Grocery Outlet Bargain Market again demonstrated significant growth in comparable transactions and new households. It is winning those by giving disruptive value to shoppers. CEO Rob Sheedy said, “So there's really strength across the basket, which of course is a good place to be. And then NOSH (natural, organic, specialty, healthy) that of course lives across departments and throughout the whole store.”
Despite grocery inflation being +4% in the period, Grocery Outlet’s comparable-ticket was flat, and they are comping at a 2-3x higher rate than Sprouts Farmers Market on a 1-year and 2-year basis. This demonstrates that a lot of new households are trialing the brand. Placer shows unique shoppers to Grocery Outlet up an incredible +4% quarter-over-quarter and +14% year-over-year, with gains in new markets and existing markets.
Grocery Outlet's gains are coming out of conventional grocery and across the board in terms of household income. As shown below, while the gains are higher for less affluent households, but gains in households with over $200K in income, are still up +13.5%.
Grocery Outlet’s gross margin rate was up +120 basis points year-over-year with CFO Charles Bracher saying, “Our buyers are doing a fantastic job partnering with suppliers, and we are seeing healthy deal flow across categories. Strong execution, combined with the favorable buying environment drove the better-than-expected margin result.” For context, Grocery Outlet uses a similar approach as an off-price retail buyer (like TJ Maxx or Ross Stores) for grocery items and other general merchandise. As traffic and sales volumes are declining at conventional grocers (see the table below), Grocery Outlet is able to buy excess inventory from manufacturers, wholesalers, and conventional groceries as these entities see their inventory turns slow. Grocery Outlet picks up these bargains at up to 40% off and then passes on those savings to customers. A disruptive level of value that gets the attention of households that are now generally scrambling to lower their monthly grocery bill. (Currently, we see a similar dynamic between off-price brands and department stores.) Given that manufacturers now have more capacity for retailer bands, that allows Grocery Outlet to now be more aggressive by offering its own brands at value.