Discounter Grocery Outlet has charged a former executive of Walmart and Boxed.com with awakening a sleepy store base in central Pennsylvania.
Heather Mayo, who recently was Boxed’s chief merchandising officer and spent 12 years with Walmart’s Sam’s Club division as an operations SVP, and before that more than a decade with BJ’s Wholesale Club, joined Grocery Outlet on Oct. 7 as EVP of the company’s East region. In this role, Mayo is expected to lead the expansion of a small pocket of independently owned discount stores to serve as a second front of long-term expansion for the Emeryville, Calif.-based company, which is currently doing most of its new-store growth in Southern California.
“Heather brings 23 years of experience in the retail club channel and will lead our efforts to expand our existing Mid-Atlantic store base and future expansion. We look forward to leveraging her operational and merchandising expertise as we develop our long-term plans for this market,” MacGregor Read, vice chairman of Grocery Outlet, said during a conference call this week reviewing the retailer’s third-quarter financial results.
CEO Eric Lindberg said Mayo has begun a lengthy “immersion” to learn about her new employer, its stores and operators. “We couldn't be more excited to see sort of the progress she'll start making in 2020," he said.
Grocery Outlet operates 337 stores, with all but 20 on the West Coast. The Pennsylvania units came by way of a 2011 acquisition of Amelia’s Grocery Outlet, a Lancaster County-based counterpart. Other than a gradual change of company banners, a few new units and assignment of some stores to independent operators—as of earlier this year, six of the 20 sites were still owned by the company—that group of stores has been relatively quiet. But officials see the East Coast as a front for future expansion, joining discounting rivals such as Lidl and Aldi that are already actively expanding there.
The company is currently focused primarily on growing stores in Southern California, after which it will turn to the Mid-Atlantic.
“Hiring Heather is a great first step in that direction,” Read said. “We fully intend for her to continue to build the infrastructure to support a higher growth rate as time goes on. … But we really believe in … this ‘crawl, walk, run’ approach. You'll see us open a few stores in 2020 in that [Mid-Atlantic] region and then continue to build from there.”
Grocery Outlet officials state they can grow their store based by about 10% annually and envision quadrupling its current store base through expansion to contiguous markets. In filings for an initial public offering earlier this year, the company said it believes the U.S. could eventually support 4,800 stores.
Most of the company’s stores are run by independent operators who sell on consignment, giving Grocery Outlet a unique business model it says provides local marketing expertise with the buying power of a large chain. Lindberg said this week the company has been successful finding operators—typically husband and wife teams—who have experience at other chains and want the opportunity to run their own businesses.
For the fiscal third quarter, which ended Sept. 28, Grocery Outlet grew sales by 13.1% to $652.5 million. Comparable store sales increased by 5.8%, matching preliminary figures released last month ahead of a secondary stock offering. Net income was $12.4 million, or 13 cents per diluted share, compared to $7.7 million, or 11 cents per share, in the third quarter of fiscal 2018. The results prompted the company to raise guidance slightly for the remainder of the fiscal year.
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