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Analyst Says Grocery Outlet Holding Is A Beneficiary Amid Coronavirus Outbreak

March 25, 2020 2:40 pm
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There had been concerns around whether Grocery Outlet Holding Corp (NASDAQ:GO) was witnessing an uplift in sales similar to its more traditional peers, as customers continued to stockpile amid the coronavirus outbreak.

Although fourth-quarter results had no surprises, sales have ramped since and it seems to be on track to recording a mid-teen comp in the first quarter, according to UBS.

The Grocery Outlet Analyst

Michael Lasser maintained a Neutral rating for Grocery Outlet Holding, keeping the price target at $35.

The Grocery Outlet Thesis

Grocery Outlet Holding’s same-store sales in the first eight weeks of the first quarter were consistent with the fourth-quarter trends, implying 30%-40% same store sales in March, Lasser said in the note.

He added that the company has a structure that allows it to be agile in adapting to local market needs. However, the biggest near-term challenge for this supermarket brand is that “its value proposition is highly dependent on opportunistic buys.”

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To address this challenge, Grocery Outlet Holding is trying to find opportunities to partner with non-traditional suppliers, like foodservice and nutrition companies.

Although the virus-triggered sales growth will not last long, the company could benefit from brand awareness, new customers and new supplier relationships over time, Lasser said.

GO Price Action

Shares of Grocery Outlet Holding closed Tuesday at $33.20.

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