Shares fell 3.6% after Grocery Outlet’s Q1 report as investors were disappointed by the cautious outlook and ongoing margin pressure, despite modest traffic improvements and performance mostly tracking guidance.

• Q1 revenue rose 3.6% to $1.17 billion, with comparable store sales down 1%, better than the expected declines but still negative.
• Traffic increased roughly 2%, improving through the quarter, but offset by lower units per transaction, signaling weak basket size.
• Gross margin contracted to 29.6%, including a 50 basis point drag from store closures and promotional investments to drive traffic.
• Adjusted EBITDA of $43.1 million was at the high end of guidance; adjusted EPS of $0.05 narrowly exceeded prior forecast by $0.01.
• Management confirmed $20 million in promotional support investments planned for the year, reflecting ongoing margin headwinds and cautious near-term outlook.