What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-04 compared with 2025-02-26 · 533 added, 325 removed, 783 unchanged (52% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Stockholders' Equity

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We have audited the accompanying consolidated balance sheets of Grocery Outlet Holding Corp.

and subsidiaries (the "Company") as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows, for each of the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2025, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

and subsidiaries (the "Company") as of January 3, 2026 and December 28, 2024, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows, for each of the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023 and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2026 and December 28, 2024, and the results of its operations and its cash flows for each of the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 3, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Long-Lived Asset Impairment — Recoverability of stores identified with impairment indicators — Refer to Notes 1, 3, and 4 to the financial statements

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Operating Lease Right-of-use Assets and Property and Equipment, net — Impairment of Long-lived Assets — Refer to Notes 1, 3, 4 and 16 to the financial statements

Critical Audit Matter Description

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Management's impairment analysis consists of (1) identifying stores with indicators of impairment, (2) testing the identified store assets for recoverability and (3) measuring the impairment loss, if any.

During the year ended December 28, 2024, Management recorded adjustments to the carrying value of long-lived assets due to impairment charges in the amount of $15.9 million.

The principal considerations for our determination that performing procedures relating to the impairment of store-level long-lived assets is a critical audit matter relates to the significant judgment by management in developing the estimated future cash flows expected to be generated by the asset group.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the cash flows, including the significant assumptions for sales growth rate, gross margin, and operating expenses.

If the carrying value of the long-lived asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value.

Fair value is determined through various valuation techniques, including discounted cash flow models, as well as other methods and approaches, as necessary.

During the year ended January 3, 2026, Management recorded adjustments to the carrying value of long-lived assets due to impairment charges in the amount of $121.7 million.

We identified impairment of long-lived assets as a critical audit matter because the estimated future cash flows to determine the recoverability of long-lived assets require significant management estimates and assumptions, specifically forecasting future sales, gross margin, operating expenses, fair market rent, the ability to sublease properties, and the likelihood of obtaining a subtenant.

Additionally, the measurement of an impairment loss involves the determination of the fair value of an asset group, which includes forecasting future sales, gross margin, and operating expenses, and estimates of market rental rates for certain stores level asset groups.

Performing audit procedures to evaluate the reasonableness of the Company’s estimates and assumptions used in determining the recoverability and measuring the impairment of long-lived assets involved a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists and to involve more experienced audit professionals.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management's judgments regarding the forecasts of future cash flows included the following, among others:

• We evaluated management's ability to accurately forecast future sales growth, gross margin, and operating expenses by comparing actual results to management's historical forecasts

• We evaluated the reasonableness of management's sales growth, gross margin, and operating expense forecasts by comparing the forecasts to:

Our audit procedures related to management's judgments regarding the forecasts of future cash flows and the fair value of certain store level asset groups included the following, among others:

• We tested the effectiveness of internal controls over management’s long-lived store asset impairment evaluation, including those over future sales, gross margin, and operating expenses projections, and those over market rental rates.

• We evaluated management's ability to accurately forecast future sales, gross margin, and operating expenses by comparing actual results to management's historical forecasts

• We evaluated the reasonableness of management's sales, gross margin, and operating expense forecasts by comparing the forecasts to:

– Current and past sales, gross margins, and operating expenses of the overall Company and individual store level asset groups

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– Internal communications to management and the Board of Directors

• With the assistance of our fair value specialists, we evaluated the appropriateness of the methodology utilized by management to estimate the fair value of certain store level asset groups.

Additionally, we evaluated the mathematical accuracy and consistency of the application of the Company's valuation model with the assistance of our fair value specialists, including the market rental rates utilized by management to estimate the fair value of certain store level asset groups.

• We tested the completeness, accuracy, and relevance of underlying data used in determining undiscounted and discounted cash flows.

