Grocery Outlet Holding Corp. (NASDAQ:GO) Q3 2023 Earnings Call Transcript

Charles Bracher: Yeah. Leah, this is Charles. Just a bit more color on cost and sort of the cadence as you think about the quarterly impact going into next year. So as it relates to the third quarter, again, think of this as being one month of impact to the fiscal quarter. And so as RJ mentioned, we felt both the topline and a margin impact in Q3, along with elective commission support. You see the same impacts in the fourth quarter, just to a greater degree as we are feeling the kind of full three-month impact, if you will, in the fourth quarter. We do expect that as we — over the course of the fourth quarter, all of those impacts moderate and as disappointed as we are with the magnitude of the impact in the fourth quarter, we do expect and believe that it will be largely behind us by the end of the year. And so, our view at this point is, we will enter the new year without any lingering cost impacts or otherwise related to the transition.

Leah Jordan: Okay. Thank you. That’s very helpful. So for my follow-up, I just wanted to ask about new store growth for next year. I know you are not giving formal guidance yet, but any color around how the pipeline is building, what you are seeing in the construction and permitting environment or how maybe the progress around discussions for potential M&A to get to 10% for next year? Thanks.

RJ Sheedy: Yeah. Yeah. We are feeling good about future store growth opportunities, white space remains massive, you continue to think about that 4,000-plus number across the U.S. So plenty of opportunities out there for us. If I were to go back earlier in the year from prior calls, first goal was to get back to 10% growth rate this year and we are happy to be tracking to this now with eight new stores that we opened in the third quarter and on track for 13 more in the fourth quarter that will get us the net 27 new stores for the year. So tracking well there. Regarding 2024 and the out years as we are actively working the pipeline right now for 2025 and 2026 as well, continue to see great opportunities. And the efforts underway continue to include organic growth, together with consideration of opportunistic real estate lists as well as smaller regional acquisition opportunities.

And same is what we have talked about before, we think about all of those activities coming together to represent future store growth. We do try to stay close to that 10% target as we think about the moving pieces here. There are a lot of opportunities, certainly as it relates to dispossessed real estate and lists that are available that we are evaluating. And then more recently from the past call, past several months, opportunities around acquisitions, those are interesting for us to explore and how it might complement the other activities that we have underway. So feeling good about the number of things in the pipeline and we will provide further update more specifically on 2024 store count on our February Q4 call.

Leah Jordan: Great. Thank you.

Charles Bracher: Thank you.

RJ Sheedy: Thanks.

Operator: Our next question comes from Oliver Chen with TD Cowen. Please proceed.

Oliver Chen: Hi, RJ and Charles. Regarding your comp guidance, is your expectation that traffic continues to be very positive, offset by average unit retail? What should we think about in terms of average unit retails near- and longer term? And as we appreciate a lot of the good changes on the new store portal. The issues you had, just what gives you confidence that they will be largely behind by end of year? And then a follow-up, as we think about new regions, it sounded like store productivity was in line with your expectations. I would just love your thoughts on your supply chain footprint. You gave more color on how you approach M&A. But that framework would be interesting to hear more about as well? Thank you very much.