What changed in this filing

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Item 1. Business

2023-03-01 compared with 2022-03-02 · 99 added, 109 removed, 249 unchanged (46% of the section changed)

Grocery Outlet is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores.

As of January 1, 2022, we had 415 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada and New Jersey.

As of December 31, 2022, we had 441 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, Maryland and New Jersey.

Our headquarters is in Emeryville, California.

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IOs initially contribute capital to establish their business and share store-level gross profits with us.

These factors both align our interests and incentivize IOs to aggressively grow their business to realize substantial financial upside.

These factors both align our interests and incentivize IOs to grow their business profitably to realize financial upside.

This combination of local decision-making supported by our purchasing scale and corporate resources results in a "small business at scale" model that we believe is difficult for competitors to replicate.

Our value proposition has broad appeal with bargain-minded customers across all income levels, demographics and geographies.

Our value proposition has broad appeal with bargain-minded customers across a broad range of income levels, demographics and geographies.

We believe that our sustained focus on delivering ever-changing "WOW!" deals within a fun, treasure hunt shopping environment has generated strong customer loyalty and brand affinity.

We believe that our broad customer appeal supports significant new store growth opportunities, and we plan to continue to expand our reach to additional customers and geographies across the United States.

Our stores have generally performed well across all economic cycles, as demonstrated by our pattern of positive comparable store sales growth and gross margin, including during the economic downturn in the years 2009 and 2009.

However, our comparable store sales decreased in fiscal year 2021 as we lapped heightened demand during the onset of the COVID-19 pandemic in 2020.

Our model is also somewhat insulated from store labor-related variability because IOs directly employ their store workers.

The result is a highly scalable business with lower corporate fixed costs, providing further protection in the event of an economic downturn.

Our stores generally have performed well across all economic cycles, as demonstrated by our pattern of positive comparable store sales growth and healthy gross margin rates.

Our comparable store sales decreased in fiscal 2021 (for the first time in 18 years) as we lapped heightened demand during the onset of the COVID-19 pandemic in 2020.

Our business returned to have positive comparable store sales in fiscal 2022.

Our model also is somewhat insulated from store labor-related variability because IOs directly employ their store workers.

The result is a highly scalable business with lower corporate fixed costs, providing further protection in the event of an economic downturn and growth opportunities in a strong economy.

Our founder, Jim Read, pioneered our opportunistic buying model in 1946 and subsequently developed the IO selling approach, which harnesses individual entrepreneurship and local decision-making to better serve our customers.

Underlying this differentiated model was a mission that still guides us today:

"Touching Lives for the Better." Since 2006, the third generation of Read family leadership, Eric Lindberg, Jr., Chief Executive Officer, and MacGregor Read, Jr., Vice Chairman of our Board of Directors, have advanced this mission.

"Touching Lives for the Better." Since 2006, the third generation of Read family leadership, Eric Lindberg, Jr., Chairman of our Board of Directors (and Chief Executive Officer during fiscal 2022), has continued to advance this mission.

Grocery Outlet Holding Corp.

was incorporated in Delaware on September 11, 2014.

In 2014, an investment fund affiliated with Hellman & Friedman LLC acquired approximately 80% of our common stock, with management and family retaining approximately 20%.

In June 2019, we completed the initial public offering of our common stock.

Hellman & Friedman distributed the remainder of its holdings in our common stock to its equity holders in May 2020.

Hellman & Friedman LLC, our former private equity sponsor, distributed the remainder of its holdings in our common stock to its equity holders in May 2020.

Our common stock trades on the Nasdaq Global Select Market under the symbol "GO".

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We expect that our compelling value proposition will continue to enable us to attract new customers, drive repeat visits, increase basket sizes for existing customers and, as a result, generate strong comparable store sales growth.

We plan to increase comparable sales by (i) delivering more opportunistic deals and expanding our offerings;

We strive to increase comparable sales by (i) delivering more opportunistic deals and expanding our offerings;

(ii) supporting our IOs in enhancing the customer experience through inventory planning and other tools;

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Our seasoned management team has a proven track record of growing our business while maintaining a disciplined cost structure.

Over the past six years, we have made significant investments that have laid a solid foundation for future growth.

Over the past several years, we have made significant investments that have laid a solid foundation for future growth.

We have implemented and will continue to identify and implement productivity improvements through both operational initiatives and system enhancements.

