What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-06 · 288 added, 236 removed, 411 unchanged (56% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 28,

2025 December 28,

41 unchanged sentences

GROCERY OUTLET HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Net sales $ 1,125,567 $ 1,036,944

2 unchanged sentences

Selling, general and administrative expenses 331,078 303,382

Operating income 40,286 37,557 66,954 106,856

Other expenses:

Restructuring charges

Operating (loss) income ( 22,508 ) 563

Interest expense, net 6,520 3,176

Loss on debt extinguishment and modification — — — 5,340

Total other expenses 6,439 4,226 15,174 20,251

Income before income taxes 33,847 33,331 51,780 86,605

Income tax expense 9,669 6,191 14,626 21,274

Net income and comprehensive income $ 24,178 $ 27,140 $ 37,154 $ 65,331

Basic earnings per share $ 0.25 $ 0.27 $ 0.37 $ 0.66

Diluted earnings per share $ 0.24 $ 0.27 $ 0.37 $ 0.65

Loss before income taxes ( 29,028 ) ( 2,613 )

Income tax benefit ( 5,711 ) ( 1,588 )

Net loss and comprehensive loss $ ( 23,317 ) $ ( 1,025 )

Basic net loss per share $ ( 0.24 ) $ ( 0.01 )

Diluted net loss per share $ ( 0.24 ) $ ( 0.01 )

Weighted average shares outstanding:

8 unchanged sentences

Shares Amount

Balance as of December 30, 2023 99,223,863 $ 99 $ 877,276 $ 341,964 $ 1,219,339

Balance at December 28, 2024

97,262,557 $ 97 $ 815,858 $ 381,429 $ 1,197,384

Exercise and vesting of share-based awards 742,511 1 53 — 54

Share-based compensation expense — — 5,458 — 5,458

Repurchase of common stock ( 200,803 ) — ( 5,325 ) — ( 5,325 )

Net loss and comprehensive loss

Balance as of March 30, 2024 100,147,065 $ 100 $ 883,534 $ 340,939 $ 1,224,573

Exercise and vesting of share-based awards 112,410 — 302 — 302

Share-based compensation expense — — 7,001 — 7,001

Repurchase of common stock ( 1,104,726 ) ( 1 ) ( 25,032 ) — ( 25,033 )

Net income and comprehensive income — — — 14,001 14,001

Balance as of June 29, 2024 99,154,749 $ 99 $ 865,805 $ 354,940 $ 1,220,844

Exercise and vesting of share-based awards 653,250 1 4,515 — 4,516

Share-based compensation expense — — 1,663 — 1,663

Repurchase of common stock ( 1,164,423 ) ( 1 ) ( 25,149 ) — ( 25,150 )

Net income and comprehensive income — — — 24,178 24,178

Balance as of September 28, 2024 98,643,576 $ 99 $ 846,834 $ 379,118 $ 1,226,051

— — — ( 23,317 ) ( 23,317 )

Balance at March 29, 2025

98,005,068 $ 98 $ 821,369 $ 358,112 $ 1,179,579

See Notes to Condensed Consolidated Financial Statements

5 unchanged sentences

Shares Amount

Balance as of December 31, 2022 97,674,356 $ 98 $ 847,589 $ 262,527 $ 1,110,214

Balance at December 30, 2023

99,223,863 $ 99 $ 877,276 $ 341,964 $ 1,219,339

Exercise and vesting of share-based awards 1,124,005 1 3,441 — 3,442

1 unchanged sentence

Repurchase of common stock ( 200,803 ) — ( 5,325 ) — ( 5,325 )

Net income and comprehensive income — — — 13,720 13,720

Balance as of April 1, 2023 98,285,804 $ 98 $ 851,194 $ 276,247 $ 1,127,539

Exercise and vesting of share-based awards, net of shares withheld for employee taxes 487,445 1 1,507 — 1,508

Share-based compensation expense — — 11,305 — 11,305

Dividends paid — — ( 9 ) — ( 9 )

Net income and comprehensive income — — — 24,471 24,471

Balance as of July 1, 2023 98,773,249 $ 99 $ 863,997 $ 300,718 $ 1,164,814

Exercise and vesting of share-based awards, net of shares withheld for employee taxes 565,541 — 3,602 — 3,602

Share-based compensation expense — — 7,535 — 7,535

Net income and comprehensive income — — — 27,140 27,140

Balance as of September 30, 2023 99,338,790 $ 99 $ 875,134 $ 327,858 $ 1,203,091

Net loss and comprehensive loss

— — — ( 1,025 ) ( 1,025 )

Balance at March 30, 2024

100,147,065 $ 100 $ 883,534 $ 340,939 $ 1,224,573

See Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

13 Weeks Ended

September 28,

2024 September 30,

2025 March 30,

Cash flows from operating activities:

Net income $ 37,154 $ 65,331

Adjustments to reconcile net income to net cash provided by operating activities:

Net loss $ ( 23,317 ) $ ( 1,025 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation of property and equipment 24,977 20,955

2 unchanged sentences

Non-cash rent 2,163 922

Loss on debt extinguishment and modification — 5,340

Impairment of long-lived assets 1,728 —

Share-based compensation 5,458 8,142

7 unchanged sentences

Income and other taxes payable ( 12 ) 532

Trade accounts payable, accrued compensation and other liabilities ( 59,664 ) 70,808

Trade accounts payable 16,916 13,753

Accrued and other liabilities 14,748 ( 17,825 )

Accrued compensation 2,620 ( 13,360 )

Operating lease liabilities 5,108 1,521

3 unchanged sentences

Repayments of advances from independent operators 931 1,503

Business acquisition, net of cash and cash equivalents acquired ( 60,526 ) —

Purchases of property and equipment ( 60,452 ) ( 46,266 )

Proceeds from sales of assets 17 24

Investments in intangible assets and licenses ( 4,834 ) ( 2,992 )

Proceeds from insurance recoveries - property and equipment — 533

Net cash used in investing activities ( 68,684 ) ( 50,887 )

1 unchanged sentence

Proceeds from exercise of stock options 53 3,442

Tax withholding related to net settlement of employee share-based awards — ( 537 )

Proceeds from senior term loan due 2028 — 300,000

Proceeds from revolving credit facility 20,000 —

1 unchanged sentence

Principal payments on senior term loan due 2028 ( 1,875 ) ( 1,875 )

Principal payments on senior term loan due 2028 ( 3,750 ) ( 3,750 )

Principal payments on finance leases ( 350 ) ( 382 )

Repurchase of common stock — ( 6,241 )

Dividends paid — ( 9 )

Debt issuance costs paid — ( 4,513 )

Net cash provided by (used in) financing activities

86,879 ( 92,253 )

Net (decrease) increase in cash and cash equivalents

Net cash used in financing activities

( 2,172 ) ( 5,056 )

Net decrease in cash and cash equivalents ( 11,918 ) ( 48,102 )

Cash and cash equivalents at beginning of period 62,828 114,987

6 unchanged sentences

(together with its wholly owned subsidiaries, collectively, "Grocery Outlet," "we," or the "Company") is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold primarily through a network of independently operated stores.

