GO - Grocery Outlet Holding: Remain Sell Rated As SSS Outlook Is Still Uncertain

2024-05-30 02:42:06 ET

Summary

• Grocery Outlet Holding reported a disappointing quarter, with EPS well below estimates and a significant decline in EBIT margin.
• The performance of same-store sales in Q1 was strong, but the real test will come in the coming quarters.
• There are risks to GO stock's FY24 guidance, including operational challenges, macro headwinds, increased competition, and potential price reductions by larger grocery chains.

Investment overview

I wrote about Grocery Outlet Holding ( GO ) previously ( 14 March 2024 ) with a sell rating as I was very negative on the potential operational impact from the acquisition of UGO , which could lead to GO missing its FY24 guidance. While the main reason for the share price decline was not the acquisition (which was completed on 1st April), 1Q24 performance did highlight cracks in management execution abilities, and I believe that has weighed on the share price....

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