Grocery Outlet projects 25% first-quarter sales jump

Citing coronavirus-triggered demand, Grocery Outlet Holding Corp. expects sales to jump more than 25% and earnings to more than double for its fiscal 2020 first quarter.

In preliminary results released late yesterday, Grocery Outlet said net sales for the quarter ended March 30 rose 25.4% to $760.3 million from $606.3 million a year earlier. The gain reflects surging same-store sales and added business from 32 net new stores opened over the last 12 months, according to the Emeryville, Calif.-based extreme value grocer.

Comparable-store sales growth soared 17.4% year over year, fueled by rising customer transactions and a bigger average transaction size.

Grocery Outlet projects first-quarter net income of $8.8 million to $9.9 million, compared with $3.8 million in the prior-year period. From the midpoint of that range, that would mark an increase of $5.6 million, or 147.7%, the company said.

On an adjusted basis, net earnings are forecast at $30.3 million to $31.4 million, up from $9.9 million a year ago, representing a gain of $20.9 million, or 209.6%, from the midpoint.

“While April sales trends have moderated compared to the wave of customer pantry-loading experienced in March, comparable-store sales trends for the first three fiscal weeks of April were in the positive high-single digits in percentage terms,” Grocery Outlet stated. “As shelter-in-place requirements continued, we have experienced reduced store traffic and, as a result, year-over-year declines in the number of customer transactions on a comparable-store basis. However, the reduction in shopper visits have been more than offset to date by an increase in average transaction size.”

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Grocery Outlet said certain high-velocity items, such as toilet paper, remain tough to procure in ample quantities, but the company continues to purchase high volumes of “both opportunistic and everyday products,” enabling it to manage overall inventory positions to meet elevated customer demand. 

“Looking forward, we expect consumer demand and shopping behavior to continue to evolve, which may impact future sales trends,” the retailer said. “In addition, our results may be impacted by existing or possible future governmental requirements concerning the operations of our stores or distribution facilities.”

Grocery Outlet reported that it expects to incur “significant additional expenses” due to the COVID-19 outbreak, including added costs for cleaning and safety, corporate and distribution center staff, protective equipment and supplies at stores and facilities, and its supply chain.

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“Because of the timing of accelerated customer purchasing beginning in mid-March, only a portion of these costs impacted our first-quarter preliminary results,” the company said. “However, we expect that COVID-19 related expenses will more significantly burden our second-quarter financial results.”

During the first quarter, Grocery Outlet opened 10 new stores and closed two stores, giving the retailer 355 locations in California, Washington, Oregon, Pennsylvania, Idaho and Nevada, compared with 323 stores a year ago.

“Although construction activities for the majority of our new stores under development continue, we expect that the timing of new store openings will be negatively impacted as a result of shelter-in-place requirements,” the company noted.

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