Grocery Outlet Beats Q2 Estimates, Raises Fiscal 2026 Guidance

Grocery Outlet Holding Corp. reported second-quarter 2026 results that surpassed the Zacks Consensus Estimate, with adjusted earnings per share reaching 20 cents against a consensus of 12 cents. Net sales rose 1.1% year over year to $1,192.8 million, outperforming the consensus mark of $1,167 million. The performance was driven by new store openings, which partially offset declines from store closures under the Optimization Plan and a slight dip in comparable-store sales.

Management noted sequential improvement in comparable-store sales and customer basket trends, indicating progress in strengthening the company’s opportunistic offering and value perception. Following the stronger-than-expected quarter, the company raised key components of its fiscal 2026 outlook, including improving its comparable-store sales forecast and increasing the lower bounds of its net sales, adjusted EBITDA, and adjusted earnings-per-share guidance ranges.

Margin Pressure Persists Amid Store Optimization

Despite top-line growth, Grocery Outlet’s margin profile remains under pressure. Gross profit held relatively steady at $360.7 million, but gross margin contracted 40 basis points to 30.2% from 30.6% in the prior-year quarter. This contraction was primarily driven by product promotions aimed at driving sales and inventory markdowns associated with the Optimization Plan, partly offset by improvements in inventory management.

Adjusted EBITDA declined 3.1% year over year to $65.7 million, resulting in a margin of 5.5%, down 20 basis points from the previous year. Operating income increased to $15.8 million from $12.8 million, though this figure included $5.4 million in net restructuring charges related to the Optimization Plan. Selling, general, and administrative expenses rose slightly to $339.5 million, remaining flat at 28.5% of net sales year over year.

Store Network Consolidates to 547 Locations

During the quarter, the company opened 10 new stores and closed 12, including nine related to the Optimization Plan, ending the period with 547 stores across 16 states. Grocery Outlet completed the closure of all 36 financially underperforming stores identified under the Optimization Plan during the first half of fiscal 2026. For the full fiscal year, the company continues to expect 30 to 33 net new store openings, excluding closures tied to the optimization initiative.

Financial Health Remains Stable

Grocery Outlet ended the quarter with cash and cash equivalents of $74.2 million, up from $69.6 million at the end of fiscal 2025. The company’s balance sheet reflects a steady position as it executes its strategic shifts. According to GN markets/earnings (en-US), the stock has added approximately 2.6% since the last earnings report, outperforming the S&P 500 during the same period.