During these difficult times, some discount chains have thrived, but California Grocery Outlet has closed its stores to ease the hangover of over-expansion.
The Emeryville-based company announced plans to close 36 underperforming stores nationwide earlier this month Overstretching until the end of the year. Nine of them will be in California.
Grocery Outlet did not say which stores would close, but consulting firm Gordon Brothers, the chain hired to handle its leases, listed 36 stores “available for sublease.”
Six Southern California stores were 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. There were no stores in Northern California on the list. Grocery Outlet did not respond to interview requests.
The company has not said whether there will be layoffs related to the closures.
Outside of California, Grocery Outlet appears to be closing eight stores in Maryland, six in New Jersey and six in Ohio, as well as some in Pennsylvania and Idaho. The company does not plan to leave any state entirely.
Grocery Outlet still plans to open more than 30 stores in 2026. The company had a difficult year, reporting a net loss of $225 million for fiscal 2025, compared to a net profit of $39 million in 2024.
“Our 2026 outlook reflects a business that is busier than we expected,” Grocery Outlet CEO Jason Potter said on a conference call earlier this month.
Grocery Outlet hopes to turn things around by closing struggling stores to focus on forming clusters around its high-performing stores, said Catherine Douglas Moran, an editor at trade publication Grocery Dive.
The company appears to have preempted demand for its brand to appeal to investors' growth mindset, Moran said. The closures in Cincinnati and Hazlet, New Jersey, suggest that locations that opened in isolation struggled to perform.
The changes are intended to improve brand awareness and deepen the company's knowledge of consumer demographics and shopping behavior by allowing managers from neighboring stores to share their expertise, Moran said.
In December, Grocery Outlet told investors to expect weaker sales than usual because the government shutdown caused federal food assistance to run out, according to a Securities and Exchange Commission filing. The company said in the filing that November 2025 comparable store sales as measured by EBT fell more than 8% year-over-year.
Founded in San Francisco in 1946, the Grocery Outlet is known for selling discounted overstock items, such as: E.g. festive foods and drinks that are close to their expiration date. The company and its subsidiaries have more than 560 stores in the United States, most of them on the West Coast.
On a recent visit to the Grocery Outlet in Highland Park, you could find Creamsicle coconut milk for less than 50 cents, pumpkin spice Cheerios for less than $2, and Cinnamon Churro Nesquik Powder — a limited-edition 2024 flavor for National Churro Day — for less than $3.
Grocery Outlet's opportunistic sourcing model has built a loyal following of TikTok bargain hunters. But as the chain expands into new markets, there can be a learning curve for consumers new to the concept, Moran said, so opening stores in groups could help spread the word.
The company faces growing competition in the discount grocery market.
The German discounter Aldi plans to open more than 180 US stores this year. The chain, which has been expanding rapidly since inflation spiked in 2021, has set a goal of opening 3,200 stores worldwide by the end of 2028.
Trader Joe's is expanding. Many Dollar General stores have begun selling fresh produce.
“Discounters are in a really tough situation where price is the priority, but they're up against companies like Walmart,” Moran said.
Walmart and Amazon have expanded their grocery offerings and are attracting wealthier consumers. Due to their massive size and efficient supply chains, they are able to lower prices compared to competitors.
Lower-income consumers facing severe economic pressures 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 most recent earnings release, Potter said Grocery Outlet left customers disappointed – and their baskets mostly empty – because stores didn't offer enough “wow” deals on branded products.
Since then, the company has expanded its distribution capabilities and reduced slow-selling inventory to make more room for “opportunistic products” from well-known brands.
At the same time, the chain is opening branches in California.
At 6130 Sunset Blvd. A grocery store was recently opened. in Hollywood, according to the new store's social media posts. The chain is planning to expand in Oakland and has signed a lease for the site of a former Walgreens near Lake Merritt Mercury News.
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