Q1 2025 Grocery Outlet Holding Corp Earnings Call

May 6, 2025

While the formal presentation.

If anyone should require operator assistance. Please press star zero and resolve on keypad. As a reminder, this conference is being recorded.

Speaker Change: Now my pleasure to introduce introduce your host Christine Chen Vice President of Investor Relations. Thank you you may begin.

Speaker Change: Good afternoon, and welcome to grocery outlet's call to discuss financial results for the first quarter ended March 28, 2025 speaking from management on today's call will be Jason part, our President and Chief Executive Officer, and Chris Miller, Chief Financial Officer.

Speaker Change: Following prepared remarks from Jason and Chris We will open the call for questions. Please note that this conference call is being webcast live and a recording will be available via telephone playback on the Investor Relations section of the company's website participants on this call may make forward looking statements within the meaning of the federal Securities laws, all statements that address future operating financial or business performance or the companys strategies or expectation.

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Kris Miller: Our effective tax rate for the quarter was 19.7% compared with 60.8% for the first quarter last year. The change in our effective tax rate was driven primarily by excess tax. This is the expense from the Exercise Investing of Stock Compensation Awards compared to excess tax benefits during the first quarter last year.

Our forward looking statements. These forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements description of these factors can be found in this afternoon's press release as well as in the company's periodic reports filed with the SEC all of which may be found on the Investor Relations section of the company's website or at SEC Doc up the <unk>.

Speaker Change: Greetings and welcome to the Grocery Outlet's first quarter 2025 earnings results conference call. The first time all participants are in OSU in any mode, a question and answer session will follow the formal presentation.

Kris Miller: Turning to cash flow, net cash provided by operating activities during the first quarter of 2025 was $58.9 million, compared with $7.8 million last year. The increase was driven primarily by improvements in working capital. Capital expenditures were $65.3 million in the first quarter, invested primarily in new stores, store maintenance, and infrastructure-related projects. In addition, we invested $4.8 million in system enhancements and improvements. Total debt, net of issuance costs, was $458.9 million at the end of the first quarter, down $3.6 million from the end of 2024. And we exited the first quarter with $205.5 million of availability under our credit agreement.

Speaker Change: If anyone should apply or offer their assistance, please press store zero and resolve on keybed. As a reminder, this conference is being recorded. If not, my pleasure is to introduce your host, Christine Chen, vice president of Invest Relations. Thank you, you may begin.

Speaker Change: <unk> undertakes no obligation to revise or update any forward looking statements or information. These statements are estimates only and not a guarantee of future performance. Additionally, during today's call. The company will reference certain non-GAAP financial information, including adjusted items reconciliations of GAAP to non-GAAP measures as well as the description limitations and rationale for using each measure may be found in the supplemental finance.

Speaker Change: Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the first quarter ended March 28, 2025. Speaking from management on today's call will be Jason Potter, President and Chief Executive Officer, and Kris Miller, Chief Financial Officer. Following prepared remarks from Jason and Kris, we will open the call for questions. Please note that this conference call is being webcast live and a recording will be available via telephone playback on the investor relations section of the company's website. Participants on this call may make forward-looking

Jason Part: Tables included in this afternoon's press release, and the Companys SEC filings and now I would like to turn it over to Jason.

Jason Part: Thank you Christine and welcome everyone, it's great to be with you on the call today.

Jason Part: I'll begin with a brief update on the quarter.

Jason Part: Much of my time on what I have focused on my first couple of months and how im thinking about our priorities.

Jason Part: First we delivered on our first quarter outlook comp store sales increased 30 basis points from last year slightly ahead of our guidance for the quarter that we provided.

Speaker Change: These four-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Description of these factors can be found in this afternoon's press release, as well as in the company's periodic reports filed with the SSC, all of which may be found on the investor relations section of the company's website or on SEC.gov.

Jason Part: We opened 10 net new stores positioning us to achieve our annual target for 33% to 35 stores this year.

Kris Miller: Our liquidity position remains strong, and we are focused on investing prudently in growth initiatives with an emphasis on driving high return on invested capital.

Jason Part: These stores are off to a solid start performing ahead of expectations.

Jason Part: We also exceeded our gross margin outlook by improving our shrink run rate through improved inventory visibility reporting and execution.

Kris Miller: Now, turning to our guidance. We are reiterating our previous full-year outlook for total net sales, net new stores, gross margin, adjusted EBITDA, and adjusted EPS. We are updating guidance for comp sales, restructuring charges, and interest expense.

Speaker Change: The company undertakes no obligation to revise or update any forward-looking statements or information. These statements are estimates only in not a guarantee of future performance. Additionally, during today's call, the company will reference certain non-GAAP financial information, including adjusted items.

Jason Part: Together these wins enabled us to deliver net sales of one $1 3 billion up eight 5% over last year and reported adjusted EBITDA and adjusted EPS above the respective outlook ranges for the first quarter.

Speaker Change: Reconciliation of gap to non-GAAP measures , as well as the description limitations and rationale for using each measure may be found in the supplemental financial tables included in this afternoon's press release in the company's SEC filings. And now I would like to turn it over to Jason. Thank you, Christine, and welcome everyone. It's great to be with you on the call today. Thank you.

Kris Miller: Despite continued strength in traffic, we are updating our comp store sales guide for the year, given pressure on the basket and broader softening of macroeconomic trends. As Jason mentioned, we have plans in place to drive basket, but this will take time to execute as the year progresses. For the full year, we now expect comp store sales growth to be between 1% and 2% with slight sequential improvement in comps quarter over quarter as the year progresses. We now expect charges related to our restructuring plan to be in the range of $59 million to $61 million. This includes approximately $49 million to $51 million from exiting store leases, which includes the five additional store closures mentioned earlier, and remains within the previously announced range.

Jason Part: We also reached an important milestone with our systems integration, including the initial phase one rollout of our real time ordering guide that we plan on having fully rolled out by the end of the second quarter.

Jason Part: Chris is going to walk you through the numbers in greater detail, but just having completed my first three months as CEO I wanted to share some early observations and give everyone on the call a sense for the work we plan to undertake to unlock the tremendous opportunity that I see here in the business.

Jason Potter: I'll begin with a brief update on the quarter and then spend much of my time on what I've focused on in my first couple of months and how I'm thinking about our priorities.

Jason Potter: First, we delivered on our first quarter outlook. Comstore sales increased 30 basis points from last year, slightly ahead of our guidance for the corner that we provided.

Jason Part: Now over the first three months I visited and met with more than 50 of our independent operators.

The opportunity to meet and speak with dozens of suppliers talked with many of the customers in our stores.

Jason Potter: We open 10 net new stores, positioning us to achieve our annual target for 33 to 35 stores this year.

Jason Part: I've listened gained valuable and candid feedback.

Jason Potter: These doors are off to a solid start, performing ahead of expectations. Thank you very much.

Jason Part: More about what matters to all of them.

Jason Potter: We also exceeded our gross margin outlook by improving our shrink run rate, through improved inventory visibility, reporting, and execution.

Jason Part: First our operators care very much about the communities they serve.

Jason Part: And are motivated to grow a profitable business together.

Kris Miller: This includes approximately $9 to $11 million in the second quarter related to the restructuring. For the year, we now expect net interest expense to be approximately $32 million, down from $38 million previously announced, subject to the pace and degree of interest rate changes. For the second quarter, we expect comparable store sales to be approximately 1%, reflecting current trends in the business, as well as uncertainty given macroeconomic trends. We expect gross margin of between 30 and 30.5% for the second quarter. Adjusted EBITDA between $62 million to $65 million and diluted EPS of 16 to 18 cents per share.

Jason Part: Seek more support from us to improve execution and participated in the building of the necessary capabilities to make this business stronger.

Jason Potter: Together, these winds enabled us to deliver net sales of 1.13 billion, up 8.5% over last year, and report adjusted EBITDA and adjusted EPS above the respective Outlook ranges for the first quarter.

Jason Part: <unk> our brand.

Jason Part: Our suppliers continue to be a source of strength as we continue to work and grow our opportunistic supply and range of assortment together, we continue to deepen those existing relationships and are actively building new ones to expand our reach and our relevance.

Jason Potter: We also reached an important milestone with our systems integration, including the initial phase one rollout of our real-time ordering guide that we plan on having fully rolled out by the end of this second quarter.

Jason Part: The customers I spoke with and the guests in our store are asking for more value with a more consistent experience that helps them complete their weekly shop.

Speaker Change: Chris is going to walk you through the numbers in greater detail, but just having completed my first three months as CEO . I wanted to share some early observations and give everyone a call. The sense for the work we planned to undertake to unlock the tremendous opportunity that I see here in the business.

Jason Part: They continue to visit our network and we need to execute better to make filling their basket further key shopping missions easier.

Jason Part: In the short time I've been here, it's clear to me that with the right focus and execution. This business can continue its history of leading growth and profitability.

Speaker Change: Now, over the first three months, I've visited that with more than 50 of our independent operators.

Speaker Change: Had the opportunity to meet and speak with dozens of suppliers, talked with many of the customers in our stores.

Kris Miller: In closing, we delivered solid first quarter results. We are highly focused on execution in the near term with the objective of driving value and excellent in-store experiences for our customers and IOs. We believe our strategic plan will enable us to harness the many exciting opportunities in front of us and unlock value within the business while generating meaningful profitability and returns on capital over the long term.

Jason Part: We have a highly differentiated offering one driven by our value based treasure Hunt and a convenient box operated by motivated and engaged independent operators.

Speaker Change: I've listened, gained valuable and candid feedback, and learned more about what matters to all of them.

Speaker Change: First, our operators care very much about the communities they serve and are motivated to grow a profitable business together and seek more support from us to improve execution and participate in the building of the necessary capabilities to make this business stronger that supports our brand.

Jason Part: By sharpening our focus on store experience.

Jason Part: In strengthening our support to our operators suppliers and guests.

Jason Part: We can create value for many years to come.

Jason Part: I am bullish on the long term addressable market and our ability to improve costs and margins as we continue to grow.

Operator: We will now open the call up to your questions, operator. Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone key. The confirmation tone will indicate your line. You may press star 2 to remove yourself. For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. One moment, please, while we poll for questions.

Speaker Change: Our suppliers continue to be a source of strength as we continue to work and grow our opportunistic supply and range of assortment together. We continue to deepen those existing relationships and are actively building new ones to expand our reach and our relevance.

Jason Part: As I've said I believe with the right focus and execution. This business can be much larger and much more profitable in the future.

Jason Part: Achieving our potential however requires that focused execution.

Jason Part: With that as a context, we are pursuing for important strategic imperatives.

Speaker Change: The customers I spoke with and the guests in our store are asking for more value with a more consistent experience that helps them complete their weekly shop.

Jason Part: The first is tackling our new store performance to drive long term growth and strengthen returns on invested capital.

Jason Part: Second securing top talent to activate our strategy.

Speaker Change: They continue to visit our network, and we need to execute better to make filling their basket for their key shopping missions easier.

Jason Part: Third addressing execution gaps by continuing to make progress on our systems to improve our performance and.

Anthony Bonadio: First question here is from Anthony Bonadio from Wells Fargo, please go ahead. Yeah, hey guys, thanks for taking our question.

Speaker Change: In the short time I've been here, it's clear to me that with the right focus and execution, this business can continue its history of leading growth and profitability. [inaudible]

Jason Part: And finally fourth improve our ability to execute at scale by continuing to strengthen our leadership in opportunistic buying.

Jason Potter: So as you've gotten settled into your new seats, can you maybe just talk high level about how you're thinking about the appropriate strategy and growth level for the business, and then maybe anything you're thinking about differently versus what we've seen from management historic? Thanks for the question.

