A discount grocery chain is continuing to shrink parts of its store network after acknowledging it expanded too quickly, with another round of closures adding to dozens of locations already eliminated this year.

The latest closures come as the retailer tries to balance removing stores that are unlikely to become sustainably profitable while continuing to open new locations in markets where it sees room to grow.

Founded in 1946, Grocery Outlet is an extreme-value supermarket chain that sells brand-name groceries and other products at discounted prices. The company operates 547 stores across 16 states.

Grocery Outlet closes 12 stores

Grocery Outlet (GO) closed 12 stores during the 13 weeks ended July 4, 2026, including nine locations tied to its Optimization Plan. The retailer ended the quarter with 547 stores across 16 states.

The Optimization Plan was launched in the first quarter of fiscal 2026 following a strategic, financial, and operational review of its store fleet. The plan originally called for the closure of 36 underperforming stores as Grocery Outlet sought to improve profitability, cash flow, and the productivity of its existing footprint.

By the end of the second quarter, the company had completed the shutdown of 40 stores, including all 36 locations identified under the plan.

The closures represented a significant reversal for a retailer that spent years pursuing aggressive store growth.

During the company’s fourth-quarter fiscal 2025 earnings call, CEO Jason Potter acknowledged that Grocery Outlet had expanded faster than the business could effectively support.

“It’s clear now that we expanded too quickly, and these closures are a direct correction,” said Potter.

The company has said it is not abandoning expansion altogether. Instead, it plans to take a more disciplined approach to new locations, including tighter site selection and a more clustered store strategy designed to improve supply chain efficiency and market leverage.

Grocery Outlet expects the Optimization Plan to generate an annualized adjusted EBITDA benefit of about $12 million. The company currently estimates that the plan will result in between $15 million and $24 million in net restructuring charges across fiscal 2026 and fiscal 2027, with the actions expected to be substantially completed by the first quarter of fiscal 2027.

Why Grocery Outlet is closing stores

The latest closures come as the retailer works to improve the productivity of its existing stores while maintaining overall sales growth.

During the second quarter of fiscal 2026, which ended July 4, 2026, comparable store sales declined 0.3% year over year. The decline was driven in part by a 2.1% drop in average transaction size, although the number of transactions increased 1.8%.

At the same time, net sales increased 1.1%, helped by new-store sales and partially offset by the impact of closures.

The numbers illustrate the challenge facing the retailer. Grocery Outlet is still adding revenue as it opens new stores, but sales productivity at existing locations remains under pressure.

The company is therefore using the closures to remove stores it believes do not have a viable path to sustained profitability while redirecting resources toward locations with strong potential. In its fourth-quarter results, Grocery Outlet said the 36 stores targeted by the Optimization Plan had been identified after rigorous review of the fleet.

The retailer is also continuing to invest in growth.

Grocery Outlet opened 10 new stores in the second quarter and has reaffirmed its expectations of opening 30 to 33 net new stores during fiscal 2026, excluding closures associated with the Optimization Plan.

The company says its future expansion will emphasize stricter site selection and a more clustered approach to new markets. That represents a significant change from the past expansion strategy that preceded the current round of closures.

Grocery Outlet is also rolling out a store refresh program designed to improve customer experience. The company said during its latest earnings call that it plans to expand the program to 100 stores by the end of 2026, with the initiative focused on store layouts, assortment, value messaging, and other aspects of the shopping experience.

Grocery retailers continue adjusting store networks

Grocery Outlet’s pullback comes as retailers across the industry continue to reassess their physical footprints and concentrate investments on locations with stronger long-term prospects.

The grocery industry remains highly competitive, with traditional supermarkets facing pressure from large-scale retailers and rapidly expanding discount chains, according to Kaizen Institute. Grocery Outlet’s own strategy shift shows that it is increasingly focusing on whether individual locations can generate sustainable returns.

The shift also underscores why store location remains important in grocery retail. Research from the Marketing Science Institute found that consumers can be reluctant to switch to other retail formats after their preferred supermarket closes, suggesting that retailers have an incentive to build loyalty and traffic before problems at an individual location force a shutdown.

Here’s some of my previous coverage of store closures:

• Grocery chain makes final major business closure
• Major grocery chain resumes store closures in 2026
• Grocery chain resumes store closures after monthslong pause

For Grocery Outlet, the current strategy is therefore less about abandoning physical expansion and more about becoming selective about where that expansion happens.

The retailer continues to see opportunities to grow, particularly in the East, but its latest moves show that future store openings will be measured against profitability, operational efficiency, and the ability to generate sustainable returns rather than simply increasing the store count.

Related: Grocery giant rethinks supply chain plans as store closures mount