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Grocery Outlet Holding Corp. Announces Net Sales Increase In Q3

Grocery Outlet Holding Corp. fiscal 2020

Emeryville, Califorinia-based Grocery Outlet Holding Corp. has announced financial results for the third quarter of fiscal 2020 ended Sept. 26. Net sales increased by 17.1 percent to $764.1 million from $652.5 million in the third quarter of fiscal 2019; comparable store sales increased by 9.1 percent compared to a 5.8 percent increase in the same period last year.

The company opened 10 new stores, ending the quarter with 372 stores in six states.

Net income increased 225.2 percent to $40.5 million, or $0.41 per diluted share, compared to net income of $12.4 million, or $0.13 per diluted share, in the third quarter of fiscal 2019.

Primarily as a result of tax benefits associated with employee stock option exercises, the company recorded a $15.0 million net tax benefit resulting in an effective tax rate of (58.8) percent. Relative to our normalized rate, these stock option-related tax benefits increased net income in the quarter by $21.9 million, or $0.22 per diluted share.

Adjusted EBITDA increased 25.1 percent to $55.3 million compared to $44.2 million in the third quarter of fiscal 2019.
Adjusted net income increased 141.8 percent to $49.9 million, or $0.50 per non-GAAP diluted share, compared to $20.6 million, or $0.22 per non-GAAP diluted share, in the third quarter of fiscal 2019.

Eric Lindberg, CEO of Grocery Outlet, stated, “I am extremely proud of our strong execution throughout the third quarter as our corporate teams and IOs continue to focus on what we do best: offering exciting deals and delivering exceptional value to our customers. While we continue to navigate COVID, we are actively reinvesting in our people and operational initiatives in support of our long-term growth objectives. We remain excited about our ample white space for retail expansion and the opportunity to continue to deliver tremendous values to our loyal customers.”

Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures, which exclude the impact of certain special items.

For the 39 weeks ended Sept. 26:

  • Net sales increased by 22.3 percent to $2.33 billion from $1.90 billion in the same period in fiscal 2019; comparable store sales increased by 14.3 percent compared to a 5.3 percent increase in the same period last year.
  • Net income increased $76.9 million to $82.4 million, or $0.84 per diluted share, compared to net income of $5.6 million, or $0.07 per diluted share, in the same period in 2019.
  • Primarily as a result of tax benefits associated with employee stock option exercises, the company recorded a $19.0 million net tax benefit resulting in an effective tax rate of (30.0) percent. Relative to our normalized tax rate, these stock option-related tax benefits increased net income by $36.5 million, or $0.37 per diluted share.
  • Adjusted EBITDA increased 34.8 percent to $172.9 million compared to $128.3 million in the same period in 2019.
  • Adjusted net income increased 179.2 percent to $125.8 million, or $1.28 per non-GAAP diluted share, compared to $45.0 million, or $0.57 per non-GAAP diluted share, in the same period last year.

 

Balance sheet and cash flow

  • Cash and cash equivalents totaled $59.1 million at the end of the third quarter of fiscal 2020 compared to $44.0 million at the end of the same period in fiscal 2019.
  • Total debt was $460.1 million at the end of the third quarter, compared to $475.5 million at the end of the same period in fiscal 2019.
  • Capital expenditures for the third quarter of fiscal 2020, excluding the impact of landlord allowances, were $35.9 million.

 

Fiscal 2020 outlook

Grocery Outlet currently expects to open 34 stores this year with no additional closures planned. The company continues to build its real estate pipeline to support 10 percent annual unit growth.

Quarter-to-date comparable store sales growth for the fourth quarter of fiscal 2020 is in the positive mid-single digits driven by an increase in average basket size partially offset by declines in store traffic. Based on current trends, the company expects comparable store results for the full fourth quarter to remain consistent at these levels.

Excluding the impact of discrete items, the company anticipates a normalized tax rate of 28 percent.
Weighted average diluted share count is expected to be approximately 100 million shares for the fourth quarter of fiscal 2020.

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