolstered by a sequential boost in the company's product mix and constant traffic. However, comparable store sales declined by 0.3% due to a 2.1% drop in average transaction size, which was partially offset by a 1.8% rise in transactions. Gross margins contracted by 40 basis points to 30.2% owing to promotional activities and inventory markdowns related to the grocery chain's optimization plan.

The company added 10 new stores and closed 12 during the quarter, including nine closures aligned with its optimization strategy, resulting in a total of 547 stores across 16 states. Operating income reached $15.8 million, including $5.4 million in restructuring charges. For fiscal 2026, Grocery Outlet anticipates comparable store sales to stay between -0.5% and flat, an improvement from the earlier forecast range of -2.0% to flat.

Adjusted EBITDA guidance has been raised to $225-$235 million from the prior range of $220-$235 million. The retailer plans to open 30-33 new stores, accounting for closures, and expects capital expenditures of $170 million.