Executive Summary

Q1 FY2025 (quarter ended March 29, 2025) delivered solid execution: net sales grew 8.5% to $1.13B, gross margin expanded 110 bps to 30.4%, and adjusted EBITDA rose 31.7% to $51.9M; however, GAAP EPS was a loss of $(0.24) due to $33.9M in restructuring charges .
Versus S&P Global consensus, revenue of $1.13B missed $1.20B and adjusted EPS of $0.13 missed $0.144; management emphasized beats versus internal outlook (gross margin, adj. EBITDA and EPS above guidance ranges) driven by lower shrink and better inventory execution . Consensus figures marked with an asterisk are from S&P Global (see Estimates Context).
Full‑year 2025 guidance was maintained except comps, which were lowered to 1%–2% (from 2%–3%) on softer basket and macro uncertainty; management reaffirmed gross margin, adjusted EBITDA, adjusted EPS, net new stores, and capex .
Call tone focused on execution: real‑time order guide rollout boosted DC fill rates to >99% (from 92–93%), PNW DC consolidation, and an indirect procurement program to fund reinvestment; basket rebuilding and value perception are key to re‑accelerating comps .
Potential stock catalysts: visible comp inflection as basket initiatives take hold; sustained margin gains from shrink reductions; delivery on cost‑savings and store refresh program; clarity on UGO integration timing (late 2026) .

What Went Well and What Went Wrong

What Went Well

Margin execution: Gross margin rose to 30.4% (+110 bps YoY) on tighter inventory management, with adjusted EBITDA +31.7% YoY; both gross margin and adjusted EPS exceeded the company’s outlook ranges .
Operations/system progress: Phase 1 of the real‑time order guide rolled out, lifting fill rates from 92–93% to >99% and improving in‑stocks; PNW DC consolidation to one facility targeted efficiency and service gains .
Strategic clarity and procurement: CEO articulated four imperatives (new store ROIC, talent, systems/execution, scale) and CFO launched an indirect procurement program (freight, pallets, IT, professional fees) to create reinvestment “fuel” .

Management quote: “We delivered solid first quarter results, with comp-store sales and gross margins slightly ahead of our outlook, driven by traffic growth and tighter inventory management.” — Jason Potter, CEO .

What Went Wrong

Top‑line vs Street: Net sales ($1.13B) and adjusted EPS ($0.13) were below Street consensus ($1.20B and $0.144), despite beating internal outlook; comps were +0.3% with pressure from lower average basket .
Comps outlook cut: 2025 comp guide reduced to 1%–2% (from 2%–3%) due to softer basket and macro uncertainty; April trends were “a little softer” than desired .
GAAP loss on restructuring: $(0.24) GAAP EPS and $33.9M restructuring charges weighed on reported profitability; SG&A deleverage also reflected UGO company‑operated store costs .

Financial Results

Headline P&L and Margins (oldest → newest)

Metric	Q4 2024	Q1 2025 (Current)	Q3 2025
Net Sales ($USD Billions)	$1.10	$1.13	$1.17
GAAP Diluted EPS	$0.02	$(0.24)	$0.12
Adjusted EPS	$0.15	$0.13	$0.21
Gross Margin %	29.5%	30.4%	30.4%
Adjusted EBITDA ($USD Millions)	$57.2	$51.9	$66.7
Adjusted EBITDA Margin %	5.2%	4.6%	5.7%

Notes: Q1 showed YoY gross margin expansion and strong adjusted EBITDA growth, but GAAP loss due to restructuring charges .

Comparable Sales and Traffic

KPI	Q4 2024	Q1 2025 (Current)	Q3 2025
Comparable Store Sales	+2.9%	+0.3%	+1.2%
Transactions (YoY)	+3.0%	+2.3%	+1.8%
Avg. Transaction Size (YoY)	Flat	(2.0%)	(0.6%)
Stores Opened / Closed	5 / 1	11 / 1	13 / 2
Ending Store Count	533	543	563

Cash Flow and Balance Sheet (Q1 2025)

Operating cash flow: $58.9M vs $7.8M LY, driven by working capital improvements .
Capex (net of TI): $57.3M vs $46.5M LY; investments in supply chain and new stores .
Cash: $50.9M; Total debt (net) $458.9M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable Store Sales	FY2025	2.0%–3.0%	1.0%–2.0%	Lowered
Net Sales	FY2025	$4.7B–$4.8B	$4.7B–$4.8B	Maintained
Gross Margin	FY2025	30.0%–30.5%	30.0%–30.5%	Maintained
Adjusted EBITDA	FY2025	$260M–$270M	$260M–$270M	Maintained
Adjusted Diluted EPS	FY2025	$0.70–$0.75	$0.70–$0.75	Maintained
Net New Stores (net)	FY2025	33–35	33–35	Maintained
Capex (net of TI)	FY2025	$210M	$210M	Maintained
Net Interest Expense	FY2025	~$38M (Q4 guide)	~$32M (updated)	Lowered
Restructuring Charges	FY2025	$52M–$61M (initial)	$59M–$61M (tightened)	Tightened range
Q2 Comps	Q2 2025	N/A	~1%	New quarterly color
Q2 Gross Margin	Q2 2025	N/A	30.0%–30.5%	New quarterly color
Q2 Adjusted EBITDA	Q2 2025	N/A	$62M–$65M	New quarterly color
Q2 Diluted EPS	Q2 2025	N/A	$0.16–$0.18	New quarterly color