Goodwill Impairment — Refer to Notes 1 and 5 to the financial statements

Critical Audit Matter Description

The Company’s goodwill is tested annually for impairment during the fourth quarter of each year, and more frequently if events and circumstances indicate that the assets might be impaired.

The Company's evaluation of goodwill for impairment involves the comparison of the estimated fair value of the Company’s reporting unit to its carrying value.

The Company estimates the reporting unit’s fair value using a combination of the income approach, which uses projected discounted cash flows, and the market approach, which uses sales revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples of comparable publicly traded companies.

The determination of fair value using the

income approach requires management to make estimates and assumptions related to cash flow projections and the selection of an appropriate discount rate.

The determination of the fair value using the market approach also requires management to make estimates and assumptions related to cash flow projections used to determine EBITDA as well as the market multiples of comparable publicly traded companies.

During the year ended January 3, 2026, the Company recognized a goodwill impairment of $149 million.

We identified the valuation of the Company’s reporting unit as a critical audit matter because it requires significant management estimates and assumptions, specifically in forecasting discounted cash flows and selecting sales revenue and EBITDA multiples of comparable publicly traded companies, and the discount rate.

The audit of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our internal fair value specialists when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to cash flow projections, the selection of EBITDA multiples, and the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to cash flow projections, and the selection of sales revenue and EBITDA multiples and discount rate for the valuation of the Company’s reporting unit included the following, among others:

• We tested the effectiveness of internal controls over the goodwill impairment analysis, including those over cash flow projections, the selection of sales revenue and EBITDA multiples and the discount rate.

• We evaluated the reasonableness of management’s cash flow projections by comparing the cash flow projections to:

◦ Historical cash flows.

◦ Internal communications between management and the Board of Directors.

◦ Projected information included in industry reports and certain of its peer companies.

• With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methodologies, the selection of sales revenue and EBITDA multiples and the discount rate by:

◦ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculations.

◦ Developing a range of independent estimates and comparing those estimates to the discount rate selected by management.

◦ Evaluating sales revenue and EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its comparable publicly traded companies.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

February 26, 2025

March 4, 2026

We have served as the Company's auditor since 2007.

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Intangible assets, net 78,375 78,778

Goodwill 782,734 747,943

Goodwill, net

633,835 782,734

Other assets 4,702 6,869

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GROCERY OUTLET HOLDING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

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Selling, general and administrative expenses 1,332,288 1,227,722 1,115,897

Operating income 78,327 125,782 94,990

Impairment of long-lived assets

Restructuring charges

45,903 15,888 —

Goodwill impairment 149,000 — —

Operating income (loss)

( 221,705 ) 78,327 125,782

Other expenses:

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Total other expenses 27,480 22,156 21,701

Income (loss) before income taxes

( 249,185 ) 56,171 104,081

Income before income taxes 56,171 104,081 75,749

Income tax expense 16,706 24,644 10,697

Net income and comprehensive income $ 39,465 $ 79,437 $ 65,052

Basic earnings per share $ 0.40 $ 0.80 $ 0.67

Diluted earnings per share $ 0.40 $ 0.79 $ 0.65

Income tax expense (benefit)

( 24,273 ) 16,706 24,644

Net income (loss) and comprehensive income (loss)

$ ( 224,912 ) $ 39,465 $ 79,437

Basic earnings (net loss) per share

$ ( 2.30 ) $ 0.40 $ 0.80

Diluted earnings (net loss) per share

$ ( 2.30 ) $ 0.40 $ 0.79

Weighted-average shares outstanding:

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Shares Amount

Balance at January 1, 2022 96,144,433 $ 96 $ 811,701 $ 197,475 $ 1,009,272

Exercise and vesting of share-based awards 1,669,641 2 6,888 — 6,890

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

Exercise and vesting of share-based awards, net of shares withheld for employee taxes 1,804,023 1 5,420 — 5,421

Share-based compensation expense — — 31,091 — 31,091

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

Exercise and vesting of share-based awards, net of shares withheld for employee taxes 1,804,023 1 5,420 — 5,421

