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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 186 added, 241 removed, 189 unchanged (69% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Form 10-Q" or “report"), and the audited consolidated financial statements and related notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 ("2023 Form 10-K").

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.

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We operate on a fiscal year that ends on the Saturday closest to December 31st each year.

Fiscal 2023 ended December 30, 2023.

References to the third quarter of fiscal 2024 and the third quarter of fiscal 2023 refer to the 13 weeks ended September 28, 2024 and September 30, 2023, respectively.

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.

As used in this report, references to "Grocery Outlet," "the Company," "the registrant," "we," "us" and "our," refer to Grocery Outlet Holding Corp.

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Our flexible buying model allows us to offer quality, name-brand opportunistic products at prices generally 40% to 70% below those of conventional retailers.

Our stores are primarily run by entrepreneurial independent operators ("IOs") who create a neighborhood feel through personalized customer service and a localized product offering.

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

Macroeconomic Conditions and Recent Developments

Over the past several years, and to a lesser extent recently, our business has been and continues to be impacted by macroeconomic conditions including supply chain and labor challenges, inflation and subsequent disinflation, and changes in consumer behavior, and our IOs have been impacted by staffing challenges and increased labor costs and utility costs within their businesses.

Furthermore, planned construction and opening of new stores has been, and may continue to be, negatively impacted due to both increased lead times to acquire materials, obtain permits and licenses, hook up utilities as well as higher construction and development related c osts.

Additionally, during fiscal 2024 we have seen increases in promotional and pricing activities from key competitors, putting further pressure on our relative value.

In turn, we have been actively negotiating costs and adjusting prices to sharpen our value proposition.

The ext ent of the continuing impact of these factors on our operational and financial performance will depend on many factors, including certain factors outside of our control.

Our new store growth efforts for fiscal 2024 and beyond are focused on organic growth and new real estate opportunities that align with our long-term geographic expansion and store growth strategies.

Our Grocery Outlet stores are primarily run by entrepreneurial independent operators ("IOs") who create a neighborhood feel through personalized customer service and a localized product offering.

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

Recent Trends and Developments

The extent of the continuing impact of the factors set forth below on our operational and financial performance will depend on many factors, including certain factors outside of our control.

Macroeconomic Conditions.

Over the past several years, our business has been and continues to be impacted by macroeconomic conditions including supply chain and labor challenges, inflation and subsequent disinflation, tariffs, and changes in consumer behavior, and our IOs have been impacted by staffing challenges and increased labor costs and utility costs within their businesses.

Tariffs, such as those recently implemented or proposed by the U.S.

government on goods imported from China and certain other countries, may result in cost increases on some of the products we sell, such as fresh meat and general merchandise that we import from impacted countries, as well as the materials and supplies we use for store construction.

Tariffs may also negatively affect consumer sentiment.

While we are still evaluating the potential impact of these tariffs, the short-term impact of price increases due to tariffs is largely dependent on our ability to negotiate with suppliers, opportunities to change sources of supply, our assortment decisions and whether or not we pass the effects through to our customers, which will largely depend upon competitive market conditions.

It is reasonably possible that new or additional tariffs will be periodically announced given the current global trade environment.

Sustained uncertainty about, or worsening of, current global economic conditions and further tariffs and escalations of tensions between the U.S.

and its trading partners has and could continue to adversely impact the stability of global financial markets and result in a global economic slowdown and long-term changes to global trade, which could in turn have a material adverse impact on our business and financial condition.

Pricing Competition.

During the last few years we have observed an increase in promotional and pricing activities from key competitors, putting further pressure on our relative value proposition, which in turn, has resulted in our increased efforts to actively negotiate costs and adjust prices to sharpen our value proposition.

Restructuring Plan.

While we continue to believe in our long-term growth potential, we reviewed our strategic initiatives and priorities in late fiscal 2024 and determined to simplify our near-term growth strategy in order to build a stronger foundation from which to scale in the future and to drive sustainable and disciplined growth.

As a result, 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").

The Restructuring Plan includes the activities set forth below:

• We are optimizing new store growth in the next several years to increase efficiencies for distribution and optimize brand awareness and marketing.

Specifically, we have narrowed our focus on our future new store openings to target existing markets and a smaller set of high-priority adjacent new markets to improve new store sales productivity and return on invested capital.

As such we have 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, as expanded in scope by five additional stores from the 23 stores determined as of fiscal 2024.

We plan to open 33 to 35 net new stores in fiscal 2025 in existing markets and a smaller set of high-priority adjacent new markets.

• 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 are building a more scalable cost structure.

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

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 cumulative costs incurred of $49.8 million since the initiation of the Restructuring Plan, of which $33.9 million was incurred in the first quarter of fiscal 2025.

All costs incurred in the first quarter of fiscal 2025 are included in Restructuring charges on the condensed consolidated statements of operations and comprehensive income (loss).

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

See Note 12 to the condensed consolidated financial statements for additional information regarding the Restructuring Plan, including the costs incurred and restructuring liability activity.

New Store Growth.

Planned construction and opening of new stores has been, and may continue to be, negatively impacted due to both increased lead times to acquire materials, obtain permits and licenses, hook up utilities as well as higher construction and development related costs.

Recently implemented and proposed tariffs could further impact our constructions costs.

Our new store growth efforts are focused on organic growth combined with complementary real estate opportunities that align with our long-term geographic expansion and store growth strategies.

Complementary growth opportunities may include expanding strategic relationships with large property owners, evaluating acquisitions of opportunistic real estate that become available through consolidation in the retail sector, and exploring strategic regional acquisitions of operating businesses.

