Dive Brief:
- Grocery Outlet recorded $1.13 billion in net sales during its second quarter of fiscal year 2024, a nearly 12% year-over-year increase, the discounter reported Tuesday. The company’s comparable store sales increased almost 3% compared with the same quarter last year.
- In Q2, the discounter’s net income decreased by almost 43% year over year to $14 million and its adjusted EBITDA dipped by nearly 4% to $68 million.
- Grocery Outlet recently hired Sandeep Chawla as its new senior vice president and chief information officer, President and CEO RJ Sheedy told investors on a Tuesday earnings call.
Dive Insight:
Grocery Outlet had a busy Q2 as it saw its net sales achieve more than $1 billion for the fourth time since it first eclipsed that milestone during its Q2 FY 2023.
Company executives said the discounter’s focus on value appeals to consumers still struggling with higher food prices and other financial burdens. To further its value proposition, the discounter has launched its private label program, which initially includes three lines, Sheedy said.
Here’s a rundown of the highlights the discounter’s executives shared on the Tuesday earnings call:
Improving financials
Grocery Outlet said its comp-store sales increase was driven by a roughly 5% bump in the number of transactions but partially offset by a 2% decrease in average transaction size.
The discounter resolved earlier this year the last large remaining system issues hurting the company’s profit, Sheedy said, noting that warehouse shrink is back to normal levels. The discounter has since improved its payables process and restored data visibility for future margin management and forecasting, he added.
The company is making “good progress” with its systems transition and is currently focused on improving visibility to additional operating data, increasing system speed, enhancing functionality and optimizing system efficiencies, Sheedy said.
Grocery Outlet is looking to use its new app — which has higher basket sizes than non-app transactions due to its personalization features — to boost customer loyalty and trip frequency, Sheedy said.
New CIO
Chawla, Grocery Outlet’s new CIO, was previously CIO of professional landscaping services firm Monarch Landscape Companies and 99 Cents Only Stores, according to his LinkedIn profile.
Chawla is the latest top executive hire for Grocery Outlet, which earlier this year named former Walmart veteran Ramesh Chikkala as its first executive vice president and chief operations officer and appointed Lindsay Gray, previously the discounter’s senior vice president of accounting, as its interim CFO following Charles Bracher’s departure.
“Sandeep brings over 20 years of experience in developing, implementing, and managing technology and business strategy,” Sheedy said. “Throughout his career, Sandeep has led several strategic technology and operational transformations and brings strong experience in enterprise platform development and management.”
Private label debut
Grocery Outlet launched its private label with its Simply Go brand. “This brand represents our high-quality food staples at extremely affordable prices. Our initial categories include beverage, dairy, baking and pasta,” Sheedy said on the call.
The discounter shared plans to add two additional store brand lines: Go Home and Haven, which offers personal care and household essentials, and Go Paw and Pamper, which is a pet food and supplies brand, Sheedy said.
Grocery Outlet is on track to debut 100 private label SKUs by the end of the year, he added.
Store growth
In addition to the 40 stores it recently added as part of the United Grocery Outlet acquisition, which closed on April 1, Grocery Outlet opened 11 new stores and closed one store during its second quarter. In total, Grocery Outlet has 524 stores in 16 states as of the end of Q2.
“New market store economics are healthy and we are pleased with the portability of our customer value proposition,” Sheedy said. “We've also seen nice progress with ramping sales and profit for new market stores opened over the past several years.”
Grocery Outlet is opening new stores ahead of schedule and anticipates seeing 10% new store growth in 2025, Sheedy said.