Exercise and vesting of share-based awards 2,015,857 2 8,843 — 8,845

Share-based compensation expense — — 10,516 — 10,516

Repurchase of common stock ( 3,977,163 ) ( 4 ) ( 80,777 ) — ( 80,781 )

Dividends paid — — ( 15 ) — ( 15 )

Net income and comprehensive income — — — 39,465 39,465

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Share-based compensation expense — — 10,491 — 10,491

Repurchase of common stock ( 3,977,163 ) ( 4 ) ( 80,777 ) — ( 80,781 )

Net income and comprehensive income — — — 39,465 39,465

Balance at December 28, 2024

Net loss and comprehensive loss

— — — ( 224,912 ) ( 224,912 )

Balance at January 3, 2026

98,153,086 $ 98 $ 827,048 $ 156,517 $ 983,663

See Notes to Consolidated Financial Statements

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Cash flows from operating activities:

Net income $ 39,465 $ 79,437 $ 65,052

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

Net income (loss)

$ ( 224,912 ) $ 39,465 $ 79,437

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation of property and equipment 107,610 90,747 76,600

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Impairment of long-lived assets

121,492 15,888 —

Goodwill impairment 149,000 — —

Share-based compensation 10,491 10,516 31,091

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Net cash provided by (used in) financing activities 14,316 109,906 ( 97,023 )

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

6,774 ( 52,159 ) 12,259

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Cash paid for interest, net of amounts capitalized $ 32,771 $ 26,196 $ 22,722

Income taxes paid (refunded) in cash $ 3,376 $ 7,557 $ ( 1,721 )

Property and equipment accrued at end of period $ 12,791 $ 7,310 $ 18,536

Intangible assets accrued at end of period $ 1,286 $ 5,507 $ 3,736

Income taxes paid in cash

$ 2,283 $ 3,376 $ 7,557

Purchases of property and equipment accrued at end of period

$ 16,288 $ 12,791 $ 7,310

Investments in intangible assets accrued at end of period

$ 1,306 $ 1,286 $ 5,507

See Notes to Consolidated Financial Statements

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Notes to Consolidated Financial Statements

NOTE 1— Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

Description of Business — Based in Emeryville, California, and incorporated in Delaware in 2014, Grocery Outlet Holding Corp.

(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 December 28, 2024, we had 533 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Maryland, Nevada, North Carolina, New Jersey, Georgia, Ohio, Alabama, Delaware, Kentucky and Virginia.

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

As of January 3, 2026, we had 570 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, Ohio, New Jersey, North Carolina, Georgia, Alabama, Delaware, Kentucky and Virginia.

Grocery Outlet Holding Corp.

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

The fiscal years ended December 28, 2024 ("fiscal 2024"), December 30, 2023 ("fiscal 2023") and December 31, 2022 ("fiscal 2022") all consisted of 52 weeks.

The fiscal year ended January 3, 2026 ("fiscal 2025") consisted of 53 weeks while the fiscal years ended December 28, 2024 ("fiscal 2024") and December 30, 2023 ("fiscal 2023") consisted of 52 weeks.

Basis of Presentation — The accompanying 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 (the "SEC").

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Changes in these estimates are recorded when known.

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

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

Cash and Cash Equivalents — We consider all highly liquid investments, purchased with original maturities of three months or less, to be cash equivalents.

All cash equivalents are unrestricted and available for immediate use.

Cash and cash equivalents consisted primarily of cash held in checking and money market accounts as of December 28, 2024 and December 30, 2023.

Cash and cash equivalents consisted primarily of cash held in checking and money market accounts as of January 3, 2026 and December 28, 2024.

Allowance for Independent Operator ("IO") Receivables and IO Notes and Other Accounts Receivable — We maintain allowances and accruals for estimated losses of amounts advanced to IOs and other third parties determined to be uncollectible.

See NOTE 2 — Independent Operator Notes and Independent Operator Receivables, for additional information.

