GO - Grocery Outlet is a sell at Quo Vadis because earnings may be revised lower

Quo Vadis reiterated a Sell rating on Grocery Outlet Holdings ( NASDAQ: GO ) after pointing to correspondence with the SEC in which the grocery retailer stated it will alter "adjusted" EBITDA and EPS calculations.

Analyst John Zolidis said the firm believes it is the second time that GO has changed its calculations for adjusted earnings since going public.

"Our view, and we are in print in a recent note stating it, is that adjusted EPS is overstated by >40% relative to actual EPS."

Per the released SEC correspondence, Grocery Outlet ( GO ) said it will no longer exclude non-cash rent and the write off of accounts receivable reserves from the expenses tally. While the restatement of EBITDA is called a step in the right direction, Quo Vadis does not believe it come close to aligning reported results with best practices of the majority of retailers.

After factoring in the adjusted EPS, Quo Vadis calculated that GO trades with a trade an earnings multiple of 28X the 2023 consensus, which is noted to be one of the highest multiples in retail.

Grocery Outlet ( GO ) is expected to report earnings sometime during the first two weeks of November.

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