We intend to reinforce our value proposition and drive further growth by reinvesting future productivity improvements into enhanced buying and selling capabilities.

Fiscal 2021 and Recent Developments

COVID-19 Pandemic.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus, COVID-19, a global pandemic and recommended containment and mitigation measures worldwide.

During the third and fourth quarters of fiscal 2021 and continuing into fiscal 2022, there were surges of positive COVID-19 cases related to the Delta and Omicron variants around the country, including all the states in which we operate.

In fiscal 2021, and ongoing to an extent, consumer behavior has been impacted by increased consumer mobility and travel, higher food-away-from-home spend, continued consolidation of grocery store visits, elevated grocery e-commerce usage and higher levels of government stimulus, leading consumers to prioritize convenience over value and negatively impacting our sales.

We and our IOs also had in fiscal 2021, and continue to have, challenges with staffing, inventory supply and timing, and distribution and logistics.

Further, planned construction and opening of new stores also have been, and may continue to be, negatively impacted due to increased time periods to get materials such as steel, obtain permits and licenses and set up utilities.

Additionally, certain fixture upgrades and new refrigeration units now have longer lead times.

Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on the impact of COVID-19 and supply chain, labor, transportation, new store and inflation impacts.

In spite of these headwinds, we believe the flexibility of our unique buying model, our strong vendor relationships and our agile approach to inventory management have allowed us to maintain healthy inventory levels and an assortment of products for our customers.

Recently, we entered into a pilot partnership with Instacart to test online shopping at 68 stores in California.

We believe an e-commerce channel may allow us to expand our reach to existing and new customers and further leverage our existing retail footprint.

Macroeconomic Conditions.

During fiscal 2022, our business was and continues to be impacted by current macroeconomic conditions including supply chain and labor challenges, inflation, and changes in consumer behavior.

Our IOs also faced and continue to face staffing challenges and increased labor costs within their businesses.

Like many companies in the grocery and retail sectors, we continue to experience increased product costs, which is being reflected in part in higher retail pricing.

These cost increases resulted in part from supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain and other disruptions.

We continue to utilize our unique buying model, our strong vendor relationships and our agile approach to inventory management to offer customers a compelling product assortment at a deep competitive value.

Additionally, planned construction and opening of new stores during fiscal 2022 was, and may continue to be, negatively impacted due to both increased lead times to acquire materials, obtain permits and licenses as well as higher construction and development related costs.

In fiscal 2022, we opened 27 new stores, which was below our long-term strategic goal of 10% unit growth.

During fiscal 2021 and 2022, we entered into partnerships with three third-party grocery delivery companies to provide online shopping at most of our stores.

We believe this e-commerce channel may allow us to expand our reach to existing and new customers and further leverage our existing retail footprint.

Products and Pricing

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Our product offering includes a constant rotation of opportunistic products, complemented by an assortment of competitively priced everyday staples, across grocery, produce, refrigerated and frozen foods, beer and wine, fresh meat and seafood, general merchandise and health and beauty care.

These products include a wide selection of Natural, Organic, Specialty and Healthy ("NOSH") products.

In fiscal 2021, we began a strategic effort to expand our product assortment, particularly in key everyday areas such as NOSH and fresh, ethnic and local products.

A typical Grocery Outlet basket is priced approximately 40% lower than conventional grocers and approximately 20% lower than the leading discounters.

We have continued to expand our product assortment to meet customer needs, including a wide selection of Natural, Organic, Specialty and Healthy ("NOSH"), fresh, ethnic and local products.

A typical Grocery Outlet basket is priced approximately 40% lower than conventional grocers and approximately 20% lower than discount retailers.

Opportunistically sourced products represent approximately half of our purchasing mix.

We refer to our best opportunistic purchases as "WOW!" deals, which generally represent deep discounts of 40% to 70% relative to conventional retailers.

We refer to our best opportunistic purchases as "WOW!" deals, which generally represent deep discounts of 40% to 70%

relative to conventional retailers.

These products encourage repeat shopper visits and typically sell quickly due to their compelling value, short duration and continually changing availability.

Our flexible sourcing and supply chain model differentiates us from traditional retailers and allows us to provide customers quality, name-brand consumables and fresh products at exceptional values.

Our flexible sourcing and supply chain model differentiates us from traditional retailers and allows us to provide customers with quality, name-brand consumables and fresh products at exceptional values.