As of September 28, 2024, we had 529 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, North Carolina, New Jersey, Georgia, Ohio, Alabama, Delaware, Kentucky and Virginia.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission for interim reporting.

As of March 29, 2025, we h ad 543 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Maryland, Nevada, North Carolina, New Jersey, Ohio, Georgia, Alabama, Delaware, Kentucky and Virginia.

Fiscal Year and Quarters — We operate on a fiscal year that ends on the Saturday closest to December 31st each year.

The fiscal years ended January 3, 2026 (“fiscal 2025”) and December 28, 2024 ("fiscal 2024") consist of 53 weeks and 52 weeks, respectively.

References to the first quarter of fiscal 2025 and the first quarter of fiscal 2024 refer to the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the "2023 Form 10-K").

The condensed consolidated balance sheet as of December 28, 2024 included herein has been derived from those audited consolidated financial statements.

4 unchanged sentences

The interim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for any future interim or annual period.

Prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

2 unchanged sentences

We consider our accounting policy relating to long-lived asset impairment to be a significant accounting policy that involves management's estimates and judgments.

Segment Reporting — We manage our business a s one operating segment.

In addition, all of our sales were made to customers located in the U.S.

and all property and equipment is located in the U.S.

Merchandise Inventories — Merchandise inventories are valued at the lower of cost or net realizable value.

6 unchanged sentences

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease over the same term.

Right-of-use assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term, reduced by landlord incentives.

Right-of-use assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, reduced by landlord incentives.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments based on the information available at the commencement date, to determine the present value of our lease payments.

4 unchanged sentences

We generally lease retail facilities for store locations, distribution centers, office space and equipment and account for these leases as operating leases.

We account for one retail store lease and certain equipment leases as finance leases.

We account for certain equipment leases as finance leases.

Lease and non-lease components are accounted for separately.

1 unchanged sentence

Fair Value Measurements — Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The fair value of financial instruments is categorized based upon the level of judgment associated with the inputs used to measure their fair values.

The fair value of financial instruments is categorized based on the level of judgment associated with the inputs used to measure their fair values.

Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

4 unchanged sentences

The fair value framework requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

There were no assets or liabilities measured at fair value on a recurring or non-recurring basis as of September 28, 2024 or December 30, 2023.

Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges.

There were no tra nsfers of assets or liabilities between levels within the fair value hierarchy during the 13 and 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

There were no assets or liabilities measured at fair value on a recurring basis as of March 29, 2025 or December 28, 2024.

Generally, long-lived assets are recorded at fair value on a non-recurring basis after the asset has been impaired.

As of March 29, 2025 and December 28, 2024, certain long-lived assets were determined to be impaired and as such were measured at fair value at the time of the impairment determination.

For the 13 weeks ended March 29, 2025, we recognized $ 1.7 million of impairment of long-lived assets resulting from the Restructuring Plan, as defined in Note 12.

See "Property and Equipment" and "Goodwill and Other Intangible Assets" within NOTE 1—Organization and Summary of Significant Accounting Policies in our 2024 Form 10-K for additional information.

There wer e no transfers of assets or liabilities between levels within the fair value hierarchy during the 13 weeks ended March 29, 2025.

Our financial assets and liabilities are carried at cost, which generally approximates their fair value, as described below:

2 unchanged sentences

The following table sets forth by level within the fair value hierarchy the carrying amounts and estimated fair values of our significant financial liabilities that are not recorded at fair value on the condensed consolidated balance sheets (amounts in thousands):

September 28,

2025 December 28,

7 unchanged sentences

_______________________

(1) The carrying amounts of the senior term loan as of September 28, 2024 and December 30, 2023 were net of debt issuance costs of $ 1.3 million and $ 1.6 million, respectively.

(1) The carrying amounts of the senior term loan as of March 29, 2025 and December 28, 2024 were net of debt issuance costs of $ 1.1 million and $ 1.2 million, respectively.

(2) The estimated fair value of our current senior term loan and revolving credit facility borrowings under the 2023 Credit Agreement, as defined in Note 3, was deemed to approximate the carrying value, excluding unamortized debt issuance costs, because the interest rate is variable with short reset periods and is reflective of the current market rate.

6 unchanged sentences

We do not accept manufacturer coupons.

We do not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any material performance obligations other than our gift card deferred revenue liability, or any material costs to obtain or fulfill a contract as of September 28, 2024 and December 30, 2023.

We did not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any material performance obligations other than our gift card deferred revenue liability, or any material costs to obtain or fulfill a contract as of March 29, 2025 and December 28, 2024.

Gift Cards — We record a deferred revenue liability when a Grocery Outlet gift card is sold.

2 unchanged sentences

We reduce the liability and recognize revenue for the unused portion of the gift cards ("breakage") under the proportional method, where recognition of breakage income is based upon the historical run-off rate of unredeemed gift cards.

Our gift card deferred revenue liability was $ 3.1 million and $ 3.2 million as of September 28, 2024 and December 30, 2023, respectively.

Breakage amounts were immaterial for the 13 and 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Our gift card deferred revenue liability was $ 3.0 million and $ 4.1 million as of March 29, 2025 and December 28, 2024, respectively.

Breakage amounts were immaterial for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

Disaggregated Revenues — The following table presents net sales revenue by type of product for the periods indicated (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Perishable (1)

8 unchanged sentences

(2) Non-perishable departments include non-perishable grocery;

general merchandise;

health and beauty care;

frozen foods;

and beer and wine.

beer and wine;

health and beauty care;

and general merchandise.

Variable Interest Entities — In accordance with the variable interest entities sub-section of Accounting Standards Codification ("ASC") Topic 810, Consolidation , we assess at each reporting period whether we, or any consolidated entity, are considered the primary beneficiary of a variable interest entity ("VIE") and therefore required to consolidate the financial results of the VIE in our condensed consolidated financial statements.

