Grocery Outlet Holding Corp. rebounded in both its 2022 fourth quarter and fiscal year from prior-year results, with adjusted earnings per share in line with Wall Street’s projections.
For the 13-week quarter ended Dec. 31, net sales totaled $930.8 million, up 18.9% from $782.7 million a year earlier, Emeryville, California-based Grocery Outlet reported after Tuesday’s market close. The gain marked a big snap-back from the fiscal 2021 quarter, when the top line—excluding the year-ago quarter’s extra week—rose 3.8%.
Comparable-store sales surged by 15.1% in the fourth quarter from a 1.2% decline in the prior-year period. Grocery Outlet attributed the growth to a 10% increase in transaction count plus a 4.6% uptick in average transaction size.
Net sales for the 52-week 2022 fiscal year jumped 16.2% to $3.58 billion from $3.08 billion in 2021, when Grocery Outlet posted virtually flat results (excluding the previous year’s 53rd week). Comp-store sales climbed 11.8%—versus a 6% decline in 2021—and were propelled by 5.9% growth in the number of transactions and a 5.6% rise in average transaction size, Grocery Outlet said.
“We are very pleased with our fourth-quarter results and the strong momentum in our business,” Grocery Outlet President and CEO RJ Sheedy said in a statement. Sheedy took over as the value grocer’s chief executive on Jan. 1 from Eric Lindberg, who became chairman.
“Our merchandise assortment is better than ever, our pipeline of opportunistic products is healthy, our marketing message of value and savings is resonating with a broad base of consumers, and our independent operators are connecting with customers in their stores and throughout their communities,” according to Sheedy. “The result is a compelling ‘WOW!’ shopping experience that is driving strong traffic and spending trends across an expanding base of customers.”
Describing itself as an “extreme value” retailer, Grocery Outlet touts big discounts on brand-name products and has said a typical shopper basket is priced about 40% lower than that of conventional grocers and 20% lower than leading discounters. Stores are run by independent owner-operators from the communities they serve, enabling locations to cater closely to changing customer preferences. Shopper savings is achieved through a sourcing model of procuring surplus inventory and product overruns directly from thousands of supplier partners. That includes a changing assortment of products with “WOW!” prices, creating “treasure hunt” shopping.
More recently, Grocery Outlet has brought that shopping experience to the digital realm by launching and expanding online grocery delivery service via Instacart, DoorDash and Uber Eats.
Grocery Outlet, too, has continued a brisk brick-and-mortar expansion. The chain reported Tuesday that it opened 27 stores in fiscal 2022, including 10 in Q4, and closed one location, ending the year with 441 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, New Jersey and Maryland. That was up from 415 stores in seven states (excluding Maryland) a year earlier.
At the bottom line, fiscal 2022 fourth-quarter net income was $15.9 million, or 16 cents per diluted share, compared with $6.6 million, or 7 cents per diluted share, in the 2021 quarter. Adjusted net earnings came in at $22.6 million, or 22 cents per diluted share, versus $17.2 million, or 17 cents per diluted share, a year ago. Analysts, on average, had forecast adjusted earnings per share (EPS) of 23 cents, with estimates ranging from 22 cents to 25 cents, according to Refinitiv.
Grocery Outlet noted that Q4 2022 ushered in a revised definition for adjusted net income and EPS to “no longer exclude” the impact of non-cash rent expense and the provision for accounts-receivable reserves. Under the former definition, 2022 fourth-quarter net earnings were $24.9 million, or 25 cents per diluted share, versus $20 million, or 20 cents per diluted share, in the year-ago period.
Fiscal 2022 net income totaled nearly $65.1 million, or 65 cents per diluted share, compared with $62.3 million, or 63 cents per diluted share, in 2021. On an adjusted basis, net earnings were about $93.9 million, or 94 cents per diluted share, versus $78.6 million, or 79 cents per diluted share, for 2021. For the full year, Wall Street’s consensus adjusted EPS forecast was $1.00, with projections running from 99 cents to $1.02, according to Refinitiv.
Under Grocery Outlet’s previous definition, 2022 net earnings were $102 million, or $1.02 per diluted share, versus $89.9 million, or 90 cents per diluted share, in 2021.
“Driven by on our strong business fundamentals, we are well-positioned as we begin fiscal 2023,” Chief Financial Officer Charles Bracher said in a statement. “We expect healthy comp-sales growth as customers continue to respond to our value offering and WOW! shopping experience.”
Looking ahead, Grocery Outlet forecasts fiscal 2023 net sales of $3.85 to $3.9 billion, comp-store sales growth of 4.5% to 5.5% and adjusted EPS (diluted) of 94 cents to 99 cents. Before the company’s fiscal 2022 report, analysts estimated adjusted EPS of $1.14 on average, with a range of $1.00 to $1.25, plus net sales of $3.92 billion to $3.96 billion for fiscal 2023.
Grocery Outlet also projects capital expenditures of about $155 million and the opening of 25 to 28 net new stores.
“We continue to expand our footprint despite construction challenges, and we expect the pace of openings to accelerate in the second half of the year to our 10% annualized new-unit growth rate,” Bracher added. “In addition, the financial flexibility provided by our new expanded credit facility will further support our strategic objectives and the overall growth of our business for years to come.”