We take advantage of opportunities to acquire merchandise at substantial discounts that regularly arise from order cancellations, manufacturer overruns, packaging changes and approaching "sell-by" dates.

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Our centralized sourcing team, consisting of our purchasing and inventory planning groups, have deep experience and decades-long relationships with leading CPG companies.

Our team is highly selective when evaluating the growing number of opportunities available to us and maintains a disciplined yet solutions-oriented approach.

Our team is highly selective when evaluating opportunities available to us and maintains a disciplined yet solutions-oriented approach.

We are always seeking out and developing new supplier relationships to acquire desirable products at discounts that excite our customers.

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As we grow, we expect to have even greater access to quality merchandise due to our increased scale, broader supplier awareness and expanded geographic presence.

While COVID-19 has caused CPGs to reduce SKU assortment, we believe that this is temporary and we expect the supply of opportunistic products to continue to expand as incumbent CPGs continue to invest in new products, brands and marketing.

While recent macroeconomic conditions have caused CPGs to reduce SKU assortment, we believe that this is temporary and we expect the supply of opportunistic products to expand as incumbent CPGs continue to invest in new products, brands and marketing.

Additionally, we believe that changing consumer preferences will continue to support the proliferation of small and innovative CPG brands, and allow us to add new suppliers to our network.

We supplement our opportunistic purchases with competitively priced everyday staples in order to provide a convenient shopping experience.

We typically source these staple products (e.g., milk, eggs, sugar) from multiple suppliers to lower our costs and we avoid long-term supply commitments to maintain the flexibility to pursue opportunistic buys as they arise.

We typically source these staple products (e.g., milk, eggs, sugar) from multiple suppliers to lower our costs and we generally avoid long-term supply commitments to maintain the flexibility to pursue opportunistic buys as they arise.

Supply Chain and Distribution

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Deliveries to our stores occur from our distribution centers or directly from our suppliers.

We distribute inventory through eight primary distribution centers.

We operate three distribution centers and use five distribution centers operated by third parties.

We distribute inventory through eight primary distribution centers, three of which we operate and five of which are operated by third parties.

We have an in-house transportation fleet as well as strong transportation partner relationships that provide consistent performance and timely deliveries to our stores.

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Independent Operators

IOs are independent business entities owned by one or more entrepreneurially minded individuals who typically live in the same community as their store with a focus on ordering and merchandising the best products for their communities,

providing personalized customer service and driving improved store performance.

The vast majority of the IOs operate a single store, with most working as a two-person team to leverage complementary operator skill sets.

The vast majority of the IOs operate a

single store, with most working as a two-person team to leverage complementary operator skill sets.

We encourage the IOs to establish local roots and actively participate in their communities to foster strong personal connections with customers.

We generally share 50% of store-level gross profits with IOs, thereby incentivizing them to grow their business and realize substantial financial upside.

We generally share 50% of store-level gross profits with IOs, thereby incentivizing them to grow their business profitably and realize financial upside.

The independent operator agreement (the "Operator Agreement") that we sign with each IO gives the IO broad responsibility over store-level decision-making, unlike a store manager of a traditional retailer.

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Our collaborative relationship with the IOs creates a powerful selling model allowing us to deliver customers exceptional value with a local touch.

As of January 1, 2022, 411 of our 415 stores were operated by IOs.

As of December 31, 2022, 438 of our 441 stores were operated by IOs.

We have entered into an Operator Agreement with each IO, which grants that IO a license to operate a particular Grocery Outlet Bargain Market retail store and to use our trademarks, service marks, trade names, brand names and logos under our brand standards.

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The success of this licensing arrangement depends upon mutual commitments by us and the IO to cooperate with each other and engage in practices that protect our brand standards and the reputation of our brand and enhance the sales, business and profit potential of the IO's store.

The Operator Agreement provides that either the IO or we may terminate the Operator Agreement for any reason on 75 days' written notice, or may terminate the Operator Agreement immediately for cause.

The Operator Agreement provides that either the IO or we may terminate the Operator Agreement for any reason on 75 days' written notice, and that we may terminate the Operator Agreement immediately for cause.

IOs are responsible for operational decision-making for their store, including hiring, training and employing their own workers as well as ordering and merchandising products.

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As consignor of all merchandise, the aggregate sales proceeds belong to us.

We, in turn, pay IOs a commission which is generally 50% of the store's gross profit in exchange for the IO's services in staffing and operating the store.

We, in turn, pay IOs a commission that is generally 50% of the store's gross profit in exchange for the IO's services in staffing and operating the store.