1 unchanged sentence

A reporting entity is determined to be a VIE's primary beneficiary if it has the power to direct the activities that most significantly impact a VIE's economic performance and the obligation to absorb losses or rights to receive benefits that could potentially be significant to a VIE.

W e had 486 , 466 a nd 453 stores operated by IOs as of September 28, 2024, December 30, 2023 and September 30, 2023, respectively.

W e had 502 , 491 a nd 472 stores operated by IOs as of March 29, 2025, December 28, 2024 and March 30, 2024, respectively.

We have agreements in place with each IO.

7 unchanged sentences

As consignor of all merchandise to each IO, the aggregate net sales proceeds from merchandise sales belongs to us.

Net sales related to IO stores were $ 1.05 billion and $ 991.4 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $ 3.15 billion and $ 2.94 billion for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Net sales related to IO stores were $ 1.1 billion and $ 1.0 billion for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

We, in turn, pay each IO a commission based on a share of the gross profit of the store.

1 unchanged sentence

IO commissions are expensed and included in selling, general and administrative expenses.

IO commissions were $ 157.0 million and $ 161.7 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $ 484.8 million and $ 465.1 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

IO commissions of $ 7.6 million and $ 21.7 million were included in accrued and other current liabilities as of September 28, 2024 and December 30, 2023, respectively.

IO commissions were $ 161.7 million and $ 160.8 million for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

IO commissions of $ 9.5 million and $ 5.6 million were included in accrued and other current liabilities as of March 29, 2025 and December 28, 2024, respectively.

An IO may fund its initial store investment from existing capital, a third-party loan or most commonly through a loan from us, as further discussed in Note 2.

10 unchanged sentences

Therefore, we are not the primary beneficiary of these VIEs.

Our maximum exposure, in accordance with ASC Topic 810, to the IOs is generally limited to the IO notes and IO receivables due from these entities, which was $ 64.1 million and $ 59.2 million, gross, as of September 28, 2024 and December 30, 2023, respectively.

Our maximum exposure, in accordance with ASC Topic 810, to the IOs is generally limited to the IO notes and IO receivables due from these entities, which was $ 75.5 million and $ 71.0 million, gross, as of March 29, 2025 and December 28, 2024, respectively.

See Note 2 for additional information.

2 unchanged sentences

Recently Issued Accounting Pronouncements

Accounting Standards Update ("ASU") No.

2023-07 — In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No.

2023-07, Segment Reporting (Topic 280) ("ASU 2023-07").

ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

We will adopt ASU 2023-07 upon the effective date.

We do not expect the adoption of ASU 2023-07 to have a material impact on our consolidated financial statements.

2023-09 — In December 2023, the FASB issued ASU No.

4 unchanged sentences

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

We will adopt ASU 2023-09 upon the effective dat e and are currently evaluating the impact on our consolidated financial statements and disclosures.

We are currently evaluating the impact on our consolidated financial statements and disclosures.

2024-03 — In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03").

ASU 2024-03 requires public entities to disclose, in the notes to financial statements, specified information about certain costs and expenses, including the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each expense caption presented on the face of the income statement, a qualitative description of the amounts remaining in these expense captions that are not separately disaggregated quantitatively, and the total amount of selling expenses and an entity's definition of selling expenses.

ASU 2024-03, as clarified by ASU No.

2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

Further, the amendments in ASU 2024-03 should be applied either prospectively or retrospectively.

We are currently evaluating the impact on our consolidated financial statements and disclosures.

Independent Operator Notes and Independent Operator Receivables

1 unchanged sentence

IO notes, which are payable on demand and have no maturity date, typically bear interest at rates between 4.50 % and 9.95 %.

Accrued interest receivable on IO notes is included within the "independent operator receivables and current portion of independent operator notes, net of allowance" line item on the condensed consolidated balance sheets and was $ 2.7 million and $ 1.8 million as of September 28, 2024 and December 30, 2023, respectively.

There were no IO notes that were past due or on a non-accrual status due to delinquency as of September 28, 2024 or December 30, 2023.

Notes and receivables from our IOs participating in our Temporary Commission Adjustment Program ("TCAP"), as defined below, are not considered to be past due or on a non-accrual status due to delinquency and are excluded from such measures.

Accrued interest receivable on IO notes is included within the "independent operator receivables and current portion of independent operator notes, net of allowance" line item on the condensed consolidated balance sheets and was $ 3.3 million and $ 3.0 million as of March 29, 2025 and December 28, 2024, respectively.

There were no IO notes that were past due or on a non-accrual status due to delinquency as of March 29, 2025 or December 28, 2024.

Notes and receivables from our IOs participating in our Temporary Commission Adjustment Program ("TCAP"), as detailed below, are not considered to be past due or on a non-accrual status due to delinquency and are excluded from such measures.

IO notes and IO receivables are financial assets which are measured and carried at amortized cost.

8 unchanged sentences

Assets without such shared risk characteristics or credit quality indicators, such as assets with unique circumstances or with delinquencies and historical losses in excess of their TCAP, non-TCAP or new store peers are evaluated on an individual basis.

Amounts due from IOs and the related allowances as of September 28, 2024 and December 30, 2023 consisted of the following (amounts in thousands) :

Amounts due from IOs and the related allowances as of March 29, 2025 and December 28, 2024 consisted of the following (amounts in thousands) :

Allowance Net

1 unchanged sentence

Current Portion Long-term Portion

September 28, 2024

March 29, 2025

Independent operator notes $ 49,711 $ ( 330 ) $ ( 11,629 ) $ 37,752 $ 1,775 $ 35,977

9 unchanged sentences

A summary of activity in the IO notes and IO receivables allowance was as follows (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Beginning balance $ 18,479 $ 16,151

2 unchanged sentences

Ending balance

The following table presents the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator as of September 28, 2024 (amounts in thousands):

$ 21,611 $ 16,007

The following table presents the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator as of March 29, 2025 (amounts in thousands):

Fiscal Year of Origination

5 unchanged sentences

TCAP IO Notes

Notes of IOs participating in our TCAP represented 57.3 % and 51.6 % of total IO note balances as of September 28, 2024 and December 30, 2023, respectively.

A total of $ 4.3 million of IO notes were added into our TCAP during the 13 weeks ended September 28, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of September 28, 2024, was 5.00 %.