On April 1, 2024, we acquired The Bargain Barn, Inc., a Tennessee corporation doing business as United Grocery Outlet ("United Grocery Outlet"), which included 40 stores in six adjacent states we did not operate in as of such date (Tennessee, North Carolina, Georgia, Alabama, Kentucky and Virginia) and a company-operated distribution center.

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

Our near-term integration focus is expanding the assortment, investing in store refreshes and new fixtures and introducing some of our marketing programs to the Southeast region.

In addition to the newly acquired United Grocery Outlet stores, we plan to open 27 stores in fiscal 2024, for a planned total of 66 net new stores in fiscal 2024.

Excluding the United Grocery Outlet transaction, we opened 22 new stores and closed one store during the 39 weeks ended September 28, 2024.

We opened 11 stores and closed 1 store in the first quarter of fiscal 2025 and plan to open 33 to 35 net new stores in fiscal 2025.

Enterprise Resource Planning System Upgrades and Challenges.

In late August 2023, we replaced components of our enterprise resource planning system, including our financial ledger, inventory management platform and product data warehouse system.

The implementation of these system upgrades resulted in disruption to our business operations, including ordering and inventory disruptions, as well as payment processing, which adversely impacted our results of operations for the fiscal months of September through December of 2 023 as well as during the 39 weeks ended September 28, 2024, as more fully described below in "Comparison of the 13 and 39 weeks ended September 28, 2024 and September 30, 2023." We have since improved the data visibility to help us manage and forecast the business and we continue to work to further improve visibility into additional operating data, increase speed and refine the tools that we and our independent operators use to manage the business.

In the third quarter of fiscal 2024, we began to introduce our private label products in stores.

The implementation of these system upgrades resulted in significant disruption to our business operations, including ordering and inventory disruptions, as well as payment processing, which adversely impacted our results of operations during the remainder of fiscal 2023 through and including the first quarter of fiscal 2025, as more fully described below in "Comparison of the 13 weeks ended March 29, 2025 and March 30, 2024." We have since improved the data visibility to help us manage and forecast the business and we continue to work to further improve visibility into additional operating data, and to increase the speed and efficiency of the tools that we and our IOs use to manage the business.

Private Label Products.

We introduced our private label products in stores beginning in the third quarter of fiscal 2024, with over 215 new private-label SKUs across various grocery and deli categories introduced through the first quarter of fiscal 2025.

In addition to providing better value and inventory consistency for our customers, our private label products are expected to deliver better margins for us and our IOs.

We currently anticipate introducing over 150 new private-label SKUs by the end of fiscal 2024.

Key Factors and Measures We Use to Evaluate Our Business

We consider a variety of financial and operating measures in assessing the performance of our business.

The key generally accepted accounting principles ("GAAP") financial measures we use are net sales, gross profit and gross margin, selling, general and administrative expenses ("SG&A") and operating income.

The key financial measures we use in accordance with accounting principles generally accepted in the United States of America ("GAAP") are net sales, gross profit and gross margin, selling, general and administrative expenses ("SG&A"), operating income (loss), net income (loss) and comprehensive income (loss) and earnings (net loss) per share.

The key operational metrics and non-GAAP financial measures we use are number of new stores, comparable store sales, EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share.

Third Quarter of Fiscal 2024 Overview

Key financial and operating performance results for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 were as follows:

• Net sales increased 10.4% to $1.11 billion from $1.00 billion in the third quarter of fiscal 2023.

First Quarter of Fiscal 2025 Overview

Key financial and operating performance results for the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 were as follows:

• Net s ales increased 8.5% to $1.13 billion from $1.04 billion in the first quarter of fiscal 2024.

• Comparable store sales increased by 0.3%, driven by a 2.3% increase in the number of transactions, partially offset by a 2.0% decrease in average transaction size.

• We opened 5 new stores, ending the third quarter of fiscal 2024 with 529 stores in 16 states.

• Gross ma rgin decreased by 30 basis points to 31.1%, compare d to gross margin of 31.4% in the third quarter of fiscal 2023.

• Gross margin increased by 110 basis points to 30.4%, comp are d to gross margin of 29.3% in the first quarter of fiscal 2024.

• We opened 11 new stores and closed 1 store, ending the first quarter of fiscal 2025 with 543 stores in 16 states.

• SG&A increased by 9.1% to $331.1 million, or 29.4% of net sales.

• Net income wa s $24.2 million, or $0.24 per diluted share, compared to net income of $27.1 million, or $0.27 per diluted share, in the third quarter of fiscal 2023.

• Adjusted EBITDA (1) increased 6.0% to $72.3 million co mpared to $68.1 million in the third quarter of fiscal 2023.

• Adjusted net inco me (1) decreased 10.1% to $27.9 million, or $0.28 pe r adjusted diluted share (1) , compared to $31.0 million, or $0.31 per adjusted diluted share, in the third quarter of fiscal 2023.

• Operating loss was $22.5 million, which included $33.9 million in charges during the quarter related to the Restructuring Plan (see Note 12 to the condensed consolidated financial statements for additional information).

• Net loss was $23.3 million, or $(0.24) per diluted share, compared to net loss of $1.0 million, or $(0.01) per diluted share, in the first quarter of fiscal 2024.

• Adjusted net income (1) increased 47.7% to $13.0 million, or $0.13 diluted adjusted earnings per share (1) , compared to $8.8 million, or $0.09 diluted adjusted earnings per share, in the first quarter of fiscal 2024.

• Adjusted EBITDA (1) increased 31.7% to $51.9 million compared to $39.4 million in the first quarter of fiscal 2024.

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(1) Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures, which exclude the impact of certain special items.

(1) Adjusted net income, diluted adjusted earnings per share and adjusted EBITDA are non-GAAP financial measures, which exclude the impact of certain special items.