Any spoiled, damaged or stolen merchandise, markdowns or price changes impact gross profit and therefore the IO's commission.

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The Operator Agreement specifies the retail store that the IO is entitled to operate, but it does not grant the IO an exclusive territory, restrict us from opening stores nearby, or give the IO preference to relocate to another store as opportunities arise.

As the store tenant, we fund the build-out of the store including racking, refrigeration and other equipment and pay rent, common area maintenance and other lease charges.

As the store tenant, we fund the build-out of the store including racking, refrigeration and other equipment (which we maintain ownership of) and pay rent, common area maintenance and other lease charges.

IOs must cover their own initial working capital requirements and acquire certain store and safety assets.

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The IOs are required to hire, train and employ a properly trained workforce to enable the IO to fulfill its obligations under the Operator Agreement.

IOs are responsible for expenses required for business operations, including all labor costs, utilities, credit card processing fees, supplies, taxes (i.e.,

withholding, contributions and payroll taxes and income taxes on commissions paid to them), fines, levies and other expenses attributable to their operations.

In a typical year, we field over 20,000 leads for prospective new IOs annually in pursuit of smart and entrepreneurially minded retail leaders to support our continued growth.

IOs are responsible for expenses required for business operations, including all labor costs, utilities, credit card processing

fees, supplies, taxes (i.e., withholding, contributions and payroll taxes and income taxes on commissions paid to them), fines, levies and other expenses attributable to their operations.

In a typical year, we receive and filter thousands of leads for prospective new IOs in pursuit of smart and entrepreneurially minded retail leaders to support our continued growth.

After a robust screening and interview process, we select the top candidates to enter a rigorous Aspiring Operator in Training ("AOT") program with the goal of potentially becoming an IO.

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Our Stores and Expansion Opportunities

As of January 1, 2022, our 415 total stores averaged approximately 14,000 square feet on the sales floor.

As of December 31, 2022, our 441 total stores averaged approximately 14,000 square feet on the sales floor.

We lease substantially all of our store locations, with initial lease terms of generally ten years and options to renew for two or three successive five-year periods.

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We further believe the success of our stores across a broad range of geographies, population densities and demographic groups creates a significant opportunity to profitably increase our store count.

In fiscal 2021 we opened 36 new stores, including 24 in California, five in Washington, three in Oregon, two in Pennsylvania, one in Idaho and one in New Jersey.

In fiscal 2022 we opened 27 new stores, including 12 in California, seven in Pennsylvania, three in Idaho, three in Maryland, one in Oregon and one in New Jersey.

We have a dedicated real estate team that utilizes a rigorous site selection process in order to source new store locations that generate strong overall returns.

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We target new stores of between 15,000 and 20,000 total square feet with an average of 4,000 square feet of non-selling space at an average net cash investment of approximately $2.0 million including store buildout (net of contributions from landlords), inventory (net of payables) and cash pre-opening expenses.

As a result of earlier mentioned macroeconomic conditions, including supply chain and labor challenges, we have seen increased construction and development related costs that have impacted our average net cash investment in the near term.

Based on our historical performance, we target sales of $5.5 million during the first year with sales increasing 25% to 30% cumulatively until reaching maturity in four to five years.

Our underwriting criteria target an average year-four cash-on-cash return of approximately 35% and an average payback on investment within four years.

On average, our stores achieve profitability during the first year of operations.

On average, we aim for our stores achieve profitability during the first year of operations.

We intend to continue to expand our reach to additional customers and geographies across the United States.

We believe that consumers' search for value will continue to be an important factor in retail.

Moreover, as Millennials mature and Baby Boomers age, we believe that they are increasingly focused on value, driving shopper traffic towards the deep discount channel.

Moreover, we believe that they are increasingly focused on value, driving shopper traffic towards the deep discount channel.

In the near term, we plan to grow our store base to capture whitespace in existing markets as well as contiguous regions.

Based on our experience, in addition to third-party research, we believe existing and neighboring states can support a total of approximately 1,900 stores.

The COVID-19 pandemic has had significant issues on new store development, including labor and materials shortages as well as longer lead times in lease execution, site permitting and

construction.

While these challenges will impact our new store growth in 2022, our goal is to expand our store base by approximately 10% annually by penetrating existing and contiguous regions.

