Grocery Outlet Risk-Reward Turns More Favorable on Merchandise, E-Commerce Pricing, BofA Says

MT Newswires Live
Sep 30

Grocery Outlet's (GO) risk-reward profile has become more "favorable" as the retailer returns to "attractively priced opportunistic merchandise," expands e-commerce price "parity" with DoorDash, Uber Eats and Instacart, and recovers from legacy SAP system disruptions, BofA Securities said in a report Wednesday.

Grocery Outlet's "renewed focus" on opportunistic buying, improving independent operator income and discount pricing could help drive traffic, basket growth and an earnings rebound that Wall Street may be underestimating, the report said.

The company trades at about 5.9 times the firm's estimated 2027 adjusted EBITDA, below the roughly 7 times multiple of other food retail peers.

The firm said concerns around merchandising changes, "supply chain costs," East Coast store productivity, the United Grocery Outlet acquisition and store refreshes appear largely "reflected in the current valuation," according to the report.

BofA upgraded Grocery Outlet to Buy from Neutral and raised its price objective to $15 from $12.50.

Price: 11.26, Change: +0.31, Percent Change: +2.79

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