GO - Embedded Expectations Analysis - 2021 07 01
Grocery Outlet Holding Corp. (GO:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 52.2x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their independent operators, earnings growth, and store inventorySpecifically, management may have concerns about the performance of independent operators (IOs), the impact of their schedule flexibility initiatives, and the success of social media promotions. In addition, they may lack confidence in their ability to sustain 10%+ earnings growth, improve their inventory turns, and maintain healthy in-stock levels. Furthermore, they might have concerns about a moderation in sales, their increased personnel and infrastructure investments, and the progress of their capex spending plans. Management may be also overstating the attractiveness of their WOW! items and ever-changing product mix, and they may lack confidence in their ability to increase customer basket size and capitalize on opportunistic supply trends. Finally, they may be concerned about the impact of the vaccine rollout on their aggregate volume, their pricing strategy, and inflationary headwinds
Grocery Outlet is a holding company. Through its subsidiaries, the company owns and operates a chain of grocery stores in the United States. The company offers products in various categories, such as grocery, dairy and deli, produce, refrigerated and frozen, floral, beer and wine, general merchandise, and health and beauty care, as well as fresh meat and seafood; and natural, organic, specialty, and healthy products. As of Mar. 30, 2019, the company operates 323 stores across the West Coast and Pennsylvania, including the company's expansion into Southern California.
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