Speaker Change: We have a highly differentiated offering, one driven by a value based treasure hunt in a convenient box, operated by motivated and engaged independent operators.

Jason Part: And by becoming a leading selling organization that delivers a winning customer experience by providing our network with world class training and development.

Jason Part: Customer centric data and insight all supported by new capabilities and merchandising that will drive our performance.

Speaker Change: By sharpening our focus on store experience and strengthening our support to our operators, suppliers and guests.

Jason Potter: It's Jason here. Clearly, I believe the business is we're going to focus on execution here. Creating a love brand is essential. And so the priorities we have are the capabilities that we're going to build against that. to deliver that experience. For customers, that is going to drive loyalty and performance in the business over time. So, the four key things I mentioned earlier, tackling new store performance, matching talent for the strategy we're going to execute. continuing to improve our systems for execution. And executing at scale as we move this business to a selling organization are all essential capabilities we're building against this focused execution, again, to deliver a brand reputation with a winning customer experience is going to be the key to our success.

Jason Part: First on tackling our new store performance.

We can create value for many years to come.

Jason Part: We're carefully calibrating our approach to grow to ensure we have the winning conditions in place before expanding more aggressively.

Speaker Change: I'm bullish on the long-term addressable market and our ability to improve costs and margins as we continue to grow.

Jason Part: We are in the process of.

Speaker Change: As I've said, I believe with the right focus and execution, this business can be much larger and much more profitable in the future.

Jason Part: Piloting a new commercial execution playbook to drive year, one sales at a higher starting point.

Speaker Change: Achieving our potential, however, requires that focused execution. And with that as a context, we're pursuing four important strategic imperatives. [inaudible]

Jason Part: We're also clustering stores in new markets and calibrating, our mix of new stores to incorporate approximately 50% in the fill in markets, where our brand awareness is high.

Speaker Change: The first is tackling our new store performance to drive long-term growth and strengthen returns on invested capital.

Jason Part: This is going to continue into 2026 during which we plan to open between 30% and 35 net new stores.

Second.

Securing top talent to activate our strategy.

Jason Part: We also plan to execute a series of lower Capex store pilots to address inflation in labor materials and equipment Thats occurred over the last couple of years. These.

Speaker Change: Third, addressing execution gaps by continuing to make progress on our systems to improve our performance.

Speaker Change: And finally, fourth, improve our ability to execute at scale by continuing to strengthen our leadership and opportunistic buying, and by becoming a leading selling organization that delivers a winning customer experience by providing our network with world class training and development.

Jason Part: These store pilots are going to incorporate modifying our electricity demand footprint optimizing store size and implementing sourcing strategies to improve ROIC.

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Jason Part: We're also taking a systematic and data driven approach to real estate selection of new markets to help improve returns.

Corey Tarlowe: Our next question here is from Corey Tarlowe from Jeffries. Please go ahead. Great. Thanks. I appreciate all the color today. I was wondering if you could talk a little bit more about... Second Quarter Guide and the Foliar Outlet. and how we should be thinking about the change in the comp trajectory that you outlined. I think you had used, it pointed to two things. It was Basket and Macro.

Speaker Change: Customer-centric data and insight all supported by new capabilities in merchandising that will drive our performance.

Jason Part: By standardizing and scaling the best aspects of our stores, we should be positioned to deliver stronger and more consistent returns for this company, our iOS and our shareholders.

First, on tackling our new store performance.

Speaker Change: We're carefully calibrating our approach to grow to ensure we have the winning conditions in place before expanding more aggressively. Absolutely.

Jason Part: I am very excited about the tremendous amount of white space available for us to grow.

Jason Part: And I believe that by first slowing the pace and calibrating the business now to optimize our ROIC.

Speaker Change: We are in the process of piloting a new commercial execution playbook to drive year-one sales at a higher starting point.

Jason Part: Can earn the opportunity to accelerate the pace later.

Speaker Change: We're also clustering stores and new markets and calibrating our mix of new stores to incorporate approximately 50% in the fill in markets where our brand awareness is high. This is going to continue into 2026 during which we plan to open between 30 and 35 net new stores. [inaudible]

Jason Part: Second another critical component of our future success in securing top talent.

Jason Potter: Could you maybe unpack that a little bit more for us?

Speaker Change: Our talented new CIO Kumar Misha has gotten right to work in just a few months into the role. He has already made significant progress getting our systems integration on the right track.

Kris Miller: Sure, maybe I'll take the first part here. The work we're doing right now includes Commercial and execution-related activity, and it's a little harder for me to predict the short term here, but I think we're working on the right things. I know we are. So we're doing several things on the commercial side. First, I mentioned earlier that we're tightening our gapping on KVIs. We're working the mix and pushing our opportunistic opportunities through the network as well as promoting private label. Those elements are going to absolutely help value. We're also, I've addressed some quality-related standards that I mentioned, you know, delivering that every day for guests is critical for their everyday shop.

Speaker Change: Started to search for merchandising talent to help us become a stronger selling organization and we're in the process of identifying a leader of store development as well as our head of supply chain to take our business to the next stage of development.

Speaker Change: We also plan to execute a series of lower capex store pilots to address inflation in labor, materials, and equipment that's occurred over the last couple of years.

Speaker Change: These store pilots are going to incorporate modifying our electricity demand footprint, optimizing store size and implementing sourcing strategies to improve ROIC.

Speaker Change: As we look toward adding these critical leadership capabilities today, we also announced the retirement of our Chief operations Officer Remission Chick Halla. This June and our Chief store Officer Hamburg later this year.

Speaker Change: They're also taking a systematic and data-driven approach to real estate selection of new markets to help improve returns. [inaudible]

Speaker Change: By standardizing and scaling the best aspects of our stores, we should be positioned to deliver stronger and more consistent returns for this company, our IOs and our shareholders.

Speaker Change: We appreciate the many important contributions to the business both have made.

Speaker Change: <unk> has helped stabilize and build leadership teams to drive systems improvements.

With an effective handoff to Kumar as our CIO, while also strengthening our supply chain and the team.

Kris Miller: And then execution-related activities, like the work we're doing on our DCs in the Pacific Northwest. and the progress we've made on the real-time order guide to help our in-stock and our fill rates. All of that will help the business tremendously and I believe will add sales as this year goes on.

Speaker Change: I'm very excited about the tremendous amount of white space available for us to grow. Let's go.

Speaker Change: Pam has led a number of functions and for strong relationships with our iOS. During her decade with the company Pam is going to continue to help us ensure a seamless transition within store operations over the coming months.

Speaker Change: And I believe that by first slowing the pace and calibrating the business now to optimize our ROIC, we can earn the opportunity to accelerate the pace later.

Kris Miller: You know, it's more of a timing question for me. Maybe I'll have Kris just add a little more color to how the numbers flow. Yeah, sure. So, you know, just given what we saw in the first quarter, our traffic is strong, 2.3% growth. Our basket was down 2%. And those trends are somewhat continuing, you know, especially the softer basket into Q2. We're still seeing very strong traffic.

Speaker Change: Second, another critical component of our future success is securing top talent.

Speaker Change: I want to thank them both for their dedication their commitment and hard work and of course congratulate them, we wish them all the best in their retirements.

Speaker Change: Our talented new CIO Kumar Mishra has gotten right to work in just a few months into the role. He's already made significant progress getting our systems integration on the right track. We've started to search for merchandising talent to help us become a stronger selling organization. Thank you very much.

Speaker Change: Next on addressing execution gaps progress on our systems integration is key.

Speaker Change: For operations successfully completing our systems integration is critical to ensure that we have the tools and the systems in place to be fully functional getting the operational data, we need to deliver high levels of execution in this business.

Speaker Change: And we're in the process of identifying a leader of store development as well as ahead of supply chain to take our business to the next stage of development.

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Speaker Change: In April we began the first phase of our proprietary real time order guide rollout, which is now up and running in all Skus in both our east Coast and California Dcs.

Speaker Change: As we look toward adding these critical leadership capabilities, today we also announce the retirement of our chief operations officer,

Kris Miller: So, and then just given the uncertainty that's out there from a macro lens, we thought it was prudent to lower the top line or comparable line store sales growth. You know, but I would just say, as Jason mentioned, we believe we're doing the right things to drive the basket and comp, making sure we're in stock on our top selling items and, you know, having very good produce, etc. There's a lot of things that we're doing right now, and we expect to see those help drive comps in the back half of the year. So what I'd say is that, you know, we expect modest.

Our iOS in the east and in California about 75% of our stores now have real time inventory visibility for what's available at the DC, what capacities available to fully fill out what's on their truck.

Speaker Change: We appreciate the many important contributions to the business both have made. Ramesh has helped stabilize and build leadership teams to drive systems improvements with an effective handoff to Kumar as our CIO, while also strengthening our supply chain in the team.

Speaker Change: And improving our ability to plan and manage inventory collectively.

Speaker Change: Our planners also have full real time inventory visibility into the DC, which enables them to drive the flow of opportunistic product through the system.

Speaker Change: Pam has led a number of functions and forged strong relationships with our IOs during her decade with the company. Pam is going to continue to help us ensure a seamless transition with install operations over the coming months.

Speaker Change: All of this makes it far easier to match supply and demand.

Speaker Change: We're also on track to rollout the real time order guide to the rest of our regions by the end of the second quarter.

Kris Miller: sequential improvement in the back half and our comp.

Speaker Change: I want to thank them both for their dedication, their commitment, and hard work, and of course congratulate them. We wish them all the best in their retirement.

Speaker Change: The next phase will include the new arrivals guide later this year, which is a further feature to help planning and merchandising.

Bobby Ohmes: Next question is from Bobby Ohmes from Bank of America.

Speaker Change: Next, on addressing execution gaps, progress on our systems integration is key.

Jason Potter: Please go ahead. Oh hey, thanks for taking my questions. My first question is, with the real-time order guide in place now in the East Coast stores in California, have you seen, I'm surprised, have you seen any improvement in comps related to that? What we're seeing initially is clearly, first of all, the feedback we're getting from our IOs is really positive. They're able to see what's available and how to take advantage of putting the right things on their truck. And so what we've really seen to start with is an improvement in our fill rates. So the fill rates have jumped from the 92, 93 range to over 99.

Speaker Change: We've made progress here and have line of sight and improving our ability to execute.

Speaker Change: For operations successfully completing our systems integration is critical to ensure that we have the tools and the systems in place to be fully functional, getting the operational data we need to deliver high levels of execution in this business. Thank you very much.

Speaker Change: Finally, we need to improve our ability to execute at scale.

Speaker Change: And we've been focused on improving our merchandising efforts to get the right mix in our stores to promote the health of our basket to drive our comp store sales.

Speaker Change: In April , we began the first phase of our proprietary Real Time Order Guide Rollout, which is now up and running in all skews in both our East Coast and California DCs.

Speaker Change: Commercially we have made some initial efforts across three key elements of the guest experience.

Speaker Change: Rice quality and service.

Speaker Change: First we continue to strengthen our value we've continued to tighten our gapping of caveats across several msas, while also promoting a stronger mix of high margin value driving opportunistic products and private label.

Speaker Change: We've also begun to experiment with some new in store communication tools to make our value messaging work harder.

And improving our ability to plan and manage inventory collectively.

Jason Potter: And so that doesn't always translate immediately into sales, but clearly as you match, you know, the ability to match demand and your planning with supply, you should see an improvement. And we expect one. Again, feeling really good about that work and that progress.

Speaker Change: Our planners also have full real-time inventory visibility into the DC, which enables them to drive the flow of opportunistic product through the system.

Speaker Change: It is important that we're consistently building trust with our guests and creating a sense of are and Theyre treasure Hunt.