See Note 2 for additional information.

Concentrations of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts and notes receivable.

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To date, we have not experienced any losses on our cash deposits.

No single customer or store represented more than 10% of net sales for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.

No single customer or IO represented more than 10% of accounts receivable or notes receivable as of December 28, 2024 and December 30, 2023.

No single customer or store represented more than 10% of net sales for the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023.

No single customer or IO represented more than 10% of accounts receivable or notes receivable as of January 3, 2026 and December 28, 2024.

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

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We evaluate events and changes in circumstances that could indicate carrying amounts of long-lived assets, including property and equipment, may not be recoverable.

When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered

through undiscounted future cash flows derived from their use and eventual disposition.

When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted future cash flows derived from their use and eventual disposition.

For purposes of this assessment, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, primarily at an individual store level.

If the sum of the undiscounted future cash flows is less than the carrying amount of an asset, we record an impairment loss for the amount by which the carrying amount of the asset exceeds its fair value.

The total amount of property and equipment, including store assets, and operating lease right-of-use assets as of December 28, 2024 were $ 750.4 million and $ 1.0 billion, respectively, and as of December 30, 2023 were $ 642.5 million and $ 945.7 million, respectively.

The estimated fair value of the asset or asset group is based on the estimated discounted future cash flows of the asset or asset group using a discount rate commensurate with the related risk.

In fiscal 2024, we recognized $ 15.9 million of impairment of long-lived assets resulting from the Restructuring Plan, as defined in Note 16—Restructuring Plan, which is included in selling, general and administrative expenses ("SG&A") on the consolidated statements of operations and comprehensive income.

There were no adjustments to the carrying value of long-lived assets due to impairment charges during fiscal 2023 and fiscal 2022.

In fiscal 2025, we recognized $ 121.5 million of impairment of long-lived assets, of which $ 109.8 million related to certain underperforming stores which we subsequently determined to close as part of the Optimization Plan and $ 7.7 million related to the Restructuring Plan, both as defined in Note 16.

In fiscal 2024, we recognized $ 15.9 million of impairment of long-lived assets related to the Restructuring Plan.

There were no adjustments to the carrying value of long-lived assets due to impairment charges during fiscal 2023.

See Note 3 and Note 4 for additional information.

On the consolidated statements of operations and comprehensive income (loss), impairment of long-lived assets related to the Restructuring Plan were included in Restructuring charges, and all other impairment of long-lived assets including impairment related to the Optimization Plan were included in Impairment of long-lived assets.

Leases — We determine if an arrangement is a lease at inception.

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Goodwill is not amortized, but rather is subject to an annual impairment evaluation which is performed during our fourth quarter or when events or changes in circumstances indicate that the value of goodwill may be impaired.

Our impairment evaluation of goodwill consists of an initial qualitative assessment of our reporting unit to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value.

If it is concluded that this is the case, a quantitative evaluation, based on discounted cash flows, is performed which requires us to estimate future cash flows, growth rates and economic and market conditions.

If the quantitative evaluation indicates that goodwill is not recoverable, an impairment loss is calculated and recognized during that period.

Our impairment evaluation of goodwill generally consists of an initial qualitative assessment of our reporting unit to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value.

If it is concluded that this is the case, a quantitative evaluation, based on a combination of discounted cash flows and a market approach based on revenue and earnings multiples, is performed which requires us to estimate future cash flows, growth rates and economic and market conditions.

If the quantitative evaluation indicates that the carrying value of our reporting unit exceeds its fair value, an impairment loss is calculated and recognized during that period.

Measurement of such an impairment loss would be based on the excess of the carrying amount over fair value.

There were no goodwill impairment charges recorded during fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.

The Company has one reporting unit for purposes of testing goodwill for impairment.

During the fiscal year ended January 3, 2026, we recorded a goodwill impairment charge of $ 149.0 million, which is included in Goodwill impairment on the consolidated statements of operations and comprehensive income (loss).