Please note that our non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

See the "Operating Metrics and Non-GAAP Financial Measures" section below for additional information about these items, including their definitions, how the non-GAAP measures provide useful information to investors and how management utilizes them, and reconciliations of the non-GAAP measures and the most directly comparable GAAP measures.

See the "Operating Metrics and Non-GAAP Financial Measures" section below for additional information about these items, including their definitions, how the non-GAAP financial measures provide useful information to investors and how management utilizes them, and reconciliations of the non-GAAP financial measures and the most directly comparable GAAP financial measures.

Key Components of Results of Operations

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Our customers' discretionary income is impacted by wages, fuel and other cost-of-living increases including food-at-home inflation, as well as consumer trends and preferences, which fluctuate depending on the environment.

Because we offer a broad selection of merchandise at extreme values, historically our business has benefited from periods of economic uncertainty.

Because we offer a broad selection of merchandise at extreme values, our business has in the past benefited from certain periods of economic uncertainty.

Cost of Sales, Gross Profit and Gross Margin

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The components of our SG&A may not be comparable to the components of similar measures of our competitors and other retailers.

Operating Income

Operating income is gross profit less SG&A.

Operating income excludes interest expense, net, loss on debt extinguishment and modification and income tax expense.

We use operating income as an indicator of the productivity of our business and our ability to manage expenses.

Restructuring Charges

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.

See Note 12 to the condensed consolidated financial statements for additional information on the Restructuring Plan.

Operating Income (Loss)

Operating income (loss) is gross profit less SG&A.

Operating income (loss) excludes interest expense, net and income tax benefit (expense).

We use operating income (loss) as an indicator of the productivity of our business and our ability to manage expenses.

Results of Operations

The following tables summarize key components of our results of operations both in dollars and as a percentage of net sales (amounts in thousands, except for percentages):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net sales $ 1,108,183 $ 1,003,913 $ 3,273,647 $ 2,979,635

Cost of sales 763,311 688,222 2,275,590 2,036,831

Gross profit 344,872 315,691 998,057 942,804

Selling, general and administrative expenses 304,586 278,134 931,103 835,948

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

Other expenses:

Interest expense, net 6,439 4,226 15,174 14,911

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

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Percentage of net sales (1)

The following table summarizes key components of our results of operations both in dollars and as a percentage of net sales (amounts in thousands, except for percentages):

13 Weeks Ended

2025 % of Net Sales (1)

2024 % of Net Sales (1)

$ Change % Change (2)

Net sales $ 1,125,567 100.0 % $ 1,036,944 100.0 % $ 88,623 8.5 %

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Selling, general and administrative expenses 331,078 29.4 % 303,382 29.3 % 27,696 9.1 %

Operating income 3.6 % 3.7 % 2.0 % 3.6 %

Other expenses:

Restructuring charges

33,875 3.0 % — — % 33,875 100.0 %

Operating (loss) income (22,508) (2.0) % 563 0.1 % (23,071) *

Interest expense, net 6,520 0.6 % 3,176 0.3 % 3,344 105.3 %

Loss on debt extinguishment and modification — % — % — % 0.2 %

Total other expenses 0.6 % 0.4 % 0.5 % 0.7 %

Income before income taxes 3.1 % 3.3 % 1.6 % 2.9 %

Income tax expense 0.9 % 0.6 % 0.4 % 0.7 %

Net income and comprehensive income 2.2 % 2.7 % 1.1 % 2.2 %

Loss before income taxes (29,028) (2.6) % (2,613) (0.3) % (26,415) *

Income tax benefit (5,711) (0.5) % (1,588) (0.2) % (4,123) 259.6 %

Net loss and comprehensive loss $ (23,317) (2.1) % $ (1,025) (0.1) % $ (22,292) *

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(1) Components may not sum to totals due to rounding.

* Represents a change that is not meaningful.

Operating Metrics and Non-GAAP Financial Measures

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Certain newly acquired stores may require refreshes and new fixtures.

We expect new store growth to be a very significant and critical driver of our net sales growth over the long term.

We expect new store growth to be a significant and critical driver of our net sales growth over the long term.

We lease substantially all of our store locations.

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Comparable store sales are impacted by the same factors that impact net sales.

Comparable store sales consists of net sales from our stores beginning on the first day of the fourteenth full fiscal month following a store's opening, which is when we believe comparability is achieved, or the thirteenth full fiscal month following a store's acquisition.

Comparable store sales consist of net sales from our stores beginning on the first day of the fourteenth full fiscal month following a store's opening, which is when we believe comparability is achieved, or the thirteenth full fiscal month following a store's acquisition.

Included in our comparable store definition are those stores that have been remodeled, expanded, or relocated in their existing location or respective trade areas.

Excluded from our comparable store definition are those stores that have been temporarily closed for an extended period, those that have had their business materially disrupted for both planned projects as well as due to unforeseen circumstances, permanent store closures and dispositions.

When applicable, as was the case with fiscal 2020 and will be the case with fiscal 2025, we exclude the net sales in the non-comparable week of a 53-week year from the same store sales calculation after comparing the current and prior year weekly periods that are most closely aligned.

Opening or acquiring new stores is a primary component of our growth strategy and, as we continue to execute on our growth strategy, we expect that a significant portion of our net sales growth will be attributable to non-comparable store net sales.

When applicable, as is the case with fiscal 2025, we exclude the net sales in the non-comparable week of a 53-week year from the same store sales calculation after comparing the current and prior year weekly periods that are most closely aligned.

Opening or, on a limited strategic basis, acquiring new stores is a primary component of our growth strategy and, as we continue to execute on our growth strategy, we expect that a significant portion of our net sales growth will be attributable to non-comparable store net sales.

Accordingly, comparable store sales is only one of many measur es we use to assess the success of our growth strategy.