The COVID-19 pandemic and the current macroeconomic environment have contributed to significant issues with new store development, including labor

and materials shortages as well as longer lead times in lease execution, site permitting and construction.

While these challenges impacted our new store growth in 2022 and are expected to impact our new store growth in the first half of 2023, our long-term strategic goal is to expand our store base by approximately 10% annually by penetrating existing and contiguous regions.

Over the long term, we believe the market potential exists to establish 4,800 locations nationally.

Our ability to consistently deliver "WOW!" deals that generate customer excitement is our strongest marketing tool.

Our value proposition has broad appeal, with all bargain-minded consumers.

We believe our value proposition has broad appeal with bargain-minded consumers.

We promote brand awareness and drive customers to shop through centralized marketing initiatives along with local IO marketing efforts.

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We reinforce these efforts with in-store price and item signage as well as outdoor marketing via billboards and truck wraps.

In fiscal 2021, we made progress building the infrastructure to test a mobile app in 2022 that would increase personalized customer marketing.

In fiscal 2022, we tested and began piloting a mobile personalization app that we plan to launch to all of our stores during fiscal 2023.

The app tracks customer savings and provides new, trending and top selling items as well as curated product recommendations based on user preferences.

IOs develop and fund their local marketing plan to drive customer engagement.

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The competitive landscape is highly fragmented and localized;

however, our customers most often cite Safeway as the retailer where they also shop for consumables.

We see discount retailers of consumable products, which include Walmart, WinCo, Aldi and Lidl, as competitors given their broad product offerings at low prices relative to conventional grocery stores.

however, our customers most often cite Walmart and Safeway as retailers where they also shop for consumables.

We see discount retailers of consumable products, which include Costco, WinCo, Target, Trader Joe's, Aldi and Lidl, as competitors given their broad product offerings at low prices relative to conventional grocery stores.

We compete with both conventional grocery stores and discounters by offering an ever-changing selection of name-brand products in a fun, treasure hunt shopping environment at a significant discount.

Many competitors and a number of pure online retailers are attempting to attract customers by offering various forms of e-commerce.

We have embraced online and digital marketing and are committed to rolling out online shopping to our stores through our recent partnership with Instacart.

We have embraced online and digital marketing, including recently piloting a mobile personalization app and rolling out online shopping to our stores through partnerships with online grocery delivery companies.

Beyond competition for consumers, we compete against a fragmented landscape of opportunistic purchasers, including retailers (e.g., Big Lots and 99 Cents Only) and wholesalers to acquire excess merchandise for sale in our stores.

Our established relationships with our suppliers along with our distribution scale, buying power, financial credibility and responsiveness often makes us the first call for available deals.

Our established relationships with most of our suppliers along with our distribution scale, buying power, financial credibility and responsiveness often makes us the first call for available deals.

Business Technology

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We modify, update and replace our systems and infrastructure from time to time, including by adding new hardware, software and applications;

maintaining, updating or replacing legacy programs, converting to enhanced systems;

maintaining, updating or replacing legacy programs;

converting to enhanced systems;

integrating new service providers;

and adding enhanced new functionality, such as cloud computing technologies.

In addition, we have a customized enterprise resource planning system, components of which have been replaced and additional components of which we are replacing over the next several years, including our financial ledger, inventory management platform and product data warehouse system.

In addition, we have a customized enterprise resource planning system, components of which have been replaced and additional components of which we are currently replacing, including our financial ledger, inventory management platform and product data warehouse system.

We also will continue to identify and implement productivity improvements through both operational initiatives and system enhancements, such as category assortment optimization, improved inventory management tools and greater purchasing specialization.

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Trademarks and Other Intellectual Property

We own federally registered trademarks related to our brand, including "GROCERY OUTLET BARGAIN MARKET", "WOW!", "NOSH" and "BARGAINS ON BRANDS YOU TRUST!" In addition, we maintain trademarks for the images of certain logos that we use, including the "GROCERY OUTLET BARGAIN MARKET" logo, the "NOSH" logo and the "WOW!" logo.

We own federally registered trademarks related to our brand, including "GROCERY OUTLET BARGAIN MARKET", "WOW!", "NOSH" and "BARGAIN BLISS" In addition, we maintain trademarks for the images of certain logos that we use, including the "GROCERY OUTLET BARGAIN MARKET" logo, the "NOSH" logo and the "WOW!" logo.

We are also in the process of pursuing several other trademarks to further identify our services.

