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Grocery Outlet Holding Corp.

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Business Summary

Grocery Outlet Holding Corp. operates as a growth-oriented extreme value retailer, primarily selling quality, name-brand consumables and fresh products through a network of independently operated stores . As of January 3, 2026, the company had 570 stores across 16 states, including California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, Ohio, New Jersey, North Carolina, Georgia, Alabama, Delaware, Kentucky, and Virginia . The company's headquarters is located in Emeryville, California .

The core business model of Grocery Outlet revolves around opportunistic sourcing and an independent operator (IO) selling approach. The company generates revenue from the sale of products at the point of sale, with IOs generally sharing 50% of store-level gross profits . This model incentivizes IOs to grow their business profitably. The company's revenue is primarily transactional, derived from product sales. Primary customer segments are bargain-minded shoppers across a broad range of income levels, demographics, and geographies . The "small business at scale" model, combining local decision-making by IOs with corporate purchasing scale and resources, is a key dynamic described in the filing .

The company's product and service lines include a curated and ever-changing assortment of on-trend, quality, name-brand consumables and fresh products. This offering encompasses opportunistic products and competitively priced everyday staples across grocery, produce, refrigerated and frozen foods, beer and wine, fresh meat and seafood, general merchandise, and health and beauty care . The company has also introduced its own private label products, with approximately 485 private-label SKUs across various categories as of January 3, 2026 . These private label products are intended to foster customer loyalty and deliver higher margins for the company and its IOs . In fiscal 2025, perishable departments, including dairy and deli, produce and floral, and fresh meat and seafood, generated $1.765 billion in net sales . Non-perishable departments, comprising non-perishable grocery, frozen foods, beer and wine, general merchandise, and health and beauty care, contributed $2.923 billion in net sales for the same period .

For the fiscal year ended January 3, 2026, Grocery Outlet reported net sales of $4.688 billion . The cost of sales was $3.269 billion , resulting in a gross profit of $1.419 billion and a gross margin of 30.3% . Selling, general and administrative expenses (SG&A) totaled $1.332 billion , or 28.4% of net sales . The company reported an operating loss of $221.7 million . Net loss for the period was $224.9 million , leading to a diluted EPS of $(2.30) . Cash and cash equivalents stood at $69.6 million . Total long-term debt, net of unamortized debt issuance costs, was $477.9 million .

Comparing fiscal 2025 to fiscal 2024, net sales increased by 7.3% from $4.371 billion to $4.688 billion . This increase was primarily due to the addition of 37 net new stores , an increase in comparable store sales, and $82.4 million in net sales from the 53rd week of fiscal 2025 . Comparable store sales, on a 52-week basis, increased by 0.5% , driven by a 1.6% increase in the number of transactions , partially offset by a 1.1% decrease in average transaction size . Gross margin increased by 10 basis points to 30.3% from 30.2% , primarily due to improved inventory management, partially offset by price investments, a mix shift to lower margin categories, and supply chain investments. SG&A increased by 8.5% to $1.332 billion from $1.227 billion , and as a percentage of net sales, SG&A increased to 28.4% from 28.1% . The company experienced a shift from a net income of $39.5 million in fiscal 2024 to a net loss of $224.9 million in fiscal 2025.

During fiscal 2025, the company opened 42 new stores and closed five, ending the fiscal year with 570 stores . A significant operational development was the adoption of an Optimization Plan on March 2, 2026, which provides for the closure of 36 financially underperforming stores, the termination or sublease of associated store leases, and the termination or sublease of a distribution center facility . In connection with this plan, the company recognized $110 million of non-cash charges in Impairment of long-lived assets during fiscal 2025 . Additionally, the company continued the execution of a Restructuring Plan initiated in the fourth quarter of fiscal 2024, incurring $45.9 million in charges during fiscal 2025 . A non-cash goodwill impairment charge of $149.0 million was also recognized in fiscal 2025 . The company also implemented multiple capabilities in fiscal 2025 to improve data visibility and increase the speed and efficiency of tools used by the company and IOs to manage the business, following significant disruptions from enterprise resource planning system upgrades in late August 2023 .

Business Outlook

Management plans to open 30 to 33 net new stores in fiscal 2026, excluding the Closure Stores related to the Optimization Plan . The company intends to expand with a more clustered model in new markets to improve supply chain efficiency and marketing leverage, reflecting a more disciplined approach . As part of this strategy, certain newly opened stores in fiscal 2026 will be operated as Company-operated stores for an uncertain time period, with the intent to eventually transition operations to an IO .

