Grocery Outlet Holding Corp.

At this time, all participants are in listen-only mode. 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. And I would like to turn the conference over to your host, Arvind Bhatia, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us on today's call to discuss GroceryOculus' first quarter conference. 2022 financial results. Joining me on today's call are Grocery Outlet's Chief Executive Officer, Eric Lindberg, President R.J. Sheedy, and Chief Financial Officer, Charles Brocker. Following our prepared remarks, we will open the call for questions. This conference call is being webcast live, and a recording will be available via telephone 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 our outlook for fiscal 2022 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 file with the SEC, all of which may be found on our website at investors.groceryoutlet.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 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 tables included in this afternoon's press release and our SEC filing and the investors tab for our website. With that, it is my pleasure to turn the call over to Eric.

Thanks, Arvind. Good afternoon, everyone, and thank you for joining for our discussion of our first quarter results. We are very pleased with our first quarter performance and the continued advancement of our long-term growth strategies. We delivered strong top-line growth as comparable store sales increased 5.2%, well ahead of expectations. While average ticket was a primary driver of comp growth, we saw increasingly positive year-over-year traffic trends throughout the quarter. Traffic was also up sequentially compared to Q4. The momentum in our business is extending into the second quarter with continued strength in both traffic and ticket, further validating our belief that consumers are increasingly prioritizing value again. Our supply pipeline remains strong, and our IOs are excited about the positive trends in the business. We are making continued progress on our new initiatives to expand customer reach and increase share of wallet, including e-commerce, SKU expansion, and development of our mobile app. With increased confidence in our outlook, we are raising guidance for the full year, which Charles will discuss in further detail a little later. As you know, our value proposition is fueled in large part by our independent operators. I am pleased to share that they are energized by the momentum in the business and looking forward to delivering a very strong year. IOs are engaging with new customers and highlighting our industry-leading value and treasure hunt experience. We believe this will drive repeat visits and greater loyalty over the long term. Also, IOs are maintaining healthy in stock positions and product variety across departments as they continue to benefit from our flexible purchasing and merchandising approach. Our strong relationship with the IOs is supported by collaboration, transparency, timely and open communications, as well as ongoing training and field support. To that end, we continue to invest in systems and process improvements to help operators drive higher sales, improve their margins, and achieve greater efficiency. We solicit feedback regularly from our IOs, which allows us to identify sales and cost efficiency opportunities and areas where we can further support them. Meanwhile, we also continue to invest in our ability to attract, identify, recruit, and train future IOs. Our pipeline of IOs remains healthy, and we are pleased with the quality and quantity of individuals we continue to attract. Independence and autonomy continue to be the most important reasons for potential IOs to join Grocery Outlet. In addition, many operators are highly motivated by the opportunity to work with their family members and give back to their local communities. As a reminder, we strengthened our training program for future operators last year to include both in-store learning and a robust online platform. Through this comprehensive training program, aspiring operator trainees, or AOTs, have been able to leverage the experience and strengths of existing IOs while being supported by our field and corporate teams. To date, seven cohorts have gone through the new training program. The program has improved consistency in training and increased scalability due to its online component. As an example, one of the aspects of the training that gets high marks is a simulation exercise that allows AOTs to test their strategies and day-to-day execution in a virtual environment. Overall, we have received very positive feedback on the effectiveness of the new program, and we are continually working to make further enhancements going forward. Turning now to real estate, we opened four new stores and closed one location during the first quarter. We remain on track to open 28 net new stores during the year, including approximately 10 stores in the mid-Atlantic area as we expand our footprint in the east. The challenges we discussed on our last call related to labor and material shortages, along with longer lead times in lease execution and site permitting, continue to persist. However, based on our pipeline of deals already approved and the potential sites identified, we expect to return to a 10% unit growth beginning in 2023. Meanwhile, we remain pleased with the new store performance across markets, including recent vintages as they continue to ramp in line with our underwriting expectations. With respect to ESG, as many of you know, our historical growth has been powered by our unique business model in which sustainability is at the heart of our culture, our strategy, and our operations. Our opportunistic sourcing capability and flexible supply chain allow us to procure product that would otherwise go to waste. We empower operators to curate their assortments and offer these products at deep values to their local customers. We believe that building long-term win-win partnerships with our communities and our suppliers is essential to our business model and future growth. Moreover, we recognize that reducing waste and enhancing the productive use of resources is intrinsically tied to our operational excellence. And hence, true to our mission of touching lives for the better, we believe that sustainable business practices are essential to the creation of long-term value at Grocery Outlet. As we continue to grow our store footprint, we will have an even greater positive impact on communities, creating a virtuous cycle. As part of our ESG journey, we have formed a sustainability working group to identify and assess additional ESG factors that are material to our business. The group is helping develop strategies to support our ESG goals and formalize our disclosures to demonstrate progress. To that end, we are conducting a materiality assessment and gap analysis this year and expect to publish our first sustainability report next year. In addition, we have taken important steps to evolve our governance, including submitting shareholder proposals to eliminate certain supermajority voting provisions and to declassify our board by 2026. These changes reflect our natural progression as a public company and are aligned with the feedback received during our investor outreach in 2021. To conclude, we are extremely pleased with the momentum in our business, especially the strong engagement and enthusiasm of our IOs, as well as our healthy supply pipeline. Additionally, we continue to make progress on our strategic growth initiatives as we remain well-positioned to return to our 10% unit growth as we move forward. The strength in our business is the direct result of the hard work of our entrepreneurial independent operators, along with our dedicated team members in the field, our distribution centers, and our corporate offices. I am so very proud to work alongside these incredibly talented individuals, and I believe that we are stronger and better positioned today than at any other time in our history. With that, I'll turn the call over to RJ.