Grocery Outlet Holding Corp.

Greetings and welcome to Grocery Outlet's Fiscal Fourth Quarter 2020 Earnings Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Joseph Pellant, Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good afternoon, everyone, and thank you for joining us on today's call to discuss Grocery Outlet's fourth quarter and full year 2020 financial results. Participants on this call will make forward-looking statements, including our outlook for fiscal 2021 and future performance that should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. A description of these factors can be found in this afternoon's press release, as well as in our 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. These statements are estimates only and not a guarantee of future performance. 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 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'll turn it over to Eric.

Thanks, Joe. Good afternoon and thank you for joining us today for the discussion of our fourth quarter fiscal 2020 results. Looking back at the year, I'm extremely proud of the work that we have done as we rose to the challenges and opportunities created by COVID. Our financial performance throughout this year demonstrates the strength and flexibility of our business model. For the full year 2020, we delivered new store growth of 10% with 35 stores open, despite the difficulties created by the pandemic. We also exceeded our long-term targets across key financial metrics, including top-store sales growth of 12.7%, gross margin expansion of 30 basis points to 31.1%, and adjusted EBITDA growth of 32%. We achieved those results by staying true to our business model, providing our customers with treasure hunts and ever-changing deals, friendly customer service, and a locally curated assortment provided by the independent operators. We worked closely with our supplier partners and leveraged our operational agility to meet consumers' needs, delighting them with unexpected deals each and every time they walked into a grocery outlet. Throughout this difficult period, our highly committed independent operators proved their resilience, dedication, and creativity in the many ways they helped each other and their communities. This included remaining in stock on essential items and keeping customers informed on the arrival of in-demand products, while maintaining clean and safe stores for their customers in an ever-changing landscape of requirements and protocols. True to our mission of touching lives for the better, we are committed to giving back to our communities with a focus on reducing food insecurity. Perhaps one of the greatest accomplishments last year was our Independence from Hunger campaign. It was a record year with customers donating $3 million to their local stores and Grocery Outlet contributing $1 million, with all money going directly to local charities. I want to thank our teams and thank our IOs once again for their extraordinary efforts. Our flexible business model, supported by many years of strategic investments, positioned us to deliver exceptional results in an unprecedented environment. We continue to build on our strong foundation and reinvest in our business. as we prepare for the many years of growth ahead. A big part of this investment has been our effort to attract, develop, and retain talent. We're very pleased to have assembled a group of highly accomplished and skilled team members across the organization. Our most recent senior executive hire is Tim Scott, our chief supply chain officer. Tim started this January and brings more than 20 years of business leadership and supply chain experience to Grocery Outlet. Most recently as a senior vice president, supply chain for Sobeys, one of Canada's largest grocery retailers. We look forward to Tim's contributions as we continue to develop our supply chain and support future growth. Our efforts to bring talented individuals with deep experience and new skill sets did not stop there. We also further expanded our board of directors, which now stands at 12 members. Most recently, we announced the addition of two new board members, Maria Fernanda Mejia who draws from her consumer goods experience across strategic planning, brand management, and supply chain, and Gail Moody-Berg, who has a wealth of experience in digital and brand marketing, demand generation, and merchandising. We are extremely pleased to have a diverse, well-rounded board of directors with a breadth of background, insights, and expertise that will benefit the business. As I stated earlier, the success we have achieved this year is attributable to a strong execution of our business model, which is differentiated in two primary ways. how we buy and how we sell. Our accomplishments throughout this year only further my confidence and excitement in the future growth potential of this business. Starting with the buy, we continue to closely partner with our strong network of suppliers as well as build new vendor relationships during 2020. We help them to manage unprecedented demand and swiftly changing consumer behavior during a challenging period. At the same time, we continue to ensure that we consistently meet the needs of our customers with a full assortment and great value. We could not have accomplished this if it were not for the strength of our buying organization and the infrastructure we have invested in for many years. Turning to the sell, IOs and their associates work tirelessly to serve their communities during periods of high demand and uncertainty. They further deepen relationships with their customers while introducing new shoppers to our value proposition. In addition to the ever-changing deals and extreme values, it is the customer loyalty garnered by our IOs through friendly and helpful service that drives return visits to the stores. For example, throughout the holiday season, several of our stores give back to their customers in need each year through random acts of kindness, selecting customers throughout the season to pay for their groceries at checkout. This type of unexpected generosity, the personal connection it creates with customers, is a great example of what sets our model apart. On the real estate front, we opened 35 stores in 2020, keeping pace with our stated objective of 10% unit growth annually, despite the hurdles created by COVID. We also continue to make progress in investing in infrastructure to position us for successful expansion in our existing West Coast markets, as well as in our Mid-Atlantic region. This year, we plan to open 36 to 38 stores and are excited to be reaching the 400 store mark this summer. These openings will include three to five new stores in the Mid-Atlantic region. In terms of IOs, we continue to build our pipeline of operators and training with high-quality candidates. We are receiving significant interest from quality candidates with grocery retail backgrounds, as well as candidates across a number of other industries that we believe will translate well into our business model. We remain focused on recruiting those who share the entrepreneurial spirit of our organization We continue to enhance our training program to become more scalable and efficient in order to support future store growth. Before I hand it off to RJ, I wanted to highlight a milestone in the history of Grocery Outlet. We've come a long way since Jim Reed founded the company in 1946, and 2021 marks our 75th anniversary. The business has evolved, but we've remained centered on delivering value through our unique business model, our focus on execution, and our commitment to our mission of touching lives for the better. As we reflect on our history, we're very proud of the impact we've been able to have over the past 75 years on the lives of our employees, independent operators, customers, suppliers, and all of those whom we've touched. As we look forward, we are energized by the opportunity to continue to expand this impact long into the future. I will now turn over the call to RJ.