Grocery Outlet’s Store Closures Reveal a Contradiction: Expanding While Admitting It Expanded Too Quickly
Grocery Outlet is closing 36 stores—24 on the East Coast—after CEO and President Jason Potter told investors the company realized it “expanded too quickly, ” even as management continues to outline new store openings and an aggressive remodeling plan.
Why is Grocery Outlet closing 36 stores while still planning new openings?
The company framed the closures as part of an “optimization and restructuring plan” intended to redirect resources toward stronger-return markets. Chief Financial Officer Christopher Miller said the company expects the closures, once completed, to deliver an annualized adjusted EBITDA improvement of approximately $12 million. At the same time, Grocery Outlet is not pausing growth: during Q4 it opened seven stores and ended the quarter with 570 locations across 16 states, and for fiscal 2026 it plans to open between 30 and 33 stores using a “clustered model” intended to improve supply chain efficiency and marketing leverage.
The financial mechanics of the closures are material. Grocery Outlet forecasts between $14 million and $25 million in net total restructuring charges in fiscal 2026. It also expects a $4 million to $6 million hit to 2026 gross profit tied to discounts and markdowns used to liquidate inventory at closing stores. The company described these moves as a way to operate more profitably across its markets while focusing financial and operating resources where returns are strongest.
What did executives say went wrong in recent performance?
Management used blunt language about results. Potter called fourth-quarter performance “unacceptable” and said the company’s outlook for 2026 reflects “a business that has more work to do than we expected, ” adding: “I own this and own fixing the issues. ” The company described a challenging period as it seeks to regain financial footing.
Grocery Outlet’s Q4 ended Jan. 3. net sales increased nearly 11% to about $1. 2 billion, while comparable-store sales slipped by nearly 1%. Miller told investors that amid a highly promotional holiday period, comparable-store sales decelerated in December and then “bottomed out” in January. Executives also pointed to a double-digit decrease in EBT sales in November amid a temporary lapse in SNAP funding.
Potter said pressure on the company’s core consumer increased more than expected by the end of last year, and by January the company was seeing declining units per transaction and slowing traffic growth. Management attributed the comparable-sales decline to multiple drivers, including an erosion of “value perception” even as base pricing remained competitive and operational decisions that reduced the flow and in-store impact of opportunistic “treasure hunt” product. In management’s framing, shoppers came in expecting value and the treasure hunt experience, but left with fewer items per trip because the company did not deliver enough “WOW” deals or breadth of assortment to support basket size and value.
What is the restructuring plan—and who is accountable for results?
The company described several operational fixes, spanning merchandising, supply chain, store standards, and pricing perception. Steps discussed by management included leaning on a store remodeling program that standardizes store format, adding new C-suite hires, and implementing new product ordering guides for independent operators. Additional actions described include unifying merchandising and purchasing under one leader, adding distribution-center capacity, improving forecasting and operator tools, and accelerating a 150-store refresh program planned for 2026.
Management also described a temporary promotional push to restore traffic and value perception, including a roughly $20 million investment in promotions. Miller said the comparable-sales decline (excluding an extra week) was driven by a 170-basis-point decline in average transaction size, partially offset by a 90-basis-point increase in traffic. Leadership characterized February performance as improving after promotional activity began in early February, with comparable performance improving by about 100 basis points month over month relative to January, while emphasizing it was an early signal rather than a definitive turnaround.
Beyond store operations, management said it is conducting a strategic review of UGO, with possible outcomes ranging from integration to sale. The company’s 2026 guidance included comparable sales of negative 2% to flat and adjusted EBITDA of $220 million to $235 million, while the quarter also included large non-cash charges that contributed to a Q4 net loss of $218. 2 million.
For Grocery Outlet, the immediate accountability question is whether a plan built on closures, promotions, and operational retooling can restore “value perception” and the opportunistic pipeline quickly enough to reverse smaller baskets and weakened comps—while the company simultaneously pursues additional store openings and extensive remodels in 2026.
