10-Q · May 13, 2026
Grocery Outlet reported a Q1 revenue of $1.17 billion, a 3.6% increase year-over-year, but fell short of expectations. The company faced a substantial operating loss of $178 million, primarily driven by a $158 million…
Earnings analysis · 10-Q
GO earnings analysis
Filed August 12, 2026 · Our reading of the company's report
The latest report
Grocery Outlet delivered modest second-quarter revenue growth and returned to GAAP profitability, with revenue of $1.193 billion, operating income of $15.8 million and diluted EPS of $0.06. However, underlying trends…
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Grocery Outlet delivered modest second-quarter revenue growth and returned to GAAP profitability, with revenue of $1.193 billion, operating income of $15.8 million and diluted EPS of $0.06. However, underlying trends remain pressured: comparable sales declined 0.3%, gross margin fell 40 basis points to 30.2%, adjusted EBITDA declined 3.1%, and first-half net loss reached $174.7 million after a $158.0 million goodwill impairment. Liquidity is adequate with $74.2 million of cash and $153.8 million of remaining revolver capacity, but operating cash flow weakened and the Optimization Plan requires additional restructuring and lease-exit cash costs.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.06
What stood out
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Revenue Rebounded Sequentially
Second-quarter net sales increased 1.1% year over year to $1.193 billion, and rose approximately 1.9% sequentially from $1.17 billion in the first quarter of fiscal 2026. Growth was primarily driven by new-store sales despite store closures and a 0.3% comparable-store sales decline.
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Quarter Returned to Operating Profit
GAAP operating income was $15.8 million, or 1.3% of sales, versus $12.8 million, or 1.1%, in the prior-year quarter and a $179.0 million operating loss, or -15.3%, in the first quarter of fiscal 2026 based on the reported quarterly history. The year-over-year improvement included a 51.3% reduction in restructuring charges to $5.4 million.
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EPS Improved From Q1 Loss
GAAP diluted EPS was $0.06 versus $0.05 in the prior-year quarter and improved from -$1.83 in the first quarter of fiscal 2026. Second-quarter net income was $5.6 million, compared with $5.0 million in the prior-year quarter.
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Disciplined Store Expansion Continues
The company opened 10 stores and closed 12 during the quarter, ending with 547 stores across 16 states. Excluding Optimization Plan closures, management opened 13 net new stores in the first half and plans 30 to 33 net new stores for fiscal 2026.
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Liquidity Remains Available
Cash and cash equivalents were $74.2 million as of July 4, 2026, with $240.0 million drawn on the $400.0 million revolving facility and $153.8 million of remaining borrowing capacity. The company was in compliance with all applicable financial covenants.
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Lower Cash Generation, Reduced Capex
First-half operating cash flow was $95.7 million, down 27.8% from $132.6 million in the prior-year period, while capital expenditures were $100.5 million before tenant allowances and $92.6 million net. Fiscal 2026 net capital expenditures are expected to be approximately $170.0 million.
What to watch
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Promotional Activity Pressures Margin
Second-quarter gross margin declined 40 basis points year over year to 30.2% from 30.6%, while adjusted EBITDA fell 3.1% to $65.7 million. Management attributed the pressure to product promotions, inventory markdowns and write-offs, and expects promotional activity to continue adversely affecting gross margin through the third quarter of fiscal 2026.
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Core Store Demand Remains Weak
Comparable-store sales declined 0.3% in the quarter and 0.6% in the first half, driven by average transaction-size declines of 2.1% and 2.6%, respectively. The transaction decline was only partially offset by increases in transaction count of 1.8% and 2.0%.
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Goodwill and Restructuring Exposure
First-half net loss widened to $174.7 million from $18.4 million, primarily because of a $158.0 million goodwill impairment and $23.6 million of restructuring charges. The impairment followed a triggering event caused by a decline in the company’s stock price, and management stated that lower future cash flows or higher WACC could cause an additional material impairment.
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Store Closures Require Further Cash Costs
The Optimization Plan closed 36 financially underperforming stores during the first half. Management estimates $15 million to $24 million of net restructuring charges in fiscal 2026 and fiscal 2027, including expected cash costs of $50 million to $60 million for lease exits.
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Cash Conversion Deteriorated
Operating cash flow declined by $36.9 million year over year to $95.7 million in the first half, primarily due to working-capital changes, including merchandise inventories and accrued and other liabilities, and lower operating lease liabilities. Net cash used in investing activities was $103.1 million, exceeding operating cash flow by $7.4 million.
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Variable-Rate Debt Adds Interest Risk
As of July 4, 2026, total borrowings included a $266.3 million senior term loan and $240.0 million revolving balance, both carrying interest rates of approximately 6%. A hypothetical 10% relative rate increase would raise interest expense by approximately $3.0 million over the next 12 months.
Management's outlook
The 10-Q provides no explicit quantitative revenue or EPS outlook and does not reaffirm the prior FY2026 revenue outlook of $4.6 billion to $4.72 billion or EPS outlook of $0.45 to $0.55. It expects 30 to 33 net new stores, approximately $170.0 million of fiscal 2026 capital expenditures net of tenant improvement allowances, and gross-margin pressure through the third quarter of fiscal 2026.
Earlier filings 4
10-K · March 4, 2026
The 10-K reiterates Grocery Outlet's differentiated IO-driven, opportunistic buying model and growth strategy (570 stores as of January 3, 2026) while disclosing near-term restructuring and optimization actions. Fiscal…
10-Q · November 5, 2025
Grocery Outlet reported net sales of $1,168,153 (in thousands) for the 13 weeks ended September 27, 2025, up from $1,108,183 a year ago, but operating income declined to $22,824 (in thousands) and diluted EPS fell to…
10-K · February 26, 2025
Grocery Outlet (GO) ended fiscal 2024 with 533 stores (491 IO-operated, 42 company-operated) and completed the April 1, 2024 acquisition of United Grocery Outlet (40 stores). Management initiated a Restructuring Plan in…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.