Grocery Outlet Holding (NASDAQ:GO) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Grocery Outlet Holding reported Q1 2026 revenue of $1.17 billion, up 3.6% year-over-year, with comparable store sales down 1%, slightly better than expected.
The company is focusing on restoring customer value perception by increasing the mix of branded opportunistic products and enhancing promotional efforts, with a $20 million investment planned for 2026.
Grocery Outlet Holding completed 34 store refreshes in Q1 and plans to refresh 100 stores by year-end, prioritizing store-level performance improvements.
The company closed 36 underperforming stores, expecting an adjusted EBITDA improvement of approximately $12 million annually due to restructuring.
Grocery Outlet Holding is enhancing analytical tools and insights for independent operators, focusing on improving store performance and engagement.
Management reaffirmed its full-year guidance, expecting improvements in gross margin and sales as opportunistic products increase in the mix.
The company is exploring strategic options for its Ugo business and has made key hires to strengthen leadership, including a new Chief Marketing Officer.
Full Transcript
OPERATOR
Greetings and welcome to the Grocery Outlet’s first quarter 2026 earnings results conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ian Ferry, Senior Vice President of Strategic Finance and Investor Relations. Thank you. You may begin.
Ian Ferry (Senior Vice President of Strategic Finance and Investor Relations)
Good afternoon and welcome to Grocery Outlet’s call to discuss financial results for the first quarter ended April 4, 2026. Speaking for management on today’s call will be Jason Potter, President and Chief Executive Officer and Chris Miller, Chief Financial Officer. Following prepared remarks from Jason and Chris, we will open the call for questions. Please note that this conference call is being webcast live and a recording will be available via playback on the Investor Relations SECtion of the Company’s website. Participants on this call may make forward looking statements with the meaning of the Federal SECurities laws. All statements that address future operating financial or business performance or the Company’s strategies or expectations are forward looking statements. These forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Description of these factors can be found in this afternoon’s press release as well as in the Company’s periodic reports filed with the SEC, all of which may be found on the Investor Relations SECtion of the Company’s website or on SEC.gov the company undertakes no obligation to revise or update any forward looking statements or information. These statements are estimates only and not a guarantee of future performance. Additionally, during today’s call, the Company will reference certain non Generally Accepted Accounting Principles (GAAP) financial information, including adjusted items. Reconciliation of Generally Accepted Accounting Principles (GAAP) to non Generally Accepted Accounting Principles (GAAP) measures as well as the description, limitations and rationale for using each measure may be found in the Supplemental Financial Tables included in this afternoon’s press release, on the Investors SECtion of the Company’s website under News and Releases and in the Company’s SEC filings. And now I would like to turn it over to Jason Good afternoon everyone and thank you for joining us on today’s call. In the first quarter we delivered results in line with our guidance as our work to strengthen the business gained traction. We reported Q1 revenue of 1.17 billion, up 3.6% with comparable store sales down 1%, slightly ahead of our outlook for a decline of minus 2.5% to negative 1.5%. Traffic remained positive, up approximately 2% with consistent improvement throughout the quarter. This was offset by continued basket pressure from lower units per transaction. Gross margin of 29.6% was also within our outlook range and included a 50 basis point impact related to our previously announced store closures. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of 43.1 million came in at the top end of our range, while adjusted earnings per share (EPS) of $0.05 was a penny above the guidance range we shared in March. As I mentioned, performance improved as the quarter progressed, with traffic strengthening each month and exiting March at a meaningful higher rate than at the start of the quarter. In the month of March, weekly traffic grew in the range of 2% to 5% year to year, reaffirming that our value oriented product offering continues to resonate with consumers. While we’re encouraged by the progress we’re beginning to see, we’re not satisfied with our current level of performance and are focused on the work we have in front of us. As we said in March, we entered 2026 with a clear agenda restore what makes this brand special, tighten execution where we’ve fallen short, and improve returns. That work is well underway and while it’s still early, the traction we see reinforces our conviction that we are taking the right action. Grocery Outlet has meaningful strengths, a differentiated model, a highly relevant value proposition, strong independent operators, and a format that resonates when we execute well. Our focus is on translating those strengths into a more consistent performance. Our work to achieve this centers on improving comp store performance while continuing to advance important strategic initiatives that deliver stronger long term growth and profitability. Restoring Customer Value Perception Let me start with customer value perception because that’s