Speaker Change: Second we've also made some changes to our standards and the quality profile of key protos items, ensuring they are ripe and ready to eat.

Speaker Change: All this makes it far easier to match supply in the manner.

Jason Potter: And Robbie, like I mentioned, we'll have that all complete by the end of the second quarter. So, you know, the better in-stock you have, the more sales you get and, you know, around it goes.

Speaker Change: We're also on track to roll out the real-time order guide to the rest of our regions by the end of the second quarter.

Speaker Change: Starting with everyday items like bananas, and avocados builds the basket unprofitable everyday items that matter most to our guests, making their shopping experience easier.

Speaker Change: The next phase will include the new arrivals guide later this year, which is a further feature to help planning and merchandising.

Speaker Change: We've made progress here and have line of sight in improving our ability to execute. Thank you.

Speaker Change: On service, we believe that our real time order guide rollout will assist our teams and better planning driving in stock improvements throughout the network. This is very helpful, especially to newer iOS and their team members.

Matthew Rothway: Please go ahead. Hi, this is Matthew Rothway, I'm from Mark Carden. Thanks for taking our question.

Speaker Change: Finally, we need to improve our ability to execute at scale.

Kris Miller: I was hoping you could unpack the gross margin performance in the quarter, obviously coming in much better than expectations. What drove that outperformance? I know last quarter, there was some negative impact. The egg shortage and pricing, did you see any of that this quarter? And then it looks like it's, you're not expecting this progress to quite carry through for the rest of the year. So, what are your expectations as we look at the balance of the year? Thank you.

Speaker Change: We've been focused on improving our merchandising efforts to get the right mix in our stores to promote the health of our basket to drive our comp store sales.

Speaker Change: And the company is in the early stages of sharing impactful data and insights to better support our iOS in delivering a more consistent guest experience.

Speaker Change: Commercially, we've made some initial efforts across 3T elements of the guest experience.

Speaker Change: While we make progress to improve our commercial execution with one foot on the gas. It's important at this stage of this turnaround we have one foot on the brake.

Price, Quality, and Service. [inaudible]

Speaker Change: We're being intentional about making meaningful progress on addressing the cost side of this business.

Speaker Change: Chris Miller, our new and very experienced CFO is leading a program on indirect procurement to create fuel to enhance the profitability and provide the space for the team to drive performance improvement through reinvestment.

Speaker Change: We've also begun to experiment with some new in-store communication tools to make our value messaging work harder.

Kris Miller: Yeah, sure. Hi, it's Chris. So yeah, Q1. We definitely saw improvement in shrinkage, which I mentioned in my remarks, and that's a result of a lot of the work we're doing with our system, as well as process around that. So, we do expect that that is sustainable as we go through the year, and I would just say for the full year margins. Yes, there's potentially more shrink there, as well as improvement in assortment, whether that's opportunistic, MEGS, private label, those are all things that could influence the margin. It's just a little early at this point to know what impact that's going to be, but we are definitely working on those things to also drive margin in the back half of the year.

Speaker Change: It's important that we're consistently building trust with our guests and creating a sense of awe in their treasure hunt.

Speaker Change: And finally to improve our ability to execute at scale. We continue to advance our supply chain, we will complete our consolidation from five Dcs in the Pacific Northwest to one D. C. At the end of this month, which will drive greater efficiency and better levels of service to our stores.

Speaker Change: Second, we've also made some changes to our standards in the quality profile of key produce items ensuring they're ripe and ready to eat.

Speaker Change: Starting with everyday items like bananas and avocados, builds the basket on profitable everyday items that matter most to our guests, making their shopping experience easier.

Speaker Change: Later this year, we plan to activate our new DC in the east region at relatively low Capex, which we expect to improve execution and expand our capacity for opportunistic supply.

Speaker Change: On service, we believe that our real-time order guide rule will assist our teams in better planning, driving in-stock improvements throughout the network. This is very helpful, especially to newer IOs and their team members.

Speaker Change: We're also honing our approach to implementing scalable practices.

Speaker Change: Im a firm believer in test and learn and we will pilot test engage our network to develop repeatable cost effective standards.

Speaker Change: The company is in the early stages of sharing impactful data and insights to better support RIOs and delivering a more consistent guest experience.

Speaker Change: We're developing a new model store to support our goals of implementing more uniform merchandising and help provide effective and efficient operational sop to help our <unk> drive more consistent customer experiences.

Speaker Change: While we make progress to improve our commercial execution with one foot on the gas, it's important at this stage of this turnaround, we have one foot on the break.

Oliver Chen: Our next question is from Oliver Chen from TD Cowen, please go ahead.

Speaker Change: We're being intentional about making meaningful progress on addressing the cost side of this business.

Speaker Change: At a lower cost.

Speaker Change: Creating impeccable partnerships with our <unk> continues to be an essential element of the differentiation of this business and we intend to continue to strengthen our support.

Jason Potter: Hey, this is Tom Nass on for Oliver Chen. I wanted to ask for any color around any trends you've been seeing on opportunistic sourcing, given the current environment. And then secondly, any details you can share around independent operator profitability trends year to date so Yeah, thanks, Tom, for the question. Opportunistic supply continues to be there. You know, we've got very strong supplier relationships. I had, you know, great opportunity in my first 90 days or so to meet a lot of them, talk to a lot of them. That continues to be a source of strength. I think that part of our opportunity here, some of the upside in this business as I look at all the different opportunities is, you know, tools and visibility into what's available.

Speaker Change: With our systems progress, we're working towards providing more data analytics training and best in class operational tools that will enable <unk> to deliver better service to their guests and drive performance.

Speaker Change: And finally, to improve our ability to execute that scale, we continue to advance our supply chain. We'll complete our consolidation from five DCs in the Pacific Northwest to one DC at the end of this month, which will drive greater efficiency and better levels of service to our stores.

Speaker Change: Building our brands reputation for a winning customer experience is the key to our shared success now on guidance before I turn it over to Chris I wanted to touch on our outlook for the balance of the year.

Speaker Change: While we achieved our financial objectives for the first quarter and are making progress ramping our initiatives to deliver sustainable growth for.

Speaker Change: We're moderating our outlook for annual comp store sales growth, reflecting current trends in the business as well as uncertainty given the macro economic environment.

We're also holding our approach to implementing scalable practices.

Speaker Change: I'm a firm believer in test and learn, and we will pilot test and gauge our network to develop repeatable cost effective standards.

Speaker Change: The progress the team has made in yielding strong gross margin, while containing expenses gives us confidence in the outlook for gross margin and adjusted EBITDA and adjusted EPS that we all shared previously.

Jason Potter: And so I know the feedback we got from our IOs, they're very pleased to see and be able to see what's available and opportunistic. The unique part of this business, there's literally tens of thousands of SKUs that go through this. This business that are unique and the ability for our IOs to be able to see it, understand what it is, what the savings are, the value, and helping them plan and then execute that is tremendous. So we've also recently started to share specific scan data related to MIX to help our IOs understand the opportunities and increase our level of communication on that front.

Speaker Change: We're developing a new model store to support our goals of implementing more uniform merchandising and help provide effective and efficient operational SOPs to help our IOs drive more consistent customer experiences.

Speaker Change: We believe that the continued execution of the initiatives, we outlined today should build momentum as we move through the year positioning us for profitable long term growth.

At Lower Cost.

Speaker Change: We believe the initiatives underway.

Speaker Change: Should strengthen our competitive moat by emphasizing and executing what has made the grocery outlet are unique and special destination.

Speaker Change: With our systems progress, we're working toward providing more data, analytics, training, investing class, operational tools that will enable RIOs to deliver better service to their guests and drive performance.

Speaker Change: The focus we are making.

Speaker Change: An in store experience should improve the treasure hunt and.

Jason Potter: So for us, it's the opportunity to execute at a higher level. It's not a question of supply. But obviously, that's something we want to double down on and continue to build those supply relationships and grow the business as quickly as we can on that front.

Speaker Change: And we intend to amp up our focus on opportunistic products that delight, our guests and keep them coming back.

Speaker Change: Building our brand's reputation for a winning customer experience is the key to our shared success.

Speaker Change: Now on guidance. Before I turn it over to Chris, I want to touch on our outlook for the balance of the year.

Speaker Change: We have a powerful brand and a tremendous value proposition to work from.

Speaker Change: We know this work is vital for our shareholders as well.

Speaker Change: While we achieved our financial objectives for the first quarter and our making progress ramping our initiatives to deliver sustainable growth.

Speaker Change: <unk> said, it before but it's worth emphasizing that the.

John Heinbockel: Our next question is from John Heinbockel from Guggenheim Securities.

Speaker Change: Foundational work, we are undertaking we're making decisions with a determined focus on optimizing returns on invested capital with the goal of returning grocery outlet.

Speaker Change: We're moderating our Outlet for Annual Comp Store Sales Growth, reflecting current trends in the business as well as uncertainty given the macro economic environment. [inaudible]

Jason Potter: Please go ahead. Jason, two related questions. So when you talk about the KVIs, is your thought you should look at every day versus the closeout treasure hunt? Where do you think there's the bigger opportunity? I know Treasurer, maybe you got away from that a little bit last year. So that's number one, and then number two, when you talk about execution, what's your thought on sort of field organization, right? Because I think the field organization's been historically, by design, maybe a little bit lean. Is that an area of potential investment?

Speaker Change: The performance levels, our model supports and driving shareholder value creation that our shareholders deserve.

Speaker Change: The progress the team has made in yielding strong, gross margin while containing expenses gives us confidence in the yield look for gross margin and adjusted EBITDA. [inaudible]

Speaker Change: I'm very excited to lead this business into a bright future.

Speaker Change: Our vision is to become one of the country's most loved brands.

Speaker Change: And adjusted EPS that we all shared previously. We believe the continued execution of the initiatives we outlined today should build momentum as we move through the year, positioning us for profitable long-term growth.

Speaker Change: And as we move forward, we will build trust consistency excitement amongst our key stakeholders, including our guests our iOS our suppliers our teams and our shareholders.

We believe the initiatives underway.

Speaker Change: I look forward to getting to know many of you better and sharing more about the progress we are achieving against the plans I laid out today. Thank.

Jason Potter: Thanks, John, for the question. So I think the in the early days here, and this is work that the, you know, Eric had really begun in the late fall last year was to, you know, tighten up on KBIs. I think that's a regular thing that you do. We're in the process of continuing to improve our monitoring of that. We've made some adjustments in my time here. We're going to continue to make adjustments as we go where we think it's necessary. It's important to stay tight on that front. It helps value perception tremendously, so it's very important, as you know.

Speaker Change: Should strengthen our competitive mode by emphasizing and executing what has made the Grocery Outlet a unique and special destination.

Speaker Change: Thank you to our iOS to our suppliers and.

Speaker Change: And team members across this organization your support is invaluable and we look forward to rewarding that support.

Speaker Change: An in-store experience should improve the treasure hunt, and we intend to amp our up our focus on opportunistic products that delight our guests and keep them coming back. We have a powerful brand, and a tremendous value proposition to work from.

Speaker Change: Now I'll turn it over to Chris to take you through the results and our outlook. Thank you.

Chris Miller: Thanks, Jason and good afternoon, everyone.

Chris Miller: Our first quarter results highlight improved execution and a dynamic environment.

Speaker Change: We know this work is vital for our shareholders as well.

Chris Miller: We delivered on the key value metrics that are driving store traffic as our buyers continued to deliver value for both operators and customers reinforcing the relevance of our model with consumers.

We've said it before, but it's worth emphasizing. [inaudible]

Speaker Change: But the foundational work we're undertaking, we're making decisions with a determined focus on optimizing returns on invested capital with the goal of returning Grocery Outlet.

