Grocery Outlet Holding Corp. (GO): Results of Operations and Financial Condition
Grocery Outlet Holding Corp. (GO) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Grocery Outlet Holding Corp. Announces Second Quarter Fiscal 2026 Financial Results Emeryville, CA – August 12, 2026 – Grocery Outlet Holding Corp. (NASDAQ: GO) ("Grocery Outlet," the "Company," "we" or "our") today announced financial results for the second quarter
How this was made
The 30-second read
Why it matters
Investors will likely reprice GO based on the mix of modest top-line growth, negative comps, margin compression from promotions and closure-related markdowns, and cash flow deterioration, while also weighing whether the Optimization Plan is reducing future cost drag.
Market read
This is a primary earnings-style disclosure with detailed GAAP and non-GAAP metrics plus restructuring and cash flow impacts, which can drive near-term positioning in discount retail.
What to watch
Operating loss over the first half includes a large non-cash goodwill impairment, so traders should separate cash earnings power from accounting charges when assessing sustainability.
Grocery Outlet reported 1.1% net-sales growth and a 0.3% comparable-store-sales decline, while raising the low ends of several fiscal 2026 guidance ranges.
Second-quarter results were ahead of the Company’s outlook and comparable-store-sales trends improved sequentially, but sales growth remained modest, comparable-store sales declined, gross margin contracted, and adjusted earnings declined from the prior-year period.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, second quarter fiscal 2026GAAP | $1.19 billion | – | increased by 1.1% |
| Comparable store sales, second quarter fiscal 2026other | declined by 0.3% | – | declined by 0.3% |
| Average transaction size, second quarter fiscal 2026other | decrease of 2.1% | – | decrease of 2.1% |
| Number of transactions, second quarter fiscal 2026other | increase of 1.8% | – | increase of 1.8% |
| Gross profit, second quarter fiscal 2026GAAP | $360.7 million | – | relatively unchanged |
| Gross margin, second quarter fiscal 2026GAAP | 30.2% | – | a decline of 40 basis points |
| Selling, general and administrative expenses, second quarter fiscal 2026GAAP | $339.5 million | – | increased slightly |
| Selling, general and administrative expenses as a percentage of net sales, second quarter fiscal 2026GAAP | 28.5% of net sales | – | relatively flat |
| Operating income, second quarter fiscal 2026GAAP | $15.8 million | – | – |
| Net restructuring charges, second quarter fiscal 2026GAAP | $5.4 million | – | – |
| Net income, second quarter fiscal 2026GAAP | $5.6 million | – | – |
| Diluted earnings per share, second quarter fiscal 2026GAAP | $0.06 per diluted share | – | – |
| Adjusted net income, second quarter fiscal 2026non-GAAP | $20.3 million | – | – |
| Diluted adjusted earnings per share, second quarter fiscal 2026non-GAAP | $0.20 diluted adjusted earnings per share | – | – |
| Adjusted EBITDA, second quarter fiscal 2026non-GAAP | $65.7 million | – | – |
| Adjusted EBITDA margin, second quarter fiscal 2026non-GAAP | 5.5% of net sales | – | – |
| Net sales, 26 weeks ended July 4, 2026GAAP | $2.36 billion | – | increased by 2.3% |
| Comparable store sales, 26 weeks ended July 4, 2026other | declined by 0.6% | – | declined by 0.6% |
| Average transaction size, 26 weeks ended July 4, 2026other | decrease of 2.6% | – | decrease of 2.6% |
| Number of transactions, 26 weeks ended July 4, 2026other | increase of 2.0% | – | increase of 2.0% |
| Gross profit, 26 weeks ended July 4, 2026GAAP | $705.9 million | – | increased slightly versus last year |
| Gross margin, 26 weeks ended July 4, 2026GAAP | 29.9% | – | decreased 60 basis points |
| Selling, general and administrative expenses, 26 weeks ended July 4, 2026GAAP | $686.5 million | – | increased by 2.8% versus last year |
| Selling, general and administrative expenses as a percentage of net sales, 26 weeks ended July 4, 2026GAAP | 29.1% of net sales | – | increased slightly |
| Operating loss, 26 weeks ended July 4, 2026GAAP | $162.2 million | – | – |
| Non-cash goodwill impairment charge, 26 weeks ended July 4, 2026GAAP | $158.0 million | – | – |
| Net restructuring charges, 26 weeks ended July 4, 2026GAAP | $23.6 million | – | – |
| Net loss, 26 weeks ended July 4, 2026GAAP | $174.7 million | – | – |
| Diluted net loss per share, 26 weeks ended July 4, 2026GAAP | $(1.77) per diluted share | – | – |