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Our Operator Agreement grants the IOs a limited, non-exclusive license to use our trademarks solely in connection with the operation and promotion of their store and not in connection with other activities.

IOs are not permitted to sublicense our trademarks to others.

To maintain quality of use of our trademarks, we exercise actual control over the IO's use of our trademarks and IOs are not permitted to sublicense our trademarks to others.

We attempt to obtain registration of our trademarks as practical and pursue infringement of those marks when appropriate.

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Department of Agriculture (the "USDA") the Consumer Product Safety Commission and the Environmental Protection Agency.

We and the IOs are also subject to various federal, state and local laws and regulations, including those governing labor and employment, including minimum wage requirements, advertising, privacy, safety and environmental protection and consumer protection regulations, including those that regulate retailers and/or govern product standards, the promotion and sale of merchandise, packaging material safety and recycling and the operation of stores and warehouse facilities.

In addition, we and the IOs must comply with provisions regulating health and sanitation standards, food labeling, and licensing for the sale of food and alcoholic beverages.

We and the IOs are also subject to various federal, state and local laws and regulations, including those governing labor and employment, including minimum wage requirements, advertising, privacy, safety and environmental protection and consumer protection regulations, including those that regulate retailers and/or govern product standards, the importation, transportation, promotion and sale of merchandise, packaging material safety and recycling and the operation of stores and warehouse facilities.

In addition, we and the IOs must comply with provisions regulating health and sanitation standards, food labeling, non-food labeling and licensing for the sale of food and alcoholic beverages.

We actively monitor changes in these laws.

In addition, we and the IOs are subject to environmental laws, including but not limited to hazardous waste laws, regulations related to refrigeration and stormwater, pursuant to which we and/or the IOs could be strictly and jointly and severally liable, regardless of our knowledge or responsibility.

Shortly after the beginning of the COVID-19 pandemic, many state and local government agencies declared states of emergency, which triggered a wide variety of temporary, but challenging, requirements for the operation of grocery stores.

We and our IOs have worked diligently to comply with these varied rules.

Food and Dietary Supplements — The FDA regulates the safety of certain food and food ingredients, as well as dietary supplements under the federal Food, Drug, and Cosmetic Act (the "FDCA").

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The FDA also regulates the use of structure/function claims, health claims, nutrient content claims and the disclosure of calories and other nutrient information for frequently sold items.

In addition, compliance dates on various nutrition initiatives that impacted many supply chain participants, such as in relation to partially hydrogenated oils, went into effect through 2022.

In addition, compliance dates on various nutrition initiatives that impacted supply chain participants, such as in relation to partially hydrogenated oils, went into effect in 2021.

The FDA has comprehensive authority to regulate the safety, ingredients, labeling and good manufacturing practices for dietary supplements.

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However, no statement on a dietary supplement may expressly or implicitly represent that it will diagnose, cure, mitigate, treat or prevent a disease.

EBT Payments —Approximately 13% of sales are in the form of Electronic Benefits Transfer ("EBT") payments and a substantial portion of these payments may be related to benefits associated with the Supplemental Nutritional Assistance Program ("SNAP").

EBT Payments —Approximately 13% of our net sales are in the form of Electronic Benefits Transfer ("EBT") payments and a substantial portion of these payments may be related to benefits associated with the Supplemental Nutritional Assistance Program ("SNAP").

Department of Agriculture regulates these programs and their eligibility requirements.

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They are key to achieving our business goals and growth strategy.

As of January 1, 2022, we had 946 employees, 803 of whom were full-time and 143 of whom were part-time.

As of January 1, 2022, 427 of our employees were based at our corporate headquarters in Emeryville, California, and our Leola, Pennsylvania office, 130 of which were classified as field employees.

As of January 1, 2022, our distribution centers employed 331 persons.

As of December 31, 2022, we had 969 employees, 864 of whom were full-time and 105 of whom were part-time.

As of December 31, 2022, 470 of our employees were based at our corporate headquarters in Emeryville, California, and our Leola, Pennsylvania office, 144 of which were classified as field employees.

As of December 31, 2022, our distribution centers employed 360 persons.

The remaining 139 employees were employees in our Company-operated stores.

As of January 1, 2022, 110 of our employees were union employees, all of whom were employees at two Company-operated stores.

As of December 31, 2022, 103 of our employees were union employees, all of whom were employees at two Company-operated stores.

We have experienced no material interruptions of operations due to disputes with our employees and consider our relations with our employees to be very good.

