Retail stock to watch: Grocery Outlet Holding Corp (NASDAQ: GO)

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Grocery Outlet Holding Corp (NASDAQ: GO) stock lost over 0.50% despite decent results for the fourth quarter of FY 19. The company has reported 67.8% rise in the adjusted net income to $19.9 million compared to $11.9 million, in the fourth quarter of fiscal 2018. At the end of year, the company had cash and cash equivalents of $28.1 million. Inventory has increased to $219.4 million as compared to $198.3 million in the same period last year. For the year, the company has generated $132.8 million in operating cash and invested $97.2 million in gross capex. GO has ended the fourth quarter with $460 million in gross debt, reflecting a 2.6 times adjusted EBITDA net leverage ratio.

Meanwhile, the company’s buying team is working in overdrive to source more products to meet the increased demand the company is experiencing. On the everyday side, the company’s focus has been on replenishing the need-based products that have seen the largest spikes in sales. This environment reflects the high degree of supply chain disruption. The company will continue to lean on the long-standing vendor relationships and work to develop new supplier partners to capture these opportunities as they become available. The company is working equally hard to get products through the warehouses and into stores. The self-managed distribution centers, third-party partners and transportation fleet are working around the clock to make this happen.

GO in the fourth quarter of FY 19 has reported the adjusted earnings per share of 21 cents, beating the analysts’ estimates for the adjusted earnings per share of 17 cents. The company had reported the adjusted revenue growth of 12 percent to $655.5 million in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $655 million. This growth came on the back of a 5.1% increase in comparable store sales as well as the sales contribution from 31 net new stores opened during fiscal 2019. The company had opened 10 new stores during the fourth quarter and a balance of openings in mature and developing geographies. Fourth quarter gross profit has risen 13.7% to $200.3 million compared to the fourth quarter of fiscal 2018 and its gross margin rate has expanded by 45 basis points to 30.6%.

Additionally, for the first eight weeks of the current quarter, the company’s comp sales trends remain healthy, which is consistent with the fourth quarter performance. Beginning in March, the company saw customer demand both traffic and ticket beginning to build in conjunction with concern surrounding the coronavirus. As a result, comp sales increases have been significant across regions.

 

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