For the second quarter of fiscal 2019 ended June 29, Emeryville, California-based Grocery Outlet Holding Corp. said its net sales increased by 12.2 percent to $645.3 million vs. $575.1 million in the second quarter of fiscal 2018 and its comparable store sales increased by 5.8 percent vs. a 2.7 percent increase last year.
The company’s net loss for the quarter was $10.6 million, or $0.15 per diluted share, compared to net income of $7.3 million, or $0.11 per diluted share in the second quarter of fiscal 2018.
Adjusted EBITDA increased 15 percent to $45 million compared to $39.1 million in the second quarter of fiscal 2018, and adjusted net income increased 12.1 percent to $14.5 million, or $0.20 per diluted share, compared to $12.9 million, or $0.19 per diluted share last year.
Grocery Outlet opened eight new stores and closed one during the second quarter for a total of 330 stores in six states at the end of June.
Eric Lindberg, CEO of Grocery Outlet, said, “We are pleased with our second quarter financial performance, which reflects consistent comparable sales growth, strong new store performance and gross margin expansion. Our comparable store sales growth was broad-based across product categories, regions, and store vintages. We attribute the consistency of our performance to our unique business model that provides customers unbeatable value in a fun, treasure hunt experience along with great customer service through our local independent operators.
“We continue to identify ways to further support our network of independent operators, broaden our reach with existing and new suppliers, and more effectively engage with our customers,” Lindberg continued. “We remain focused on driving sales growth by delivering incredible savings on name-brand products and creating a ‘wow’ experience for our customers. At the same time, we look to continue expanding our store base and reinvesting in our people, systems and infrastructure to support our long-term growth objectives.”
For the 26-week half, net sales increased 11.2 percent to $1.25 billion from $1.13 billion in the first half of fiscal 2018, and comparable store sales increased by 5 percent vs. a 3.5 percent increase last year.
The net loss for the half was $6.9 million, or $0.10 per share, compared to net income of $12.8 million, or $0.19 per diluted share in the same period in 2018. Adjusted EBITDA increased 11.8 percent to $84.1 million compared to $75.2 million in the same period in 2018, and adjusted net income decreased 0.2 percent to $24.4 million, or $0.35 per diluted share, compared to $24.4 million, or $0.36 per diluted share last year.
Just before the end of the second quarter, on June 24, Grocery Outlet consummated its initial public offering (IPO) at an offering price to the public of $22 per share. The company sold 19.8 million shares of its common stock in the IPO, including the additional 2.6 million shares purchased by the underwriters in the exercise of their over-allotment option, resulting in total net proceeds of $400.5 million after deducting underwriters’ discounts, commissions and offering costs.
Grocery Outlet used the net proceeds from the IPO to repay in full the $150 million principal amount of indebtedness plus $3.6 million of accrued and unpaid interest on its second lien term loan. In addition, using the remainder of net proceeds, together with excess cash on hand, the company prepaid $248 million of its outstanding first lien term loan plus accrued interest of $3.8 million.
On July 23, the company completed the repricing of its remaining $475.2 million first lien term loan.
Fiscal 2019 outlook
Grocery Outlet expects the following results for the fiscal year 2019:
|Full-Year 2019 Guidance|
|Net Sales||$2.50-$2.53 billion|
|Unit Growth||Approximately 29 stores|
|Comparable store sales growth||3-4 percent|
|Adjusted EBITDA||$162.0-$165.5 million|
|Adjusted diluted earnings per share||$0.68-$0.71|
|Effective tax rate||Approximately 28 percent|
|Capital expenditures (net of tenant improvement allowances)||$85-$90 million|