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EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share are also frequently used by analysts, investors and other interested parties to evaluate us and other companies in our industry.

Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate our operating results.

We use these non-GAAP measures to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.

In addition, we use adjusted EBITDA to supplement GAAP measures of performance to evaluate our performance in connection with compensation decisions.

We believe that excluding items from operating income, net income and earnings per diluted share that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides additional information for analyzing trends in our business.

We define EBITDA as net income before net interest expense, income taxes and depreciation and amortization expenses.

Adjusted EBITDA represents EBITDA adjusted to exclude share-based compensation expense, loss on debt extinguishment and modification, asset impairment and gain or loss on disposition, acquisition and integration costs, costs related to the amortization of inventory purchase accounting asset step-ups and certain other expenses that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude.

Adjusted net income represents net income adjusted for the previously mentioned adjusted EBITDA adjustments, further adjusted for the amortization of property and equipment purchase accounting asset step-ups and deferred financing costs, tax adjustment to normalize the effective tax rate, and tax effect of total adjustments.

Management believes it is useful to investors and analysts to evaluate these non-GAAP financial measures on the same basis as management uses to evaluate our operating results.

We use these non-GAAP financial measures to supplement GAAP financial measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.

In addition, we use adjusted EBITDA to supplement GAAP financial measures of performance to evaluate our performance in connection with compensation decisions.

We believe that excluding items from operating income (loss), net income (loss) and earnings (net loss) per diluted share that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides additional information for analyzing trends in our business.

We define EBITDA as net income (loss) before net interest expense, income taxes and depreciation and amortization expenses.

Adjusted EBITDA represents EBITDA adjusted to exclude share-based compensation expenses, asset impairment and gain or loss on disposition, acquisition and integration costs, restructuring charges, and certain other expenses that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude.

Adjusted net income represents net income (loss) adjusted for the previously mentioned adjusted EBITDA adjustments, further adjusted for the amortization of property and equipment purchase accounting asset step-ups and deferred financing costs, tax adjustment to normalize the effective tax rate, and tax effect of total adjustments.

Basic adjusted earnings per share is calculated using adjusted net income, as defined above, and basic weighted average shares outstanding.

Diluted adjusted earnings per share is calculated using adjusted net income, as defined above, and diluted weighted average shares outstanding.

These non-GAAP measures may not be comparable to similar measures reported by other companies and have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

We address the limitations of the non-GAAP measures through the use of various GAAP measures.

These non-GAAP financial measures may not be comparable to similar measures reported by other companies and have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

We address the limitations of the non-GAAP financial measures through the use of various GAAP measures.

In the future, we will incur expenses or charges such as those added back to calculate adjusted EBITDA or adjusted net income.

presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by the adjustments we have used to derive such non-GAAP measures.

Our presentation of these non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by the adjustments we have used to derive such non-GAAP measures.

The following table summarizes key operating metrics and non-GAAP financial measures for the periods presented (amounts in thousands, except for percentages and store counts):

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

Other Financial and Operations Data

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$ 7,389 $ 25,452

$ 68,101 $ 59,443 $ 146,203 $ 165,197

Adjusted EBITDA (2)

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(1) 39 weeks ended September 28, 2024 includes addition of 40 stores from acquisition of United Grocery Outlet.

(1) Comparable store sales consist of net sales from our stores beginning on the first day of the fourteenth full fiscal month following the store's opening, which is when we believe comparability is achieved, or the thirteenth full fiscal month following the store's acquisition.

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GAAP to Non-GAAP Reconciliations

The following tables provide a reconciliation from our GAAP net income to EBITDA and adjusted EBITDA, GAAP net income to adjusted net income, and our GAAP earnings per share to adjusted earnings per share for the periods presented (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 $ 24,178 $ 27,140 $ 37,154 $ 65,331

The following tables provide a reconciliation from our GAAP net loss to EBITDA and adjusted EBITDA, GAAP net loss to adjusted net income, and our GAAP net loss per share to adjusted earnings per share for the periods presented (amounts in thousands, except per share data):

13 Weeks Ended

2025 March 30,

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

Interest expense, net 6,520 3,176

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

Income tax benefit

(5,711) (1,588)

Depreciation and amortization expenses 29,897 24,889

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Share-based compensation expenses (1)

1,663 7,535 16,806 25,516

Loss on debt extinguishment and modification (2)

Asset impairment and gain or loss on disposition (2)

216 117 961 460

Acquisition and integration costs (3)

760 — 8,346 —

Amortization of purchase accounting assets (5)

1,518 1,048 6,376 5,227

Restructuring charges (4)

Adjusted EBITDA $ 51,885 $ 39,395

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

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

Share-based compensation expenses (1)

13 Weeks Ended

2025 March 30,

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

Loss on debt extinguishment and modification (2)

Share-based compensation expenses (1)

Asset impairment and gain or loss on disposition (2)

216 117 961 460

Acquisition and integration costs (3)

760 — 8,346 —

Amortization of purchase accounting assets and deferred financing costs (6)

1,389 1,424 4,939 4,415

1,518 1,048 6,376 5,227

Restructuring charges (4)

Tax adjustment to normalize effective tax rate (7)

(600) (3,418) (1,308) (4,274)

Tax effect of total adjustments (8)

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Adjusted net income $ 13,007 $ 8,809

GAAP earnings per share:

GAAP net loss per share:

Basic $ (0.24) $ (0.01)

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Diluted 97,521 99,520

Non-GAAP weighted average shares outstanding

Basic 97,521 99,520

98,227 101,136

(1) Includes non-cash share-based compensation expense and cash dividends paid on vested share-based awards as a result of dividends declared in connection with a recapitalization that occurred in fiscal 2018.

