Discount grocery chain Grocery Outlet is planning to close several underperforming stores as part of an optimization strategy to improve profitability, according to the company’s latest earnings release.
Although the company’s net sales in the fourth quarter for the fiscal year ended January 3, 2026, increased 10.7% to $1.22 billion, net loss totaled $218.2 million compared to net income of $2.3 million last year.
The results led the company to decide to close some “underperforming stores,” Grocery Outlet President and CEO Jason Potter said in the statement.
As part of a new optimization and restructuring plan, Potter said the company will be closing “36 financially underperforming stores.”
The closures include the “termination or sublease of the applicable store leases, the termination or sublease of a lease for a distribution center facility that we are no longer utilizing, and the termination of operator agreements with independent operators for the applicable store locations as well as certain other store locations.”
All the stores slated for closure are located on the East Coast, accounting for about 30% of the region’s store count and roughly 6% of the company’s total store fleet, according to a report by Grocery Dive.
New Growth Strategy
Citing Potter, KRON4 reported the closures are part of the chain’s plan to reshape its new-store growth strategy and reallocate resources “to strengthen operating results and returns on capital.”
The company has not officially announced which store locations will be affected by the closures.
Grocery Outlet’s new growth strategy is expected to be completed during the 2026 fiscal year.
The chain currently operates 17 stores in the Bay Area, according to KRON4. More than half of the company’s stores are located in California, with more stores in Washington, Idaho, Oregon, Nevada, New Jersey, Pennsylvania, Maryland, Delaware, and Ohio.
The fourth quarter results reflect that the company has “more work to do,” Potter said in the release.
Delay in Federal Benefits
He attributed the performance to intensifying consumer pressure, delay in federally funded benefits, and more competition.
The increase in net sales in the fourth quarter was driven by new store sales, partially offset by a 0.8% decline in comparable store sales, according to the statement.
“Comparable store sales for the quarter were adversely impacted by the delayed disbursement of benefits from federally-funded assistance programs that many of our customers depend on, including the Supplemental Nutrition Assistance Program,” according to the release.
Potter said the company was focused on restoring its opportunistic product mix, while expanding the store refresh program, adding that early improvements were becoming measurable.
Grocery Outlet opened seven new stores, closed zero outlets, and ended the quarter with 570 stores across 16 states.
In fiscal 2026, the company anticipates incurring between $14 million and $25 million in net total restructuring charges, including an estimated $51 million to $63 million in cash expenditures for lease termination fees and about $11 million to $14 million in bad debt expense.
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