Key Points
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Although some fourth-quarter fundamentals improved, the retailer’s comparable sales sagged.
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It also missed the consensus analyst profitability estimate.
The latest earnings report from discount food retailer Grocery Outlet (NASDAQ: GO) certainly didn’t leave a good taste in many investor mouths. This was compounded by several analyst recommendation downgrades and price target cuts. According to data compiled by S&P Global Market Intelligence, the company’s shares lost more than 33% of their value over the week.
A slide in “comps”
Grocery Outlet’s net sales for its fourth quarter of 2025 were $1.22 billion, a year-over-year improvement of almost $11%. Yet the retailer‘s comparable sales saw a decline, dipping by almost 1% from the fourth quarter 2024 figure.
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On the bottom line, net income not in accordance with generally accepted accounting principles (GAAP) rose by 29% to $18.7 million, or $0.19 per share.
Although net sales essentially met the consensus analyst estimate, Grocery Outlet missed on profitability, as pundits tracking the stock had modeled a non-GAAP (adjusted) net income figure of $0.21 per share.
In its earnings release, the company said its performance was affected by delays in federal food benefits and strengthening competition, among other factors. It said it was launching a “business optimization plan,” which includes the closure of 36 stores.
Weaker-than-expected guidance
Grocery Outlet also proffered guidance for the entirety of 2026. Despite the closures, ultimately its store count should rise, with 30 to 33 net new openings. In terms of financials, net sales are expected to land at $4.6 billion to slightly over $4.7 billion, with adjusted earnings per share of $0.45 to $0.55. The company’s “comps” are expected to range from flat to a 2% decline.
Both ranges fell short of 2025’s almost $4.7 billion on the top line and $0.76 per share adjusted net profit. They were also well below the consensus analyst estimates of $4.9 billion and $0.82 per share, respectively.
Grocery Outlet will likely spend most of 2026 implementing what amounts to a restructuring plan, so, at best, the company’s stock is a “wait and see” to me. As it looks now, its prospects aren’t particularly encouraging.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.