Grocery Outlet Holding Corp (GO) reported net sales of $1.19 billion for the quarter ended July 4, 2026, representing a 1% year-over-year increase.
Comparable-store sales declined 0.3%, which was an improvement of 70 basis points from the first quarter and better than the company’s projected 1.5% to 2% decline.
Chief Financial Officer Ian Ferry noted the result included an estimated 50-basis-point headwind from the timing of Easter during the period.
Store traffic increased 1.8% during the quarter, while average basket size declined 2.1%, reflecting ongoing pressure on consumer spending habits.
President and Chief Executive Officer Jason Potter said basket performance improved by roughly 100 basis points sequentially as shoppers responded to an expanded selection of opportunistic merchandise.
Management attributed the sequential improvement to a revitalized opportunistic offering, which saw a 500-basis-point acceleration in performance relative to the start of Q1.
The company executed a strategic pivot by discontinuing 400 to 500 non-opportunistic items to open up shelf space for high-value branded deals that resonate more strongly with value-seeking customers.
Gross profit came in flat at $360.7 million, while gross margin declined 30 basis points year over year to 30.2%, still exceeding the company’s guidance range of 29.8% to 30%.
Adjusted EBITDA reached $65.7 million, and management raised the low end of full-year guidance despite flagging a 100-basis-point Q3 comparable-store sales headwind stemming from a Cyclospora outbreak.
The company beat the midpoint of its guidance by approximately $9 million, with roughly half attributable to outperformance on comparable sales and gross margin rate.
Of the remaining $4.5 million beat, two-thirds represents SG&A dollars that will shift into the back half of the year, primarily the third quarter, with $1.5 million attributed to cost discipline versus plan.
Management warned there will be a sequential step down in gross margins in Q3, partly due to elevated shrink tied to the produce issues Potter highlighted, which will meaningfully weigh on third-quarter results.
Grocery Outlet maintains a 15% to 20% price gap against low-cost mass retailers and a 30% to 40% gap against conventional grocers, a positioning it views as central to its value proposition.
Several competitors have recently signaled plans to invest in price throughout the back half of the year, pointing to a more competitive grocery environment over the coming months.
Management acknowledged they are alert to the competitive activity and recent announcements, as well as seeing a recent uptick in promotion in syndicated data, and noted the customer is searching for value and is under pressure.
Operational strategy for 2027 has shifted toward in-fill store growth to leverage existing brand power, distribution density, and independent operator expertise across established markets.
Management also clarified that UGO remains a 2026 conversation with various strategic options currently under evaluation.
