Morgan Stanley Agrees With Grocery Outlet CEO On E-Commerce

The extreme value grocery chain Grocery Outlet Holding Corp GO has no plans to make a major push into e-commerce — a decision Morgan Stanley analysts agree with.

Grocery Outlet CEO: 'TJ Maxx Of Grocery'

Grocery Outlet is best described as the "TJ Maxx of grocery," as it targets consumers looking for "great deals" of 40-70% off frozen, fresh, produce and other products, CEO Eric Lindberg said on CNBC's "Mad Money" Friday.

The lower price proposition gives a leg-up against competitors, and there are no "immediate plans" for Grocery Outlet to make a push toward the online segment, he said. 

Grocery Outlet doesn't believe consumers will find a similar shopping experience online as they do in the store, the CEO said. Perhaps more importantly, Lindberg said he doesn't think rival grocers are making money in the online space by delivering food.

Morgan Stanley: 'Treasure Hunt' Store

Grocery Outlet offers consumers a "treasure hunt" experience in stores, and its entire business is built around its physical stores, Morgan Stanley analyst Simeon Gutman said in a Sunday note.

Granted, Grocery Outlet isn't immune to growing e-commerce penetration, especially with a customer base that spans income ranges and demographics, the analyst said. 

Over the next three to five years, Grocery Outlet could be forced to invest in an online presence, which would impact margins, Gutman said.

This should not be considered a "major risk," as overall online grocery penetration is still low, standing at an estimated 3% to 4%, according to Morgan Stanley.

Morgan Stanley has an Equal-weight rating on Grocery Outlet with a $39 price target. 

Grocery Outlet shares were trading 0.15% higher at $32.50 before the close Monday. 

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