Grocery Outlet Holding Corp.

Greetings and welcome to Grocery Outlet's fiscal third quarter 2020 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Pallant. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us on today's call to discuss Grocer Allett's third quarter financial results. Participants on this call will make forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such items, including our outlook for fiscal 2020 and future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A description of these factors can be found in this afternoon's press release, as well as in our latest prospectus and periodic reports we file with the SEC, all of which may be found on our website at investors.groceryallet.com or on sec.gov. We undertake no obligation to revise or update any forward-looking statements or information. During our call, we may reference certain non-GAAP financial information, including adjusted items. Reconciliations of GAAP to non-GAAP measures, as well as the description, limitations, and rationale for using each measure may be found in the supplemental financial tables included in this afternoon's press release in our SEC filings and the Investors tab of our website. We reference non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and the underlying results of our business. Presenting on today's call will be Grocery Outlet's Chief Executive Officer, Eric Lindberg, President RJ Sheedy, and Chief Financial Officer Charles Brocker. Following our prepared remarks, we will open the call for questions. With that, I will turn it over to Eric.

Thanks, Joe. Good afternoon, everyone. I'm very pleased with our third quarter results as we continue to leverage our flexible and differentiated business model. Our performance reflects our commitment to providing our customers unbeatable values in a treasure hunt of ever-changing products along with friendly customer service and a locally curated assortment provided by our independent operators. For the third quarter, we generated 17% revenue growth, driven by 35 net store openings since the end of the same period last year, in combination with 9.1% comp increase. This follows a 5.8% comp increase in the third quarter last year. Our strong comp performance was driven by higher basket size as customers continue to consolidate their shopping trips. Gross margin expanded 40 basis points ahead of our expectations, primarily through the reduction in product markdowns and throwaways. Adjusted EBITDA increased 25% despite elevated costs related to COVID and reinvestments back into our business to support our long-term growth strategies. The consistency of our results would not be possible without the hard work and dedication of our entire team, including our IOs and their store associates, Our operators do an extraordinary job of creating a safe, friendly, and exciting shopping environment. They actively engage with local consumers through social media and by personally connecting with customers in our stores. Over seven decades, we have developed tremendous customer loyalty as we've remained focused on delivering deep values and a fun treasure hunt shopping experience for our customers. We know that our customers shop our stores in different ways and for different reasons. some because they are on a limited budget and rely on us for our great values, and others because they just enjoy treasure hunt experiences and are seeking great deals. And we love to hear feedback from all of them. A few standout customer comments we recently received include, from a customer in Springfield, Oregon, I love shopping here. I can get my money's worth in a hard economy. And from one of our fans in Santa Barbara, California, I love this store. They are innovative and always well-stocked with lots of cool things. And this one, one of my favorites, which came in from a response to one of our Instagram posts. I like to wake up to a big bowl of bargain bliss before a hard day at the office. Thanks for being there for me. These testimonials are great illustrations of our strong connection with customers and the unique value proposition that our model delivers. While we're always looking to strengthen our relationships with our existing customers, we're equally focused on bringing Grocery Outlet's model to new communities and expanding our retail footprint. To that end, we opened 10 new stores during the third quarter, with seven more expected to open in the fourth quarter. This will bring our total 2020 store openings to 34, representing approximately 10% unit growth. Looking forward, we remain pleased with the health of our real estate pipeline in support of our 10 percent annual unit growth objective. As we have discussed previously, we have significant white space in front of us, which we believe supports over 1,500 new stores in existing states and neighboring markets. Our business model is rooted in value. It has a broad customer appeal. This has resulted in a store model that has proven to be highly portable with strong performance across geographies, urbanicities, and with customers at various income levels. We have made great progress this year in establishing our foundation for growth in the Mid-Atlantic region, where we plan to open approximately three to five stores next year. We remain focused on building our pipeline to support ongoing growth in this region, and we are very encouraged by both the quality of the real estate sites we're seeing and the operator talent we're finding. While we're energized about the growth potential of the East, we will manage this expansion with the same disciplined growth we have taken in the West. Our first priority is to ensure we maintain high standards in freshness, product assortment, merchandising, cleanliness, and safety. These standards ensure that we'll provide a consistent customer shopping experience as we continue to grow brand awareness in the market. I recently had an opportunity to tour the stores in Pennsylvania and held a small town hall meeting with our team. I want to thank our entire team for their incredible execution as I was extremely pleased to see the engagement and the enthusiasm of our I.O.s. I can honestly say that the stores have never looked better from a merchandising, freshness, and visual presentation perspective, so we continue to be very pleased with our results. As we look forward, we remain committed to reinvesting back in the business across talent and infrastructure, as well as operational and systems enhancements as we scale for the long-term growth. We've added some incredible talent to our organization over the last 12 months, and I'm very pleased to share that we recently hired Harrison Lewis to be our Chief Information Officer. Harrison brings over 30 years of business leadership and IT experience to Grocery Outlet, including the design and integration of digital platforms, AI and big data adoption, and cloud-based operations. His knowledge and expertise make him a great complement to our leadership team, and we are excited to have him on board. In summary, I'm extremely proud of our operating results and the continued strong execution on behalf of our entire organization this year. We have a long track record of consistent performance in various economic cycles, and we have again proven our ability to react swiftly and effectively in uncertain times. We continue to see enormous growth opportunity in front of us and are making the right investments to scale our business for long-term success. We look forward to updating you on that progress in the future. With that, I'll turn it over to RJ.