(2) Represents the write-off of debt issuance costs and debt discounts as well as debt modification costs related to refinancing and/or repayment of our credit facilities.

See Note 3 to the condensed consolidated financial statements for additional information.

(3) Represents asset impairment charges and gains or losses on dispositions of assets.

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(1) Includes non-cash share-based compensation expense.

(2) Represents non-restructuring asset impairment charges and gains or losses on dispositions of assets.

(3) Represents costs related to the acquisition and integration of United Grocery Outlet, including due diligence, legal, other consulting and retention bonus expenses.

(5) For purposes of determining adjusted EBITDA, this line represents the incremental amortization of inventory step-ups resulting from purchase price accounting related to acquisitions.

For purposes of determining adjusted net income, in addition to the previously noted item, this line also represents the incremental amortization of an asset step-up resulting from purchase price accounting related to our acquisition in 2014 by an investment fund affiliated with Hellman & Friedman LLC, as well as the amortization of debt issuance costs, as these items are already included in the adjusted EBITDA reconciliation within the depreciation and amortization expenses and interest income, net, respectively.

(6) Represents other non-recurring, non-cash or non-operational items, such as technology upgrade implementation costs, certain personnel-related costs, costs related to employer payroll taxes associated with equity awards, legal settlements and other legal expenses, store closing costs, strategic project costs and miscellaneous costs.

(7) Represents adjustments to normalize the effective tax rate for the impact of unusual or infrequent tax items that we do not consider in our evaluation of ongoing performance, including excess tax expenses or benefits related to stock option exercises and vesting of restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") that are recorded in earnings as discrete items in the reporting period in which they occur.

(4) Represents charges related to the Restructuring Plan as described in Note 12 to the condensed consolidated financial statements.

(5) Represents other non-recurring, non-cash or non-operational items, such as certain personnel-related hiring and termination costs, system implementation costs, costs related to employer payroll taxes associated with equity awards, legal settlements and other legal expenses, store closing costs, strategic project costs and miscellaneous costs.

(6) Represents the incremental amortization of an asset step-up resulting from purchase price accounting related to our acquisition in 2014 by an investment fund affiliated with Hellman & Friedman LLC, as well as the amortization of debt issuance costs.

(7) Represents adjustments to normalize the effective tax rate for the impact of unusual or infrequent tax items that we do not consider in our evaluation of ongoing performance, including excess tax expenses or benefits related to stock option exercises and vesting of time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") that are recorded in earnings as discrete items in the reporting period in which they occur.

(8) Represents the tax effect of the total adjustments.

We calculate the tax effect of the total adjustments on a discrete basis excluding any non-recurring and unusual tax items.

Comparison of the 13 and 39 weeks ended September 28, 2024 and September 30, 2023 (amounts in thousands, except percentages)

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

(9) To calculate diluted adjusted earnings per share, we adjusted the weighted-average shares outstanding for the dilutive effect of all potential shares of common stock.

As discussed in Note 9 to the condensed consolidated financial statements, there is no difference in the weighted-average shares outstanding used to calculate the basic and diluted GAAP net loss per share due to the Company's net loss for the periods presented.

Comparison of the 13 weeks ended March 29, 2025 and March 30, 2024 (amounts in thousands, except percentages)

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Net sales $ 1,125,567 $ 1,036,944 $ 88,623 8.5 %

The increase in net sales for the 13 and 39 weeks ended September 28, 2024 compared to the same periods in fiscal 2023 was primarily attributable to an increase in comparable store sales as well as non-comparable store net sales growth primarily from the 74 net new stores acquired or opened over the last 12 months.

Comparable store sales increased 1.2% for the 13 weeks ended September 28, 2024 and 2.6% for the 39 weeks ended September 28, 2024 compared to the same periods in fiscal 2023.

The increase in comparable store sales for the 13 weeks ended September 28, 2024 was driven by a 2.0% increase in the number of transactions, partially offset by a 0.7% decrease in average transaction size.

The increase in comparable store sales for the 39 weeks ended September 28, 2024 was driven by a 4.6% increase in the number of transactions, partially offset by a 1.9% decrease in average transaction size.

Cost of Sales

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

The increase in net sales was primarily attributable to an increase in non-comparable store net sales growth primarily from the 69 net new stores acquired or opened over the last 12 months as well as comparable store sales.

Comparable store sales increased 0.3%, driven by a 2.3% increase in the number of transactions, partially offset by a 2.0% decrease in average transaction size.

Comparable store sales were impacted by the timing shift of the Easter holiday, which occurred during the first quarter of fiscal 2024 while comparatively occurring during the second quarter of fiscal 2025.

Cost of Sales, Gross Profit and Gross Margin

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

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% of net sales 69.6 % 70.7 %

The increase in cost of sales for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily the result of an increase in comparable store sales combined with non-comparable net sales from 74 net new stores acquired or opened over the last 12 months.

The increase in cost of sales for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily the result of an increase in comparable store sales combined with non-comparable net sales from 74 net new stores acquired or opened over the last 12 months, as well as impacts related to our system upgrades.

Cost as a percentage of net sales increased slightly for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023.

Cost as a percentage of net sales increased for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 primarily due to inventory management impacts related to our system upgrades, as certain tools we used to manage the business on our legacy system took longer to rebuild, which impacted data visibility.

Gross Profit and Gross Margin

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

2023 $ Change % Change

Gross profit $ 344,872 $ 315,691 $ 29,181 9.2 % $ 998,057 $ 942,804 $ 55,253 5.9 %

Gross margin 31.1 % 31.4 % 30.5 % 31.6 %

The increase in gross profit for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily the re sult of an increase in comparable store sales combined with non-comparable sales from 74 net new stores acquired or opened over the last 12 months.

