As Grocery Outlet considers IPO, it sees thousands of stores in its future

Grocery Outlet’s flexible sourcing brings the “Wow!” deals and a treasure hunt atmosphere, the company said. (Photo by Pamela Riemenschneider)

Emeryville, CA-based Grocery Outlet (BB #:154673) said in an SEC filing it plans to double, then quadruple store count as it plans an initial public offering.

The company announced plans for the IPO in March, and reportedly expects to raise $100 million.

“Our goal is to expand our store base by approximately 10% annually by penetrating existing and contiguous regions,” the company said. “Over the long term, we believe the market potential exists to establish 4,800 locations nationally.”

Grocery Outlet currently more than 300 stores via independent operators on the West Coast and Pennsylvania, offering a “Wow!” for customers looking for discounts and deals in name-brand consumables and fresh products.

The company said it believes the search for value, which it called a “treasure hunt” is the new normal in retail.

“The success of off-price retailers represents a secular consumer shift toward value as a leading factor in purchasing decisions,” the company said.

A typical basket is 40% lower than conventional grocers, and 20% lower than other leading discounters. The company cited 15 consecutive years of positive same-store sales growth, including 12.3% and 14.7% during the Great Recession in 2008 and 2009.

Its “flexible sourcing and distribution model” also are difficult for other mainstream retailers to replicate.

“Our buying strategy is deliberately flexible,” the filing said,” which allows us to react to constantly changing opportunities.”

Read more about the company’s strategy in the filling here.

Grocery Outlet is in good company, with discounters like Dollar General adding more fresh food to its 15,000-store lineup, and Aldi, which is spending billions to upgrade and open stores across the U.S.

Lidl, the German discounter based on the East Coast of the U.S., recently acquired Best Supermarket in New York and New Jersey to expand its footprint closer to 100 stores in the first two years of U.S. operations.

St. Louis-based Save-A-Lot Ltd. , however, hasn’t fared so well since it was purchased by Onex Corp. from Supervalu in 2016. The St. Louis Post Dispatch reported the company has hired an investment bank to explore a sale of all or part of itself.

Pamela Riemenschneider is the Retail Editor for Blue Book Services.