There were no goodwill impairment charges recorded during the fiscal years ended December 28, 2024 and December 30, 2023.

See Note 5 for additional information.

Intangible assets include trademarks, computer software, and liquor licenses.

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If the carrying amount of the intangible assets are not recoverable, the impairment is measured as the amount by which the carrying value of the intangible asset exceeds its fair value.

There were no impairments of intangible assets recognized during the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.

There were no impairments of intangible assets recognized during the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023.

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.

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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 basis as of December 28, 2024 or December 30, 2023.

There were no assets or liabilities measured at fair value on a recurring basis as of January 3, 2026 or December 28, 2024.

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

See "Property and Equipment" and "Goodwill and Other Intangible Assets" within NOTE 1—Organization and Summary of Significant Accounting Policies, for additional information.

There were no transfers of assets or liabilities between levels within the fair value hierarchy during the fiscal years ended December 28, 2024 or December 30, 2023.

As of January 3, 2026 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 fiscal year ended January 3, 2026, we recognized $ 121.5 million of impairment of long-lived assets, of which $ 109.8 million related to certain underperforming stores which we subsequently determined to close as part of the Optimization Plan and $ 7.7 million related to the Restructuring Plan, both as defined in Note 16.

For the fiscal year ended December 28, 2024, we recognized $ 15.9 million of impairment of long-lived assets related to the Restructuring Plan.

See "Property and Equipment" within Note 1, Note 3, and Note 4 for additional information.

There were no transfers of assets or liabilities between levels within the fair value hierarchy during the fiscal years ended January 3, 2026 or December 28, 2024.

Fair value was determined using Level 3 inputs at the time of impairment.

We performed a quantitative goodwill impairment test during the fourth quarter of fiscal 2025 which concluded that the estimated fair value of our reporting unit was lower than carrying value.

Goodwill impairment charges of $ 149.0 million were recorded in Goodwill impairment on the consolidated statements of operations and comprehensive income (loss).

There were no goodwill impairment charges recorded during the fiscal years ended December 28, 2024 and December 30, 2023.

See Note 5 for additional information.

The calculation of the fair value of our reporting unit was determined using Level 3 fair value measurements.

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

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Independent operator notes — The carrying value of such financial instruments approximates their fair value due to the effect of the related allowance for expected credit losses.

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 consolidated balance sheets (amounts in thousands):

Long-term debt — 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 consolidated balance sheets (amounts in thousands):

2026 December 28,

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Financial Liabilities:

Senior term loans (Level 2) $ 287,502 $ 288,750 $ 292,732 $ 294,375

Senior term loan (Level 2)

$ 272,905 $ 273,750 $ 287,502 $ 288,750

Revolving credit facility (Level 2) $ 220,000 $ 220,000 $ 190,000 $ 190,000

_______________________

(1) The carrying amounts of the senior term loans as of December 28, 2024 and December 30, 2023 are net of debt issuance costs of $ 1.2 million and $ 1.6 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 6—Long-term Debt, were 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.

(1) The carrying amounts of the senior term loan as of January 3, 2026 and December 28, 2024 were net of debt issuance costs of $ 0.8 million and $ 1.2 million, respectively.

(2) The estimated fair value of the senior term loan and revolving credit facility borrowings under the 2023 Credit Agreement, as defined in Note 6, 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.

Revenue Recognition

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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 December 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 January 3, 2026 and December 28, 2024.

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

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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 $ 4.1 million and $ 3.2 million as of December 28, 2024 and December 30, 2023, respectively.

Breakage amounts were $ 0.5 million, $ 0.2 million and $ 0.3 million for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

Disaggregated Revenues — The following table presents net sales revenue by type of product for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 (amounts in thousands):

Our gift card deferred revenue liability was $ 4.5 million and $ 4.1 million as of January 3, 2026 and December 28, 2024, respectively.

