Why Grocery Outlet is having an historic year

Despite the inflationary environment in the grocery space, Grocery Outlet's unique business model is one of the many factors helping the retailer achieve record-setting results.
Grocery Outlet
Grocery Outlet is having an historic year as growth is poised to continue for the remainder of 2023. / Photo courtesy: Shutterstock

Earlier this year,foot-traffic analytics firm listed Grocery Outlet in its 10 Top Retail Brands to Watch in 2023. Fast-forward to August, and the rapidly-growing West Coast discounter has already made company history this year.

As previously reported, Grocery Outlet Holding Corp. achieved record-setting results during its second quarter, reporting Tuesday that net sales topped $1 billion. One of the many factors helping to paint the picture of a record-breaking year is the retailer’s unique business model.

Grocery Outlet stores are owned and run by independent retailers based in the communities they serve. Interest in becoming an independent operator (IO) is at an all-time high, the grocer reported.

CEO RJ Sheedy told analysts on the earnings call this week that the retailer received “nearly 30,000 leads last year, which is up 50% over the previous year,” according to a transcript from financial services site Senteio.

Grocery Outlet relies on a unique model, and becoming an IO, Sheedy said, is a “highly selective process." Less than 1% of interested applicants were accepted last year. 

As grocery retailers navigate to compete in this inflationary environment, this combination of value and connection to the community is proving to be a winning strategy for Grocery Outlet.

“The strong partnership we have with operators allows us, as we say, to out-chain the locals and out-local the chains,” Sheedy noted on the call, adding “there is nothing else quite like it.”

Offering the same brands as traditional grocery stores but at lower prices, Grocery Outlet’s buyers “scour the country to find the top manufacturers with excess inventory and seasonal closeouts, so Grocery Outlet can offer ‘wow savings’ on thousands of name-brand products," the company said in a statement.

Focusing on trying to provide relief for shoppers facing high prices, Grocery Outlet remains optimistic its business model will propel even more growth going forward, even as inflation moderates.

“Looking ahead, we have tremendous white space with the potential to operate over 4,000 stores in the U.S. We are continuing to invest in real estate and construction resources to fulfill our future store potential,” Sheedy said.

With a strong momentum, the grocer raised its fiscal 2023 outlook and is now predicting same-store sales to jump 7% to 8%, up from 5% to 6%, proving just how historic this year has been and continues to be for the California-based retailer.



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