Grocery Outlet Holding Corp. (NASDAQ: GO) ("Grocery Outlet" or the
"Company") today announced financial results for the first quarter
of fiscal 2021 ended April 3, 2021.
Highlights for First Quarter Fiscal 2021
as compared to the First Quarter Fiscal 2020:
- Net sales
decreased by 1.0% to $752.5 million.
- Comparable store
sales decreased by 8.2% compared to a 17.4% increase in the same
period last year.
- The Company opened
10 new stores and closed one store, ending the quarter with 389
stores in six states.
- Net income
increased 49.4% to $18.9 million, or $0.19 per diluted share.
- Adjusted EBITDA(1)
decreased 13.7% to $48.8 million.
- Adjusted net
income(1) decreased 19.6% to $23.1 million, or $0.23 per non-GAAP
diluted share.
Eric Lindberg, CEO of Grocery Outlet, stated,
"We were pleased to have delivered on our expectations in the first
quarter and I want to thank our employees and our independent
operators for their fantastic work in serving our customers. We
continue to provide extreme values and a treasure hunt shopping
experience with friendly customer service delivered by local
independent operators. This unique value proposition continues to
resonate with our customers.
As our markets begin to reopen, we believe that
we are well positioned for long-term growth due to our deep value
orientation, strong customer and supplier relationships, and
significant whitespace opportunity. We remain committed to our
long-term algorithm of expanding our store base 10% each year while
continually reinvesting in our business. We will continue to
execute on our strategic initiatives that support consistent
long-term growth and drive stockholder value."
__________________________________
(1) Adjusted EBITDA, adjusted net income and
adjusted diluted earnings per share are non-GAAP financial
measures, which exclude the impact of certain special items.
Beginning with the fourth quarter of fiscal 2020, we updated our
definitions of our non-GAAP financial measures to simplify our
presentation and enhance comparability between periods. The
presentations for adjusted EBITDA, non-GAAP adjusted net income and
non-GAAP adjusted diluted earnings per share for the first quarter
of fiscal 2020 have been recast to reflect these changes. Please
note that our non-GAAP financial measures should be considered as a
supplement to, and not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP. See the
"Non-GAAP Financial Information" section of this release for
additional information about these items.
Balance Sheet and Cash
Flow:
- Cash and cash
equivalents totaled $95.3 million at the end of the first quarter
of fiscal 2021.
- Total debt was
$449.7 million at the end of the first quarter of fiscal 2021, net
of unamortized debt discounts and debt issuance costs.
- Net cash provided
by operating activities during the first quarter of fiscal 2021 was
$26.4 million.
- Capital
expenditures for the first quarter of fiscal 2021, excluding the
impact of tenant improvement allowances, were
$36.6 million.
Outlook:
- The Company
continues to expect to open between 36 and 38 stores in fiscal 2021
with one closure.
- Quarter-to-date
comparable store sales for the second quarter of fiscal 2021 are in
the negative low double digits.
- Capital
expenditures, net of tenant improvement allowances, are estimated
to be approximately $130.0 million for fiscal 2021.
- The Company will
report 52 weeks of operating results in fiscal 2021 compared to 53
weeks in fiscal 2020.
Charles Bracher, Chief Financial Officer,
commented, "The core drivers of our business remain strong across
opportunistic supply, customer excitement, and the engagement of
our independent operators. As we navigate the transitory impact of
reopening and peak-COVID comparisons from 2020, we continue to
anchor ourselves in absolute performance metrics which remain
stable. While it remains difficult to forecast the near term
environment, we remain bullish for the future and continue to
expand our footprint and invest in the business to deliver on our
long-term algorithm."
Conference Call
Information:
A conference call to discuss the first quarter
fiscal 2021 financial results is scheduled for today, May 11,
2021 at 4:30 p.m. Eastern Time. Investors and analysts interested
in participating in the call are invited to dial 877-407-9208
approximately 10 minutes prior to the start of the call. A live
audio webcast of the conference call will be available online at
https://investors.groceryoutlet.com.
A taped replay of the conference call will be
available within two hours of the conclusion of the call and can be
accessed both online and by dialing 844-512-2921. The pin number to
access the telephone replay is 13718911. The replay will be
available for approximately two weeks after the call.
