Grocery Outlet's (GO) "early marketing missteps" are weighing on the company's H2 comparable sales, Morgan Stanley said in a Wednesday note.

Morgan Stanley said the company cited changes to its promotional and marketing mix strategies as factors that drove a slowdown in H2 comparable sales. Grocery Outlet's refresh initiative could serve as a top-line catalyst, but it remains in early stages, the investment firm noted.

"We are struggling to give the business the benefit of the doubt given execution inconsistency from systems issues, pricing, and/or marketing mix," Morgan Stanley said.

Grocery Outlet has shifted a big portion of its marketing spend to social media from traditional channels, leading to negative comps in the last week of September and the first week of October, and is likely to be a lingering headwind in the next few weeks, according to the note.

Grocery Outlet has corrected its marketing mix, and Morgan Stanley said the company's comparable sales have normalized over the last two weeks. However, the estimated mid-single-digit percentage boost to comparable sales from the refresh initiative remains "challenging to extrapolate," Morgan Stanley added.

Morgan Stanley lowered its price target on Grocery Outlet's stock to $15 from $16, while reiterating an equal-weight rating.

Price: 12.53, Change: -1.65, Percent Change: -11.61