Grocery Outlet weathered macro challenges in fiscal 2021

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Grocery Outlet Holding Corp. posted profits in line with Wall Street forecasts for its fourth quarter and fiscal 2021, as the value grocer’s sales increased on the back of COVID-related gains and an extra week in the period of the last year.

In the 13-week quarter ended Jan. 1, net sales fell 3% to $782.7 million from $806.8 million in the 14-week quarter a year earlier, Grocery reported. Outlet, based in Emeryville, Calif., after yesterday’s market close. Excluding the extra week’s sales of $53.3 million, net sales increased 3.8%. On a 13-week basis, same-store sales were down 1.2% year-over-year. These results compare to gains of 23.1% in net sales and 7.9% in comp sales in the fiscal quarter of 2020.

“We are very pleased with our fourth quarter performance, which exceeded our sales and gross margin expectations and reflects a sequential improvement in trends compared to the third quarter,” CEO Eric Lindberg said. (left picture) told analysts on a conference call Wednesday night. “Comparable store sales declined 1.2% and, year over year, increased 6.7%, an acceleration of nearly 200 basis points from the third quarter. This performance reflects strong execution across our businesses. I am extremely grateful to our corporate teams for their hard work, and to our operators whose commitment to serving their communities is unwavering.

Net sales for the 52-week 2021 fiscal year fell 1.8% to $3.08 billion, from $3.13 billion in 2020, when Grocery Outlet posted a 22.5% increase. Rolling back to the 53rd week, net sales remained virtually flat for 2021. Offset store sales were down 6% on a 52-week basis versus rising 12.7% a year ago.

“Looking at fiscal 2021, we successfully weathered macroeconomic challenges, including the pandemic and global supply chain issues,” Lindberg said. “Despite these headwinds, we’ve leveraged our flexible business model to provide customers with the unbeatable deals and exciting treasure hunting experience they love.”

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A changing assortment of products with “WOW!” prices are highlighted at independent Grocery Outlet stores.

Grocery Outlet opened 36 new stores in fiscal 2021, including eight in the fourth quarter, and ended the year with 415 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada and New Jersey, the latter marking a new state for the retailer. The company had 380 stores in six states at the end of fiscal 2020.

“We expanded our store base with the opening of 36 new stores in 2021, representing growth of over 9% on a net basis. We remain pleased with the productivity of our new stores in all markets,” Lindberg said. “Additionally, we embarked on several new initiatives to expand our reach and increase our share of wallet, including an e-commerce pilot and the strategic expansion of our product assortment.

Last year, Grocery Outlet added 275 new product SKUs to provide “a more comprehensive store for our customers,” according to President RJ Sheedy.

“Item selection was informed by industry data, supplier conversations, and operator and customer feedback. We are thrilled with the added convenience this provides to our customers, which we believe drives greater loyalty,” Sheedy said on the call. “Going forward, we plan to add an additional 300 SKUs this year. We remain focused on growth categories such as NOSH [natural, organic, specialty, healthy]fresh, ethnic and local, and we expect this next phase of expansion to also help increase the number of transactions.

grocery storeGrocery Outlet store-Windsor CA-2021.jpg

Grocery Outlet opened 36 stores in fiscal 2021 and plans to add a net total of 28 in 2022.

In late October, Grocery Outlet unveiled an online grocery delivery pilot with Instacart in California, months after the retailer revealed it was in talks with potential e-commerce partners. Lindberg noted that the digital service will allow its stores to expand their reach.

“We are excited to have our e-commerce pilot operating in 68 stores in California on the Instacart platform. More importantly, the pilot went smoothly and, although we are early, we are optimistic about the future potential,” he said on the call with analysts. “We plan to roll it out to all stores over the next few months. We believe these strategic initiatives are complementary to our measured and disciplined expansion of new stores. »

Grocery Outlet said it is targeting 28 net new stores in fiscal 2022, with about two-thirds of new locations opening in the second half.

“Our 2021 stores are off to a good start which, with recent vintages, is increasing in line with their underwriting expectations. Our value proposition resonates across all geographies, and we continue to build and strengthen brand awareness in both mature and new markets. For these reasons, we remain confident in the long-term unit potential of our new differentiated store model and are committed to achieving our goal of 10% annual unit growth,” Lindberg explained.

“That said, as we mentioned on our last call, we are experiencing some short-term challenges, including labor and material shortages, extending the time and cost to open stores. Additionally, we are seeing longer delays in executing leases as well as permitting and developing the site,” he noted. “We believe these challenges are largely temporary and we remain committed to resuming our 10% unit growth in 2023.”

Ultimately, net income for the fourth quarter of fiscal 2021 was $6.6 million, or 7 cents per diluted share, compared to $24.3 million, or 24 cents per diluted share, in the quarter. the previous year. Adjusted net income was $20 million, or 20 cents per diluted share, compared to $24.2 million, or 24 cents per diluted share, in the 2020 quarter. Analysts had on average expected adjusted earnings per 20-cent share, with estimates ranging from 17 cents to 22 cents, according to Refinitiv.

Net income for fiscal 2020 totaled $62.3 million, or 63 cents per diluted share, compared to $106.7 million, or $1.08 per diluted share, in 2020. On an adjusted basis, the net income was $89.9 million, or 90 cents per diluted share, compared to $112.7 million, or $1.14 per diluted share, in the 2020 quarter. For the full year, Wall Street consensus-adjusted EPS forecasts were 90 cents, with projections ranging from 84 cents to 92 cents.

“As we review trends for the quarter to date, sales have continued to improve, reflecting increases in both tickets and traffic over the prior year. Looking forward, we remain confident that the strength of our model, combined with our strategic initiatives, will drive additional top line growth,” Lindberg said. “Furthermore, we anticipate a more favorable operating environment for our extreme value model as consumers face continued inflationary pressures and reduced stimulus. To that end, we remain committed to our value proposition. unique in providing our customers with the best value in grocery retailing.In an inflationary environment, the incredible savings we offer customers become even more important, providing an opportunity to both increase our share portfolio and reach new customers.

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