In addition, $ 1.3 million of IO notes were transferred from TCAP to Non-TCAP during the 13 weeks ended September 28, 2024.

A total of $ 6.2 million of IO notes were added into our TCAP during the 39 weeks ended September 28, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of September 28, 2024, was 5.00 %.

In addition, $ 3.7 million of IO notes were transferred from TCAP to Non-TCAP during the 39 weeks ended September 28, 2024.

Notes of IOs participating in our TCAP represented 47.4 % and 49.1 % of total IO note balances as of March 29, 2025 and December 28, 2024, respectively.

A total of $ 1.1 million of IO notes were added into our TCAP during the 13 weeks ended March 29, 2025.

The weighted average contractual interest rate of these IO notes was 4.50 % as of March 29, 2025, a reduction from the standard rate of 9.95 %.

In addition, $ 0.7 million of IO notes were transferred from TCAP to Non-TCAP during the 13 weeks ended March 29, 2025.

Long-term Debt

Long-term debt consisted of the following (amounts in thousands):

September 28,

2025 December 28,

12 unchanged sentences

Borrowings under the 2023 Credit Agreement bear interest at a rate equal to, at our option, either (a) the base rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the federal funds rate then in effect, plus 0.50 %, (ii) the prime rate then in effect and (iii) a specified Term SOFR (as defined in the 2023 Credit Agreement) rate plus 1.00 %, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 0.75 % to 1.75 % based on our Total Net Leverage Ratio (as defined in the 2023 Credit Agreement);

and (b) an adjusted Term SOFR rate determined on the basis of a one, three or six month interest period, plus 0.10 %, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 1.75 % to 2.75 % based on our Total Net Leverage Ratio.

As of September 28, 2024, interest on borrowings under the credit facilities was based on one-month Term SOFR with an applicable margin of 2.25 %.

and (b) an adjusted Term SOFR rate determined on the basis of a one, three or six month interest period, plus 0.10 %, subject to the interest rate floors set forth therein, plus

an applicable margin ranging from 1.75 % to 2.75 % based on our Total Net Leverage Ratio.

As of March 29, 2025, interest on borrowings under the credit facilities was based on Term SOFR with interest periods ranging from one month to six months.

The applicable margin was 2.25 % on all borrowings.

The 2023 Credit Agreement permits us to add incremental term loan facilities, increase any existing term loan facility, increase revolving commitments, and/or add incremental replacement revolving credit facility tranches.

The aggregate principal amount of such incremental facilities are limited to (a) an amount not in excess of the sum of the greater of $ 200.0 million and 100 % of Consolidated EBITDA (as defined in the 2023 Credit Agreement), subject to certain limitations, plus (b) voluntary prepayments of any term loan facility, voluntary permanent reductions of the commitments for the revolving credit facility and voluntary prepayments of indebtedness secured by liens on the collateral securing the credit facilities, subject to certain exceptions, plus (c) an amount such that (assuming that the full amount of any such incremental revolving increase and/or incremental replacement revolving credit facility was drawn, and after giving effect to any appropriate pro forma adjustment events) we would be in compliance, on a pro forma basis (but excluding the cash proceeds of such incurrence), with a Total Net Leverage Ratio of 3.00 to 1.00.

Our obligations under the 2023 Credit Agreement are unconditionally guaranteed by the Grocery Outlet Holding Corp.’s direct and indirect wholly owned restricted subsidiaries, subject to certain exceptions.

Our obligations under the 2023 Credit Agreement are unconditionally guaranteed by Grocery Outlet Holding Corp.'s direct and indirect wholly owned restricted subsidiaries, subject to certain exceptions.

All obligations under the 2023 Credit Agreement, and the guarantee of such obligations, are secured, subject to permitted liens and other exceptions, by substantially all of the Company’s assets and those of each subsidiary guarantor.

2 unchanged sentences

Senior Term Loan due 2028

The senior term loan under the 2023 Credit Agreement matures on February 21, 2028 and had an interest rate of 7.60 % as of September 28, 2024.

The senior term loan under the 2023 Credit Agreement matures on February 21, 2028 and had an interest rate of 6.65 % as of March 29, 2025.

Revolving Credit Facility

As of September 28, 2024, we had $ 4.5 million of outstanding letters of credit and $ 255.5 million of remaining borrowing capacity available under the revolving credit facility, which matures on February 21, 2028.

Borrowings under the revolving credit facility had interest rates ranging from 7.60 % to 7.70 % as of September 28, 2024.

The aggregate outstanding principal balance under the revolving credit facility was $ 140.0 million and zero as of September 28, 2024 and December 30, 2023, respectively.

The aggregate outstanding principal balance under the revolving credit facility, which matures on February 21, 2028, was $ 190.0 million as of March 29, 2025 and December 28, 2024.

As of March 29, 2025, we had $ 4.5 million of outstanding letters of credit and $ 205.5 million of remaining borrowing capacity available under the revolving credit facility, which matures on February 21, 2028.

Borrowings under the revolving credit facility had interest rates ranging from 6.59 % to 6.65 % as of March 29, 2025.

We are required to pay a quarterly commitment fee ranging from 0.15 % to 0.30 % on the daily unused amount of the commitment under the revolving credit facility based upon our Total Net Leverage Ratio.

12 unchanged sentences

The minimum interest coverage ratio test requires us to be in compliance with a Consolidated Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of no less than 1.75 to 1.00 as of the last day of each test period.

As of September 28, 2024, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

As of March 29, 2025, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

Schedule of Principal Maturities

Principal maturities of debt as of September 28, 2024 are as follows (amounts in thousands):

Principal maturities of debt as of March 29, 2025 are as follows (amounts in thousands):

Remainder of fiscal 2025 $ 13,125

2 unchanged sentences

Fiscal 2028 433,750

Fiscal 2028 383,750

Fiscal 2029 and thereafter —

Total $ 476,875

1 unchanged sentence

Interest expense, net, consisted of the following (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Interest on loans $ 7,997 $ 5,678

1 unchanged sentence

Interest on finance leases 59 95

Other — 13 24 13

Interest income ( 1,290 ) ( 2,492 )

1 unchanged sentence

Interest expense, net $ 6,520 $ 3,176

Loss on Debt Extinguishment and Modification

Loss on debt extinguishment and modification consisted of the following (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Write off of debt issuance costs $ — $ — $ — $ 4,518

Write off of debt discounts — — — 578

Debt modification costs — — — 244

Loss on debt extinguishment and modification $ — $ — $ — $ 5,340

Stockholders' Equity

Share Repurchase Program

In November 2021, our Board of Directors (the "Board") approved our first share repurchase program (the "2021 Share Repurchase Program").