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Our values translate into our human capital offerings to recruit, engage, develop, reward and retain employees who believe in our mission and emulate our values.

COVID-19 Pandemic —In response to the COVID-19 pandemic, we continued to reinforce and implemented new safety precautions we determined were in the best interest of our employees, and which comply with government regulations.

These measures included allowing certain of our employees to work from home from a variety of locations, while implementing additional safety measures for employees continuing critical on-site work, including providing personal protective equipment, health and temperature checks, spacing markers, plexiglass shields at check stands, signage regarding face coverings and physical distancing and sanitation stations.

We closely monitor the evolving landscape of the COVID-19 pandemic so we can make appropriate decisions to support and keep our employees safe.

Employee Development —We seek to grow leaders at every level of our organization by creating a culture of mentoring and coaching.

As part of our succession planning, we prioritize growing talent internally within our organization and invest resources to develop our employee's skill sets and career path.

As an example, our current Chief Executive Officer, Robert Joseph Sheedy, Jr., joined Grocery Outlet in 2014 as our Vice President of Strategy and thereafter was promoted three times before becoming President and Chief Executive Officer in January 2023.

Some of our offerings during 2022 (offered virtually and, in some cases, in person) included:

• A customized leadership resilience program for all employees at or above the director level focusing on a variety of topics including leading and working in a remote environment, strengthening teamwork, learning agility, and managing anxiety

• Certification program opportunities, including offerings in personal growth and professional development;

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• Individual coaching for leadership development, and other leadership training on an ad hoc basis

We encourage internal promotions and hiring for open positions.

During fiscal 2022, we promoted 42 corporate and field employees.

Employee Health and Safety —Providing a safe and compliant working environment and ensuring safety is critical to the Company.

We have robust safety programs in place to prevent workplace injury and illness.

In fiscal 2022, we refined and adopted additional safety training initiatives in a variety of areas, including among others, hazard communications, fire prevention, emergency action playbooks, blood borne pathogens, health illness avoidance, and active shooter.

These refinements and initiatives are ongoing.

We also maintain a Safety Committee for our distribution center employees and our Safety Department regularly provides new injury avoidance information at monthly distribution center employee-wide meetings.

Additionally, we provide detailed health and safety resources to our independently operated stores, including specific information and requirements by state to support their adherence to compliance.

Employee Compensation and Benefits —We provide compensation and comprehensive benefits designed to recruit, reward and retain the talent necessary to advance our mission, meet our business goals and execute our long-term growth strategy.

Our compensation components vary by employee level and include cash base compensation, cash bonuses, equity awards and a profit-sharing program.

Our compensation components vary by employee level and include cash based compensation, cash bonuses, equity awards and a profit-sharing program.

Additionally, we provide generous and highly competitive health and welfare benefits programs.

Diversity, Equity and Inclusion —We report annually on employment data, including ethnicity, inline with Equal Opportunity Commission ("EEOC") guidelines and we believe that a diverse and inclusive team is critical to our long-term business success.

Diversity, Equity and Inclusion —We report annually on employment data, including ethnicity, in line with Equal Opportunity Commission ("EEOC") guidelines and we believe that a diverse and inclusive team is critical to our long-term business success.

Employee Diversity

Women in Director and above roles 34 %

Racially and ethnically diverse 60 %

Racially and ethnically diverse in Director and above roles 31 %

In fiscal 2022, of the 42 promoted corporate and field employees, 50% were female and 50% were racially and ethnically diverse.

We have several employee resource groups that enhance our inclusive and diverse culture, including our overarching Equity, Diversity and Inclusion Council, our Black Partnership Network, and our WOW!

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Name Age Position

Lindberg, Jr 51 Chief Executive Officer and Director

Robert Joseph Sheedy, Jr 47 President

Robert Joseph Sheedy, Jr 48 President and Chief Executive Officer

Bracher 50 EVP, Chief Financial Officer

Bortner 60 EVP, Chief Human Resources Officer

Burke 54 EVP, Chief Stores Officer, Interim General Counsel and Secretary

Mayo 58 EVP, Chief Sales and Merchandising Officer, East

McAndrews 61 SVP, Chief New Store Development Officer

Wilson 57 SVP, Chief Purchasing Officer

Burke 55 EVP, Chief Stores Officer

Wilson 58 EVP, Chief Purchasing Officer

Thompson 50 SVP, General Counsel and Secretary

Set forth below is a brief description of the business experience of our executive officers.