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q3 2025)	Current Period (Q1 2025)	Trend
Systems/Tech (real‑time order guide)	Need to remediate systems; shrink pressure linked to conversion .	Phase 1 live, fill rates >99%, full rollout by end of Q2; improves matching supply/demand .	Improving execution; positive trajectory
Supply Chain & DC footprint	Emphasis on DC tools/processes for shrink; PNW network pre‑consolidation .	PNW consolidation to one DC; planning a low‑capex East DC to expand capacity .	Efficiency gains; capacity expansion
Comps: traffic vs basket	Q4 comps +2.9% with higher shrink .	Traffic +2.3% but basket −2.0%; April “a little softer”; comp guide cut to 1%–2% .	Traffic resilient; basket rebuild needed
Pricing/KVIs & value messaging	Value perception focus; shrink weighed on GM .	Tightening KVI gapping; experimenting with in‑store value communications .	Reinvesting in value perception
Cost actions	Restructuring initiated; 2025 charges guided .	Indirect procurement program (freight, pallets, IT, fees) to fund reinvestment .	Cost discipline accelerating
UGO integration	Acquisition completed in 2024 .	Sales growing in line; integration targeted late 2026 .	Longer‑dated synergy timeline
Regulatory/Compliance	—	FSMA 204 traceability software implementation with iFoodDS announced (supply chain visibility) .	Compliance capability building

Management Commentary

“We also exceeded our gross margin outlook by improving our shrink run rate through improved inventory visibility, reporting and execution.” — Jason Potter, CEO .
“Our planners also have full real‑time inventory visibility into the DC… enabling them to drive the flow of opportunistic product through the system.” — Jason Potter .
“We’re launching an indirect procurement efficiency program… freight, pallets, IT spend, professional fees… and consolidating PNW warehouses to capture efficiencies.” — Chris Miller, CFO .
“Despite continued strength in traffic… we now expect full year comp store sales growth to be between 1% and 2%.” — Chris Miller .

Q&A Highlights

Margin vs share trade‑offs: Management aims to create “optionality to be more aggressive” on value while protecting margins via cost savings; comps are “the #1 metric” and will be prioritized as capabilities ramp .
April/near‑term trends: April was softer than desired; no clear evidence of trade‑down; basket softness viewed as execution‑related (in‑stocks, quality, mix) .
RT order guide impact: Fill rates improved from 92–93% to over 99%; expected to translate to sales as rollout completes by end of Q2 .
Cost programs: Indirect procurement targeted at freight/supplies/IT and efficiencies from DC consolidation; savings to fund reinvestment and profitability .
UGO integration: Sales growing in line; integration planned for late 2026 .
Guidance clarifications: FY2025 comps lowered to 1%–2%; net interest expense reduced to ~$32M (from ~$38M); restructuring charges refined to $59M–$61M; Q2 guide: ~1% comps, 30.0%–30.5% GM, $62M–$65M adj. EBITDA, $0.16–$0.18 EPS .

Estimates Context

Metric	Consensus (S&P Global)	Actual	Surprise
Revenue	$1,203.2M*	$1,125.6M	Miss
Adjusted EPS	$0.144*	$0.13	Miss
EPS Estimates (count)	12*	—	—
Revenue Estimates (count)	10*	—	—

Values retrieved from S&P Global* Management noted adjusted EBITDA and adjusted EPS exceeded the company’s internal outlook ranges despite missing Street consensus, reflecting stronger‑than‑expected gross margin from shrink improvements .

Where estimates may adjust: Lowered full‑year comp guide (1%–2%) and softer April could drive downward revisions to revenue; margin execution and interest expense reduction (~$32M vs ~$38M prior) may support EPS resilience near term .

Key Takeaways for Investors

Execution > narrative: Tangible systems/operational progress (real‑time order guide, DC consolidation) is improving fill rates and shrink, supporting sustained gross margin at ~30%+ .
Near‑term comp headwind is basket: Traffic is healthy; focus on KVIs, in‑stocks and produce quality should aid basket rebuild through 2H, but timing uncertain; FY comp guide now 1%–2% .
Cost‑down funds offense: Indirect procurement and network efficiencies create reinvestment capacity to sharpen value messaging without sacrificing margin .
Quality of earnings: Q1 GAAP loss reflects restructuring; underlying adj. EBITDA +32% and GM +110 bps YoY indicate core improvement; monitoring SG&A leverage as UGO costs normalize .
Catalysts: Evidence of comp reacceleration (basket), continued shrink gains, rollout of store refresh program (piloted later in 2025), and clearer UGO integration milestones (late 2026) .
Risk checks: Macro sensitivity (consumer basket), ongoing systems/tool refinement, and store growth ROIC discipline amid tightened site selection .
Compliance/supply chain visibility: FSMA 204 traceability platform deployment should enhance supply chain data integrity and responsiveness .

Additional Relevant Press Releases (Q1 timeframe)

FSMA 204 traceability: Partnership to implement iFoodDS software to enhance traceability and visibility across the supply chain .

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