In November 2021, our Board of Directors (the "Board") approved a share repurchase program (the "2021 Share Repurchase Program").

This program, which was effective November 5, 2021 and without an expiration date, authorized us to repurchase up to $ 100.0 million of our outstanding common stock utilizing a variety of methods including open-market purchases, accelerated share repurchase programs, privately negotiated transactions, structured repurchase transactions and under a Rule 10b5-1 plan (which would permit shares to be repurchased when we might otherwise be precluded from doing so under securities laws).

Any repurchased shares were constructively retired and returned to an unissued status.

The following table presents activity related to the 2021 Share Repurchase Program (amounts in thousands except share and per share amounts).

In the fourth quarter of fiscal 2024, the Board approved a new share repurchase program (the "2024 Share Repurchase Program"), which replaced the Company’s 2021 Share Repurchase Program, under which $ 9.4 million previously remained available for repurchase.

The 2024 Share Repurchase Program does not have an expiration date and authorizes us to repurchase up to $ 100.0 million of our outstanding common stock (inclusive of fees and commissions) utilizing a variety of methods including open-market purchases, accelerated equity repurchase programs, privately negotiated transactions, block trades and under a Rule 10b5-1 plan.

Any repurchased shares are constructively retired and returned to an unissued status.

The following table presents activity related to the share repurchase programs (amounts in thousands except share and per share amounts).

We repurchased these shares in open-market transactions pursuant to a Rule 10b5-1 plan.

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Shares repurchased

1,164,423 — 2,469,952 122,862

Amount repurchased (1)

$ 25,035 $ — $ 55,394 $ 3,275

Average repurchase price per share

_______________________

(1) Includes commissions for the shares repurchased for the 13 and 39 weeks ended September 28, 2024 and the 39 weeks ended September 30, 2023 and excludes excise tax due of $ 0.1 million under the Inflation Reduction Act of 2022 for the 13 and 39 weeks ended September 28, 2024

As of September 28, 2024, we had $ 34.4 million of repurchase authority remaining under the 2021 Share Repurchase Program.

Subsequent to September 28, 2024, we repurchased 1,507,211 shares of common stock totaling $ 25.0 million at an average price of $ 16.62 per share in open-market transactions pursuant to a Rule 10b5-1 plan.

In the fourth quarter of fiscal 2024, the Board approved a new share repurchase program (the "2024 Share Repurchase Program"), replacing the Company’s 2021 Share Repurchase Program, under which $ 9.4 million remained available for repurchase.

Any repurchased shares are constructively retired and returned to an unissued status.

(1) Includes commissions for the shares repurchased during the 13 weeks ended March 30, 2024.

As of March 29, 2025, we had $ 100.0 million of repurchase authority remaining under the 2024 Share Repurchase Program.

Share-based Awards

1 unchanged sentence

Share-based Award Activity

The following table summarizes stock option activity under all equity incentive plans during the 39 weeks ended September 28, 2024:

Time-Based Stock Options Performance-Based Stock Options

During the 13 weeks ended March 29, 2025, we granted time-based stock options, which have a ten-year term and vest in annual installments over a three-year period, subject to continued employment.

In addition, during the 13 weeks ended March 29, 2025, we granted a one-time, special new hire stock option award with a ten-year term to our President and Chief Executive Officer.

Under this award, one-third of such stock options vest and become exercisable three years after the grant date, subject to continued employment.

The remaining two-thirds of those stock options vest based upon the achievement of certain price targets of the Company's common stock during the three-year period following the grant date.

Any options that vest based on achievement of stock price targets, regardless of when such options vest, will not be exercisable until the third anniversary of the grant date, subject to the recipient's continued employment at that time.

The fair value of stock option grants is determined on the grant date.

For time-based stock options, a Black-Scholes valuation model is used to estimate the fair value of the awards.

For market-based stock options, a Monte Carlo simulation model is used to estimate the fair value of the awards.

Time-based stock options and market-based stock options granted during the 13 weeks ended March 29, 2025 had grant date fair values per share of $ 5.67 and $ 4.65 , respectively.

We determine the input assumptions for the Black-Scholes stock option valuation model as follows:

• Expected term — The expected term represents the period that a stock option award is expected to be outstanding.

We have limited historical exercise data from which to derive expected term input assumptions.

Consequently, we calculate the expected term using the SEC simplified method whereby the expected term of a stock option award is equal to the average of the award's contractual term and vesting term.

• Volatility — We have limited historical data from which to derive stock price volatility input assumptions.

Consequently, we estimate stock price volatility for our common stock by using a time-weighted average methodology, placing proportional weight on our volatility over our full trading history and the average volatility of industry peers over the expected term.

Industry peers consist of several public companies in our industry which are of similar size, complexity and stage of development.

• Risk-free interest rate — The risk-free interest rate is based on the U.S.

Treasury yield curve on a stock option award's grant date.

Maturities that approximate the expected term of the stock option award were used to interpolate the risk-free rate.

• Dividend yield — Dividend yield is assumed to be zero as we have not historically paid and do not expect to pay cash dividends on our common shares issued.

The grant date fair value of time-based stock options awarded during the 13 weeks ended March 29, 2025 was estimated using the Black-Scholes valuation model with the following weighted-average assumptions:

13 Weeks Ended

Exercise price

42.9 % to 43.3 %

Risk-free interest rate

4.0 % to 4.1 %

Dividend yield

Expected term (in years)

The following table summarizes stock option activity under all equity incentive plans during the 13 weeks ended March 29, 2025:

Time-Based Stock Options Market-Based and Performance-Based Stock Options

Number of Options Weighted-Average

3 unchanged sentences

879,357 $ 19.98 99,384 $ 10.25

Granted 1,272,170 11.87 166,667 11.87

Exercised ( 3,850 ) 7.13 ( 5,050 ) 4.98

Forfeitures ( 183,490 ) 21.91 — —

Options outstanding as of September 28, 2024

Options outstanding as of March 29, 2025

1,964,187 $ 14.57 261,001 $ 11.39

Options vested and exercisable as of September 28, 2024

Options vested and exercisable as of March 29, 2025

692,017 $ 19.54 94,334 $ 10.54

The following table summarizes restricted stock unit ("RSU") activity under all equity incentive plans during the 39 weeks ended September 28, 2024:

The following table summarizes time-based restricted stock unit ("RSU") activity under all equity incentive plans during the 13 weeks ended March 29, 2025:

Number of Shares Weighted-Average

5 unchanged sentences

Forfeitures ( 277,806 ) 16.38

Unvested balance as of September 28, 2024

Unvested balance as of March 29, 2025

1,589,322 $ 16.10

The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp.

