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Grocery Outlet($GO) Directors Invest $4.3 Million Over Six Months: Insider Conviction Strengthens Following Stock Plunge

05/13/2025 00:18

Small-cap discount grocery chain Grocery Outlet Holding Corp ($GO) has been showing noteworthy insider trading patterns recently. Particularly significant is the alignment between directors' aggressive buying activity following last quarter's stock plunge and the company's recently improved earnings, which has heightened investor interest. $GO's stock has demonstrated considerable volatility over the past six months. After maintaining levels around $15-16 in late 2024, the share price plummeted more than 30% in a single day on February 26, 2025, falling to $10.99 following disappointing Q4 results and weak guidance. The company projected adjusted EPS of $0.70-0.75 for 2025, significantly below analysts' expectations of $0.87. This prompted five brokerages, including Telsey Advisory Group, to lower their price targets. Grocery Outlet operates 543 stores across the United States as a discount grocery retailer with a unique business model that focuses on purchasing excess inventory from manufacturers and distributors to offer consumers significantly reduced prices. They differentiate themselves from major distribution chains by providing a 'treasure hunt' shopping experience aimed at price-sensitive consumers. Notably, following February's stock collapse, the company saw collective buying action from its board members. Starting with CFO Christopher Miller purchasing 10,000 shares ($116,800) on February 27, a sequence of buys followed between February 28 and March 4: Director Erik Ragatz (165,000 shares, $2,021,250), Director Kenneth Alterman (25,000 shares, $297,000), Director John Bachman (14,000 shares, $159,040), and Director Carey Jaros (5,000 shares, $57,000). This cluster buying suggests management viewed the stock drop as a buying opportunity and maintains confidence in the company's long-term value. Particularly noteworthy is Director Erik Ragatz's repeated substantial purchases. He acquired 110,000 shares ($2,007,500) in November 2024, 165,000 shares ($2,021,250) in February 2025, and most recently, an additional 19,000 shares ($274,740) on May 9, 2025. This pattern signals strong conviction in the company's fundamentals despite stock volatility. Conversely, Director Eric Lindberg Jr. executed large-scale selling from mid-August through September 2024, totaling approximately 400,000 shares (about $7.5 million). He continued selling in February and March 2025. According to footnotes, these transactions involved shares held by the Lindberg Irrevocable Trust, where Lindberg serves as trustee, making them indirect transactions. Additionally, the September 2024 sales involved exercising stock options scheduled to expire on October 21, 2024. Interestingly, multiple executives simultaneously sold shares in early March, but footnotes indicate these sales were primarily to satisfy tax withholding obligations upon the vesting of Restricted Stock Units (RSUs) and performance shares, representing technical necessities rather than investment decisions. On May 6, 2025, Grocery Outlet announced Q1 results that significantly exceeded market expectations. Adjusted EPS reached $0.13, surpassing analyst forecasts of $0.07 and representing a 44.4% increase from $0.09 in the same period last year. Revenue grew 8.5% to $1.13 billion, while comparable store sales growth was 0.3%, exceeding the projected 0.2%. This strong performance likely influenced Director Ragatz's additional purchase on May 9. Earlier, on April 16, Jefferies upgraded $GO stock from 'hold' to 'buy' and raised its price target from $13 to $18. Jefferies emphasized Grocery Outlet's defensive positioning and strong value proposition as crucial elements for growth potential amid economic uncertainty. Currently, $GO shares trade at $14.40 as of May 9, having declined approximately 11% year-to-date. Brokerage ratings show 2 'buys', 11 'holds', and 2 'sells', with a median price target of $14.50. Considering the insider trading patterns alongside recent performance improvements, Grocery Outlet appears to be gradually recovering after February's sharp decline. The management's aggressive buying activity particularly represents a positive signal indicating internal confidence in the company's long-term growth prospects. Nevertheless, intensifying competition in the grocery retail industry and evolving consumer spending patterns remain significant challenges.

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