EMERYVILLE, Calif. - Grocery Outlet Holding Corp. (NASDAQ: NASDAQ:GO) reported a challenging first quarter for fiscal 2024 with a net loss and a significant cut to its full-year earnings guidance, leading to a sharp 15% decline in its stock price.
The discount grocery retailer's earnings per share (EPS) for the quarter was -$0.01, falling short of the analyst consensus of $0.18. Revenue, however, slightly beat expectations at $1.04 billion compared to the forecasted $1.02 billion, marking a 7.4% increase from the same quarter last year.
The company's comparable store sales saw a 3.9% rise, buoyed by a 7.0% jump in transactions, which was somewhat offset by a 2.9% drop in average transaction size. Despite the growth in sales and store count, which reached 474 across nine states, Grocery Outlet's profits were hampered by continued technology transition issues.
These issues, which began with new platform implementations in late August 2023, negatively impacted gross margin by an estimated 210 basis points, contributing to a gross margin decrease to 29.3%.
President and CEO RJ Sheedy expressed disappointment over the additional systems conversion problems, which led to an adverse profit impact greater than anticipated. Sheedy emphasized the company's strong sales momentum and the end of the operator commission support program, which was provided during the system upgrades.
Despite the setbacks, Sheedy remains confident in the company's long-term growth potential.
Grocery Outlet's guidance for fiscal 2024 reflects the challenges faced in the first quarter. The company now expects adjusted EPS to be between $0.89 and $0.95, which is below the analyst consensus of $1.17. Revenue projections for the year are set at $4.3 to $4.35 billion, aligning closely with the consensus estimate of $4.34 billion.
The lowered outlook and first-quarter performance have clearly rattled investors, as evidenced by the significant drop in the company's stock price. Grocery Outlet's balance sheet shows $66.9 million in cash and cash equivalents, with total debt standing at $291.0 million, net of unamortized debt issuance costs.
The first quarter also saw the company complete the acquisition of United Grocery Outlet, expanding its geographical footprint into six new states in the Southeastern United States.
In his statement, Sheedy reiterated the company's commitment to providing unbeatable value and an exciting shopping experience, which continues to drive traffic and sales growth. As Grocery Outlet navigates through its systems transition, management looks forward to returning to more normalized business results.
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