2019 Incentive Plan during the 39 weeks ended September 28, 2024:

2019 Incentive Plan during the 13 weeks ended March 29, 2025:

Number of Shares Weighted-Average

4 unchanged sentences

Adjustment for expected performance achievement (2)

( 326,549 ) 26.96

Vested ( 320,407 ) 29.18

Forfeitures ( 14,749 ) 26.69

Unvested balance as of September 28, 2024 (3)

Unvested balance as of March 29, 2025 (3)

1,423,773 $ 17.38

1 unchanged sentence

(1) Represents initial grant of PSUs based on performance target level achievement of 100 %.

(2) Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of September 28, 2024.

(3) An additional 977,116 PSUs could potentially be included if the maximum performance level of 200 % is reached for all PSUs outstanding as of September 28, 2024.

(2) Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of March 29, 2025.

(3) Up to an additional 1,760,434 PSUs could potentially be included if the performance level achievement exceeds 100 % (with 200 % being the maximum performance level achievement).

Share-based Compensation Expense

We recognize compensation expense for stock options, RSUs and PSUs by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent we determine the vesting of the grant is probable.

We recognize share-based award forfeitures in the period such forfeitures occur.

Share-based compensation expense consisted of the following (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Time-based stock options $ 191 $ 9

Market-based and performance-based stock options

RSUs 2,923 3,236

PSUs 2,324 4,897

Dividends (1)

Share-based compensation expense $ 5,458 $ 8,142

Our income tax benefit and effective income tax rate were as follows (amounts in thousands, except percentages):

13 Weeks Ended

2025 March 30,

Income tax benefit

$ ( 5,711 ) $ ( 1,588 )

(1) Represents cash dividends paid upon vesting of share-based awards as a result of dividends declared in connection with a recapitalization that occurred in fiscal 2018.

Our income tax expense and effective income tax rate were as follows (amounts in thousands, except percentages):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Income tax expense $ 9,669 $ 6,191 $ 14,626 $ 21,274

Effective income tax rate 19.7 % 60.8 %

1 unchanged sentence

During each interim period, we update the estimated annual effective tax rate.

Our effective income tax rate for the 13 and 39 weeks ended September 28, 2024 was higher than the combined U.S.

federal and state statutory income tax rate primarily due to non-deductible executive compensation under Internal Revenue Code Section 162(m), partially offset by excess tax benefit related to the exercise of stock options.

The increase in our effective income tax rate for the 13 and 39 weeks ended September 28, 2024 compared to the 13 and 39 weeks ended September 30, 2023 was primarily driven by lower excess tax benefits related to the exercise of stock options, nondeductible acquisition and integration costs related to the acquisition of United Grocery Outlet (as further discussed in Note 10), and lower pretax book income.

Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision in our condensed consolidated statements of operations and comprehensive income and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets.

The change in our effective income tax rate for the 13 weeks ended March 29, 2025 compared to the 13 weeks ended March 30, 2024 was primarily driven by excess tax expense from the exercise and vesting of certain stock compensation awards during the 13 weeks ended March 29, 2025 and excess tax benefits related to the exercise and vesting of certain stock compensation awards during the 13 weeks ended March 30, 2024.

Our effective income tax rate for the 13 weeks ended March 29, 2025 was lower than the combined U.S.

federal and state statutory income tax rates primarily due to a pretax book loss, partially offset by excess tax expense related to the exercise and vesting of certain stock compensation awards and non-deductible executive compensation under Internal Revenue Code Section 162(m).

Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision in our condensed consolidated statements of operations and comprehensive income (loss) and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets.

To date, we have not recognized any interest and penalties, nor have we accrued for or made payments for interest and penalties.

uncertain tax positions as of September 28, 2024 and December 30, 2023, respectively, and do not anticipate having any material uncertain tax positions within the next 12 months.

We had no uncertain tax positions as of March 29, 2025 and December 28, 2024, respectively.

Related Party Transactions

Related Party Leases

As of September 28, 2024 and September 30, 2023, we le ased 14 store locations and one warehou se location from entities in which Eric Lindberg, Jr., Chairman of the Board, Interim President and Chief Executive Officer, or his family, had a direct or indirect financial interest.

As of September 28, 2024, the right-of-use assets and lease liabilities related to these pro perties were $ 37.9 million and $ 42.9 million , respectively.

As of March 29, 2025 and March 30, 2024, we le a sed 14 store locations and one war ehou se location from entities in which Eric Lindberg, Jr., Chairman of the Board and former Chief Executive Officer (who also served as Interim President and Chief Executive Officer for a portion of fiscal 2024 and the 13 weeks ended March 29, 2025), or his family, had a direct or indirect financial interest.

As of March 29, 2025, the right-of-use assets and lease liabilities related to these pro perties w ere $ 47.6 million and $ 52.7 million, respectively.

As of December 28, 2024, the right-of-use assets and lease liabilities related to these properties were $ 38.7 million and $ 43.8 million, respectively.

These related parties received aggregate lease payments from u s of $ 1.9 million and $ 1.7 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, a nd $ 5.5 million a nd $ 5.1 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

These related parties received aggregate lease payments from u s of $ 1.9 million and $ 1.8 million for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

Independent Operator Notes and Independent Operator Receivables

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $ 64.1 million and $ 59.2 million as of September 28, 2024 and December 30, 2023, respectively.

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $ 75.5 million and $ 71.0 million as of March 29, 2025 and December 28, 2024, respectively.

See Note 2 for additional information.

Commitments and Contingencies

We are involved from time to time in claims, proceedings and litigation arising in the normal course of business.

From time to time, we may be a party to legal proceedings that arise in the ordinary course of business, some of which may be covered by insurance.

We establish an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable.

1 unchanged sentence

We monitor those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjust the amount as appropriate.

If the loss contingency at issue is not both probable and reasonably estimable, we do not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable.

