What Happened?
Shares of discount grocery store chain Grocery Outlet (NASDAQ: GO) fell 28% in the afternoon session after the company reported disappointing fourth-quarter 2025 financial results and provided a weak forecast for 2026.
The discount grocer's adjusted earnings of $0.19 per share and sales of $1.22 billion both fell short of analyst expectations. Additionally, a key performance metric, same-store sales, was flat year on year. The outlook for the upcoming year was particularly concerning for investors. The company's full-year revenue guidance of $4.66 billion at the midpoint was 5.4% below estimates, and its adjusted earnings per share guidance of $0.50 at the midpoint missed analyst projections by a substantial 38.6%. Overall, the combination of missed Q4 targets and a sharply lower-than-expected forecast for the year ahead drove negative investor sentiment.
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What Is The Market Telling Us
Grocery Outlet’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Grocery Outlet and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock gained 38.9% on the news that the company reported second-quarter earnings that surpassed analyst expectations and raised its full-year profit forecast. The discount grocer posted an adjusted profit of $0.23 per share, which outpaced projections. In response to the strong quarter, management lifted its full-year adjusted earnings guidance to a range of $0.75 to $0.80 per share, above its prior outlook and Wall Street's estimates. The company attributed the better-than-expected performance to improved operational efficiency and increased comparable store sales. Following the results, Morgan Stanley upgraded the stock to Equalweight from Underweight and increased its price target, noting that the company's fundamentals appeared to be turning around.
Grocery Outlet is down 37.8% since the beginning of the year, and at $6.33 per share, it is trading 66.1% below its 52-week high of $18.66 from September 2025. Investors who bought $1,000 worth of Grocery Outlet’s shares 5 years ago would now be looking at an investment worth $175.58.
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