where our work begins. Our job right now is to make Grocery Outlet a more compelling choice for the customer. In this environment, value matters more than ever. We must make that value visible, consistent fighting and easy to shop. We executed on that in several ways during this last quarter. First and most importantly, we’ve made meaningful strides to increase the mix of branded opportunistic products in our stores. Our best opportunistic deals offer savings up to 70% versus conventional retailers. These savings, when paired with the excitement of a treasure hunt experience, provide a compelling experience that our customers love. Since the start of the year, we’ve increased our opportunistic mix by nearly 2 percentage points with meaningful improvement across inventory, shipments, variety and sales. We’ve made meaningful progress sourcing, increasing product visibility and helping operators further differentiate their stores. That works included upgrading systems and reporting, expanding supplier outreach, shortening delivery times, testing short dated offerings and engaging suppliers more directly. At the leadership level. These efforts enabled us to move quickly in Q1 on excess inventory from several top selling brands, delivering significant savings for customers while creating high margin, high volume opportunities for us and our operators. Second, we invested in reshaping value perception as we work to improve the impact of our opportunistic supply. The near term synthetic promotional support we’re providing is driving customers into our stores. It’s been especially effective around high traffic occasions like this year’s super bowl and Easter where event driven promotions help drive meaningful traffic gains. This is an important first step in restoring comp performance as the momentum from our improving opportunistic product mix begins to translate into stronger transaction trends. Through the first quarter we received positive feedback from both customers and our iOS and as we invest, we’re managing the impact on gross margins through disciplined promotional targeting and our ongoing focus on improving our mix. We continue to expect these investments to be in the range of $20 million for this year. Third, we’re sharpening our value messaging through our Extreme Value campaign. This work is focused on making our value proposition unmistakable, highlighting the significant savings customers can find on branded products, often at meaningful discounts to conventional retailers and reinforcing the excitement of the treasure hunt experience that defines grocery outlet. To support this, we’re driving awareness through targeted at home and digital campaigns that bring our deals and product discovery to life. In market, we’re focused on awareness based media. In store, we’re simplifying signage and elevating key value items to make savings more visible, easier to navigate and more compelling at the shelf. Together, these three initiatives with a singular focus of improving value are beginning to drive a meaningful positive and customer response reflected in improving sales, improving traffic trends, net promoter score and survey data while reinforcing one another. Though there’s much to do to restore comp performance, the trends we’re seeing in traffic are consistent with the initial stages of stabilization that we would expect at this point. Improving the in Store Experience we also continue to improve the in store experience to support stronger store level performance across our fleet. One of the most important of these initiatives is our store refresh program and in the first quarter we completed 34. As of today, we’ve completed 58 stores in total. These refresh stores are benefiting from improvements in layout, signage and merchandising that make the shopping trip easier and reinforce value more clearly. We continue to receive positive feedback from both customers and operators and we are confident that improving the customer in store experience is the right step for grocery outlet and that it will become an important lever over time. The impact of our value restoration initiatives in Q1 reinforces our conviction that an all hands on deck focus on executing Our opportunistic engine is the fastest and most effective path to improving results across the business, with a clear path to deliver on that objective the results that support that focus. We’re prioritizing our initial resources on that work. That requires deliberate choices about how we execute our other priorities this year, including taking a more measured pace on our store refresh program. We will continue to invest in these longer term improvements to our stores while maintaining a near term focus on driving comp sales through opportunistic initiatives that I’ve discussed. As we balance our resources around these efforts, we now expect to complete approximately 100 store refreshes by year end. This sharper focus will reduce distractions and help us return comp growth as quickly as possible. Supporting Independent Operators Independent operators are central to restoring our performance and they’ve been clear about what they need. Better analytical tools, more actionable insight, greater visibility into what is working across the system. And that’s exactly what we’re focused on delivering. In Q1. We made meaningful progress during the quarter. We held regional forms to share best practices across operators. We enhanced benchmarking capabilities and expanded the functionality of our real time order guide. We also streamlined commercial communications to help operators simplify execution at store level. Importantly, we also