A major growth area is the strategic new store growth, which management believes remains a significant driver of long-term stockholder value . The company's success across diverse geographies and demographics supports opportunities for growth across the United States . Complementary growth opportunities include expanding strategic relationships with large property owners, evaluating opportunistic real estate, and exploring strategic regional acquisitions .

Operationally, the company has shifted its planned investments in distribution infrastructure for fiscal 2025 and fiscal 2026 away from highly capital-intensive projects . Instead, the focus is on investing in lower-cost distribution centers for dry goods to enhance capacity and improve inventory management and overall execution . During the first quarter of fiscal 2025, certain warehouse projects were cancelled in line with this strategy . The company continues to work on improving visibility into additional operating data and increasing the speed and efficiency of tools used by the company and IOs to manage the business .

Planned capital allocation for fiscal 2026 includes approximately $170.0 million in capital expenditures, net of tenant improvement allowances . These expenditures are primarily for new store openings, ongoing store maintenance and improvements, supply chain investments, and systems and infrastructure investments . The company has $100.0 million of repurchase authority remaining under the 2024 Share Repurchase Program as of January 3, 2026 . The company currently does not expect to declare any dividends on its common stock in the foreseeable future .

Management explicitly flagged several structural headwinds and execution risks. Macroeconomic conditions, including supply chain and labor challenges, varying rates of inflation, tariffs, and changes in consumer behavior, continue to impact the business . Comparable store sales have been negatively impacted by decreased average transaction size, and the company is actively pursuing initiatives to increase this through enhanced in-store merchandising . Tariffs, such as those recently implemented or proposed by the U.S. government, may result in cost increases on products and store construction materials, and could negatively affect consumer sentiment . The U.S. Government shutdown during the fourth quarter of fiscal 2025 adversely impacted the disbursement of benefits from federally-funded assistance programs, including SNAP, negatively affecting sales from EBT payments . Pricing competition has increased, with promotional and pricing activities from key competitors putting pressure on the company's relative value proposition . The company's recent focus on improving in-stocks and ensuring the availability of everyday commodity staples adversely impacted its ability to deliver high-quality opportunistic product and the perception of value leadership . To address this, the company intends to invest in additional promotional activity in the near term, which is expected to adversely impact gross margin in the first half of fiscal 2026 .

Risk Factors

The company faces several material risks, including the failure of suppliers to consistently provide opportunistic products at attractive pricing, which is largely outside of its control . Economic conditions, such as inflation or deflation, competition, and increased supplier operating costs, could materially adversely affect financial performance by impacting customer disposable income or discretionary spending . The U.S. Government shutdown during the fourth quarter of fiscal 2025 adversely impacted the disbursement of benefits from federally-funded assistance programs, including SNAP, which accounted for approximately 9% of net sales in fiscal 2025 . Competition in the retail food industry, including increased promotional and pricing activities from key competitors, could pressure the company's value proposition and negatively impact margins . Operational risks include significant disruptions to the distribution and transportation network, and the potential for newly opened stores to negatively impact financial results in the short-term or not achieve expected sales and operating levels . The implementation of the revised near-term growth strategy, including the Restructuring Plan and Optimization Plan, may not achieve expected benefits, could incur unexpected costs and liabilities, and may harm the company's reputation with stakeholders . Legal challenges to the IO/independent contractor business model, or a determination that IOs are employees or the company is a joint employer, could materially adversely affect the business . The company's substantial indebtedness, including a senior term loan of $273.8 million and a revolving credit facility with $220.0 million outstanding as of January 3, 2026, could affect its ability to operate and meet obligations, with restrictive covenants limiting business strategies .

