Grocery Outlet Holding Corp.

Good afternoon and welcome to Grocery Outlet's Fiscal Second Quarter 2021 Earnings Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. I would like to turn the conference over to Arvind Bhatia. Please go ahead.

Thank you. Good afternoon and thank you for joining us in today's call to discuss Grocery Outlet's third quarter 2021 financial results. Joining me on the call are Grocery Outlet's Chief Executive Officer, Eric Lindberg, President RJ Shidi, and Chief Financial Officer, Charles Brocker. Following our prepare the mark, we will open the call for questions. This conference call is being webcast live and a recording will be available via audio playback for approximately two weeks. It will also be archived in the investor relations section of our website. Participants on this call will make forward-looking statements, including statements regarding our outlook for the fourth quarter and fiscal 2021 and future performance. 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 filed at the SEC, all of which may be found on our website at investors.groceryoutlet.com or on sec.gov. Except as required by law, 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 will also 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 table included in this afternoon's press release, our SEC filing, and the Investors tab for our website. With that, I'll turn it over to Eric.

Thanks, Arvind. Good afternoon, everyone, and thank you for joining us for a discussion of our third quarter results. I'm pleased with our sales and margin performance during the third quarter, and I'm encouraged by the early momentum in Q4 with October comp sales flat to last year. We continue to offer the most compelling value in grocery retail by executing our core strategy leveraging our unique purchasing capabilities and passionate network of independent operators. We are also making progress on initiatives to further increase share of wallet and broaden our reach, including a strategic expansion of our assortment, the launch of an e-commerce pilot, and development of personalized customer marketing tools. We are as excited as ever about our runway to extend our reach through ongoing store growth as well as new digital opportunities. Reflecting confidence in the health of our business and our long-term growth potential, our Board of Directors has authorized a $100 million share repurchase program that complements our primary objectives of opening stores, reinvesting in existing fleet, and building a strong infrastructure for the future. Let me now take a moment to share with you some of our key priorities as we navigate the current environment. First, we are staying true to our model of offering great value to our customers. We remain focused on being the industry leader in optimistic sourcing, and our best-in-class buying team continues to execute at a very high level. In a dynamic supply chain environment, we are benefiting from the flexibility of our model and the nimbleness of our purchasing team to deliver customers a full assortment, as well as the deep discounts and treasure hunt experience that they expect. Second, we continue to strengthen our relationships with our IOs through a consistent engagement and improved support to help them better serve their customers. We just returned from a 10-city regional roadshow where we connected face-to-face with IOs, sharing ideas, listening to their feedback, and discussing strategies to drive sales, enhance operations, and collaborate even more effectively. While it's been a very challenging operating environment due to the inflation, labor, and supply chain issues, I'm humbled by the resilience and the can-do attitude and the entrepreneurial spirit that our IOs demonstrate every single day. They continue to have a positive impact on their local communities while delivering outstanding service to their customers. Third, we are improving our messaging and our marketing communication. While we continue to highlight our most compelling wow deals, we are also putting a spotlight on the broad selection and full shop that we provide. Our focus messaging will become even more important in the future as we strategically expand our product assortment, particularly in the key areas such as nosh and fresh. With respect to personalized customer marketing, we are making progress building the infrastructure required to test a mobile app in the first half of 2022. We are excited about the potential of this effort as we believe the capability to communicate new products and great values based on individual preferences will positively impact the customer experience. Fourth, our new store growth engine, which we believe remains our biggest driver of long-term shareholder value, remains healthy, both in terms of future pipeline and new store performance. During Q3, we opened seven new sites, ending the quarter with 407 stores. In terms of new unit productivity, we continue to be pleased with the early performance of the stores open this year, as well as the continued sales ramp of recent vintages across both infill and new markets. With respect for our real estate pipeline, we are tracking towards the new store goal we set forth at the beginning of the year. I want to thank our highly talented real estate team for their continued focus despite challenges in sourcing construction materials, equipment, and trade labor. As part of our fourth quarter openings, we are proud to be returning to Paradise, California, three years after the 2018 wildfire. Our operators Wayne and Olivia Kurtz are making incredible contributions in rebuilding after the fires that destroyed our store and most of the town. As we look beyond this year, we continue to find great sites across markets and as such remain excited about the long-term unit growth potential. Our real estate team has a strong lineup of new stores in 2022. While we don't know when building materials and labor challenges will ease, our construction team will continue to work creatively to navigate those headwinds to build our stores to the best of their ability. Looking forward, we remain focused on continuing to expand in existing and new markets as we make progress towards our full white space potential. In addition to our real estate pipeline, our pool of future IOs remains very healthy with a robust stream of potential recruits. We field over 20,000 leads annually from which we shortlist only the strongest candidates. We've evolved our training approach to include a virtual learning environment that supplements in-store training allowing us to leverage the strengths of our operator field and corporate teams. This enhanced training program for aspiring operators launched in the first quarter has yielded promising early results in terms of effectiveness, scalability, and community building. Finally, while our stores remain our priority, we're also very excited about the potential to reach more customers by adding the convenience of e-commerce. After giving careful consideration to the unique aspects of our opportunistic purchasing independent operator model. We recently initiated a pilot program with Instacart, which RJ will discuss in more detail. While the pilot has only just commenced, we, along with our independent operators, are very excited about the potential of this new channel to expand our reach and further leverage our existing retail footprint. Before turning it over to RJ, I want to thank the entire GEO community of operators, employees, and partners for their continued commitment to our mission, Touching Lodge to the Better. For our community of operators, employees, and partners, our business continues to deliver unbeatable food values, reduce food insecurity, positively impact local communities, and create economic opportunity for entrepreneurs and employees. While I'm constantly amazed by everything the operators are doing to help their communities, I'd like to share one example that struck a chord with me recently. Ellie and Rita Skeed in our Alameda store have donated more than 40,000 meals to a local food bank so far in 2021. In addition, they partner with the Do Good Foundation to feed homeless children and have raised funds for the Alameda Arts Association. Congratulations, Ellie and Rita, and a big thank you for your inspiring philanthropy and the leadership in your community. With that, I'd like to turn it over to RJ. Thanks, Eric.