Jason Potter: The opportunistic is really, with our real-time order guide on lock, really helping our IOs see and understand what's there, and that ability to flow supply through the system is going to be very helpful for us. Both things are very important when you're building value. It's also important to communicate that well in-store, and so we've been experimenting with some marketing materials. We think that's a nice opportunity.

We also continue to operate the business with discipline, enabling us to exceed our outlook for gross margin and deliver adjusted EBITDA and EPS above the top of our outlook range.

Speaker Change: The performance levels are model supports and driving shareholder value creation that our shareholders deserve. I'm very excited to lead this business into a great future. Our vision is to become one of the country's most loved brands. And as we move forward, we will build trust, consistency, excitement amongst our key stakeholders, including our guests, our IOs, our suppliers, our teams, and our shareholders. Thank you very much. Thank you very much. Thank you very much.

As Jason noted, while first quarter results exceeded our outlook, we are making a modest adjustment to our comp store sales outlook for the balance of the year, reflecting our updated expectations for consumer trends given the uncertainty of the macro environment.

Jason Potter: The second part of your question is... Clearly, whatever we can do to improve the support for stores, we'll consider. I think it's a little early on that front, but as I spend more time with the operations team and our I.O. group, we want to make sure that we're doing everything we can to help them be successful. So at least that's the way I think about it.

Speaker Change: I look forward to getting to know many of you better and sharing more about the progress we're achieving against the plans I've laid out today. Thank you to our IOs, to our suppliers, and team members across this organization. Your support is invaluable, and we look forward to rewarding that support. Thank you very much.

Chris Miller: Despite this adjustment we remain confident in our ability to manage the factors within our control and deliver the gross margin adjusted EBITDA and adjusted EPS outlook, we shared with you in February.

Chris Miller: We also remain committed to improving same store sales growth as we progressed through the year with a sound strategy in place as Jason shared.

Speaker Change: Now I'll turn over to Chris to take you through the results and I'll look. Thank you.

Joel Feldman: Our next question is from Joel Feldman from Telsey Advisory Group.

Unknown Executive: Please go ahead.

Thanks Jason and good afternoon everyone.

Unknown Executive: Yeah, hey, thanks for taking the question, guys. I wanted to go back to the basket size for a minute.

Chris Miller: Our first quarter results highlight improved execution in a dynamic environment.

Chris Miller: We believe the initiatives we are undertaking will not only drive meaningful near term improvement, but also drive sustainable long term growth and a return on invested capital for years to come.

Chris Miller: We delivered on the key value metrics that are driving store traffic, as our buyers continue to deliver value for both operators and customers, reinforcing the relevance of our model with consumers.

Chris Miller: I will walk you through our first quarter results and then turn to our outlook.

Chris Miller: We also continue to operate the business with discipline, enabling us to exceed our outlook for Gross Margin and deliver adjusted EBITDA and EPS above the top of our outlook range.

Chris Miller: The comparisons I will provide are on a year over year basis unless noted otherwise.

Chris Miller: Net sales increased eight 5% to $113 billion driven by a combination of new stores opened in the last 12 months. The addition of Ugo in April last year as well as 30 basis point increase in comparable store sales.

Chris Miller: As Jason noted, while first quarter results exceeded our outlook, we are making a modest adjustment to our comp-store sales outlook for the balance of the year, reflecting our updated expectations for consumer trends given the uncertainty of the macro environment.

Chris Miller: Comp growth was driven by a two 3% increase in the number of transactions, partially offset by a 2% decrease in average transaction size.

Chris Miller: Despite this adjustment, we remain confident in our ability to manage the factors within our control and deliver the gross margin, adjusted EBITDA and adjusted EPS outlook, we shared with you in February .

Our first quarter comp was impacted by the shift of the Easter holiday into the second quarter. This year versus the first quarter of last year.

Chris Miller: We also remain committed to improving safe-store sales growth as we progress through the year with a sound strategy in place as Jason chaired.

Chris Miller: During the first quarter, we opened 11, new stores and closed one store putting us on track to achieve our annual target for 33 to 35 net new stores for the year.

Chris Miller: We believe the initiatives we are undertaking will not only drive meaningful near-term improvement, but also drive sustainable long-term growth and return on a vested capital for years to come.

Chris Miller: We ended the first quarter with 543 stores in 16 states.

Chris Miller: Gross profit increased 12, 7% to $342 4 million.

Chris Miller: I will walk you through our first quarter results and then turn to our outlook.

Gross margin increased by 110 basis points to 34% exceeding the high end of our outlook.

Chris Miller: The comparisons I will provide are on a year-over-year basis unless noted otherwise.

Chris Miller: Given primarily by improvements in inventory management, which contributed to lower inventory shrinkage.

Chris Miller: Netsales increased 8.5% to $1.13 billion driven by a combination of new stores opened in the last 12 months, the addition of UGO in April last year, as well as 30 basis point, increase in comparable store sales. [inaudible]

Chris Miller: As Jason highlighted we're also focusing on keeping our everyday items in stock and improving our assortment, including more fresh and opportunistic product, which drives increased traffic and our newly launched private label items, which all helped complete and build baskets at accretive margins.

Michael Baker: The next question is from Michael Baker from D.A.

Kris Miller: Davidson. Please go ahead. Okay, thanks. I wanted to ask you if you could quantify the Easter shift, because I'm a little surprised that April, it doesn't sound at least as if April is off to a great start given the Easter shift. So I wonder if you think you're seeing any impact already from the uncertainty from, you know, quote unquote, Liberation Day on April 2nd. Did you, maybe it might be hard to tease out because of the Easter shift. But have you seen any kind of downshift in how the consumers reacted? Yeah, I would say we we thought it was a little soft for sure.

Chris Miller: Comp gross was driven by a 2.3% increase in the number of transactions, partially offset by a 2% decrease in average transaction size.

Chris Miller: SG&A increased nine 1% to $333 1 million and increased 10 basis points to 29, 4% of net sales.

Chris Miller: Our first quarter comp was impacted by the shift of the Easter holiday into the second quarter this year, versus the first quarter last year. [inaudible]

Chris Miller: The increase in SG&A was driven primarily by additional personnel costs from company owned Ugo stores and was partially offset by a decrease in commissions as we are no longer paying elective Commission support.

Chris Miller: During the first quarter, we opened 11 new stores and closed one store, putting us on track to achieve our annual target for 33 to 35 net new stores for the year.

Chris Miller: We ended the first quarter with 543 stores in 16 states. [inaudible]

Jason Potter: You know, it's difficult to sort of pin it to what but Clearly, you know, there's a shift there and with some other, I guess, just a lot of news out there, changes for the customer, there's clearly some uncertainty for them, but, you know, we're, that's probably. Part of our thinking here is that April was a little softer than I'd like.

Jason Part: We've embarked on a cost efficiency program as Jason mentioned that is aimed at finding procurement and efficiency related savings that we will balance between driving enhanced profitability and reallocating toward growth investments.

Gross profit increased 12.7% to $342.4 million.

Chris Miller: Gross Margin increased by 110 basis points to 30.4%, exceeding the high end of our outlook, driven primarily by improvements in inventory management, which contributed to lower inventory shrinkage. [inaudible]

Jason Part: During the first quarter, the company incurred $33 $9 million and restructuring charges.

Included $29 $1 million and lease termination costs.

As Jason highlighted,

Jason Potter: Okay, it makes sense. And if I could ask a follow-up, when you talk about the KVIs, can you talk about where, do you think your price gaps, I know that the previous managing team had some, you know, knew that they needed to get a little bit sharper and close some of those price gaps with competitors, where do you think you stand now? You said you always need to focus on the value, but We feel like you need to specifically catch up to some other guys who are being more price promoted. I think we're in a good spot as we sit here today.

Jason Part: $1 $7 million in noncash impairment and disposal of long lived assets $1 5 million in employee severance and benefit costs and.

Jason Part: And $1 5 million in legal professional and other costs related to the previously announced restructuring plan.

Chris Miller: SG&A increased nine 1% to $333 $1 million and increased 10 basis points to 29, 4% of net sales.

Jason Part: As we looked at potential new store performance cash flow and return on invested capital. We took one more pass through the new stores for 2026, and 27 and identified five additional stores that did not fit our revised approach for clustered openings with the most attractive market conditions.

Jason Potter: There, you know, clearly has been some work done over the last, you know, couple of quarters and You know, whenever there's that gets a little bit out of the pocket, so to speak, you can lose some perception. I think maybe that's Part of the story here and so, you know, ensuring that you're tight, you stay tight, make sure you're on top of that every day is critical. And that's just an ongoing piece of work. So I feel good about where we are right now. It doesn't mean that you're ever done and you want to be strategic about those things.

Jason Part: With these additional lease terminations, we still expect the total restructuring costs to come in within the range that we originally estimated.

Jason Potter: We've embarked on a cost efficiency program as Jason mentioned that is aimed at finding procurement and efficiency related savings that we will have a balance between driving enhanced profitability and reallocating toward growth investments.

Jason Part: And Thats the work related to the restructuring will be substantially completed by the end of the second quarter.

Jason Part: Net loss was $23 $3 million or negative <unk> 24 per diluted share compared to net loss of $1 million or negative <unk> <unk> per diluted share last year.

Chris Miller: Yeah.

Chris Miller: During the first quarter, the company incurred $33 $9 million and restructuring charges, which included $29 $1 million and lease termination costs.

Jason Potter: Clearly, part of our work here, as you think about the consumer today, and maybe there's some uncertainty out there, is we want to be in their corner fighting hard for them to deliver value. And so being fit and ready commercially and execution-wise are critical, and KVIs are just part of that equation.

Jason Part: Adjusted net income increased to $13 million or <unk> 13 per diluted adjusted share from $8 $8 million or <unk> <unk> per adjusted diluted share last year.

Chris Miller: $1.7 million in noncash impairment and disposal of long lived assets $1 5 million in employee severance and benefit costs.

Chris Miller: And $1 5 million in legal professional and other costs related to the previously announced restructuring plan.

Jason Part: Adjusted EBITDA increased 31, 7% to $51 9 million compared to $39 $4 million last year and adjusted EBITDA margin was four 6% of net sales up 80 basis points from the prior year.

Anthony Chukumba: Next question is from Anthony Chukumba from Loop Capital Markets. Please go ahead. Thanks for taking my question. So you talked about seeking indirect cost reduction opportunities.

Chris Miller: As we looked at potential new store performance cash flow and return on invested capital. We took one more pass through the new stores for 2026, and 27 and identified five additional stores that did not fit our revised approach for clustered openings with the most attractive market conditions.

Unknown Executive: I was just wondering if you can just sort of highlight some of the potential areas for cost reductions and sort of order of magnitude that you're targeting. Thank you.

Jason Part: Net interest expense was $6 5 million.

Jason Part: An increase of $3 $3 million over the first quarter last year.

Jason Part: The increase in net interest expense was driven primarily by higher average principal debt outstanding due largely to support share repurchases and the acquisition of United grocery outlet last year and cash expenditures related to the restructuring plan.

Chris Miller: With these additional lease terminations, we still expect the total restructuring costs to come in within the range that we originally estimated.

Chris Miller: And that's the work related to the restructuring will be substantially completed by the end of the second quarter.

Our effective tax rate for the quarter was 19, 7% compared with 68% for the first quarter last year.

Chris Miller: Net loss was $23.3 million or negative <unk> 24 cents per diluted share compared to net loss of $1 million or negative one cents per diluted share last year.

Jason Part: The change in our effective tax rate was driven primarily by excess tax expense from the exercise and vesting of stock compensation awards compared to excess tax benefits during the first quarter last year.

Chris Miller: Adjusted net income increased to $13 million or 13 cents per diluted adjusted share from $8 $8 million or nine cents per adjusted diluted share last year.