launched a new annual business review or ABR process across our entire store base. This process benchmarks each store against top quartile peers with similar market characteristics and sales volumes, then translates those performance gaps into clear profit opportunities for our operators to pursue for each store. We can now help operators quantify the potential opportunity across sales, mix shrink and other important operating expenses, while enabling operators to track progress against those opportunities over time. Just as importantly, we pair these insights with best practice recommendations and field support to help operators realize those improvements. While company wide margin performance in Q1 was impacted by strategic promotional investments as well as inventory liquidations associated with our store closures, we’re encouraged by the underlying operational trends we’re seeing at store level. Operators saw encouraging trends in profitability during the quarter, driven primarily by better shrimp performance. If these Q1 improvements are sustained through the balance of the year, they could translate into meaningful incremental annual operator income per store over time. Improvements like these create meaningful upside for grocery outlet through stronger gross profit performance across the system. Our ABR process encourages accountability while giving operators a practical roadmap to improve their business supported by quarterly reviews and ongoing field partnership. And we believe that as operators see benefits from these enhanced analytical tools, engagement with the key company initiatives will also improve. When operators have the right tools, visibility and support to execute effectively, the customer experience improves, store performance improves, operator economics strengthen and the overall business should become more productive and resilient. Optimizing the Store Base and Strengthening Returns As I mentioned earlier, we continue to drive our key strategic objectives as we work to restore comp performance. Among our most important objectives are optimizing the store base and improving our returns. As we outlined in March, we are closing 36 underperforming stores this year. These closures are now complete and have improved fleet quality and will strengthen the earnings profile of the business over time. Based on the progress we’ve achieved to date, we continue to expect adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improvement of approximately 12 million at the conclusion of our restructuring on an annual run rate basis. We’ve also tightened our approach to new store growth. We continue to believe that there is substantial white space ahead for Grocery Outlet, but growth must be disciplined, productive and supported by the right economics. That means being more selective on real estate, rigorous underwriting and holding ourselves to high standards on capital returns. This approach will position us to grow from a stronger foundation and create more value over time. We are focused not just on growing, but growing in a sustainable way. Finally, as we noted in March, we’re continuing to explore strategic options for Ugo and we’ll provide updates when we have more to share. Securing Top Talent Having the right strategy is critical to our success. So is having the right talent to execute it. We recently welcomed Jim Porterfield as our next Chief Marketing Officer. Jim brings more than 30 years of brand leadership and consumer insight experience to Grocery Outlet. Jim previously served as Chief Marketing Officer at Pinsight Media and as a Senior Vice President at Bernstein Wren Advertising before founding his own firm, Meaningful Works. Most recently, he’s advised several well known retail and restaurant brands including Grocery Outlet. Jim’s experience, strategic judgment and passion for building strong brands make him the right leader to help advance our strategy and strengthen Grocery Outlet’s position as one of America’s most loved brands. Securing top talent is also a priority at our board level. In April we added two exceptional independent directors. Frances Allen brings over 40 years of consumer and food industry expertise across brand strategy, marketing, franchising, technology and operations. Alicia Thornton brings more than 30 years of executive leadership across grocery retail specialty retail with deep expertise in corporate finance, strategic growth and operational restructuring and governance. Both new members have highly relevant experience that will help our efforts to strengthen execution and reinforce Grocery Outlets long standing leadership in value. Finally, in closing, when taken together, we believe that our near term actions and continued execution against our strategic priorities position us for improved performance While we still have work ahead, we’re making solid progress that’s beginning to be reflected in the business. We’re executing our plan, improving consistency and building a more durable foundation. I’m confident that the work underway will position Grocery Outlet to become a stronger, more productive and more profitable business for many years to come. I want to thank our independent operators, our team members and our supply partners for their hard work and their commitment. I’d also like to thank our shareholders for your continued support as we move the business forward with focus and attention. I’ll now turn it over to Chris to walk through the quarter and the financials in more detail. Thank you.
Jason Potter (President and Chief Executive Officer)
Thanks Jason. Our first …
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