| Adjusted net income, 26 weeks ended July 4, 2026non-GAAP | $24.9 million | – | – |
| Diluted adjusted earnings per share, 26 weeks ended July 4, 2026non-GAAP | $0.25 diluted adjusted earnings per share | – | – |
| Adjusted EBITDA, 26 weeks ended July 4, 2026non-GAAP | $108.8 million | – | – |
| Adjusted EBITDA margin, 26 weeks ended July 4, 2026non-GAAP | 4.6% of net sales | – | – |
Fiscal 2026 outlook
- Revenue$4.70 to $4.72 billion
- Gross margin29.8%-30.0%
- NoteNew store openings, net: 30 to 33
- NoteComparable store sales increase / decrease: -0.5% to 0.0%
- NoteAdjusted EBITDA: $225 million to $235 million
- NoteDiluted adjusted earnings per share: $0.51 to $0.55
- NoteCapital expenditures (net of tenant improvement allowances): $170 million
- NoteNet total restructuring charges in fiscal 2026 and fiscal 2027: between $15 million and $24 million
- NoteOptimization Plan actions expected to be substantially completed by the first quarter of fiscal 2027
What drove it
- Second-quarter net sales increased due to new store sales, partially offset by decreased sales from store closures under the Optimization Plan and a 0.3% decrease in comparable store sales.
- The second-quarter comparable-store-sales decline reflected a 2.1% decrease in average transaction size, partially offset by a 1.8% increase in the number of transactions.
- Gross margin declined due primarily to product promotions to drive sales and inventory markdowns and write-offs associated with Optimization Plan store closures, partially offset by improvements in inventory management.
- The Company opened 10 new stores and closed 12 stores, including 9 stores as a result of the Optimization Plan, ending the quarter with 547 stores in 16 states.
- During the first half of fiscal 2026, the Company opened 17 new stores and closed 40 stores, including 36 stores as a result of the Optimization Plan.
Concerns
- Comparable store sales declined by 0.3% in the second quarter and by 0.6% during the 26 weeks ended July 4, 2026.
- Average transaction size decreased by 2.1% in the second quarter and by 2.6% during the first half.
- Second-quarter gross margin was 30.2% compared to 30.6% last year, while first-half gross margin was 29.9% compared to 30.5% last year.
- Adjusted net income and diluted adjusted earnings per share declined from the prior-year period in both the second quarter and the 26 weeks ended July 4, 2026.
- The first-half operating loss included a $158.0 million non-cash goodwill impairment charge and $23.6 million in net restructuring charges.
- Second-quarter operating cash flow declined to $43.2 million from $73.6 million in the prior-year quarter.
What to watch
- Comparable-store-sales progress as the Company seeks to improve basket performance while traffic remains positive.
- The effect of product promotions and Optimization Plan closure-related markdowns and write-offs on gross margin.
- Execution and remaining costs of the Optimization Plan, for which the Company estimates between $15 million and $24 million in net total restructuring charges in fiscal 2026 and fiscal 2027.
- Delivery against fiscal 2026 guidance for net sales of $4.70 to $4.72 billion, adjusted EBITDA of $225 million to $235 million, and diluted adjusted earnings per share of $0.51 to $0.55.
- Progress toward 30 to 33 net new store openings, excluding store closures related to the Optimization Plan.
Balance sheet and cash flow
- Net cash provided by operating activities during the second quarter of fiscal 2026 was $43.2 million compared with $73.6 million for the second quarter last year.
- Capital expenditures for the second quarter of fiscal 2026, before tenant improvement allowances, were $43.7 million, a decrease of $21.5 million from the second quarter of fiscal 2025.
- Capital expenditures, net of tenant improvement allowances, for the second quarter this year, were $38.7 million compared with $58.3 million for the same period last year.
Analysis
Grocery Outlet produced $1.19 billion of second-quarter net sales, up 1.1%, as new-store sales more than offset sales lost from store closures. Comparable-store sales declined by 0.3%, with a 2.1% decrease in average transaction size partly offset by a 1.8% increase in the number of transactions. Management said comparable-store-sales trends improved over the first quarter through sequential improvement in basket performance while traffic remained positive.
