Discount grocery chain Grocery Outlet is reshaping its national footprint, announcing plans to close 36 underperforming stores while continuing to expand with up to 33 new locations in 2026. The strategy highlights a growing trend in the retail sector: retailers are becoming more selective about store locations, prioritizing profitability and long-term market potential over sheer store count.
The California-based grocer says the closures are part of a broader “store optimization” initiative designed to redirect capital and operational resources toward stronger-performing markets.
A Strategic Reset for a Fast-Growing Discount Grocer
Headquartered in Emeryville, California, Grocery Outlet operates more than 560 stores across 16 states through its network of independent operators. The chain has built a loyal customer base by specializing in deep discounts on surplus and opportunistic inventory, a model that has become increasingly appealing to cost-conscious consumers.
However, even successful discount retailers face challenges when scaling rapidly.
The company confirmed that the closures will affect stores across California, Idaho, Pennsylvania, New Jersey, Maryland, and Ohio. These locations were identified as underperforming within the company’s portfolio and no longer aligned with its long-term growth strategy.
At the same time, Grocery Outlet plans to open between 30 and 33 net new stores in fiscal 2026, signaling that the company remains firmly committed to expansion—just with a more disciplined approach.
Leadership: Focus on Value Perception and Operational Efficiency
According to CEO Jason Potter, the company’s strategy centers on strengthening Grocery Outlet’s value proposition and improving store performance.
Potter emphasized that the retailer is working to restore what it calls its “opportunistic mix”—the rotating assortment of deeply discounted branded goods that differentiates the chain from traditional supermarkets.
He also highlighted the company’s store refresh program, which aims to modernize locations and improve the shopping experience.
In essence, the strategy combines three key initiatives:
•Closing weaker locations
•Reallocating resources to stronger markets
•Accelerating store upgrades and operational improvements
Early indicators, Potter noted, suggest the approach is already delivering measurable improvements.
Real Estate Repositioning Opens Opportunities for Retail Operators
To manage the closures, Grocery Outlet has partnered with real estate advisory firm Gordon Brothers to market the affected store leases and related assets.
The available locations include 14,000 to 30,000 square feet of retail space and are largely situated in established shopping centers and busy regional retail corridors.
From a commercial real estate perspective, these stores may represent attractive opportunities for other operators. Many include existing furniture, fixtures, and equipment (FF&E), which could allow new tenants to launch operations faster and at lower capital costs.
According to Gordon Brothers executive Al Williams, the combination of strong locations and existing infrastructure creates a significant “speed-to-market advantage” for retailers looking to expand.
The Bigger Picture: Retailers Are Optimizing, Not Retreating
Grocery Outlet’s move reflects a broader structural shift happening across the retail industry.
In recent years, retailers have learned that growth for growth’s sake can be costly. Instead, companies are increasingly focusing on store network optimization—closing weaker stores while investing more aggressively in profitable regions.
Even major chains in grocery, apparel, and electronics have adopted similar strategies, using detailed data analytics to evaluate store-level performance.
For Grocery Outlet specifically, the move underscores a key reality: the discount grocery segment remains highly competitive, with players like Aldi, Lidl, Walmart, and dollar-store chains all competing for value-focused shoppers.
By trimming underperforming locations and doubling down on high-potential markets, Grocery Outlet appears to be positioning itself for more sustainable long-term growth.
What to Watch Next
Looking ahead to 2026, three factors will determine whether Grocery Outlet’s optimization strategy succeeds:
•Execution of new store openings in stronger markets
•Effectiveness of the store refresh program in improving customer perception
•Continued demand for discount grocery models as inflation-sensitive consumers seek value
If executed well, the current restructuring could strengthen the company’s competitive position rather than signal retrenchment.
In today’s retail environment, the smartest expansion strategy may not be adding more stores—it may be having the right stores in the right places.
Source: Based on reporting from Chain Store Age