Breakage amounts were $ 0.7 million, $ 0.5 million and $ 0.2 million for the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.

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

2026 December 28,

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$ 4,688,759 $ 4,371,501 $ 3,969,453

_______________________

(1) Perishable departments include dairy and deli;

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

general merchandise;

health and beauty care;

frozen foods;

and beer and wine.

beer and wine;

general merchandise;

and health and beauty care.

(3) Fiscal 2025 consisted of 53 weeks while fiscal 2024 and fiscal 2023 consisted of 52 weeks.

Cost of Sales — Cost of sales includes, among other things, merchandise costs, inventory markdowns, shrink, transportation, third-party delivery fees and distribution and warehousing costs, including depreciation.

Marketing and Advertising Expenses — Costs for store promotions, newspaper, television, radio and other media advertising are expensed at the time the promotion or advertising takes place.

Marketing and advertising costs are included in SG&A in the accompanying consolidated statements of operations and comprehensive income and amounted to $ 43.0 million, $ 36.4 million and $ 34.6 million, respectively, in the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.

Marketing and advertising costs are included in selling, general and administrative expenses ("SG&A") in the accompanying consolidated statements of operations and comprehensive income (loss) and amounted to $ 46.8 million, $ 43.0 million and $ 36.4 million, respectively, in the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023.

Share-based Awards — We estimate the fair value of time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs") based upon the closing price of our common stock as reported on the Nasdaq Global Select Market on the date of grant.

The PSUs vest in one installment after a three-year performance period based on a service condition and the achievement of cumulative operating goals.

The RSUs vest evenly over periods ranging from one year to three years .

See Note 8 for information on the fair value of stock options.

We recognize compensation expense for share-based payment awards with only a service condition on a straight-line basis over the requisite service period, which is generally the award's vesting period.

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Until such award is exercised or vested we assume that the amount ultimately recognized for tax purposes is the same amount we are currently recognizing in our operating results, that is for "book" purposes.

Consequently, our deferred tax asset related to share-based compensation expense, which totaled $ 5.8 million as of December 28, 2024, is based on each qualifying award's grant date fair value rather than the award's to-be-determined exercise date intrinsic value (or vesting date fair value).

For awards exercised or vested during our fiscal year ended December 28, 2024, the exercise or vest date intrinsic value exceeded the grant date fair value by a total of $ 7.0 million.

Consequently, our deferred tax asset related to share-based compensation expense, which totaled $ 5.0 million on a tax-effected basis as of January 3, 2026, is based on each qualifying award's grant date fair value rather than the award's to-be-determined exercise date intrinsic value (or vesting date fair value).

For awards exercised or vested during our fiscal year ended January 3, 2026, the exercise or vest date intrinsic value was below the grant date fair value by a total of $ 3.5 million on a tax-effected basis.

If the share price for our common stock were to depreciate for a sustained period of time, we could be required to recognize a tax shortfall.

Such shortfalls could have a material effect on our cash flows and financial results.

See NOTE 8—Share-based Awards and NOTE 10—Income Taxes, for additional information.

See Note 8 and Note 10 for additional information.

Income Taxes — Income taxes are accounted for using an asset and liability approach that requires recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns.

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A valuation allowance is established, when necessary, to reduce net deferred income tax assets to the amount expected to be realized.

We have not recorded any valuation allowances against our deferred income tax balances for the fiscal years ended December 28, 2024 and December 30, 2023.

Significant items comprising our future tax benefits and liabilities (deferred tax assets and liabilities) include lease liability obligations, right-of-use assets, depreciation and amortization, net operating losses and other carryforwards, goodwill and share-based compensation expense.

We recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

We have not recorded any valuation allowances against our deferred income tax balances for the fiscal years ended January 3, 2026 and December 28, 2024.

We recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense (benefit).

We record uncertain tax positions in accordance with Accounting Standards Codification ("ASC") Topic 740, Income Taxes, on the basis of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

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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.