The increase in gross profit for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily the result of an increase in comparable store sales combined with non-comparable sales from 74 net new stores acquired or opened over the last 12 mo nths, partially offset by impacts related to our system upgrades.

Gross margin decreased slightly for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023.

Gross margin decreased for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 primarily due to inventory management impacts related to our system upgrades, as certain tools we used to manage the business on our legacy system took longer to rebuild, which impacted data visibility.

$ 342,445 $ 303,945 $ 38,500 12.7 %

30.4 % 29.3 %

T he increases in cost of sales and gross profit were primarily the result of an increase in non-comparable net sales from the 69 net new stores acquired or opened over the last 12 month s combined with comparable store sales .

Cost of sales as a percenta ge of net sales decreased, and correspondingly gross margin increased, due primarily to improvements in inventory management capabilities, which was adversely impacted by our system upgrades in the prior year as certain tools we used to manage the business on our legacy system took longer to rebuild.

Selling, General and Administrative Expenses

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

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% of net sales 29.4 % 29.3 %

The increase in SG&A for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was driven by $26.5 million in higher store-related expenses while corporate-related expenses remained relatively flat.

Store-related expenses primarily increased as a result of higher store occupancy costs due to 74 net new stores acquired or opened over the last 12 months, additional personnel costs from the Company-operated stores that were acquired in the United Grocery Outlet transaction, and the recognition of an e-commerce vendor receivable during the 13 weeks ended September 30, 2023.

These increases were partially offset by lower commission payments to IOs primarily due to $7.2 million of incremental support we elected to provide our IOs in connection with our system upgrade during the 13 weeks ended September 30, 2023, while support was minimal during the 13 weeks ended September 28, 2024.

Corporate-related expenses remained relatively flat and included lower incentive compensation expenses, partially offset by increases in other corporate-related expenses to support the continued growth of the business.

The increase in SG&A for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was driven by $77.7 million in higher store-related expenses and $17.5 million in higher corporate-related expenses.

Store-related expenses primarily increased as a result of higher commission payments to IOs, largely due to 33 net new stores operated by IOs over the last 12 months and an increase of $9.0 million period over period in incremental support we elected to provide to our IOs in connection with our system upgrades.

Also contributing to the increase in SG&A, were higher store occupancy costs due to 74 net new stores acquired or opened over the last 12 months, additional personnel costs from the Company-operated stores that were acquired in the United Grocery Outlet transaction, and the recognition of an e-commerce vendor receivable during the 39 weeks ended September 30, 2023.

Corporate-related expenses increased largely due to increased professional service costs to support our system upgrades and support the continued growth of the business, United Grocery Outlet acquisition-related costs, and higher marketing expenses, partially offset by lower incentive compensation expenses.

As a percentage of net sales, SG&A decreased slightly for the 13 weeks ended September 28, 2024 and increased slightly for the 39 weeks ended September 28, 2024 compared to the same periods in fiscal 2023 primarily due to the aforementioned factors.

Interest Expense, Net

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

The increase in SG&A was driven by $22.7 million in higher store-related expenses and $5.0 million in higher corporate-related expenses.

Store-related expenses increased primarily as a result of higher store occupancy costs and depreciation due to the 69 net new stores acquired or opened over the last 12 months, additional personnel costs from the Company-operated stores acquired in the United Grocery Outlet transaction in the prior year and increases in other store costs.

Corporate-related expenses increased primarily due to increases in costs to support the continued growth of the business.

SG&A as a percentage of net sales increased primarily due to additional personnel costs from the Company-operated stores acquired in the United Grocery Outlet transaction in the prior year and increases in other store costs, partially offset by a decrease from elective commission support we provided to IOs in the prior year related to the systems conversion.

Restructuring Charges

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Interest expense, net $ 6,439 $ 4,226 $ 2,213 52.4 % $ 15,174 $ 14,911 $ 263 1.8 %

Restructuring charges

$ 33,875 $ — $ 33,875 100.0 %

% of net sales 3.0 % — %

The increase in net interest expense for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily driven by higher average principal debt outstanding during the 13 weeks ended September 28, 2024, due largely to support share repurchases and other cash outlays to support the continued growth of the business, after the acquisition of United Grocery Outlet.

The increase in net interest expense for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily driven by higher average principal debt outstanding during the 39 weeks ended September 28, 2024, due largely to support share repurchases and other cash outlays to support the continued growth of the business, after the acquisition of United Grocery Outlet, partially offset by the capitalization of $1.0 million of interest for the 39 weeks ended September 28, 2024.

See Note 3 to the condensed consolidated financial statements for additional information.

Loss on Debt Extinguishment and Modification

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

Restructuring charges for the 13 weeks ended March 29, 2025 included 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 (see Note 12 to the condensed consolidated financial statements for additional information).

Interest Expense, Net

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Loss on debt extinguishment and modification $ — $ — $ — — % $ — $ 5,340 $ (5,340) (100.0) %

Interest expense, net $ 6,520 $ 3,176 $ 3,344 105.3 %

% of net sales 0.6 % 0.3 %

During the 39 weeks ended September 30, 2023, we recorded a $5.3 million loss on debt extinguishment related to the payoff of $385.0 million of principal on the senior term loan outstanding under our prior credit facilities.

Income Tax Expense

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

The increase in net interest expense was primarily driven by higher average principal debt outstanding during the 13 weeks ended March 29, 2025, due largely to fund share repurchases in prior periods and the acquisition of United Grocery Outlet since the end of the first quarter of fiscal 2024, as well as cash expenditures related to the Company's Restructuring Plan as discussed in the "Recent Trends and Developments" section above.

See Note 11 and Note 12 to the condensed consolidated financial statements for additional information regarding the acquisition of United Grocery Outlet and the Restructuring Plan, respectively.

