Grocery Outlet Resets Growth Strategy Under New CEO

Grocery Outlet (NASDAQ: GO) held its fourth-quarter 2024 earnings call on February 25, 2025, introducing new leadership and outlining strategic shifts to improve execution and profitability. The stock was down as much as 30% following earnings. The company reported comparable-tore sales growth of 2.9% while announcing plans to moderate store expansion and optimize operations.

New Leadership Team Brings Retail and Systems Expertise

The company has assembled a new executive team to address operational challenges. Jason Potter joins as CEO with over 30 years of grocery experience, including franchise model expertise. Chris Miller becomes CFO with 40 years of finance experience, and Kumar Mishra joins as CIO with 25 years of IT leadership and SAP implementation expertise.

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I was attracted to this business because the Grocery Outlet team has, over many decades, developed this differentiated concept, creating an incredible customer experience that generates that feeling of the thrill of the treasure hunt.

-- Jason Potter, CEO

Strategic Reset on Store Growth Plans

Management is taking a more disciplined approach to expansion, focusing on existing markets and adjacent territories where brand awareness and operational synergies exist. The company reduced its 2025 store opening target from over 50 to 33-35 net new locations.

We were trying to open too many stores in too many new markets, which don't perform as well as existing markets or new adjacent markets. Thus, we are narrowing the focus in our future new store openings to target existing markets in a smaller set of high-priority adjacent new markets.

-- Eric Lindberg, Chairman

Systems Implementation Progress and Challenges

The company continues working through its systems conversion, with plans to phase in an upgraded real-time order guide during the second quarter of 2025. Inventory management challenges persist, impacting margins through higher shrink rates.

We have made progress toward launching our upgraded real-time order guide, which we expect to begin phasing in during the second quarter. ... As I mentioned on the last call, this is the critical merchandising and inventory management tool for our independent operators.

-- Eric Lindberg, Chairman

Supply Chain Optimization Underway

The company is streamlining its distribution network through a strategic consolidation in the Pacific Northwest, aiming to improve efficiency, reduce costs, and enhance service levels through a new modern facility expected to be fully operational by the end of 2025.

In February, we opened a new 680,000-square-foot ambient distribution center in Vancouver, Washington, to increase the warehouse capacity in the Pacific Northwest that will support our growing business in Washington, Oregon and Idaho. This DC will consolidate all or part of 5 warehouse facilities in the greater Portland area into a new and more modern facility with room to grow.

-- Eric Lindberg, Chairman

Looking Ahead

Management expressed measured optimism about the company's positioning while acknowledging ongoing execution challenges. With a differentiated business model combining opportunistic buying at scale with independent operator execution, Grocery Outlet is aiming to improve operational efficiency and returns on capital and get back on track.

Management is focused on three key areas: completing systems implementation, optimizing store growth in existing markets, and enhancing inventory management. As Chairman Eric Lindberg emphasized, "Our recent financial performance reflects temporary impacts from systems conversions and executional challenges, but I remain as confident as ever in the long-term potential of this business."