Non-GAAP Financial
Information:
In addition to reporting financial results in
accordance with accounting principles generally accepted in the
United States ("GAAP"), the Company uses EBITDA, adjusted EBITDA,
adjusted net income and adjusted diluted earnings per share
measures of performance to evaluate the effectiveness of its
business strategies, to make budgeting decisions and to compare its
performance against that of other peer companies using similar
measures. Management believes it is useful to investors and
analysts to evaluate these non-GAAP measures on the same basis as
management uses to evaluate our operating results.
Adjusted EBITDA is defined as net income before
interest expense, taxes, depreciation and amortization ("EBITDA")
and other adjustments noted in the "Reconciliation of GAAP Net
Income to Adjusted EBITDA" table below. Adjusted net income is
defined as net income before the adjustments noted in table
"Reconciliation of GAAP Net Income to Adjusted Net Income"
below.
Adjusted EBITDA and adjusted net income are
non-GAAP measures and may not be comparable to similar measures
reported by other companies. Adjusted EBITDA and adjusted net
income have limitations as analytical tools, and you should not
consider them in isolation or as a substitute for analysis of our
results as reported under GAAP.
Beginning with the fourth quarter of fiscal
2020, we updated our definitions of adjusted EBITDA and non-GAAP
adjusted net income to simplify our presentation and enhance
comparability between periods. We no longer exclude new store
pre-opening expenses from our presentation of adjusted EBITDA and
non-GAAP adjusted net income. We also updated our definition of
non-GAAP adjusted net income to exclude the tax impact of options
exercises and vesting of restricted stock units. Lastly, debt
extinguishment and modification costs were reclassified to the
other adjustments line item within the presentation of both
adjusted EBITDA and non-GAAP adjusted net income. The presentations
for adjusted EBITDA and non-GAAP adjusted net income for fiscal
2020 have been recast to reflect these changes. Reconciliations
between the revised and previous definitions of adjusted EBITDA and
non-GAAP adjusted net income for each quarter of fiscal years 2020
and 2019 were provided in our Form 8-K filed with the U.S.
Securities and Exchange Commission on March 2, 2020.
Forward-Looking Statements:
This news release includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 as contained in Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which reflect management's current views
and estimates regarding the prospects of the industry and the
Company's outlook, prospects, plans, business, results of
operations, financial position, future financial performance and
business strategy. These forward-looking statements generally can
be identified by the use of forward-looking terminology such as
"may," "should," "expect," "intend," "will," "estimate,"
"anticipate," "believe," "predict," "potential" or "continue" or
the negatives of these terms or variations of them or similar
terminology. Although the Company believes that the expectations
reflected in these forward-looking statements are reasonable, the
Company cannot provide any assurance that these expectations will
prove to be correct.
The following factors are among those that may
cause actual results to differ materially from the forward-looking
statements: failure of suppliers to consistently supply us with
opportunistic products at attractive pricing; inability to
successfully identify trends and maintain a consistent level of
opportunistic products; failure to maintain or increase comparable
store sales; changes affecting the market prices of the products we
sell; failure to open, relocate or remodel stores on schedule;
risks associated with newly opened stores; inability to retain the
loyalty of our customers; costs and implementation difficulties
associated with marketing, advertising and promotions; failure to
maintain our reputation and the value of our brand, including
protecting our intellectual property; any significant disruption to
our distribution network, the operations of our distributions
centers and our timely receipt of inventory; inability to maintain
sufficient levels of cash flow from our operations; risks
associated with leasing substantial amounts of space; failure to
participate effectively or at all in the growing online retail
marketplace; unexpected costs and negative effects if we incur
losses not covered by our insurance program; inability to attract,
train and retain highly qualified employees; difficulties
associated with labor relations; loss of our key personnel or
inability to hire additional qualified personnel; risks associated
with economic conditions; competition in the retail food industry;
movement of consumer trends toward private labels and away from
name-brand products; major health epidemics, such as the outbreak
of COVID-19, and other outbreaks; natural disasters and unusual
weather conditions (whether or not caused by climate change), power
outages, pandemic outbreaks, terrorist acts, global political
events and other serious catastrophic events; failure to maintain
the security of information we hold relating to personal
information or payment card data of our customers, employees and
suppliers; material disruption to our information technology
systems; risks associated with products we and our independent
operators ("IOs") sell; risks associated with laws and regulations
generally applicable to retailers; legal proceedings from
customers, suppliers, employees, governments or competitors;
failure of our IOs to successfully manage their business; failure
of our IOs to repay notes outstanding to us; inability to attract
and retain qualified IOs; inability of our IOs to avoid excess
inventory shrink; any loss or changeover of an IO; legal
proceedings initiated against our IOs; legal challenges to the
IO/independent contractor business model; failure to maintain
positive relationships with our IOs; risks associated with actions
our IOs could take that could harm our business; our substantial
indebtedness could affect our ability to operate our business,
react to changes in the economy or industry or pay our debts and
meet our obligations; our ability to generate cash flow to service
our substantial debt obligations; impairment of goodwill and other
intangible assets; any significant decline in our operating profit
and taxable income; risks associated with tax matters; changes in
accounting standards and subjective assumptions, estimates and
judgments by management related to complex accounting matters;
failure to comply with requirements to design, implement and
maintain effective internal controls; and the other factors
discussed under "Risk Factors" in the Company's most recent annual
report on Form 10-K. Such risk factors may be updated from time to
time in the Company's periodic filings with the SEC. The Company's
periodic filings are accessible on the SEC's website at
www.sec.gov.