Income Tax Benefit

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Income tax expense $ 9,669 $ 6,191 $ 3,478 56.2 % $ 14,626 $ 21,274 $ (6,648) (31.2) %

Income tax benefit

$ (5,711) $ (1,588) $ (4,123) 259.6 %

% of net sales (0.5) % (0.2) %

1 unchanged sentence

19.7 % 60.8 %

The increase in income tax expense for the 13 weeks ended September 28, 2024, compared to the same period in fiscal 2023 was primarily due to the increase in our effective income tax rate.

The decrease in income tax expense for the 39 weeks ended September 28, 2024, compared to the same period in fiscal 2023 was primarily due to lower pretax book income, partially offset by the increase in our effective income tax rate.

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, non-deductible acquisition and integration costs related to the acquisition of United Grocery Outlet, and lower pretax book income.

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

The increase in income tax benefit was primarily due to a corresponding increase in pretax book loss, partially offset by excess tax expense from the exercise and vesting of certain stock compensation awards during the 13 weeks ended March 29, 2025 compared to excess tax benefits related to the exercise and vesting of certain stock compensation awards during the same period in fiscal 2024.

The change in our effective income tax rate 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 compared to excess tax benefits related to the exercise and vesting of certain stock compensation awards during the same period in fiscal 2024.

13 Weeks Ended

2025 March 30,

2024 $ Change % Change (1)

Net income $ 24,178 $ 27,140 $ (2,962) (10.9) % $ 37,154 $ 65,331 $ (28,177) (43.1) %

$ (23,317) $ (1,025) $ (22,292) *

% of net sales (2.1) % (0.1) %

As a result of the foregoing factors, net income decreased for the 13 and 39 weeks ended September 28, 2024 compared to the same periods in fiscal 2023.

_______________________

* Represents a change that is not meaningful.

Net loss was $23.3 million for the 13 weeks ended March 29, 2025 compared to net loss of $1.0 million for the same period in fiscal 2024 as a result of the foregoing factors.

Adjusted EBITDA

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Adjusted EBITDA $ 51,885 $ 39,395 $ 12,490 31.7 %

The increase in adjusted EBITDA for the 13 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily due to the increase in gross profit, partially offset by the increase in SG&A related expenses, as discussed above.

The decrease in adjusted EBITDA for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily due to the increase in SG&A related expenses, partially offset by the increase in gross profit, as discussed above.

The increase in adjusted EBITDA was primarily attributable to increased gross margin and an increase in comparable store sales of 0.3% for the 13 weeks ended March 29, 2025 as well as non-comparable store sales, partially offset by higher SG&A, as discussed above.

Adjusted Net Income

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 $ Change % Change September 28,

2024 September 30,

13 Weeks Ended

2025 March 30,

2024 $ Change % Change

Adjusted net income $ 13,007 $ 8,809 $ 4,198 47.7 %

The decrease in adjusted net income for the 13 and 39 weeks ended September 28, 2024 compared to the same periods in fiscal 2023 was primarily due to the increase in SG&A related expenses, partially offset by the increase in gross profit, as discussed above.

The increase in adjusted net income was primarily attributable to increased gross margin and an increase in comparable store sales of 0.3% for the 13 weeks ended March 29, 2025 as well as non-comparable store sales, partially offset by higher SG&A (including higher depreciation expense) and higher net interest expense, as discussed above.

Liquidity and Capital Resources

5 unchanged sentences

Additionally, we may seek to take advantage of market opportunities to refinance our existing debt instruments with new debt instruments at interest rates, maturities and terms we deem attractive.

As of September 28, 2024, we had cash and cash equivalents of $68.7 million, which consisted primarily of cash held in checking and money market accounts with financial institutions.

As of March 29, 2025, we had cash and cash equivalents of $50.9 million, which consisted primarily of cash held in checking and money market accounts with financial institutions.

In addition, we have a revolving credit facility with $400.0 million in borrowing capacity under the 2023 Credit Agreement.

As of September 28, 2024, we had $140.0 million outstanding under the revolving credit facility and $4.5 million of outstanding standby letters of credit, resulting in $255.5 million of remaining borrowing capacity available under this revolving credit facility.

During the 39 weeks ended September 28, 2024, $140.0 million was borrowed under this revolving credit facility to support share repurchases and other cash outlays to support the continued growth of the business, after the acquisition of United Grocery Outlet.

In October 2024, we borrowed an additional $30.0 million of principal under the revolving credit facility primarily to support share repurchases.

As of March 29, 2025, we had $190.0 million of borrowings outstanding under the revolving credit facility and $4.5 million of outstanding standby letters of credit, resulting in $205.5 million of remaining borrowing capacity available under this revolving credit facility.

The senior secured credit facilities of the 2023 Credit Agreement permit 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.

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Material Cash Requirements

Other than the information noted below, there has been no material change in our material cash requirements since the end of fiscal 2023.

There has been no material change in our material cash requirements since the end of fiscal 2024, other than those which occur in the ordinary course of business and the information noted below.

See our 2024 Form 10-K for additional information.

1 unchanged sentence

Capital expenditures include purchases of capital assets such as property and equipment as well as intangible assets and licenses.

Capital expenditures for the 39 weeks ended September 28, 2024, before the impact of tenant improvement allowances, were $140.8 million, and, net of tenant improvement allowances, were $124.9 million.

We currently expect total capital expenditures, net of tenant improvement allowances, to be approximately $200.0 million for fiscal 2024, which includes new store growth, upgrades to our existing fleet including United Grocery Outlet store capital improvements, as well as ongoing investments in technology, supply chain and infrastructure.