Management Priorities

Management's message to shareholders emphasizes strengthening long-term profitability and cash flow generation, improving operational execution, and optimizing the existing store footprint, aligning with a disciplined new store growth strategy. The company plans to open 30 to 33 net new stores in fiscal 2026, excluding Closure Stores related to the Optimization Plan . Management also intends to expand with a more clustered model in new markets to improve supply chain efficiency and marketing leverage . A key strategic priority is to operate certain newly opened stores in fiscal 2026 as Company-operated stores for an uncertain time period, with the intent to eventually transition them to IOs . This approach aims to ensure the success of store openings and could be applied in more markets as the company grows .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Our Company
  2. [2] Item 1, Business — Our Company
  3. [3] Item 1, Business — Our Company
  4. [4] Item 1, Business — How we sell
  5. [5] Item 1, Business — Our Company
  6. [6] Item 1, Business — How we sell
  7. [7] Item 1, Business — Products and Pricing
  8. [8] Item 1, Business — Products and Pricing
  9. [9] Item 1, Business — Procurement
  10. [10] Item 7, MD&A — Disaggregated Revenues
  11. [11] Item 7, MD&A — Disaggregated Revenues
  12. [12] Item 7, MD&A — Results of Operations
  13. [13] Item 7, MD&A — Results of Operations
  14. [14] Item 7, MD&A — Results of Operations
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 7, MD&A — Results of Operations
  17. [17] Item 7, MD&A — Results of Operations
  18. [18] Item 7, MD&A — Results of Operations
  19. [19] Item 7, MD&A — Results of Operations
  20. [20] Item 7, MD&A — Results of Operations
  21. [21] Item 7, MD&A — Liquidity and Capital Resources
  22. [22] Item 7, MD&A — Liquidity and Capital Resources
  23. [23] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  24. [24] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  25. [25] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  26. [26] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  27. [27] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  28. [28] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  29. [29] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  30. [30] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  31. [31] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  32. [32] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  33. [33] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  34. [34] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  35. [35] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  36. [36] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  37. [37] Item 7, MD&A — Comparison of fiscal 2025 (53 weeks) to fiscal 2024 (52 weeks)
  38. [38] Item 7, MD&A — Fiscal 2025 Overview
  39. [39] Item 7, MD&A — Optimization Plan and Restructuring Plan
  40. [40] Item 7, MD&A — Optimization Plan and Restructuring Plan
  41. [41] Item 7, MD&A — Optimization Plan and Restructuring Plan
  42. [42] Item 7, MD&A — Fiscal 2025 Overview
  43. [43] Item 7, MD&A — Enterprise Resource Planning System Upgrades and Challenges
  44. [44] Item 7, MD&A — New Store Growth
  45. [45] Item 7, MD&A — New Store Growth
  46. [46] Item 7, MD&A — New Store Growth
  47. [47] Item 1, Business — Store Expansion Opportunities
  48. [48] Item 1, Business — Store Expansion Opportunities
  49. [49] Item 1, Business — Store Expansion Opportunities
  50. [50] Item 1, Business — Supply Chain and Distribution
  51. [51] Item 1, Business — Supply Chain and Distribution
  52. [52] Item 1, Business — Supply Chain and Distribution
  53. [53] Item 1, Business — Business Technology
  54. [54] Item 7, MD&A — Capital Expenditures
  55. [55] Item 7, MD&A — Capital Expenditures
  56. [56] Item 7, MD&A — Share Repurchases and Dividends
  57. [57] Item 7, MD&A — Share Repurchases and Dividends
  58. [58] Item 7, MD&A — Recent Trends and Developments
  59. [59] Item 7, MD&A — Recent Trends and Developments
  60. [60] Item 7, MD&A — Recent Trends and Developments
  61. [61] Item 7, MD&A — Recent Trends and Developments
  62. [62] Item 7, MD&A — Recent Trends and Developments
  63. [63] Item 7, MD&A — Opportunistic Product
  64. [64] Item 7, MD&A — Opportunistic Product
  65. [65] Item 1A, Risk Factors — Risks Related to Our Operations
  66. [66] Item 1A, Risk Factors — Risks Related to Our Business Environment
  67. [67] Item 1A, Risk Factors — Risks Related to Legal and Regulatory Risks
  68. [68] Item 1A, Risk Factors — Risks Related to Our Business Environment
  69. [69] Item 1A, Risk Factors — Risks Related to Our Operations
  70. [70] Item 1A, Risk Factors — Risks Related to Our Operations
  71. [71] Item 1A, Risk Factors — Risks Related to Our IO Model
  72. [72] Item 1A, Risk Factors — Risks Associated with our Indebtedness
  73. [73] Item 1A, Risk Factors — Risks Associated with our Indebtedness
  74. [74] Item 1A, Risk Factors — Risks Associated with our Indebtedness
  75. [75] Item 7, MD&A — New Store Growth
  76. [76] Item 7, MD&A — New Store Growth
  77. [77] Item 7, MD&A — New Store Growth
  78. [78] Item 7, MD&A — New Store Growth

Analysis on 5/21/2026