All of our officers serve at the discretion of our Board of Directors.

Lindberg, Jr.

has served as our Chief Executive Officer since January 2019 and as a director since January 2006.

Previously, from January 2006 to December 2018, Mr.

Lindberg served as our Co-Chief Executive Officer.

Prior to being appointed Co-Chief Executive Officer, Mr.

Lindberg served in various positions with us since 1996.

As our Chief Executive Officer, Mr.

Lindberg brings to our Board of Directors significant senior leadership, and his detailed knowledge of our operations, finances, strategies and industry garnered over his 23-year tenure with us makes him well qualified to serve as our Chief Executive Officer and as a member of the Board of Directors.

Lindberg and S.

MacGregor Read Jr., the Vice Chairman of our Board of Directors, are cousins by marriage.

Robert Joseph Sheedy, Jr.

has served as our President since January 2019.

Sheedy previously served as our Chief Merchandise, Marketing & Strategy Officer from April 2017 to December 2018, our Chief Merchandise & Strategy Officer from March 2014 to April 2017 and our Vice President, Strategy from April 2012 to February 2014.

has served as our President, Chief Executive Officer and as a director since January 2023.

Previously, Mr.

Sheedy served as our President from January 2019 to December 2022, as our Chief Merchandise, Marketing & Strategy Officer from April 2017 to December 2018, our Chief Merchandise & Strategy Officer from March 2014 to April 2017 and our Vice President, Strategy from April 2012 to February 2014.

Before joining us, Mr.

7 unchanged sentences

Bortner served as Chief Human Resources Officer at Maxar Technologies, Inc., a space technology company, from August 2016 to October 2019 and as Chief Human Resources Officer at Catalina, an advertising and marketing company, from August 2012 to June 2016.

Burke has served as our EVP, Chief Stores Officer, Interim General Counsel and Secretary since January 2022.

Burke has served as our EVP, Chief Stores Officer since January 2022.

Burke previously served as our EVP, Chief Administrative Officer, General Counsel and Secretary from January 2019 to December 2021 and our General Counsel and Secretary from June 2015 to December 2018.

1 unchanged sentence

Burke served in various management positions at CRC Health Group, Inc., a provider of specialized behavioral health services, most recently as Senior Vice President of Legal, HR and Risk from April 2010 to February 2015.

Mayo has served as our EVP, Chief Sales and Merchandising Officer, East since August 2020 and previously served as Executive Vice President of Sales and Merchandising, East since October 2019.

As previously disclosed, Ms.

Mayo will be departing from the Company on March 4, 2022.

Before joining us, Ms.

Mayo served as Chief Merchandising Officer of Boxed, a wholesale retailer, from November 2016 to September 2017.

Mayo served in various roles in merchandising and operations at Sam's Club, a division of Walmart, from 2004 to 2016, most recently as their Senior Vice President, Operations for the West Division from February 2015 to March 2016 and as Senior Vice President, Operations for the South Division from August 2014 to February 2015.

McAndrews has served as our SVP, Chief New Store Development Officer since August 2020 and previously served as Senior Vice President of Store Development overseeing all company real estate functions since July 2018.

Before joining us, Mr.

McAndrews served as Chief Real Estate Officer at Conn's Home Plus from June 2017 to June 2018 and as Senior Vice President, Global Real Estate & Construction at Dollar Financial Corporation from February 2010 to June 2017.

Wilson has served as our SVP, Chief Purchasing Officer since August 2020 and previously served as Senior Vice President of Purchasing since February 2018 and served as our Vice President of Purchasing from July 2006 to January 2018.

Wilson has served as our EVP, Chief Purchasing Officer since January 2023.

Previously, Mr.

Wilson served as SVP, Chief Purchasing Officer from September 2020 to December 2022, as our Senior Vice President of Purchasing from February 2018 to August 2020 and as our Vice President of Purchasing from July 2006 to January 2018.

Prior to being appointed Vice President of Purchasing, Mr.

Wilson has served in various positions of increasing responsibility since 1994.

Wilson served in various positions of increasing responsibility with us since 1994.

Thompson has served as our SVP, General Counsel and Secretary since July 2022.

Before joining us, Mr.

Thompson served in various roles at Big 5 Sporting Goods, a sporting goods retailer, from 2002 to 2022, most recently as Executive Vice President, General Counsel and Secretary.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business