If it is at least a reasonable possibility that a material loss will occur, we will provide disclosure regarding the contingency.

Management believes that we do not have any pending litigation that, separately or in the aggregate, would have a material adverse effect on our results of operations, financial condition or cash flows.

Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share (amounts in thousands, except per share data):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net income and comprehensive income $ 24,178 $ 27,140 $ 37,154 $ 65,331

Weighted-average shares outstanding – basic

98,359 99,108 99,140 98,514

Effect of dilutive options 465 1,624 787 1,913

Effect of dilutive RSUs and PSUs (1)

If the loss contingency at issue is not both probable and reasonably estimable, we do not establish an accrual, but will continue to monitor the matter for developments that could make the loss contingency both probable and reasonably estimable.

If there is at least a reasonable possibility that a material loss will occur, we will provide disclosure regarding the contingency.

Except as disclosed below, management believes that we do not have any pending legal proceedings that, separately or in the aggregate, would have a material adverse effect on our results of operations, financial condition or cash flows.

On January 30, 2025, a federal securities class action lawsuit, captioned Liberato v.

Grocery Outlet Holding Corp., et al.

25-cv-00957, was filed in the United States District Court in the Northern District of California against Grocery Outlet Holding Corp.

and certain of its former officers on behalf of purchasers of our common stock between November 7, 2023 and May 7, 2024 (the “Liberato Lawsuit”).

On March 28, 2025, a second and related federal securities class action lawsuit, captioned Cavanaugh v.

Grocery Outlet Holding Corp., et al.

25-cv-2886, was filed in the United States District Court in the Northern District of California against the same defendants on behalf of purchasers of our common stock between August 8, 2023 and October 29, 2024 (the “Cavanaugh Lawsuit,” and together with the Liberato Lawsuit, the “Class Action Lawsuits”).

The Class Action Lawsuits allege that the defendants violated federal securities laws by making materially false and misleading statements and/or failing to disclose material adverse facts regarding our transition to new and upgraded internal systems.

The Class Action Lawsuits seek remedies under the Securities Exchange Act of 1934, as amended, including an undisclosed amount of monetary damages, interest, fees and other costs.

On March 31, 2025, the plaintiff who filed the Cavanaugh Lawsuit filed a motion to consolidate both actions and to be appointed as lead plaintiff.

We intend to defend these matters vigorously.

On April 28, 2025, a federal stockholder derivative lawsuit, captioned Conners v.

Sheedy, et al.

25-cv-03697, was filed in the United States District Court in the Northern District of California against certain of the Company’s directors and two of its former officers purportedly on behalf of the Company.

On May 2, 2025, a second federal stockholder derivative lawsuit, captioned Jackson v.

Lindberg, et.

25-cv-03843, was filed in the United States District Court in the Northern District of California against certain of the Company’s directors and two of its former officers purportedly on behalf of the Company.

These stockholder derivative lawsuits are collectively referred to as the “Derivative Lawsuits.” The Derivative Lawsuits allege claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets and for violations of Sections 10(b), 14(a), and 20(a) of the Exchange Act, based on similar allegations to those at issue in the Class Action Lawsuits.

The Derivative Lawsuits seek, among other relief, undisclosed damages, restitution, fees and other costs, and the institution of corporate governance reforms.

It is reasonably possible that a loss may be incurred in connection with either or both the Class Action Lawsuits or the Derivative Lawsuits;

however, the possible range of losses is not reasonably estimable.

Net Loss Per Share

The following table sets forth the calculation of basic and diluted net loss per share (amounts in thousands, except per share data):

13 Weeks Ended

2025 March 30,

Net loss and comprehensive loss

$ ( 23,317 ) $ ( 1,025 )

Weighted-average shares outstanding – diluted

Weighted-average shares outstanding – basic and diluted (1)(2)

97,521 99,520

Earnings per share:

Net loss per share:

Basic $ ( 0.24 ) $ ( 0.01 )

1 unchanged sentence

_______________________

(1) We are required to include in diluted weighted-average shares outstanding contingently issuable shares that would be issued assuming the end of our reporting period was the end of the relevant PSU award contingency period.

The following weighted-average common share equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

(1) We are required to include in diluted weighted-average shares outstanding contingently issuable shares that would be exercisable or issued, assuming the end of our reporting period was the end of the relevant market-based option award or PSU award contingency period.

(2) There is no difference in the weighted-average shares outstanding used in the above calculations due to the Company's net loss for the periods presented.

The following weighted-average common share equivalents were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive (amounts in thousands):

13 Weeks Ended

2025 March 30,

Stock options

RSUs 821 10 685 42

RSUs and PSUs

Total 2,203 2,031

Segment Information

We are a retailer of quality, name-brand consumables and fresh products sold primarily through a network of independently operated stores.

We manage our business on a consolidated basis and have one reportable segment.

The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

In addition, all of our sales were made to customers located in the U.S.

and all property and equipment is located in the U.S.

The chief operating decision maker ("CODM"), who is our President and Chief Executive Officer, assesses performance for the segment and decides how to allocate resources based on net income (loss) and comprehensive income (loss), which is reported on the condensed consolidated statements of operations and comprehensive income (loss).

The CODM uses this measure in deciding where to reinvest profits and to monitor budget versus actual results.

The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.

Information for the segment, including the significant expenses regularly reviewed by the CODM, is provided in the following tables for the periods indicated (amounts in thousands):

13 Weeks Ended

2025 March 30,

Net sales $ 1,125,567 $ 1,036,944

Cost of sales (1)

781,769 732,141

Commission expenses (2)

161,720 160,790

Other selling expenses (3)

74,530 56,004

General and administrative expenses (4)

60,826 54,415

Restructuring charges (5)

Other segment items (6)

Depreciation and amortization expenses 29,897 24,889

Interest income

( 1,764 ) ( 2,825 )

Interest expense

Income tax benefit

( 5,711 ) ( 1,588 )

Net loss and comprehensive loss

$ ( 23,317 ) $ ( 1,025 )

_______________________

(1) Cost of sales includes merchandise costs, inventory markdowns, inventory losses, transportation costs and distribution and warehousing costs and excludes depreciation and amortization expenses of $ 1.4 million and $ 0.9 million for the 13 weeks ended March 29, 2025 and March 30, 2024, respectively.

(2) Commission expenses represent commissions paid to IOs.

(3) Other selling expenses include occupancy for all stores, our portion of maintenance costs for IO stores, the cost of opening new IO stores and payroll, benefits, maintenance, supplies and utilities for company-operated stores.

