Telsey Advisory Group analyst Joseph Feldman maintained his positive outlook on Grocery Outlet Holding Corp (GO) with an Outperform rating and a price target of $40.
Feldman believes that in the near term, Grocery Outlet will continue to perform well due to solid traffic and consumers’ preference for value and deals in an uncertain macro environment. The company has provided 3Q23 comp guidance of approximately 6.5%.
The analyst also notes that Grocery Outlet benefits from a healthy sourcing environment, driven by a demand-supply imbalance, ongoing product innovation, and expanding partnerships with existing and new vendors.
Grocery Outlet is leveraging technology to attract new customers and increase productivity. This includes the launch of a mobile app, partnerships with delivery providers, and a new IT platform for independent operators.
One of Grocery Outlet’s key strengths is its ability to offer deeply discounted prices, aiming to be lower than competitors like Walmart Inc (WMT) by around 20% and traditional grocers by about 40%.
The company plans to open 25-28 net new stores in 2023, resulting in a unit growth of 5.7%-6.3% and a total store count of 466-469.
Looking beyond 2023, Grocery Outlet is focused on square footage growth, opportunistic sourcing, in-store enhancements, and digital targeted marketing to further increase its market share.
Grocery Outlet’s unique model, which combines entrepreneurship, local decision-making, and corporate resources, has allowed it to create a successful small business at a larger scale.
As of the latest check on Friday, GO shares were trading at $30.05, up 0.12%.