• Net Sales: Increased 10.9% to $1.1 billion for the fourth quarter.
• Comparable Store Sales: Increased 2.9% in the fourth quarter.
• Gross Profit: Increased 8.4% to $323.9 million.
• Gross Margin: 29.5%, a decline of 70 basis points year over year.
• SG&A Expenses: Increased 11.6% to $312.5 million.
• Net Income: $2.3 million or $0.02 per fully diluted share.
• Adjusted Net Income: $14.5 million or $0.15 per fully diluted share.
• Adjusted EBITDA: Increased 12.5% to $57.2 million.
• Cash Flow from Operations: $112 million.
• Capital Investments: $185.7 million net of tenant allowances in fiscal 2024.
• Total Debt: $477.5 million at the end of the fourth quarter.
• Store Count: Ended the year with 533 locations, approximately 14% unit growth for the year.
• Share Repurchases: 1.5 million shares repurchased in Q4, totaling $25 million.
• 2025 Guidance - Net Sales: Expected between $4.7 billion to $4.8 billion.
• 2025 Guidance - Comp Store Sales Growth: Expected between 2% to 3%.
• 2025 Guidance - Adjusted EBITDA: Expected between $260 million to $270 million.
• 2025 Guidance - Adjusted EPS: Expected between $0.70 to $0.75 per fully diluted share.

• Warning! GuruFocus has detected 5 Warning Signs with GO.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grocery Outlet Holding Corp (NASDAQ:GO) reported a 2.9% increase in comparable store sales for the fourth quarter, driven by a 3% growth in customer count.
• The company successfully appointed key leaders, including a new CEO, CFO, and CIO, to drive future growth and strategic initiatives.
• Grocery Outlet Holding Corp (NASDAQ:GO) opened a new 680,000-square-foot distribution center in Vancouver, Washington, to enhance supply chain efficiency in the Pacific Northwest.
• The company repurchased approximately 3.98 million shares in 2024, demonstrating a commitment to returning value to shareholders.
• Grocery Outlet Holding Corp (NASDAQ:GO) plans to open 33 to 35 net new stores in 2025, focusing on existing and high-priority adjacent markets to improve sales productivity and return on invested capital.

Negative Points

• The company faced challenges with systems implementation, which negatively impacted inventory management and contributed to higher inventory shrinkage.
• Grocery Outlet Holding Corp (NASDAQ:GO) experienced a decline in gross margin by 70 basis points year over year, partly due to issues with egg supply and pricing.
• The company incurred $15.9 million in restructuring charges, including costs related to exiting store leases and supply chain expansion projects.
• Net interest expense increased significantly, driven by higher average principal debt to support share repurchases and capital spending.
• The company is tempering near-term unit growth expectations due to execution challenges and increased pressure on build-out costs.

Q & A Highlights

Q: What attracted Jason Potter to Grocery Outlet, and how does the 2025 outlook bridge adjusted EBITDA to EPS? Also, does the narrowed focus on new store openings indicate a change in the go-forward algorithm? A: Jason Potter was attracted to Grocery Outlet due to its differentiated business model and the potential for local operators to execute effectively. Chris Miller explained that higher interest expenses and depreciation/amortization are impacting EPS growth compared to adjusted EBITDA. Eric Lindberg noted that the narrowed focus on new store openings is to address executional challenges and improve performance, not necessarily a change in the long-term strategy.

Q: Can you elaborate on the gross margin issues and systems challenges faced in Q4? A: Chris Miller stated that while value improved in Q4, egg pricing and supply issues impacted margins by about 50 basis points. Additionally, inventory shrinkage due to ongoing systems issues also affected margins. The company is working on resolving these systems challenges to improve margins.

Q: How are the new systems expected to perform compared to the old ones, and have any independent operators been lost due to system disruptions? A: Eric Lindberg mentioned that no independent operators have been lost due to system disruptions. The new systems are expected to be as efficient as the old ones by Q2, with enhancements to make them better than before. The focus is on stabilizing the systems and then improving them further.

Q: How did the comparable store sales perform throughout the quarter, and what is the balance between investing in price versus margin consistency? A: Eric Lindberg reported that Q4 saw healthy customer counts and positive transactions across all geographies, driven by improved value offerings. However, Q1 started softer than expected, influenced by general economic trends and the Easter holiday shift. The company is focusing on maintaining value while addressing basket composition through assortment and merchandising initiatives.

Q: What are the plans for private label penetration, and how are these products performing? A: Dorian Bertsch shared that private label products have been well-received, becoming top sellers in their categories. The company launched 180 items by the end of last year and plans to introduce another 150 this year. These products offer better value, consistent inventory, and margin incrementality, benefiting both Grocery Outlet and its operators.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.