(4) General and administrative expenses include payroll and benefits for corporate and field support, marketing and advertising, insurance and professional services and operator recruiting and training costs.

(5) Restructuring charges include lease termination costs, non-cash impairment and disposal of long-lived assets, employee severance and benefit costs and legal, professional and other costs related to the Restructuring Plan, as defined in Note 12.

(6) Other segment items represents share-based compensation expenses.

13 Weeks Ended

2025 March 30,

Purchases of property and equipment

$ 60,452 $ 46,266

Investments in intangible assets and licenses

Total capital expenditures

$ 65,286 $ 49,258

Business Combination

3 unchanged sentences

Holdings is the owner of all of the issued and outstanding capital stock of The Bargain Barn, Inc., a Tennessee corporation doing business as United Grocery Outlet ("United Grocery Outlet").

United Grocery Outlet operated 40 discount grocery stores across six states in the southeastern United States as of April 1, 2024.

The acquisition provides us with the opportunity to scale in a new region as well as a platform for future potential expansion in the Southeast.

We accounted for the acquisition as a business combination using the acquisition method of accounting, which requires, among other things, that we allocate the purchase consideration to the identifiable assets acquired and liabilities assumed based on their acquisition-date fair values.

The fair values of the acquired assets and assumed liabilities recorded on our condensed consolidated financial statements may be subject to adjustment pending completion of final valuation.

These fair value estimates will be reevaluated and adjusted, if needed, during the measurement period of up to one year from the acquisition date, and recorded as adjustments to goodwill.

The following table summarizes the preliminary purchase price allocation as of September 28, 2024 recorded for acquired assets and assumed liabilities at the acquisition date (amounts in thousands):

The fair values of the acquired assets and assumed liabilities recorded on our condensed consolidated financial statements were subject to adjustment during the measurement period of up to one year from the acquisition date.

As of March 29, 2025, the valuation of the acquired assets and assumed liabilities has been completed.

The following table summarizes the purchase price allocation as of March 29, 2025 recorded for acquired assets and assumed liabilities at the acquisition date (amounts in thousands):

Cash and cash equivalents $ 2,003

17 unchanged sentences

The goodwill will not be deductible for income tax purposes.

During the 39 weeks ended September 28, 2024, we recogniz ed $ 8.3 million i n acquisition and integration costs related to due diligence, legal, other consulting and retention bonus expenses.

Such costs were included within selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

During the 13 weeks ended March 29, 2025, we recogniz ed $ 0.3 million i n acquisition and integration costs related to legal, retention bonus and other consulting expenses.

Such costs were included within selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Pro forma results are not presented as the impact of this acquisition is not material to our condensed consolidated financial results.

Subsequent Events

CEO Transition

On October 29, 2024, Robert J.

agreed to step down as the Company’s President and Chief Executive Officer and resign as a member of the Board, and the Board appointed Eric J.

Lindberg, Jr., the current Chairman of the Board of Directors, as the Company’s Interim President and Chief Executive Officer, each effective immediately.

2024 Share Repurchase Program

In the fourth quarter of fiscal 2024, the Board approved the 2024 Share Repurchase Program, which replaced the Company's 2021 Share Repurchase Program.

The 2024 Share Repurchase Program does not have an expiration date and authorizes us to repurchase up to $ 100.0 million of our outstanding common stock (inclusive of fees and commissions).

See Note 4 for additional information.

Restructuring Plan

We initiated a restructuring plan during the fourth quarter of fiscal 2024, with continuing implementation in fiscal 2025, intended to improve our long-term profitability, cash flow generation and return on invested capital, optimize the footprint of new store growth, and lower our cost base (the "Restructuring Plan").

Under the Restructuring Plan:

• We determined to terminate a total of 28 leases for unopened stores in suboptimal locations which we had planned to open in the next several years.

The scope of store lease terminations has been expanded by five additional stores from the 23 stores determined as of fiscal 2024.

• We have shifted our planned investments in our distribution infrastructure in fiscal 2025 and fiscal 2026 away from highly capital-intensive projects.

We have instead, and plan to continue to, invest in lower cost distribution centers for dry goods to enhance capacity and improve inventory management and overall execution.

During the first quarter of fiscal 2025, we cancelled certain warehouse projects in connection with such strategy.

• We reduced headcount by approximately 40 full-time employees in the first quarter of fiscal 2025.

The following table summarizes charges incurred related to the Restructuring Plan for the 13 weeks ended March 29, 2025 and for the cumulative-to-date period ended March 29, 2025 since the initiation of the Restructuring Plan (in thousands):

Cumulative (2)

2025 March 29,

Cash restructuring charges:

Lease termination costs

$ 29,093 $ 29,093

Employee severance and benefit costs

Legal, professional and other costs

Total cash restructuring costs

32,147 32,147

Non-cash impairment and disposal of long-lived assets

Total restructuring charges

$ 33,875 $ 49,763

_______________________

(1) All costs incurred related to the Restructuring Plan during the 13 weeks ended March 29, 2025, are included in Restructuring charges on the condensed consolidated statements of operations and comprehensive income (loss).

(2) Cumulative-to-date since the initiation of the Restructuring Plan during the fourth quarter of fiscal 2024.

As of March 29, 2025, we estimate that we will incur total costs under the Restructuring Plan of between $ 59 million and $ 61 million, of which between $ 40 million and $ 42 million are expected to be cash expenditures.

The estimated total costs include charges incurred cumulative-to-date since the initiation of the Restructuring Plan, along with an additional $ 8 million to $ 10 million of cash lease termination costs and $ 1 million of non-cash charges for asset disposals estimated to be incurred in the second quarter of fiscal 2025.

The actions under the Restructuring Plan are expected to be substantially completed by the first half of fiscal 2025.

The following table summarizes the restructuring liability activity for the Restructuring Plan during the 13 weeks ended March 29, 2025 (in thousands):

Lease Termination Costs

Employee Severance and Benefit Costs

Legal, Professional and Other Costs

Balance at December 28, 2024

$ — $ — $ — $ —

Cash restructuring charges

29,093 1,532 1,522 32,147

Cash payments

( 23,383 ) ( 1,462 ) ( 341 ) ( 25,186 )

Balance at March 29, 2025

$ 5,710 $ 70 $ 1,181 $ 6,961

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-Q

Item 1. Financial Statements