Profitability remained pressured. Second-quarter gross margin was 30.2%, compared with 30.6% last year, as product promotions and closure-related inventory markdowns and write-offs more than offset inventory-management improvements. Selling, general and administrative expenses were $339.5 million, or 28.5% of net sales, and operating income was $15.8 million including $5.4 million in net restructuring charges. GAAP net income was $5.6 million, or $0.06 per diluted share, while adjusted net income was $20.3 million, or $0.20 diluted adjusted earnings per share, below $22.8 million and $0.23 diluted adjusted earnings per share last year.
The first-half results show the effect of the Optimization Plan and goodwill impairment. For the 26 weeks ended July 4, 2026, net sales increased 2.3% to $2.36 billion and comparable-store sales declined 0.6%. The $162.2 million operating loss included a $158.0 million non-cash goodwill impairment charge and $23.6 million in net restructuring charges. The Company stated that the goodwill impairment charge does not impact future operations. It closed all 36 Closure Stores during the first half and substantially completed Operator Agreement Terminations.
Cash generation was lower year over year in the quarter, with net cash provided by operating activities of $43.2 million compared with $73.6 million. Capital expenditures net of tenant improvement allowances were $38.7 million compared with $58.3 million. The Company attributed the operating-cash-flow decline primarily to lower accrued and other liabilities due primarily to timing, lower operating lease liabilities resulting from the Optimization Plan, and lower adjusted net income.
Management revised fiscal 2026 guidance upward at the low end for net sales, comparable-store sales, gross margin, adjusted EBITDA, and diluted adjusted earnings per share. Current guidance calls for $4.70 to $4.72 billion of net sales, comparable-store sales of -0.5% to 0.0%, gross margin of 29.8%-30.0%, adjusted EBITDA of $225 million to $235 million, and diluted adjusted earnings per share of $0.51 to $0.55. The central operating issues remain restoring transaction-size performance, limiting promotion and closure-related gross-margin pressure, and completing the Optimization Plan within the expected restructuring-charge range.
Management, verbatim
We delivered second-quarter results ahead of our outlook, as efforts to strengthen our opportunistic offering and value perception gained traction.
Jason Potter, President and CEO of Grocery Outlet
Comparable-store sales trends improved over the first quarter, driven by sequential improvement in our basket with traffic remaining positive.
Jason Potter, President and CEO of Grocery Outlet
This progress reinforces our confidence that restoring the core strengths of our business and better supporting our independent operators can build a stronger foundation for sustainable, profitable long-term growth.
Jason Potter, President and CEO of Grocery Outlet
Not in the filing
stated, not guessed- Previous quarterly outlook was not provided, so comparisons of reported results with prior guidance are unavailable.
- Segment revenue and segment performance metrics were not reported in the provided filing text.
- Cash balance, debt balance, net leverage, and free cash flow were not reported in the provided filing text.
- Share repurchases, dividends, and other capital-return activity were not reported in the provided filing text.
- Prior-quarter figures were not reported for the individual second-quarter financial metrics.
- Prior-year dollar amounts were not reported for net sales, gross profit, selling, general and administrative expenses, operating income, adjusted EBITDA, or the associated margins.
- Fiscal 2026 operating-expense guidance and tax-rate guidance were not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
The company filed an SEC 8-K with Exhibit 99.1 reporting second-quarter fiscal 2026 results ended July 4, 2026, including progress on its Optimization Plan (store closures and operator agreement terminations).
Ticker impact
Grocery Outlet reported Q2 FY2026 results with net sales up 1.1% but comparable sales down 0.3%, plus operating income hit by $5.4M restructuring charges.
Likely choppy reaction, with upside bias if investors believe comp trends are improving and restructuring is nearing completion; downside risk if margin pressure and operating loss trajectory worsen.
The filing provides fresh GAAP and non-GAAP datapoints (sales, comps, gross margin, operating income/loss, cash flow) and details of the Optimization Plan, but it does not include forward guidance in the provided excerpt.
Market effects
Discount grocery peers may see read-across on how value perception and store-footprint optimization affect comps and gross margin.
Limited direct regional spillover; impacts are primarily company-specific within US discount retail.
Low, as the disclosure is US retail operations and does not reference global macro drivers.
Counterpoint
The headline “ahead of outlook” may be less meaningful if gross margin is still pressured by promotions and inventory markdowns, and operating cash flow fell year over year.
Key entities
- companyGrocery Outlet Holding Corp.
NASDAQ-listed discount grocery retailer reporting Q2 FY2026 financial results and Optimization Plan progress.
- programOptimization Plan
Business optimization initiative including closure of underperforming stores, lease exits, and operator agreement terminations to improve long-term profitability and cash flow.
