Grocery Outlet plans to shut down numerous locations following rapid overexpansion

Grocery Outlet to Shutter 36 Stores Amid Rapid Expansion Setback

A shopping bag at a Grocery Outlet store in San Francisco, 2019. (Bloomberg)

Grocery Outlet, a discount supermarket chain headquartered in the Bay Area, has announced plans to close 36 of its stores after expanding at a pace that proved unsustainable. The decision comes as part of a broader strategy to address underperforming stores and a distribution center that is no longer operational. According to the company's CEO, these closures will be finalized by the end of the year.

Other major grocery retailers, including Kroger and Albertsons, have also shuttered locations and let go of hundreds of employees over the past year, as inflation and increasing labor expenses have squeezed profit margins.

Kroger, which owns California grocery staples Ralphs and Food 4 Less, has been undergoing significant changes since its attempted merger with Albertsons failed in 2024.

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Jason Potter, CEO of Grocery Outlet, did not confirm whether the store closures would result in layoffs.

"After a thorough review of our store network, we determined that 36 locations lacked a sustainable path to profitability," Potter stated during the latest earnings call. "It’s evident that our growth was too aggressive, and these closures are necessary to correct course."

Despite these closures, Grocery Outlet still intends to launch between 30 and 33 new stores this year. The company reported a net loss of $225 million for fiscal year 2025, a sharp contrast to the $39 million profit recorded in 2024. However, net sales rose by 7.3% year-over-year.

For the last quarter of 2025, the company posted a net loss of $218 million, and its stock price has dropped by over 43% in the past year.

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Potter acknowledged, "We made strides toward our strategic goals in 2025, but our fourth-quarter performance shows there’s still significant work ahead."

Headquartered in Emeryville, Grocery Outlet and its subsidiaries operate over 560 stores across 16 states, including California and Washington. Of the 36 stores set to close, 24 are located in the eastern United States.

Grocery Outlet stores are independently owned and focus on providing affordable options for budget-conscious shoppers. The chain has more than 100 locations throughout California, including several in the Los Angeles region.

The company’s new plan aims to "bolster long-term profitability and cash flow, enhance operational efficiency, optimize our current store base, and support disciplined new store growth," according to its earnings statement.

Financial Impact and Additional Information

Grocery Outlet estimates that markdowns on inventory at closing stores could reduce its gross profit for fiscal 2026 by $4 million to $6 million.