Grocery Outlet Holding Corp. — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance:

• Net sales for the third quarter increased 0.9% year-over-year to $1.18 billion; for the 39 weeks ended October 3, 2026, net sales increased 1.8% to $3.54 billion.
• Comparable store sales increased 0.5% in the third quarter but declined 0.2% for the 39-week period.
• Gross margin was 30.0% in the third quarter (down from 30.4% last year) and 29.9% for the 39 weeks (down from 30.5% last year).
• Operating income for the third quarter was $24.0 million, including $3.6 million in net restructuring credits; operating loss for the 39 weeks was $138.2 million.
• Net income for the third quarter was $13.3 million ($0.13 per diluted share) compared to $11.6 million ($0.12 per diluted share) last year; net loss for the 39 weeks was $161.4 million ($1.63 per diluted share) compared to a net loss of $6.8 million ($0.07 per diluted share) last year.
• Adjusted net income for the third quarter was $15.6 million ($0.16 diluted adjusted EPS) compared to $20.7 million ($0.21 diluted adjusted EPS) last year; for the 39 weeks, adjusted net income was $40.5 million ($0.41 diluted adjusted EPS) compared to $56.5 million ($0.57 diluted adjusted EPS) last year.
• Adjusted EBITDA was $59.4 million (5.0% of net sales) for the third quarter and $168.2 million (4.8% of net sales) for the 39 weeks.
• Net cash provided by operating activities for the third quarter was $18.2 million, compared to $17.3 million in the prior year period.
• Capital expenditures for the third quarter were $28.1 million before tenant improvement allowances ($25.7 million net), a decrease from $39.4 million in the prior year period.

Guidance and Future Outlook:

• The Company revised its fiscal 2026 guidance for net store openings (net) to 30 to 31, down from the previous range of 30 to 33.
• Fiscal 2026 comparable store sales guidance was revised upward to a 0.2% to 0.4% increase, compared to the previous range of -0.5% to 0.0%.
• Fiscal 2026 diluted adjusted earnings per share guidance was revised to $0.52 to $0.55, up from the previous range of $0.51 to $0.55.
• Fiscal 2026 adjusted EBITDA guidance was revised downward to $225 million to $229 million, compared to the previous range of $225 million to $235 million.
• Net sales, gross margin, and capital expenditures guidance remain unchanged at $4.70 to $4.72 billion, 29.8% to 30.0%, and $170 million respectively.
• Management expects the operational actions and financial impacts of the Optimization Plan to be substantially completed by the fourth quarter of fiscal 2027.

Business Segments and Product Lines:

• The Company opened 14 new stores and closed zero stores in the third quarter, ending the period with 561 stores in 16 states.
• Over the 39 weeks, the Company opened 31 new stores and closed 40 stores, including 36 stores related to the Optimization Plan.
• Third-quarter comparable store sales growth was driven by a 2.4% increase in the number of transactions, partially offset by a 1.9% decrease in average transaction size.
• The 39-week comparable store sales decline was driven by a 2.3% decrease in average transaction size, partially offset by a 2.1% increase in the number of transactions.
• Gross margin declines were attributed to product promotions, higher transportation expenses, and reduced consumer demand for produce due to a Cyclospora outbreak, partially offset by a favorable shift in sales mix toward opportunistic products.
• The Optimization Plan involved closing 36 financially underperforming stores in March and April 2026 and terminating operator agreements for those and other locations.

Market and Competitive Landscape:

• Management stated that traffic accelerated and basket trends improved sequentially as the Company enhanced its value proposition.
• The Company operates as a growth-oriented extreme value retailer selling quality, name-brand consumables and fresh products through a network of independently operated stores.

Risks and Challenges:

• The Optimization Plan is estimated to incur total net restructuring charges between $22 million and $29 million, with the range increased due to updated expected lease termination and idle property costs.
• The 39-week period included a $158.0 million non-cash goodwill impairment charge resulting from a decline in stock price.
• Gross margin was impacted by a broad reduction in consumer demand for produce associated with a Cyclospora outbreak.
• The Company faces risks related to supplier supply consistency, inventory management, store growth execution, labor relations, and economic conditions.

Management Commentary and Tone:

• Jason Potter, President and CEO, stated the Company returned to positive comparable store sales driven by improvements in the execution of its opportunistic product offering.
• Management expressed confidence in the long-term opportunity, citing a stronger foundation built on driving sustainable sales growth and improved profitability.
• The tone indicates a focus on building on recent progress in traffic and basket trends through partnership with operators and suppliers.

Other Key Points:

• The Company initiated a business optimization plan in the first quarter of fiscal 2026 intended to strengthen long-term profitability, cash flow, and store footprint.
• The non-cash goodwill impairment charge does not impact future operations.
• The Company has not reconciled forward-looking non-GAAP adjusted EBITDA and diluted adjusted earnings per share guidance to GAAP measures due to the inherent difficulty of forecasting timing and amounts of various items.
• A conference call to discuss results was scheduled for November 10, 2026, at 4:30 p.m. Eastern Time.