Grocery Outlet Comps Turn Positive, Up 0.5% in Q3

Grocery Outlet posted comparable store sales growth of 0.5 percent in its fiscal third quarter, its first positive comp reading of the year, with net sales up 0.9 percent to $1.18 billion for the quarter ended Oct. 3.

The gain came from feet, not baskets. Transactions climbed 2.4 percent, while average transaction size fell 1.9 percent — shoppers at the extreme-value grocer visited more often and spent less each trip. The Emeryville, California-based company opened 14 stores in the quarter and ended the period with 561 stores across 16 states.

"In the third quarter we returned to positive comparable store sales, driven by continued improvements to the execution of our opportunistic product offering," said Jason Potter, president and CEO.

"Traffic accelerated and basket trends again improved sequentially as we enhanced our value proposition," he added. "In partnership with our operators and suppliers, we will continue to build on this progress with a focus on driving sustainable sales growth and improved profitability over time."

What pressured margins?

Gross margin declined 40 basis points to 30 percent. The company attributed the drop to product promotions, higher transportation expenses, and a broad reduction in consumer demand for produce following the Cyclospora outbreak tied to certain fresh produce items. A favorable mix shift toward opportunistic products partially offset the pressure.

Operating income came in at $24 million, including $3.6 million in net restructuring credits. Net income rose to $13.3 million from $11.6 million a year earlier.

The 39-week year-to-date picture is less flattering. Net sales rose 1.8 percent to $3.54 billion, but comps were down 0.2 percent, and the company recorded a year-to-date operating loss of $138.2 million. That loss reflects a $158 million non-cash goodwill impairment taken in the first quarter after a stock price decline, along with restructuring charges.

Where does the Optimization Plan stand?

Under the Optimization Plan launched early this year, Grocery Outlet closed 36 underperforming stores in March and April. The company has substantially completed terminating the related independent operator agreements.

Total net restructuring charges are now estimated at $22 million to $29 million — a raised range that reflects updated lease termination and idle property costs. The plan should be substantially complete by the fourth quarter of fiscal 2027.

What does this change for the full year?

Plenty, on paper. Grocery Outlet raised its fiscal 2026 comparable store sales guidance to growth of 0.2 to 0.4 percent, up from a prior range of down 0.5 percent to flat. At the same time, it trimmed the top of its adjusted EBITDA range to $225 million to $229 million and narrowed expected net new store openings to 30 to 31.

The net sales outlook holds at $4.70 billion to $4.72 billion.

The message for the trade: a comp turnaround built on traffic gains and opportunistic sourcing is taking hold, but promotions and freight are still eating into margin — and profitability, per Potter's own framing, remains a project "over time."