Jason Part: Turning to cash flow net cash provided by operating activities. During the first quarter of 2025 was $58 9 million compared with $7 $8 million last year.

Chris Miller: Adjusted EBITDA increased 31, 7% to $51 $9 million compared to $39 $4 million last year and adjusted EBITDA margin was four 6% of net sales up 80 basis points from the prior year.

Jason Part: The increase was driven primarily by improvements in working capital.

Jason Part: Capital expenditures were $65 3 million in the first quarter invested primarily in new stores store maintenance and infrastructure related projects.

Chris Miller: Net interest expense was $6 $5 million, an increase of $3 $3 million over the first quarter last year.

Chris Miller: The increase in net interest expense was driven primarily by higher average principal debt outstanding due largely to support share repurchases and the acquisition of United grocery outlet last year and cash expenditures related to the restructuring plan.

Jason Part: In addition, we invested $4 8 million and system enhancements and improvements.

Jason Part: Total debt net of issuance costs was $458 9 million at the end of the first quarter down $3 $6 million from the end of 2024.

Chris Miller: Our effective tax rate for the quarter was 19, 7% compared with 68% for the first quarter last year.

Jason Part: And we exited the first quarter with $205 $5 million of.

Chris Miller: The change in our effective tax rate was driven primarily by excess tax expense from this exercise investing of stock compensation awards compared to excess tax benefits during the first quarter last year.

Jason Part: Ability under our credit agreement.

Jason Part: Our liquidity position remains strong and we are focused on investing prudently and growth initiatives with an emphasis on driving high return on invested capital.

Simeon Gutman: Next question is from Simeon Gutman from Morgan Family, please go ahead. Good afternoon. So just to go back on the April trend line. Was the traffic something that flowed, or the consumer got afraid with their basket? And I ask because the premise we would have is that if the backdrop does get worse, I think that maybe trade downs should help. Part one, so the question and the thought.

Chris Miller: Turning to cash flow net cash provided by operating activities. During the first quarter of 2025 was $58 $9 million compared with $7 $8 million last year.

Jason Part: Sure.

Jason Part: Now turning to our guidance.

Jason Part: We are reiterating our previous full year outlook for total net sales net new stores gross margin adjusted EBITDA and adjusted EPS.

Chris Miller: The increase was driven primarily by improvements in working capital.

Jason Part: We are updating guidance for comp sales restructuring charges and interest expense.

Chris Miller: Capital expenditures were $65 $3 million in the first quarter invested primarily in new stores store maintenance and infrastructure related projects. In addition, we invested $4 $8 million and system enhancements and improvements.

Jason Part: Despite continued strength in traffic we are updating our comp store sales guide for the year given pressure on the basket and broader softening of macro economic trends.

Jason Potter: And then the second, it looks like some of the language with restructuring plan change, maybe the cash expenditures, if that's right, does it impact the guidance? First part of the question, you know, we're Yeah, I mentioned it was a little softer than I'd like. We're not, we haven't seen any evidence of, you know, things like trading down and so on that you typically see. But clearly, we've got some softness in the basket. And that's something we think is more execution related. And, and we're monitoring that, obviously.

Jason Part: As Jason mentioned, we have plans in place to drive basket, but this will take time to execute as the year progresses.

Chris Miller: Total debt net of issuance cost was $458 $9 million at the end of the first quarter down $3.6 million from the end of 2024.

Jason Part: For the full year, we now expect comp store sales growth to be between 1% and 2% with slight sequential improvement in comps quarter over quarter as the year progresses.

Chris Miller: And we exited the first quarter with $205 $5 million of availability under our credit agreement.

Jason Part: Yeah.

Kris Miller: And I think the second part of the question is a cash question. I'll pass to Chris. Yeah. So on the restructuring, you know, what we said was, or what I said was that we're going to be within the original range, which we said 50 to 60. Initially, we tightened that up to 59 to 61 is where we're landing with the five additional stores. So, you know, there's really no impact to the profitability guidance for the year, the adjusted profitability numbers, if that's what you're asking.

Jason Part: We now expect charges related to our restructuring plan to be in the range of 59 million to $61 million. This includes approximately 49 million to $51 million from exiting store leases, which includes the five additional store closures mentioned earlier and we remain.

Chris Miller: Our liquidity position remains strong and we are focused on investing prudently and growth initiatives with an emphasis on driving high return on invested capital.

Chris Miller: Now turning to our guidance.

Chris Miller: We are reiterating our previous full year outlook for total net sales.

Jason Part: Within the previously announced range.

Chris Miller: New stores gross margin adjusted EBITDA and adjusted EPS.

Jason Part: This includes approximately 9% to $11 million in the second quarter related to the restructuring.

Chris Miller: We are updating guidance for comp sales restructuring charges and interest expense.

Jason Part: For the year, we now expect net interest expense to be approximately $32 million down from $38 million previously announced subject to the pace and degree of interest rate changes.

Chris Miller: Despite continued strength in traffic we are updating our comp store sales guide for the year given pressure on the basket and broader softening of macro economic trends.

Leah Jordan: Next question is from Leah Jordan from Golden Sachs. Please go ahead. Thank you. Good afternoon. Your gross margin improved nicely in the quarter, but you're still losing market share. So I just wanted to see if you could talk through how you're thinking about the tradeoffs between defending share and maintaining margins in the current environment. I guess just given the lower comp outlook, how are you thinking about reinvestment of any margin upside as you go throughout the year? Or just given the softer April, how quickly can you react on pricing when you see a behavior shift?

Jason Part: For the second quarter, we expect comparable store sales to be approximately 1%, reflecting current trends in the business as well as uncertainty given macroeconomic trends.

As Jason mentioned, we have plans in place to drive basket, but this will take time to execute as the year progresses.

Chris Miller: For the full year, we now expect comp store sales growth to be between 1% and 2% with slight sequential improvement in comps quarter over quarter How's the year progresses.

Jason Part: We expect gross margin of between 30% and 35% for the second quarter.

Jason Part: Adjusted EBITDA between $62 million to $65 million and diluted EPS of <unk> 16 to 18 per share.

Chris Miller: Yes.

Chris Miller: We now expect charges related to our restructuring plan to be in the range of 59 million to $61 million. This includes approximately 49 million to $51 million from exiting store leases, which includes the five additional store closures mentioned earlier and Merck.

Jason Part: In closing we delivered solid first quarter results. We are highly focused on execution in the near term with the objective of driving value and excellent in store experiences for our customers and iOS.

Jason Potter: Thanks, Leah.

Jason Potter: I think, you know, the idea of one foot on the gas and one foot on the brake is how I'm thinking about it. Clearly, we will want to create room for ourselves to create the optionality to be more aggressive. And we think with the improvements that are naturally coming in the business from some of the capabilities we're unlocking, as well as The future work that we think will help us improve our cost base, those things are very helpful for us to be fit and make adjustments in the business as we go. The commercial and execution-related things we've begun here, premier no-regret moves, those things are going to add sales, and we'll do the job on balancing the margins for sales.

Chris Miller: Mains within the previously announced range.

We believe our strategic plan will enable us to harness the many exciting opportunities in front of us and unlock value within the business, while generating meaningful profitability and our returns on capital over the long term.

Chris Miller: This includes approximately 9% to $11 million in the second quarter related to the restructuring.

Chris Miller: For the year, we now expect net interest expense to be approximately $32 million down from $38 million previously announced subject to the pace and degree of interest rate changes.

Jason Part: We will now open the call up to your questions operator.

Thank you we will now.

Jason Part: Be conducting a question and answer session if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Chris Miller: For the second quarter, we expect comparable store sales to be approximately 1%, reflecting current trends in the business as well as uncertainty given macroeconomic trends.

Jason Potter: Clearly, comps are an essential part, probably the number one metric that I look at, and so we have some work to do there, but feeling good about what's going to come later.

Jason Part: Maybe first start to remove yourself from the queue.

Jason Part: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Chris Miller: We expect gross margin of between 30 and 35% for the second quarter.

Speaker Change: One moment please poll for questions.

Chris Miller: Adjusted EBITDA of between $62 million to $65 million.

Jeremy Hamblin: Next question is from Jeremy Hamblin from Craig Powell Capital Group. Please go ahead. Thanks for taking the question and just shifting gears a bit here. I wanted to ask about United Grocery Outlet as you get your first few months in here. And I don't know how much time you spent on those locations, but I want to get a sense for how you feel like they're performing. And, you know, I know that not a lot is going to be done with them in 2025, but just getting a sense for the timeframe on how you think you might integrate that portion of the business a bit more with.

First question here.

Speaker Change: Neil from Wells Fargo. Please go ahead.

Chris Miller: And diluted EPS of 16 to 18 per share.

Speaker Change: Yeah, Hey, guys. Thanks for taking my question.

Chris Miller: In closing we delivered solid first quarter results. We are highly focused on execution in the near term with the objective of driving value and excellent in store experiences for our customers and iOS.

Speaker Change: So as you've gone settled into your new seats can you, maybe just talk high level about how youre thinking about.

Speaker Change: Preet strategy and growth level for the business and then maybe anything you're thinking about differently versus what we've seen from management historically.

Chris Miller: We believe our strategic plan will enable us to harness the many exciting opportunities in front of us and unlock value within the business, while generating meaningful profitability and our returns on capital over the long term.

Jason Part: Thanks for the question, it's Jason here.

Jason Part: Clearly I believe the businesses, we're going to focus on execution here.

Jason Part: Creating a loved brand is essential and so the priorities. We have are the capabilities that we're going to build against that.

Chris Miller: We will now open the call up to your questions operator.

Jason Potter: Yeah, I think, you know, the basic headline there is we're growing sales, it's in line with expectation. And it's something we're going to integrate 26, late 26 is probably the timeframe.

Chris Miller: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Jason Part: To deliver that experience.

Jason Part: For customers that is going to drive loyalty and performance of the business overtime. So Keith.

Jason Potter: So that's what I would share today.

Keith: Key things I mentioned earlier tackling new store performance.

Chris Miller: Let me first start to remove yourself from the queue.

Jason Potter: This concludes the question and answer session. I'd like to turn the floor back to management for any questions. Can you repeat again, sorry, what was that? That was our last question, did you have any closing comments to a close-up call? Oh yes, thank you very much for your interest today. I'm very excited to be here. This is an incredible business to be a part of. I'm excited about the future. We've got lots of execution opportunity here. We're going to get that back on track. We've got a great model, motivated people, and we look forward to sharing exciting wins as we go here.

Speaker Change: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Matching talent for the strategy, we're going to execute.

Keith: Continuing to improve our system.

Speaker Change: One moment please poll for questions.

Keith: <unk>.

Keith: And executing at scale as we move this business to a selling organization are all essential capabilities. We're building against this focused execution again to deliver a brand reputation with a winning customer experience is going to be the key to our success. So.

Speaker Change: First question here on a deal from Wells Fargo. Please go ahead.

Speaker Change: Yeah, Hey, guys. Thanks for taking my question, so as you've gotten settled into your new seats can you maybe just talk high level about how youre thinking about the appropriate strategy and growth level for the business.

Keith: To.

Keith: Follow that on with another question.

Speaker Change: And then maybe anything you're thinking about differently.

Speaker Change: What we've seen from management historically.

Speaker Change: Okay.

Speaker Change: And our next question here is from Cory <unk> from Jefferies. Please go ahead.

Speaker Change: Thanks for the question, it's Jason here.

Speaker Change: Clearly I believe the business is we're going to focus on execution here.

Keith: Great.

Speaker Change: Thanks, I appreciate all the color today.

Operator: Thank you for your attention today.

Keith: If you could talk.

