DISCUSSION
What will happen when Grocery Outlet takes things public?
Written by RetailWire Staff
Photo: Grocery Outlet
Grocery Outlet has kept its customers happy with low priced groceries for more than 70 years. Now the chain will see if it can please Wall Street, as well.
The grocer has filed for a $100 million initial public offering, according to a CNN Business article, which pointed out that, unlike companies involved in many of this year’s high-profile IPOs, Grocery Outlet is actually profitable. The chain’s opportunistic buying strategy, which consists of acquiring overstock inventory left with its 1,500 suppliers, and small store format (the typical unit is about 15,000-square-feet) allows it to keep prices at around 40 percent that of regular grocery stores.
The chain, which operates more than 300 stores in California, Idaho, Nevada, Oregon, Washington and Pennsylvania, plans to open 30 more locations in those states in 2019. Future plans call for 400 new stores in the states where it currently operates as well as opening 1,600 more locations in adjacent states where it doesn’t currently do business.
The low-price grocery and dollar store space has continued to boom in the aftermath of the economic recession with customers of all demographics focusing on deals even in a period of recovery.
Some, like Dollar General, revamping their operations and rolling out new, cleaner, smaller and more inviting store concepts to keep pace with the demands of the Millennial shopper. Aldi has likewise taken steps such as adding larger fresh food sections and better lighting in some locations to look less like a deep discounter and more like a traditional grocer.
The recent entry of German grocer Lidl, which has a global rivalry with Aldi, to the U.S. low-price grocery market has added another wildcard to the mix. Lidl is planning a 25-store expansion on the East Coast in the coming year, according to a separate CNN Business article. This will bring the chain’s U.S. store count up above 100 in 2020, which represents a slowdown in the grocer’s planned expansion timeline.
While much of the IPO news of recent months has centered on rideshares (Uber and Lyft) and other startups without time-tested business models, other more traditional retailers have gone public as well. Levi’s, for instance, was once publicly-traded but went private for more than 30 years before announcing a return to the stock market with a $6.7 billion IPO this spring.