You should not rely upon forward-looking
statements as predictions of future events. Although the Company
believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee that the
future results, levels of activity, performance and events and
circumstances reflected in the forward-looking statements will be
achieved or occur. Except as required by applicable law, the
Company undertakes no obligation to update publicly any
forward-looking statements for any reason after the date of this
news release to conform these statements to actual results or to
changes in our expectations.
About Grocery Outlet:
Based in Emeryville, California, Grocery Outlet
is a high-growth, extreme value retailer of quality, name-brand
consumables and fresh products sold through a network of
independently operated stores. Grocery Outlet has more than 375
stores in California, Washington, Oregon, Pennsylvania, Idaho and
Nevada.
|
GROCERY OUTLET HOLDING CORP. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME |
(in thousands, except per share data) |
(unaudited) |
|
|
13 Weeks Ended |
|
April 3, |
|
March 28, |
|
2021 |
|
2020 |
Net sales |
$ |
752,466 |
|
|
$ |
760,308 |
|
Cost of sales |
520,539 |
|
|
523,282 |
|
Gross profit |
231,927 |
|
|
237,026 |
|
Operating expenses: |
|
|
|
Selling, general and administrative |
188,598 |
|
|
186,931 |
|
Depreciation and amortization |
15,543 |
|
|
12,945 |
|
Share-based compensation |
3,939 |
|
|
20,277 |
|
Total operating expenses |
208,080 |
|
|
220,153 |
|
Income from operations |
23,847 |
|
|
16,873 |
|
Other expenses: |
|
|
|
Interest expense, net |
3,906 |
|
|
5,834 |
|
Debt extinguishment and modification costs |
— |
|
|
198 |
|
Total other expenses |
3,906 |
|
|
6,032 |
|
Income before income
taxes |
19,941 |
|
|
10,841 |
|
Income tax expense
(benefit) |
1,049 |
|
|
(1,801 |
) |
Net income and comprehensive
income |
$ |
18,892 |
|
|
$ |
12,642 |
|
Basic earnings per share |
$ |
0.20 |
|
|
$ |
0.14 |
|
Diluted earnings per
share |
$ |
0.19 |
|
|
$ |
0.13 |
|
Weighted average shares
outstanding: |
|
|
|
Basic |
95,195 |
|
|
89,481 |
|
Diluted |
99,570 |
|
|
94,869 |
|
GROCERY OUTLET HOLDING CORP. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
|
|
|
April 3, |
|
January 2, |
|
2021 |
|
2021 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
95,292 |
|
|
$ |
105,326 |
|
Independent operator receivables and current portion of independent
operator notes, net of allowance |
5,925 |
|
|
5,443 |
|
Other accounts receivable, net of allowance |
2,645 |
|
|
5,950 |
|
Merchandise inventories |
243,270 |
|
|
245,157 |
|
Prepaid expenses and other current assets |
17,519 |
|
|
20,081 |
|
Total current assets |
364,651 |
|
|
381,957 |
|
Independent operator notes,
net of allowance |
20,688 |
|
|
27,440 |
|
Property and equipment,
net |
458,313 |
|
|
433,652 |
|
Operating lease right-of-use
assets |
849,654 |
|
|
835,397 |
|
Intangible assets, net |
47,765 |
|
|
48,226 |
|
Goodwill |
747,943 |
|
|
747,943 |
|
Deferred income tax assets,
net |
2,500 |
|
|
3,529 |
|
Other assets |
7,223 |
|
|
7,480 |
|
Total assets |
$ |
2,498,737 |
|
|
$ |
2,485,624 |
|
Liabilities and
Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Trade accounts payable |
$ |
109,841 |
|
|
$ |
114,278 |
|
Accrued expenses |
36,079 |
|
|
35,699 |
|
Accrued compensation |
9,399 |
|
|
26,447 |
|
Current lease liabilities |
35,382 |
|
|
48,675 |
|
Income and other taxes payable |
6,353 |
|
|
7,547 |
|
Total current liabilities |
197,054 |
|
|
232,646 |
|
Long-term debt, net |
449,743 |
|
|
449,233 |
|
