Grocery Outlet operates as a retailer of consumables and fresh products through independently owned stores across the United States. According to the complaint, on November 7, 2023, CEO Robert Joseph Sheedy disclosed an ongoing systems transition that had started in August and was expected to be completed by the end of the year.

The class action lawsuit against Grocery Outlet alleges that, during the Class Period, the defendants made false and/or misleading statements or failed to disclose critical information. Specifically, the complaint claims that: (i) the defendants gave the false impression that they had reliable information regarding the completion of the systems transition and its potential impact, while downplaying the risks associated with setbacks that could negatively affect the company’s finances due to implementation errors and other challenges during the transition; (ii) in reality, the defendants’ assurances about the timing of the transition’s completion and its minimal impact on sales and margins were misleading, as they were overly optimistic about the company’s ability to carry out the systems upgrades without substantial financial setbacks; and (iii) Grocery Outlet was unprepared to effectively implement the transition as planned, despite repeated assurances that any issues would be resolved, and the transition would be completed on schedule.

The lawsuit further alleges that on May 7, 2024, the defendants released the financial results for the first quarter of fiscal year 2024. The results revealed a significantly greater-than-expected impact from the systems transition issues and much lower-than-expected guidance for the second quarter. Following this news, Grocery Outlet’s stock price dropped by more than 19%, according to the complaint.