11:56 AM EDT, 08/06/2025 (MT Newswires) -- Grocery Outlet's ( GO ) operational improvements are leading to margin stability and driving a stronger trajectory into H2, Morgan Stanley said in a note Wednesday.

The investment firm pointed to the rollout of real-time order guides and new ordering tools that are helping stores to better plan and balance product mix and drive double-digit category growth in test markets.

Gross margins are expected to stabilize between 30% and 30.5% in 2025, supported by internal initiatives and increasing private-label penetration, Morgan Stanley said.

The 2025 guidance appears achievable and the firm sees potential upside to 2026 and 2027 EBITDA supported by continued gross margin expansion, according to the note.

Meanwhile, Morgan Stanley noted that 2025 new store openings are trending ahead of expectations with about half of new stores opening in existing markets showing "early sign of progress."

Morgan Stanley upgraded the stock to equal-weight from underweight and raised its price target to $16 from $13.

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