Long-term lease
liabilities |
903,854 |
|
|
881,438 |
|
Total liabilities |
1,550,651 |
|
|
1,563,317 |
|
Stockholders' equity: |
|
|
|
Voting common stock |
96 |
|
|
95 |
|
Additional paid-in capital |
793,933 |
|
|
787,047 |
|
Retained earnings |
154,057 |
|
|
135,165 |
|
Total stockholders' equity |
948,086 |
|
|
922,307 |
|
Total liabilities and stockholders' equity |
$ |
2,498,737 |
|
|
$ |
2,485,624 |
|
GROCERY OUTLET HOLDING CORP. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in thousands) |
(unaudited) |
|
|
13 Weeks Ended |
|
April 3, |
|
March 28, |
|
2021 |
|
2020 |
Cash flows from
operating activities: |
|
|
|
Net income |
$ |
18,892 |
|
|
$ |
12,642 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation of property and equipment |
14,221 |
|
|
11,788 |
|
Amortization of intangible and other assets |
1,923 |
|
|
1,782 |
|
Amortization of debt issuance costs and debt discounts |
628 |
|
|
502 |
|
Debt extinguishment and modification costs |
— |
|
|
198 |
|
Share-based compensation |
3,939 |
|
|
20,277 |
|
Provision for accounts receivable |
955 |
|
|
848 |
|
Deferred income taxes |
1,029 |
|
|
(1,801 |
) |
Other |
477 |
|
|
1,055 |
|
Changes in operating assets and liabilities: |
|
|
|
Independent operator and other accounts receivable |
2,482 |
|
|
(3,219 |
) |
Merchandise inventories |
1,887 |
|
|
31,073 |
|
Prepaid expenses and other current assets |
2,562 |
|
|
847 |
|
Income and other taxes payable |
(1,194 |
) |
|
722 |
|
Trade accounts payable, accrued compensation and other accrued
expenses |
(16,458 |
) |
|
(14,412 |
) |
Changes in operating lease assets and liabilities, net |
(4,930 |
) |
|
5,518 |
|
Net cash provided by operating activities |
26,413 |
|
|
67,820 |
|
Cash flows from
investing activities: |
|
|
|
Advances to independent operators |
(2,659 |
) |
|
(1,485 |
) |
Repayments of advances from independent operators |
1,188 |
|
|
1,136 |
|
Purchases of property and equipment |
(36,570 |
) |
|
(28,173 |
) |
Proceeds from sales of assets |
17 |
|
|
79 |
|
Intangible assets and licenses |
(1,140 |
) |
|
(1,350 |
) |
Net cash used in investing activities |
(39,164 |
) |
|
(29,793 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds from exercise of stock options |
2,953 |
|
|
6,033 |
|
Proceeds from revolving credit facility loan |
— |
|
|
90,000 |
|
Principal payments on term loans |
— |
|
|
(187 |
) |
Principal payments on other borrowings |
(231 |
) |
|
(191 |
) |
Dividends paid |
(5 |
) |
|
(147 |
) |
Debt issuance costs paid |
— |
|
|
(700 |
) |
Net cash provided by financing activities |
2,717 |
|
|
94,808 |
|
Net increase (decrease) in
cash and cash equivalents |
(10,034 |
) |
|
132,835 |
|
Cash and cash equivalents at
beginning of period |
105,326 |
|
|
28,101 |
|
Cash and cash equivalents at
end of period |
$ |
95,292 |
|
|
$ |
160,936 |
|
GROCERY OUTLET HOLDING CORP. |
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED
EBITDA |
(in thousands) |
(unaudited) |
|
|
13 Weeks Ended |
|
April 3, |
|
March 28, |
|
2021 |
|
2020 |
Net income |
$ |
18,892 |
|
|
$ |
12,642 |
|
Interest expense, net |
3,906 |
|
|
5,834 |
|
Income tax expense
(benefit) |
1,049 |
|
|
(1,801 |
) |
Depreciation and amortization
expenses (1) |
16,144 |
|
|
13,570 |
|
EBITDA |
39,991 |
|
|
30,245 |
|
Share-based compensation
expenses (2) |
3,939 |
|
|
20,277 |
|
Non-cash rent (3) |
2,908 |
|
|
2,214 |
|
Asset impairment and gain or
loss on disposition (4) |
452 |
|
|
975 |
|
Provision for accounts
receivable reserves (5) |
955 |
|
|
848 |
|
Other (6) |
592 |
|
|
2,062 |
|