We had 491 , 466 and 438 stores operated by IOs as of December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

We had 529 , 491 and 466 stores operated by IOs as of January 3, 2026, December 28, 2024 and December 30, 2023, respectively.

We have agreements in place with each IO.

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Additionally, the IO is responsible for expenses required for business operations, including all labor costs, utilities, credit card processing fees, supplies, taxes, fines, levies and other expenses.

Either party may terminate the Operator Agreement without cause upon 75 days' notice.

Either party may terminate the Operator Agreement without cause upon no less than 75 days' notice.

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

Net sales related to IO store s were $ 4.2 billion, $ 3.9 billion, and $ 3.5 billion for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

Net sales related to IO store s were $ 4.5 billion, $ 4.2 billion, and $ 3.9 billion for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

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

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IO commissions are expensed and included in SG&A.

IO commissions were $ 637.2 million, $ 621.7 million, and $ 533.1 million for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

IO commissions of $ 5.6 million and $ 21.7 million were included in accrued and other current liabilities as of December 28, 2024 and December 30, 2023, 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—Independent Operator Notes and Independent Operator Receivables.

IO commissions were $ 667.3 million, $ 637.2 million, and $ 621.7 million for the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively.

IO commissions of $ 6.1 million and $ 5.6 million were included in accrued and other current liabilities as of January 3, 2026 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.

As collateral for IO obligations and performance, the Operator Agreement grants us the security interests in the assets owned by each IO related to the respective store.

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The IO is also responsible for all of its own labor.

Labor activities that significantly impact the IO's economic performance include hiring, training, supervising, directing,

compensating (including wages, salaries and employee benefits) and terminating all of the employees of the IO, activities which the IO controls.

Labor activities that significantly impact the IO's economic performance include hiring, training, supervising, directing, compensating (including wages, salaries and employee benefits) and terminating all of the employees of the IO, activities which the IO controls.

Accordingly, the IO has the power to direct the activities that most significantly impact the IO's economic performance.

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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 $ 71.0 million and $ 59.2 million, gross, as of December 28, 2024 and December 30, 2023, respectively.

See NOTE 2—Independent Operator Notes and Independent Operator Receivables, for additional information.

Net Income Per Share — Basic net income per share is calculated using net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period.

Diluted net income per share reflects the dilutive effects of stock options and RSUs outstanding during the period, to the extent such securities would not be anti-dilutive, as well as dilutive PSUs, and is determined using the treasury stock method.

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 $ 88.3 million and $ 71.0 million, gross, as of January 3, 2026 and December 28, 2024, respectively.

See Note 2 for additional information.

Net Income (Loss) Per Share — Basic net income (loss) per share is calculated using net income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share reflects the dilutive effects of stock options and RSUs outstanding during the period, to the extent such securities would not be anti-dilutive, as well as dilutive PSUs, and is determined using the treasury stock method.

Recently Adopted Accounting Standards

Accounting Standards Update ("ASU") No.

2023-07 — In November 2023, the 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 adopted ASU 2023-07 beginning in the fourth quarter of fiscal 2024 on a retrospective basis for all periods presented.

The adoption of ASU 2023-07 required additional disclosures in our consolidated financial statements.

See NOTE 14—Segment Information, for additional information.

Recently Issued Accounting Pronouncements

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

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

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

We adopted ASU 2023-09 beginning in fiscal 2025 on a prospective basis.

The adoption of ASU 2023-09 required additional disclosures in our consolidated financial statements.

See Note 10 for additional information.

Recently Issued Accounting Pronouncements

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

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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.

We will adopt ASU 2024-03 upon the effective date and are currently evaluating the impact on our consolidated financial statements and disclosures.

NOTE 2— Independent Operator Notes and Independent Operator Receivables

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.

2025-06 — In September 2025, the FASB issued ASU No.

2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) ("ASU 2025-06").