Capital expenditures for the 13 weeks ended March 29, 2025, before the impact of tenant improvement allowances, were $65.3 million, and, net of tenant improvement allowances, were $57.3 million.

We currently expect total capital expenditures, net of tenant improvement allowances, to be approximately $210.0 million for fiscal 2025, which includes new store growth, upgrades to our existing fleet including United Grocery Outlet store capital improvement, ongoing investments in technology and supply chain and infrastructure.

Debt Obligations

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See Note 3 to the condensed consolidated financial statements for additional information.

Acquisition of United Grocery Outlet

On April 1, 2024, Grocery Outlet Inc., our wholly owned subsidiary, acquired BBGO Acquisition, Inc., a holding company that owns all of the outstanding capital stock of The Bargain Barn Inc., which does business as United Grocery Outlet.

The acquisition was completed for the total purchase consideration of $62.5 million, including $2.0 million of cash and cash equivalents on hand, after post-closing adjustments, and was funded with cash on hand.

See Note 10 to the condensed consolidated financial statements for additional information.

Debt Covenants

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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.

The following table summarizes our cash flows for the periods presented (amounts in thousands, except percentages):

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

The following table summarizes our cash flows for the periods presented (amounts in thousands):

13 Weeks Ended

September 28, 2024 September 30, 2023 $ Change % Change

2025 March 30,

2024 $ Change % Change

Net cash provided by operating activities $ 58,938 $ 7,841 $ 51,097 651.7 %

Net cash used in investing activities (68,684) (50,887) (17,797) 35.0 %

Net cash provided by (used in) financing activities 86,879 (92,253) 179,132 194.2 %

Net (decrease) increase in cash and cash equivalents $ (46,334) $ 52,935 $ (99,269) (187.5) %

Net cash used in financing activities (2,172) (5,056) 2,884 (57.0) %

Net decrease in cash and cash equivalents $ (11,918) $ (48,102) $ 36,184 (75.2) %

Cash Provided by Operating Activities

Net cash provided by operating activities was $72.5 million for the 39 weeks ended September 28, 2024 compared to $276.2 million for the same period in fiscal 2023.

The decrease in net cash provided by operating activities of $203.8 million for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily driven by changes in accounts payable and accrued expenses combined with lower net income and changes in merchandise inventory levels.

The increase in net cash provided by operating activities of $51.1 million for the 13 weeks ended March 29, 2025 compared to the same period in fiscal 2024 was primarily driven by changes in accrued and other liabilities, accrued compensation and merchandise inventory levels, partially offset by the net loss for the 13 weeks ended March 29, 2025.

The change in accrued and other liabilities and merchandise inventory levels was partially due to the disruptions related to the implementation of our systems conversion for the 13 weeks ended March 30, 2024, as well as restructuring charges accrued for the 13 weeks ended March 29, 2025 related to the Restructuring Plan (see Note 12 to the condensed consolidated financial statements for additional information).

Cash Used in Investing Activities

Net cash used in investing activities was $205.7 million for the 39 weeks ended September 28, 2024 compared to $131.0 million for the same period in fiscal 2023.

The increase in net cash used in investing activities of $74.6 million for the 39 weeks ended September 28, 2024 compared to the same period in fiscal 2023 was primarily due to the acquisition of United Grocery Outlet in April 2024 combined with increased spending on property and equipment due to higher store count and construction related to future stores.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities of $86.9 million for the 39 weeks ended September 28, 2024 was primarily due to the borrowing of $140.0 million on our revolving credit facility under the 2023 Credit Agreement and $8.3 million in proceeds from the exercise of stock options, partially offset by the repurchase of $56.4 million of our common stock and $3.8 million in scheduled principal payments on the senior term loan under the 2023 Credit Agreement.

Net cash used in financing activities of $92.3 million for the 39 weeks ended September 30, 2023 was primarily due to the payoff of $385.0 million of principal on the prior senior term loan outstanding under our prior first lien credit facility, repayment of the $25.0 million of principal on our revolving credit facility, $4.5 million in debt issuance costs paid, $3.8 million in scheduled principal payments on the senior term loan under the 2023 Credit Agreement and the repurchase of $3.3 million worth of common stock, partially offset by $325.0 million in proceeds from the 2023 Credit Agreement.

The increase in net cash used in investing activities of $17.8 million for the 13 weeks ended March 29, 2025 compared to the same period in fiscal 2024 was primarily due to increased spending on property and equipment due to higher store count and construction related to future stores, as well as increased supply chain investments.

Cash Used in Financing Activities

Net cash used in financing activities of $2.2 million for the 13 weeks ended March 29, 2025 was primarily due to $1.9 million in a scheduled principal payment on the senior term loan under the 2023 Credit Agreement.

Net cash used in financing activities of $5.1 million for the 13 weeks ended March 30, 2024 was primarily due to the repurchase of $5.3 million of our common stock and $1.9 million in scheduled principal payments on the senior term loan under the 2023 Credit Agreement, partially offset by $3.4 million in proceeds from the exercise of stock options.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission (the "SEC") for interim reporting.

Our condensed consolidated financial statements are prepared in accordance with GAAP and the applicable rules and regulations of the SEC for interim reporting.

The preparation of our condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

2 unchanged sentences

With respect to critical accounting policies, even a relatively minor variance between actual and expected results can potentially have a materially favorable or unfavorable impact on subsequent results of operations.

There have been no material changes to our critical accounting policies and estimates during the 39 weeks ended September 28, 2024 from those disclosed in our 2023 Form 10-K.

There have been no material changes to our critical accounting policies and estimates during the 13 weeks ended March 29, 2025 from those disclosed in our 2024 Form 10-K.

Recent Accounting Pronouncements

1 unchanged sentence

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 2. Management’s Discussion and Analysis