Adjusted EBITDA |
$ |
48,837 |
|
|
$ |
56,621 |
|
GROCERY OUTLET HOLDING CORP. |
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET
INCOME |
(in thousands, except per share data) |
(unaudited) |
|
|
13 Weeks Ended |
|
April 3, |
|
March 28, |
|
2021 |
|
2020 |
Net income |
$ |
18,892 |
|
|
$ |
12,642 |
|
Share-based compensation
expenses (2) |
3,939 |
|
|
20,277 |
|
Non-cash rent (3) |
2,908 |
|
|
2,214 |
|
Asset impairment and gain or
loss on disposition (4) |
452 |
|
|
975 |
|
Provision for accounts
receivable reserves (5) |
955 |
|
|
848 |
|
Other (6) |
592 |
|
|
2,062 |
|
Amortization of purchase
accounting assets and deferred financing costs (7) |
2,943 |
|
|
2,936 |
|
Tax impact of option exercises
and vesting of restricted stock units (8) |
(4,256 |
) |
|
(4,994 |
) |
Tax effect of total
adjustments (9) |
(3,301 |
) |
|
(8,207 |
) |
Non-GAAP adjusted net income |
$ |
23,124 |
|
|
$ |
28,753 |
|
|
|
|
|
GAAP earnings per share |
|
|
|
Basic |
$ |
0.20 |
|
|
$ |
0.14 |
|
Diluted |
$ |
0.19 |
|
|
$ |
0.13 |
|
Non-GAAP adjusted earnings per
share |
|
|
|
Basic |
$ |
0.24 |
|
|
$ |
0.32 |
|
Diluted |
$ |
0.23 |
|
|
$ |
0.30 |
|
GAAP & Non-GAAP weighted
average shares outstanding |
|
|
|
Basic |
95,195 |
|
|
89,481 |
|
Diluted |
99,570 |
|
|
94,869 |
|
__________________________ |
(1) |
Includes depreciation related to our distribution centers which is
included within the cost of sales line item in our condensed
consolidated statements of operations and comprehensive
income. |
(2) |
Includes non-cash share-based compensation expense and cash
dividends paid on vested share-based awards as a result of
dividends declared in connection with recapitalizations that
occurred in fiscal 2018 and 2016. |
(3) |
Consists of the non-cash portion of rent expense, which
represents the difference between our straight-line rent expense
recognized under GAAP and cash rent payments. The adjustment can
vary depending on the average age of our lease portfolio, which has
been impacted by our significant growth in recent years. |
(4) |
Represents impairment charges with respect to planned store
closures and gains or losses on dispositions of assets in
connection with store transitions to new IOs. |
(5) |
Represents non-cash changes in reserves related to our IO
notes and accounts receivable. |
(6) |
Represents other non-recurring, non-cash or non-operational items,
such as transaction related costs, including costs related to
employer payroll taxes associated with equity awards,
personnel-related costs, store closing costs, legal expenses,
secondary equity offerings, debt extinguishment and modification
costs, and miscellaneous costs. |
(7) |
Represents the amortization of debt issuance costs and incremental
amortization of an asset step-up resulting from purchase
price accounting related to our acquisition in 2014 by an
investment fund affiliated with Hellman & Friedman LLC, which
included trademarks, customer lists, and below-market leases. |
(8) |
Represents excess tax benefits related to stock option exercises
and vesting of restricted stock units to be recorded in earnings as
discrete items in the reporting period in which they occur. |
(9) |
Represents the tax effect of the total adjustments. We calculate
the tax effect of the total adjustments on a discrete basis
excluding any non-recurring and unusual tax items. |
|
|
INVESTOR RELATIONS CONTACT:
Jean Fontana
646-277-1214
Jean.Fontana@icrinc.com
MEDIA CONTACT:
Layla Kasha
510-379-2176
lkasha@cfgo.com
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