Keith: Talk a little bit more about the second quarter guide and the full year outlook.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Speaker Change: Creating a loved brand is essential and so the priorities. We have are the capabilities that we're going to build against that to deliver that experience.

Keith: And how we should be thinking about that.

The change in the comp.

Speaker Change: For customers that is going to drive loyalty and performance in the business over time, so the key things I mentioned earlier tackling new store performance.

Keith: The trajectory that you outlined.

Keith: Pointing to shipping it was.

Keith: Yes.

Speaker Change: Basket and macro could you, maybe unpack that a little bit more for us.

Speaker Change: <unk> talent for the strategy, we're going to execute.

Speaker Change: Sure maybe I'll take the first part.

Speaker Change: Continuing to improve our system for execution.

Speaker Change: The work we're doing right now includes.

Speaker Change: And executing at scale as we move this business to a selling organization are all essential capabilities. We're building against this focused execution again to deliver a brand reputation with a winning customer experience is going to be the key to our success. So I'm happy.

Speaker Change: Commercial and execution related activity.

Speaker Change: It's a little harder for me to predict the short term here, but.

Speaker Change: I think we're working on the right things I know we are.

Speaker Change: So we're doing several things on the commercial side first.

Speaker Change: And earlier, there were tightening our gapping on Kpis.

Speaker Change: Happy to.

Speaker Change: Follow that on with another question.

Speaker Change: We're working the mix and pushing our opportunistic opportunities through the network as well as promoting private label those elements are going to absolutely help value.

Speaker Change: And our next question here is from Cory <unk> from Jefferies. Please go ahead.

Speaker Change: Great.

Speaker Change: We're also addressed some quality related standards that I mentioned.

Speaker Change: Thanks, I appreciate all the color today.

Speaker Change: Can you.

Speaker Change: Talk a little bit more about the second quarter guide the full year outlook.

Speaker Change: Delivering that everyday for guests is critical for their everyday shop, and then execution related activities like the work we're doing on our Dcs in the Pacific Northwest.

Speaker Change: And how we should be thinking about it.

Speaker Change: The change in the trajectory that you outlined.

Speaker Change: And the progress we've made on the real time order guide to help our in stock on our fill rates are.

Speaker Change: Good news.

Speaker Change: You pointed to some things it was.

Speaker Change: All of that will help the business tremendously and I believe we will add sales as this year goes on.

Speaker Change: Basket and macro could you, maybe unpack that a little bit more for us.

Speaker Change: It's more of a timing question for me.

Speaker Change: Sure.

Speaker Change: I'll take the first part here.

Speaker Change: And maybe I'll have Chris just.

The work we're doing right now includes.

Speaker Change: Yes, a little more color to the how the numbers flow, yes sure. So.

Speaker Change: Commercial and execution related activity and it's a little harder for me to predict the short term here, but I think we're working on the right things I know we are.

Speaker Change: Just given what we saw in the first quarter, we have our traffic is strong.

Speaker Change: Two 3% growth for Baskin was down 2% and those trends are somewhat continuing.

Speaker Change: So we're doing several things on the commercial side first.

Speaker Change: And earlier, there were tightening our gapping on Kpis.

Speaker Change: Especially the softer basket into Q2, we're still seeing very strong traffic. So and then just given the uncertainty that's out there.

Speaker Change: We're working the mix and pushing our opportunistic opportunities through the network.

Speaker Change: From a macro lens, we thought it was prudent to lower the topline or comparable line store sales growth.

Speaker Change: As well as promoting private label those elements are going to absolutely help value.

Speaker Change: We're also addressed some quality related standards that I mentioned.

Speaker Change: But I would just say as Jason mentioned.

Speaker Change: Delivering that everyday for guests is critical for their everyday shop.

Speaker Change: We believe we're doing the right things to drive the basket and comp.

Speaker Change: And then execution related activities like the work we're doing on our Dcs in the Pacific Northwest.

Speaker Change: Making sure we're in stock on our top selling items and.

Speaker Change: Having very good produce et cetera, there's a lot of things.

Speaker Change: And the progress we've made on the real time order guide to help our in stock on our fill rates are.

Speaker Change: We are doing right now and we expect to see those.

Speaker Change: All of that will help the business tremendously and I believe we will add sales as this year goes on.

Speaker Change: Health drive comps in the back half of the year. So what I'd say is that we expect modest sequential improvement in the back half in our in our comps.

Speaker Change: You know, it's more of a timing question for me.

Speaker Change: And maybe I'll have Chris just a hallmark color to the how the numbers flow yeah. Sure. So you know just given what we saw in the first quarter, we have now where traffic is strong.

Robert: Next question is from Robert <unk> from Bank of America. Please go ahead.

Robert: Oh, Hey, thanks for taking my questions.

Speaker Change: Two 3% growth basket was down 2% and those trends are somewhat continuing.

Speaker Change: My first question is with the with the real time Order guide.

Speaker Change: In place now in the in the East Coast stores in California have you seen I am surprised you have you seen any improvement in comps related to that.

You know, especially the softer basket into Q2, we're still seeing very strong traffic. So and then just given the uncertainty that's out there.

And what we're seeing initially is clearly first of all the feedback we're getting from our hours is really positive.

Speaker Change: My macro lens, we thought it was prudent to lower the topline or comparable line store sales growth.

Speaker Change: They are able to see what's available and.

Speaker Change: But I would just say as Jason mentioned, where are we believe we're doing the right things to drive the basket and comp.

Speaker Change: How to take advantage of.

Speaker Change: Putting the right things on their truck.

Speaker Change: And so what we've really seen to start with is an improvement in our fill rates. So their fill rates a jump from the 90 293 range to over 99%.

Speaker Change: I'm, making sure we're in stock on our top selling items and having very good produce et cetera, there's a lot of things.

Speaker Change: And so that doesn't always translate immediately into sales, but clearly as you match.

Speaker Change: That we're doing right now and we expect to see those.

Speaker Change: The ability to match demand and your planning with supply you should see an improvement and we expect one again feeling really good about that that work in that progress and Rob you'd like I mentioned, we'll have that all completed by the end of the second quarter. So.

Speaker Change: Health drive comps in the back half of the year. So what I'd say is that we expect modest sequential improvement in the back half in our in our comps.

Speaker Change: Yeah.

Robby: Next question is from Robby <unk> from Bank of America. Please go ahead.

Speaker Change: Better in stock you have the more sales you get in there.

Robby: Oh, Hey, thanks for taking my questions.

Speaker Change: And it goes.

Robby: With my My first question is with the with the real time Order guide in place now in the in the East Coast stores in California have you seen I'm surprised you yeah have you seen any improvement in comps related to that.

Mark Carden: Next question here is from Mark Carden from UBS. Please go ahead.

Hi, This is Matthew Rockaway on for Mark Carden, Thanks for taking our question.

Mark Carden: Was hoping you could unpack the gross margin performance in the quarter, obviously, you've been coming in much better than expectations.

Robby: And what we're seeing initially is clearly first of all the feedback we're getting from our hours is really positive.

Mark Carden: What drove that outperformance I know last quarter, there was some negative impact from.

Robby: They are able to see what's available and how to take advantage of putting the right things on their truck.

Mark Carden: The AG shortage in pricing.

Mark Carden: Do you see any of that this quarter and then it looks like Youre not expecting this progress too quite carried through for the rest of the year.

Robby: And so what we've really seen to start with is an improvement in our fill rates. So their fill rates a jump from the 90 293 range to over 99.

Mark Carden: So what are your expectations as we look at the balance of the year. Thank you.

Robby: And so that doesn't always translate immediately into sales, but clearly as you match.

Chris Miller: Yeah sure Hi, it's Chris So yes Q1.

Robby: The ability to match demand and your planning with supply you should see an improvement and we expect one again feeling really good about that that work in that progress and Rob you'd like I mentioned, we'll have that all completed by the end of the second quarter. So.

Chris Miller: We definitely saw improvement in shrinkage, which I mentioned in my remarks.

Chris Miller: As a result of a.

Chris Miller: A lot of the work, we're doing with our system as well as process around that so we do expect that that is sustainable as we go through the year.

Robby: Better in stock you have the more sales you get an error.

Chris Miller: And I would just say for the full year margins.

Robby: And it goes.

Chris Miller: Yes, there is.

Speaker Change: Next question here is from Mark Carden from UBS. Please go ahead.

Chris Miller: Potentially more shrink there as well as improvement in.

Matthew Rockaway: Hi, This is Matthew Rockaway on from Mark Carden, Thanks for taking my question.

Chris Miller: <unk> assortment, whether that's opportunistic mix private label those are all things that could influence the margin.

Matthew Rockaway: Was hoping you could unpack the gross margin performance in the quarter, obviously coming in much better than expectations.

Chris Miller: Just a little early at this point to know what impact that's going to be but we are definitely working on those things to also drive margin.

Matthew Rockaway: What drove that outperformance I know last quarter. There was some negative impact from the AG shortage in pricing did you see any of that this quarter and then it looks like youre not expecting this progress too quite carried through for the rest of the year.

Chris Miller: In the back half of the year.

Speaker Change: Our next question is from Oliver Chen from TD Cowen. Please go ahead.

Speaker Change: Hey, this is Tom on for Oliver Chen I wanted to ask for any color around any trends you've been seeing on opportunistic sourcing given the current environment and then secondly, any details you can share around.

Speaker Change: So what are your expectations as we look at the balance of the year. Thank you.

Chris Miller: Yeah sure Hi, it's Chris So yeah Q1.

Chris Miller: We definitely saw improvement in shrinkage, which I mentioned in my remarks, and that's a result of a lot of the work we're doing with our system as well as process around that so we do expect that that is sustainable as we go through the year.

Speaker Change: Independent operator profitability trends year to date so far.

Speaker Change: Yes, Thanks, Tom for the question.

Speaker Change: Opportunistic supply continues to be there.

Chris Miller: And I would just say for the full year margins.

Speaker Change: We've got very strong supplier relationships I had.

Speaker Change: Yes, there is there's potentially more shrink there as well as improvement and assortment whether that's opportunistic.

Speaker Change: Great opportunity to my first.

Up 90 days or so to meet a lot of them talk to a lot of them.

Speaker Change: That continues to be a source of strength.

Speaker Change: I think that part of our opportunity here some of the upside in this business as I look at all the different opportunities as tools and visibility into what's available and so I know the feedback we got from our Io is theyre very pleased to see and be able to see what's available and opportunistic.

Speaker Change: Next private label those are all things that could influence the margin. It's just a little early at this point to know what impact that's going to be but we are definitely working on those things to also drive margin.

Speaker Change: In the back half of the year.

Speaker Change: The unique part of this business and there is literally tens of thousands of Skus that go through this.

Speaker Change: Yeah.

Speaker Change: Our next question is from Oliver Chen from TD Cowen. Please go ahead.

Speaker Change: This business that are unique in the ability for our iOS to be able to see it and understand what it is what the savings are the value and helping them plan and then execute that is tremendous so.

Tom: Hey, This is Tom <unk> on for Oliver Chen I wanted to ask for any color.

Tom: Around any trends you've been seeing on opportunistic sourcing given the current environment and then secondly, any details you can share around independent operator profitability trends year to date so far.

Speaker Change: We've also recently started to share.

Speaker Change: Specific scan data related to mix to help our Io is understand the opportunities.

Speaker Change: Increased our level of communication on that front so.

Tom: Yes.

Speaker Change: Thanks, Tom for the question.

Speaker Change: For us, it's the opportunity to execute at a higher level, it's not a question of supply.

Tom: Opportunistic supply continues to be there.

Speaker Change: But obviously, that's something we want to double down on and continue to build those supplier relationships.

Tom: We've got very strong supplier relationships I had.

