Grocery Outlet Sees Comps Slow Further

Q1comps fall 8.2%, falling further

The move among grocery shoppers to limit trips and shop online during the height of the pandemic—a boon for some conventional supermarkets—are continuing to weigh disproportionately on some niche players.

The discounter Grocery Outlet, for one, is seeing pressure on comparable-store sales accelerate as it laps last year’s boom, shut-down restaurant space reopen, and rivals in the conventional supermarket space leverage e-commerce offerings and refire their price promotions.

This combination of conditions contributed to an 8.3% decline in comparable-store sales for the Emeryville, Calif.-based discounter in the first quarter that ended April 3—and the revelation that comps in the current second quarter had slid still further to low double-digit declines.

Officials discussing results with analysts in a conference call after markets closed May 11 emphasized stability among the chain’s devoted shoppers and pledged to continuing leveraging its strengths in value and an active new-store pipeline to win over the longer term. Much of the current pressures, they said, were “transitory” in nature.

“On an absolute basis, average weekly sales trends have remained consistent with the first quarter, supported by both steady customer traffic and average basket sizes,” Chief Financial Officer Charles Bracher told analysts, according to a Sentieo transcript. “As we look forward, several transitory factors are difficult to forecast, including the pace and degree of the vaccine rollout, local market reopenings and the impact of stimulus funds on the consumer. Assuming current trends continue, we expect comp sales for the full second quarter will remain in the negative low double digits. As the operating environment evolves, we will leverage the inherent flexibility of our model and unique value proposition to best serve our customers.”

Total sales in the quarter fell by 1% to $752.5 million, reflecting the effect of 34 new stores. Gross margin as a percent of sales fell slightly from 30.8% to 30.5%.

“From our perspective, we’re in the middle of a very volatile time for the consumer,” CEO Eric Lindberg said. “Things like consumer trends, behaviors, even customer psychology, they’re really hard to predict in the near term. So we’re not going to try and do that.

“What we’ve done is manage our business through this pandemic the best we know how, controlling the things that we have a real impact on,” he continued. “You have great buyers delivering super values to the stores; operators delivering service and marketing, and continuing to engage with new customers that are interested in what we offer.”

Grocery Outlet’s stock fell sharply in the first day of trading since results were announced, down near 16% midday May 12.


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