What Happened?

Shares of discount grocery store chain Grocery Outlet (NASDAQ:GO) fell 29.3% in the afternoon session after the company reported weak fourth-quarter results: its EPS, EBITDA, and full-year guidance for both metrics missed. Revenue narrowly topped Wall Street estimates. However, gross margin contracted due to higher inventory shrinkage from system conversion issues. 

Looking ahead, full-year guidance points to low-double-digit EBITDA growth, but margins remain under pressure, and restructuring costs could weigh on near-term profitability. The company recently appointed Jason Potter as its new CEO, bringing over 30 years of industry experience. His leadership will be closely watched as Grocery Outlet works to strengthen its operations and drive long-term growth. Overall, this quarter had some bright spots in revenue growth, but profitability challenges and a soft outlook made it a tough period for investors​.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Grocery Outlet? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Grocery Outlet’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Grocery Outlet and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 10 months ago when the stock dropped 23.9% on the news that the company reported weak first-quarter 2024 results. Adjusted EBITDA missed by a meaningful amount, and the company's full-year earnings forecast missed analysts' expectations. The company also called out systems conversion issues, which negatively impacted profit. On the other hand, Grocery Outlet beat analysts' revenue expectations during the quarter, driven by an increase in transaction count, and partially offset by a decline in average transaction size. Overall, this was a mediocre quarter for Grocery Outlet.

Grocery Outlet is down 31.8% since the beginning of the year, and at $11.12 per share, it is trading 61.7% below its 52-week high of $29 from March 2024. Investors who bought $1,000 worth of Grocery Outlet’s shares 5 years ago would now be looking at an investment worth $355.34.

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