Great opportunity to my first.

Speaker Change: And grow their businesses.

Tom: Hum 90 days or so to meet a lot of them talk to a lot of them that.

Speaker Change: Quickly as we can on that front.

Tom: That continues to be a sort of a source of strength.

John: Our next question is from John Hi, Michael from Guggenheim Securities. Please go ahead.

Tom: I think that part of our opportunity here some of the upside in this business as I look at all the different opportunities as tools and visibility into what's available and so I know the feedback we got from our Io is they are very pleased to see and be able to see what's available and opportunistic.

Speaker Change: Yes, Jason two related questions.

John: Can you talk about the <unk>.

Paul: Sure Paul.

Speaker Change: Everyday versions versus the treasurer of a closeout treasure Hunt.

Paul: Where do you think there's a bigger opportunity.

Tom: The unique part of this business there is literally tens of thousands of Skus that go through this.

Paul: I know, maybe you got to wait from that a little bit last year. So.

Paul: So that's number one and then number two when you talk about execution, what's your thought on sort of field organization right. Because I think the field organization has been historically by design, maybe a little bit lean.

Tom: This business that are unique in the ability for our iOS to be able to see it understand what it is what the savings are the value and helping them plan and then execute that is tremendous so.

Paul: Is that an area of potential investment.

Tom: We've also recently started to share.

Speaker Change: Thanks, John for the question. So I think the in the early days here and this is work that.

Specific scan data related to mix to help our Io is understand the opportunities in.

Speaker Change: Eric had really began in the late fall last year was to tighten up.

Tom: We increased our level of communication on that front so.

<unk>.

Tom: For us, it's the opportunity to execute at a higher level, it's not a question of supply.

Speaker Change: Thats.

Speaker Change: Thats a regular thing that you do.

Speaker Change: In the process of continuing to improve our monitoring of that we've made some adjustments in my time here, we're going to continue to make adjustments as we go where we think its necessary it's important to stay tight.

Tom: But obviously, that's something we want to double down on and continue to build those supplier relationships and and grow the business as a as quickly as we can on that front.

Speaker Change: Our next question is from John Heimbach <unk> from Guggenheim Securities. Please go ahead.

Speaker Change: On that front helps.

Value perception tremendously.

John Heimbach: Hey, Jason two related questions.

Speaker Change: Very important as you know.

Speaker Change: Can you talk about the <unk>.

Speaker Change: And the opportunistic is really with our real time order guide unlock really helping our IOC and understand what's there and the ability to flow supply through the system is going to be very helpful. For us. So both things are very important when you are building value. It's also important to communicate that well in store and so we've been experimenting with some.

Jason Potter: Sure Paul.

Jason Potter: So look at everyday versions versus the treasurer of a closeout treasure Hunt.

Jason Potter: Where do you think there's a bigger opportunity.

Jason Potter: I know, maybe you got away from that a little bit last year. So that's number one and then number two when you talk about execution.

Jason Potter: Your thought on sort of field organization right because I think the field organization has been historically by design, maybe a little bit lean.

Speaker Change: Marketing materials, we think that's a that's a nice opportunity.

Speaker Change: <unk> and.

Speaker Change: And I guess the second part of your question is.

Yes.

Jason Potter: Is that an area of potential investment.

Speaker Change: Clearly whatever we can do to improve the support for stores, we will consider I think it's a little early on that front, but.

Jason Potter: Yeah.

Speaker Change: Thanks, John for the question. So I think the in the early days here and this is work that Eric had that really began in the late fall last year was to tighten up on <unk>.

Speaker Change: As I spend more time with the operations team and our Io group, we want to make sure that we're doing everything we can to help them be successful so.

Speaker Change: Think that's you know that's a regular thing that you do.

Speaker Change: That's the way I think about it.

Joe Feldman: Our next question is from Joe Feldman from Telsey Advisory Group. Please go ahead.

Joe Feldman: Yeah, Hey, Thanks for taking my question guys I wanted to go back to the basket size for a minute.

Speaker Change: On that front it helps valley.

Is it.

Joe Feldman: Can you share a little more color like what youre seeing with the basket might be is it lower.

Speaker Change: Value perception tremendously so it's very important as you know.

Speaker Change: And the opportunistic is really with our real time order guide unlock really helping our IOC and understand whats there and that ability to flow supply through the system is going to be very helpful for us.

Joe Feldman: Mix is it lower units fewer units in the basket is it the pricing is it because.

Joe Feldman: The inventory issues that we're still dealing with maybe thats why theres just not the items people want when they come in I was just hoping to get a little more color there. Thanks.

Speaker Change: So both things are very important when you're building value. It's also important to communicate that well in store and so we've been experimenting with some marketing materials. We think that's a that's a nice opportunity.

Joe Feldman: Sure sure.

Joe Feldman: The Great news is the hardest part in any of these businesses is to traffic traffic has been quite good remains solid I think thats, usually the most difficult thing to achieve and we've got the people coming in.

Speaker Change: The second part of your question is yes.

Speaker Change: Yes.

Speaker Change: Clearly whatever we can do to improve the support for stores will consider I think it's a little early on that front, but.

Joe Feldman: This business has a tremendous value delivery system to it and forever and a day people are going to be looking for value. So we feel good from the work that's been done on both <unk> and the opportunistic.

Speaker Change: As I spend more time with the operations team and our Io group, we want to make sure that we're doing everything we can to help them be successful so.

Joe Feldman: Mix efforts that we're making.

Speaker Change: That's the way I think about it.

Joe Feldman: In the basket in particular, when we look at it it's items per basket.

Speaker Change: Our next question is from Joe Feldman from Telsey Advisory Group. Please go ahead.

Joe Feldman: So there is an opportunity for us on a couple of fronts there to do some work and the work we've done early on ensuring that we are.

Joe Feldman: Yeah, Hey, Thanks for taking my question guys I wanted to go back to the basket size for a minute.

Joe Feldman: Making sure that commercially we are in the right place some of the things I mentioned.

Speaker Change: Is it.

Can you share a little more color like what youre seeing with the basket might use it.

Joe Feldman: Based quality things like bananas, and avocados as small as that might sound are critical for day to day shopping.

Speaker Change: Mix is it lower units fewer units in the basket is it the pricing is it because.

Joe Feldman: Again, having make sure the fill rates are in the right place. So that our stores are able to fulfill our customers shop, all important elements to building the basket, so our focus and our conversations here in the communication that we're providing and the work. We're doing is really to help build those baskets, that's going to be a focus.

Speaker Change: The inventory issues that we're still dealing with maybe that's why theres just not the items people want when they come in.

Speaker Change: I was just hoping to get a little more color there. Thanks.

Speaker Change: Sure sure.

Speaker Change: The Great news is the hardest part in any of these businesses is the traffic traffic has been quite good remains solid I think thats, usually the most difficult thing to achieve and we've got the people coming in you know that this business has a tremendous value delivery system to it.

Michael Baker: Our next question is from Michael Baker from D. A Davidson. Please go ahead.

Michael Baker: Okay. Thanks, I wanted to ask you if you could quantify the Easter shift.

Speaker Change: And you know forever and a day people are going to be looking for value. So we feel good from the work that's been done on both the <unk> and the opportunistic mix efforts that we're making.

Michael Baker: I'm, a little surprised that April.

Michael Baker: It doesn't sound at least as of April is off to a great start given the Easter shift. So I Wonder. If you think you are seeing any impact already from the uncertainty from.

Speaker Change: In the basket in particular, when we look at it it's items per basket. So there is an opportunity for us on a couple of fronts. There to do some work and the work we've done early on ensuring that were made.

Michael Baker: <unk> quote Unquote Liberation day on April 2nd did you maybe it might be hard to tease out because of the Easter shift, but have you seen any kind of down shift in how the consumers reacting since then.

Speaker Change: Making sure that commercially we're in the right place some of the things I mentioned on.

Michael Baker: Yes.

Speaker Change: Yes, I would say we thought it was a little soft for sure.

Speaker Change: Based quality things like bananas, and avocados as small as that might sound are critical for day to day shopping.

Michael Baker: It's difficult to sort of pin it to what but.

Speaker Change: Clearly.

Speaker Change: There's a shift there and some other I guess just lot of news out there changes for the customer.

Speaker Change: Again, having make sure the fill rates are in the right place. So that our stores are able to fulfill the customer's shop, all important elements to building the basket, so our focus and our conversations here and the communication that we're providing and the work. We're doing is really to help build those baskets, that's going to be a focus.

Speaker Change: Some uncertainty for them, but.

Speaker Change: That's probably.

Speaker Change: Part of our thinking here is that April was a little a.

Speaker Change: A little softer than I'd like.

Speaker Change: Okay. It makes sense and if I could ask a follow up when you talk about the <unk> can you talk about where do you think your price gaps I know the previous management team had some.

The next question is from Michael Baker from D. A Davidson. Please go ahead.

Michael Baker: Okay. Thanks, I wanted to ask you if you could quantify the Easter shift.

Michael Baker: I'm, a little surprised that April it.

Speaker Change: I knew that they needed to get a little bit sharper in and close some of those price gap with competitors, where do you think you stand now you said you always need to focus on.

Michael Baker: It doesn't sound at least as of April is off to a great start given the Easter shift. So I wonder if you think youre seeing any impact already from the uncertainty from you know quote Unquote Liberation day on April 2nd did you maybe it might be hard to tease out because of the Easter shift, but have you seen any kind of down shift in how the consumer.

Speaker Change: Value, but do you feel like you need to get specifically catch up to some other guys who are being more price promotional.

Speaker Change: I think we're in a good spot as we sit here today.

Speaker Change: There has been some work done over the last couple.

Michael Baker: There is reacting since then.

Speaker Change: A couple of quarters and.

Michael Baker: Yeah.

Speaker Change: Whenever there is that gets a little bit out of the pocket. So to speak you can lose some perception I think maybe that's.

Yeah, I would say we thought it was a little soft for sure.

Michael Baker: It's difficult to sort of pin it to what but.

Speaker Change: Part of the story here and so ensuring that you are tight stay tight.

Michael Baker: Clearly.

Michael Baker: There's a shift there and some other I guess just a lot of news out there changes for the customer.

Speaker Change: Sure you are on top of that everybody is critical.

Speaker Change: And that's just an ongoing piece of work. So I feel good about we are right now it doesn't mean that you're ever done and you want to be strategic about those things.

Michael Baker: There's clearly some uncertainty for them but.

Michael Baker: That's probably.

Michael Baker: As part of our thinking here is that April was a little.

Speaker Change: Clearly part of our.

Michael Baker: A little softer than I'd like.

Speaker Change: Work here as you think about customer the consumer today and maybe there is some uncertainty out there is we want to be in their corner fighting hard for them to deliver value, so being fit and ready commercially and execution wise are critical and Kpis are just part of that equation.

Speaker Change: Knew that they needed to get a little bit sharper and close some of those price gap with competitors, where do you think you stand now you said you always need to focus on.

Anthony: Next question is from Anthony <unk> from loop capital markets. Please go ahead.

Speaker Change: Value, but do you feel like you need to get specifically catch up to some other guys who are being more price promotional.

Speaker Change: Thanks for taking my question. So you talked about seeking indirect cost reduction opportunities I was just wondering if you can.

Speaker Change: I think we're in a good spot as we sit here today. There clearly has been some work done over the last couple.

Speaker Change: You can just sort of highlight some of the potential areas for cost reduction and sort of order of magnitude that youre that youre.

A couple of quarters and.

Speaker Change: Whenever there is that gets a little bit out of the pocket. So to speak you can lose some perception I think maybe that's.

Speaker Change: Targeting thank you.

Yes, sure Anthony it's Chris So there's a couple of things on the cost efficiency program I mentioned, the first as you called out as indirect procurement.

