Why Grocery Outlet Stock Surged Today

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What happened

Shares of Grocery Outlet (GO 14.74%) leapt 14.7% on Wednesday after the supermarket chain delivered stronger-than-expected sales and profits.

So what 

Grocery Outlet’s net sales jumped 10.5% year over year to $831.4 million in its fiscal first quarter, which ended on April 2. That was above Wall Street’s estimates, which had called for revenue of $810.4 million. 

The gains were fueled by store openings and a 5.2% increase in comparable-store sales. The retailer opened a net total of three locations during the quarter and 29 over the past year, bringing its store count to 418 stores across seven states at the end of the first quarter.

“Traffic trends in the second quarter are strong as we believe consumers are increasingly looking to stretch their shopping dollar in light of inflation,” CEO Eric Lindberg said in a press release.

Image source: Getty Images.

However, rising costs ate into Grocery Outlet’s profits. The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) inched up less than 1%, to $49.3 million. Still, Grocery Outlet’s earnings per share (EPS) of $0.12 were above analysts’ expectations for EPS of $0.10. 

Now what

Grocery Outlet offers its customers sizable discounts on a constantly changing assortment of goods. The treasure hunt-type shopping experience is proving popular with shoppers, many of whom are struggling to cut costs as inflation takes a toll on their budgets.

The company, in turn, boosted its full-year financial forecast. Management now sees comparable-store sales rising by 5.5% to 6.5%, up from its prior estimate of 4% to 5%. Grocery Outlet also expects to generate adjusted EBITDA of $213 million to $220 million, up from $210 million to $217 million.

“Our unique business model and compelling value proposition are increasingly relevant to customers in light of the current macroeconomic environment,” Chief Financial Officer Charles Bracher said.