The Bay Area-based bargain grocer Grocery Outlet is closing 36 stores after it expanded too fast.
The closures are part of an optimization plan that will target financially underperforming locations as well as a distribution center facility that’s no longer in use. The closures will go into effect by the end of this year, the company’s chief executive said in an earnings call Wednesday.
Grocery giants Kroger and Albertsons also closed several locations last year and laid off hundreds of employees as inflationary pressures hit consumers and rising labor costs tightened margins.
Kroger, the parent company of California staples Ralphs and Food 4 Less, has been restructuring since a failed merger with Albertsons in 2024.
Grocery Outlet Chief Executive Jason Potter did not say there would be layoffs associated with the store closures.
“Following a rigorous analysis of the fleet, we identified 36 stores in the network that we concluded did not have a viable path to sustained profitability,” Potter said in the company’s latest earnings call. “It’s clear now that we expanded too quickly, and these closures are a direct correction.”
The company is still planning to open 30 to 33 new stores this year. It reported a net loss of $225 million for fiscal year 2025, compared to a net income of $39 million in 2024. Net sales increased 7.3% from 2024 to 2025.
In the fourth quarter of 2025, the company reported a net loss of $218 million. Shares have fallen more than 43% over the past year.
“We made progress on our strategic priorities in 2025; however, our fourth-quarter results made clear that we have more work to do,” Potter said.
Based in Emeryville, Grocery Outlet and its subsidiaries have more than 560 stores in 16 states, including California and Washington. Among the 36 stores slated for closure, 24 are in the eastern U.S. region.
Grocery Outlet locations are independently operated and geared toward affordability, targeting a value-seeking customer base. The chain has more than 100 locations in California, including several in the Los Angeles area.
The company’s new optimization plan is intended to “strengthen long-term profitability and cash flow generation, improve operational execution, optimize our existing store footprint and align with our disciplined new store growth strategy,” the company’s earnings release said.
The company estimated that its fiscal 2026 gross profit could be negatively impacted by $4 million to $6 million due to product markdowns at stores marked for closure.
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