Speaker Change: Part of the story here and so ensuring that your tight stay tight make sure youre on top of that everybody is critical.

Speaker Change: And that's just an ongoing piece of work so I feel good about right now it doesn't mean that you're ever done and you want to be strategic about those things.

Speaker Change: And look I've done a few of these before in my career.

Speaker Change: We think there is there is definitely meaningful costs, there, but we have to work through and it's kind of a methodical.

Speaker Change: Clearly part of our work.

Speaker Change: Work here as you think about customer the consumer today and maybe there's some uncertainty out there is we want to be in their corner fighting hard for them to deliver value, so being fit and ready commercially and execution wise are critical and caveats are just part of that equation.

Speaker Change: Intentional approach that we're taking.

Speaker Change: And maybe some of the I'll give you a couple of examples one is in the supply chain area.

Speaker Change: Looking at freight looking at buying supplies pallets.

Speaker Change: Simple things like that.

Speaker Change: Next question is from Anthony <unk> from loop capital markets. Please go ahead.

Speaker Change: And our it organization looking at different spend there as well as professional fees et cetera. So.

Speaker Change: Thanks for taking my question. So you talked about seeking indirect cost reduction opportunities I was just wondering if you can if you can just sort of highlight some of the potential areas for cost reduction and sort of order of magnitude that youre that youre.

Speaker Change: Yes.

Speaker Change: A piece of work we started and.

Speaker Change: As I said it is well progressed through that and then the other piece. That's worth mentioning is just overall efficiencies that we're expect to.

Speaker Change: Thank you.

Speaker Change: To get in one example, that's in our again, our supply chain, a little bit different though with the opening of our new facility in the Pacific North northwest.

Chris Miller: Yes, sure Anthony it's Chris So there's a couple of things on the cost efficiency program I mentioned, the first is you've called out as indirect procurement.

Speaker Change: We're able to consolidate several warehouses into one and really capture efficiencies in transportation and warehousing.

Speaker Change: And look I've I've done a few of these before in my career.

Chris Miller: You know what.

Speaker Change: Just all across the supply chain, so and we are.

Chris Miller: We think there's there's definitely meaningful cost there, but we have to work through and it's a kind of methodical intense.

Speaker Change: Other initiatives that working on that just to drive cost down as well.

Speaker Change: So that's.

Chris Miller: Intentional approach that we're taking.

Speaker Change: What I'd say about where were at with our program.

Chris Miller: And maybe some of the I'll give you a couple of examples one is in the supply chain area.

Speaker Change: Next question is from Simeon Gutman from Morgan Stanley. Please go ahead.

Chris Miller: Looking at freight looking at buying supplies pallets, you know simple things like that and our I T organization looking at different spend there as well as professional fees et cetera. So.

Simeon Gutman: Good afternoon.

Speaker Change: Just to go back on the April trend line.

Was the traffic something that slower or the consumer got afraid with their basket and I ask because the premise. We would have is that if if the backdrop does get weaker.

Chris Miller: That's.

Chris Miller: A piece of work we started and.

Chris Miller: As I said it is well progressed through that and then the other piece. That's worth mentioning is just overall efficiencies that we're expect to.

Speaker Change: Think that maybe trade down should help this business. This is par one so the question in the thought and then the second it looks like some of the language with restructuring plan change maybe the cash expenditures if thats right does it impact the guidance in anyway. Thank you.

Chris Miller: To get in one example, that's in our again, our supply chain, a little bit different though with the opening of our new facility in the Pacific North northwest.

Speaker Change: First part of the question.

Speaker Change: Sure.

Speaker Change: Yes, I had mentioned it was a little softer than I'd like.

Chris Miller: We're able to consolidate several warehouses into one and really capture efficiencies in transportation warehousing, just all across the supply chain. So and we have other initiatives that working on that just to drive costs out as well.

Speaker Change: We're not we haven't seen any evidence of things.

Speaker Change: Things like trading down and so on that you typically see that.

Speaker Change: Clearly, we've got some softness in the basket and that's something we think is more execution related and.

Speaker Change: And we're monitoring that obviously and I think the second part of the question of the cash question I'll pass to Chris Yeah. So on the restructuring.

Chris Miller: So that's what.

Chris Miller: What I'd say about where were at with our program.

Chris Miller: What we said was or what I said was that we're going to be within the original range, which we said 50.

Chris Miller: Next question is from Simeon Gutman from Morgan Stanley. Please go ahead.

Simeon Gutman: Good afternoon.

Chris Miller: To 60, initially we tightened that up to 59% to 61 is where we're landing with the five additional stores. So.

Speaker Change: So just to go back on the April trend line.

Speaker Change: He was the traffic something that slower or the consumer got afraid with their basket and I ask because the premise. We would have is that if if the backdrop does get weaker.

Chris Miller: There's really no impact to <unk>.

Chris Miller: The profitability guidance for the year, the adjusted profitability numbers.

Speaker Change: You would think that maybe trade down should help this business. This is par one so it's a question in the thought and then the second it looks like some of the language with restructuring plan change maybe the cash expenditures if that's right.

Chris Miller: If thats what youre asking.

Speaker Change: Next question is from Jordan from Goldman Sachs. Please go ahead.

Chris Miller: Yeah.

Chris Miller: Thank you good afternoon.

Speaker Change: It impacts our guidance in any way thank you.

Speaker Change: Gross margin improved nicely in the quarter, but you're still losing market share. So I just wanted to see if you could talk through how you're thinking about the tradeoff between defending share and maintaining margins in the current environment I guess, just given the lower comp outlook.

Speaker Change: First part of the question.

Speaker Change: Yes, I had mentioned it was a little softer than I'd like.

Speaker Change: We haven't seen any evidence of it.

Speaker Change: Things like trading down and so on that you typically see but clearly we've got some softness in the basket and that's something we think is more execution related and and.

Speaker Change: How are you thinking about reinvestment of any margin upside as you go throughout the year.

Speaker Change: And we're monitoring that obviously.

Speaker Change: Or just given the softer April how quickly can you react on pricing when you see a behavior shift. Thank you.

Speaker Change: The second part of the question of the cash question I'll pass to Chris Yeah. So on the restructuring.

Speaker Change: Yes.

Speaker Change: What we said was or what I said was that we're going to be within the original range, which we said 50 to.

Speaker Change: Thanks, Lee I think.

Speaker Change: The idea of one foot on the gas and one foot on the brake as I'm thinking about it.

To 60, initially we tightened that up to 59% to 61 is where we're landing with the five additional stores. So.

Speaker Change: Clearly, we want to create room for ourselves to create the optionality to be more aggressive than we.

Speaker Change: There's really no impact to the.

Speaker Change: I think with the improvements that are naturally coming in the business from some of the capabilities, we're unlocking as well as.

Speaker Change: The profitability guidance for the year, the adjusted profitability numbers.

Speaker Change: The future work that we think will help us improve our cost base of those things are very helpful for us to be fit and make adjustments in the business as we go.

Speaker Change: If that's what you're asking.

Next question is from Jordan <unk> from Goldman Sachs. Please go ahead.

Speaker Change: The commercial and execution related things.

Speaker Change: Yeah.

Speaker Change: We've begun here.

Speaker Change: Thank you good afternoon.

Speaker Change: Amir no regret moves those things youre going to add sales.

Speaker Change: <unk> gross margin improved nicely in the quarter, but you're still losing market share. So I just wanted to see if you could talk through how you're thinking about the tradeoff between defending share and maintaining margins in the current environment.

Speaker Change: And we'll do the job on balancing the margins for sales clearly comps are an essential part probably the number one metric that I look at and so.

Speaker Change: We have some work to do there, but feeling good about what's going to come later.

Speaker Change: Just given the lower comp outlook.

Speaker Change: How are you thinking about reinvestment of any margin upside as you go throughout the year.

Speaker Change: Next question is from Jeremy Hamblin from Craig Hallum Capital Group. Please go ahead.

Speaker Change: Or just given the softer April how quickly can you react on pricing when you see that behavior shift. Thank you.

Jeremy Hamblin: Thanks for taking the question and then just shifting gears a bit here I wanted to ask about United grocery outlet.

Speaker Change: Thanks, Leo I think.

Speaker Change: As you get your first few months in here and I don't know how much time, you spend on those locations, but wanted to get a sense for how you feel like Theyre performing.

Speaker Change: The idea of one foot on the gas and one foot on the brake as I'm thinking about it clearly we want to create room for ourselves to create the optionality to be more aggressive in.

Speaker Change: And I know not a lot is going to be done with them in 2025, but just getting a sense for the timeframe on how you think you might integrate that portion of the business a bit more with the total company.

Speaker Change: We think with the improvements that are naturally coming in the business from some of the capabilities, we're unlocking as well as.

Speaker Change: The future work that we think will help us improve our cost base of those things are very helpful for us to be fit and make adjustments in the business as we go.

Speaker Change: Yes, I think.

Speaker Change: The basic headline there as we're growing sales it's in line with expectation.

Speaker Change: The commercial and execution related things we've.

Speaker Change: Begun here Premier no regret moves those things are going to add sales.

Speaker Change: Something we're going to integrate 26.

Speaker Change: Late 'twenty six is probably the timeframe so.

Speaker Change: And we will do the job on balancing the margins for sales clearly comps are an essential part probably the number one metric that I look at and so.

That's what I would share today.

This concludes the question and answer session I would like to turn the floor back to management for any closing comments.

Speaker Change: We have some work to do there, but feeling good about what's going to come later.

Speaker Change: Next question is from Jeremy Hamblin from Craig Hallum Capital Group. Please go ahead.

Speaker Change: Can you repeat again.

Speaker Change: Sorry, what was that.

Jeremy Hamblin: Thanks for taking the question and then just shifting gears a bit here I wanted to ask about United grocery outlet.

Speaker Change: Operator.

Speaker Change: Our last question now would you do you have any closing comments to a close up the call Oh, yes. Thank you very much for your interest today.

Speaker Change: As you get your first few months in here.

Speaker Change: We're excited to be here.

Jeremy Hamblin: Don't know how much.

Jeremy Hamblin: You spent on those locations, but wanted to get a sense for how you feel like they're performing and you know I know there's not a lot is going to be done with them in 2025, but just getting a sense for the timeframe on how you think you might integrate that portion of the business a bit more with the total company.

Speaker Change: An.

Speaker Change: An incredible business to be a part of.

Speaker Change: Cited about the future we've got lots of execution opportunity here, we're going to get that back on track. We've got a great model motivated people and we look forward to sharing.

Speaker Change: Exciting wins as we go here and thank.

Speaker Change: Thank you for your attention today.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Jeremy Hamblin: Yeah I think.

Jeremy Hamblin: The basic headline there as we're growing sales it's in line with expectation.

Jeremy Hamblin: Something we're going to integrate 26 late.

Jeremy Hamblin: Late 'twenty six is probably the timeframe so.

Jeremy Hamblin: That's what I would share today.

Speaker Change: This concludes the question and answer session I would like to turn the floor back to management for any closing comments.

Speaker Change: Can you repeat again.

Speaker Change: Sorry, what was that.

Speaker Change: Operator that was our last question now would you do you have any closing comments to a close up the call Oh, yes. Thank you very much for your interest today.

Speaker Change: Very excited to be here.

Speaker Change: This is an.

Speaker Change: An incredible business to be a part of I'm excited about the future. We've got lots of execution opportunity here, we're going to get that back on track. We've got a great model motivated people and we look forward to sharing.

Speaker Change: Exciting wins as we go here and thank you for your attention today.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: [music].

Speaker Change:

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Hum.

Q1 2025 Grocery Outlet Holding Corp Earnings Call

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