In these tough times, some discount chains have been thriving, but California’s Grocery Outlet has been closing stores as it tries to remedy a hangover of overexpansion.
The Emeryville-based company earlier this month announced plans to close 36 underperforming stores nationwide because of overexpansion by the end of the year. Nine of those will be in California.
Grocery Outlet did not say which stores would close, but the advisory firm Gordon Brothers, the chain hired to handle its leases, listed 36 stores “available for sublease.”
Six Southern California stores appeared on the list: Azusa, Brawley, El Cajon, La Habra, Ontario and Poway.
In Central California, the Kerman, Patterson and Ridgecrest stores are expected to close. No stores in Northern California appeared on the list. Grocery Outlet did not respond to interview requests.
The company has not said if there will be layoffs associated with the closures.
Outside California, Grocery Outlet appears to be closing eight stores in Maryland, six in New Jersey and six in Ohio, as well as a few in Pennsylvania and Idaho. The company does not plan to fully exit any state.
Grocery Outlet still plans to open more than 30 stores in 2026. It has had a tough year, reporting a net loss of $225 million for fiscal year 2025, compared to a net income of $39 million in 2024.
“Our outlook for 2026 reflects a business that has more work to do than we expected,” Grocery Outlet Chief Executive Jason Potter said on an earnings call earlier this month.
Grocery Outlet is hoping to turn things around by closing struggling stores to focus on building clusters around its high-performing ones, said Catherine Douglas Moran, an editor at the trade publication Grocery Dive.
The company apparently got ahead of demand for its brand in an effort to cater to investors’ growth mindsets, Moran said. The closures in Cincinnati and Hazlet, N.J., indicate locations that opened in isolation struggled to perform.
The changes are meant to improve brand awareness and deepen the company’s knowledge of consumer demographics and shopping patterns, since managers of neighboring stores can share expertise, Moran said.
In December, Grocery Outlet told investors to expect weaker-than-usual sales because the government shutdown caused federal food assistance to lapse, according to a Securities and Exchange Commission filing. The company said in the filing that November 2025 comparable store sales from EBT were down more than 8% compared to last year.
Grocery Outlet, founded in 1946 in San Francisco, is known for selling discounted overstock items, such as holiday foods and drinks nearing expiration. The company and its subsidiaries have more than 560 stores across the U.S., most of which are on the West Coast.
A recent visit to the Grocery Outlet in Highland Park yielded creamsicle coconut milk for less than 50 cents, pumpkin spice Cheerios for less than $2, and cinnamon churro Nesquik powder—a limited edition flavor from 2024 for National Churro Day—for less than $3.
Grocery Outlet’s opportunistic sourcing model has cultivated a devoted fan base of TikTok bargain hunters. But when the chain enters new markets, there can be a learning curve for consumers new to the concept, Moran said, so opening stores in clusters may help word spread.
The company is facing growing competition in the discount grocery landscape.
German bargain grocer Aldi plans to open more than 180 U.S. stores this year. The chain, which has been rapidly expanding since inflation surged in 2021, has set a goal of 3,200 stores globally by the end of 2028.
Trader Joe’s has been on an expansion spree. Many Dollar General stores have begun selling fresh produce.
“Discounters are in this really tricky spot, where price is paramount, but they’re up against the likes of Walmart,” Moran said.
Walmart and Amazon have expanded grocery offerings and are scooping up wealthier consumers. Their massive size and efficient supply chains allow them to lower prices than competitors.
Lower-income consumers, facing tough economic pressure, are increasingly turning to food banks, Moran said. A November Pew Research Center study estimated that more than 40 million people in 22 million households receive monthly Supplemental Nutrition Assistance Program, or SNAP benefits.
In the latest earnings announcement, Potter said Grocery Outlet left its shoppers disappointed — and their baskets mostly empty — because stores didn’t offer enough “wow” deals on name-brand products.
The company has since expanded its distribution capacity and is reducing slow-selling stock to make more room for “opportunistic products” from name brands.
The chain is opening stores in California at the same time.
A Grocery Outlet recently opened on 6130 Sunset Blvd. in Hollywood, according to the new store’s social media posts. The chain is eyeing an expansion in Oakland and has signed a lease for the site of a former Walgreens near Lake Merritt, according to the Mercury News.
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