ASU 2025-06 removes all references to prescriptive and sequential software development stages throughout Subtopic 350-40, and therefore requires an entity to start capitalizing software costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended.

The amendments in ASU 2025-06 further specify and clarify disclosure requirements for property, plant and equipment and intangibles, as well as supersede the website development costs guidance and incorporate the recognition requirements for website-specific development costs.

ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted.

Further, the amendments in ASU 2025-06 should be applied using a transition approach that is prospective, modified based on the project status and whether software costs were capitalized before the adoption date, or retrospective.

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

Independent Operator Notes and Independent Operator Receivables

The amounts included in IO notes and IO receivables consist primarily of funds we loaned to IOs, net of estimated uncollectible amounts.

IO notes, which are payable on demand and have no maturity date, typically bear interest at rates between 4.00 % 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 consolidated balance sheets and was $ 3.0 million and $ 1.8 million as of December 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 December 28, 2024 or December 30, 2023.

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.

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 consolidated balance sheets and was $ 3.9 million and $ 3.0 million as of January 3, 2026 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 January 3, 2026 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.

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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 December 28, 2024 and December 30, 2023 consisted of the following (amounts in thousands) :

Amounts due from IOs and the related allowances consisted of the following (amounts in thousands) :

Allowance Net

Gross Current Portion Long-term Portion Total Current Portion Long-term Portion

December 28, 2024

January 3, 2026

Independent operator notes $ 57,532 $ ( 454 ) $ ( 13,864 ) $ 43,214 $ 2,301 $ 40,913

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Provision for IO notes and IO receivables reserves

12,783 4,625 3,588

Write-off of uncollectible IO notes and IO receivables ( 3,718 ) ( 2,297 ) ( 2,184 )

Ending balance $ 27,544 $ 18,479 $ 16,151

The following table presents the gross write-off of IO notes and IO receivables by year of origination for the fiscal year ended December 28, 2024 (amounts in thousands):

The following table presents the gross write-off of IO notes and IO receivables by year of origination for the fiscal year ended January 3, 2026 (amounts in thousands):

Fiscal 2024 1

Fiscal 2023 892

Fiscal 2022 1,407

Fiscal 2021 644

Total $ 3,718

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

The following tables present the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator (amounts in thousands):

Fiscal Year of Origination

Credit Quality Indicator 2024 2023 2022 2021 2020 Prior Total

2025 2024 2023 2022 2021 Prior Total

January 3, 2026

TCAP $ 4,826 $ 5,982 $ 3,972 $ 3,907 $ 1,589 $ 2,489 $ 22,765

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Total $ 21,887 $ 12,272 $ 6,734 $ 7,587 $ 3,874 $ 5,178 $ 57,532

Fiscal Year of Origination

2024 2023 2022 2021 2020 Prior Total

December 28, 2024

TCAP $ 3,522 $ 3,662 $ 5,542 $ 2,250 $ 1,592 $ 1,384 $ 17,952

Non-TCAP 4,474 4,024 4,213 3,798 1,969 2,029 20,507

New store 6,733 1,725 — — — — 8,458

Total $ 14,729 $ 9,411 $ 9,755 $ 6,048 $ 3,561 $ 3,413 $ 46,917

TCAP IO Notes

Notes of IOs participating in our TCAP represented 49.1 % and 51.6 % of total IO note balances as of December 28, 2024 and December 30, 2023, respectively.

A total of $ 4.2 million of IO notes were added into our TCAP during the fiscal year ended December 28, 2024.

The weighted average contractual interest rate of these IO notes was 4.50 % as of December 28, 2024, a reduction from the standard rate of 9.95 %.

In addition, $ 4.1 million of IO notes were transferred from TCAP to Non-TCAP during the fiscal year ended December 28, 2024.

NOTE 3— Property and Equipment

Property and equipment as of December 28, 2024 and December 30, 2023 consisted of the following (amounts in thousands):

Notes of IOs participating in our TCAP represented 50.6 % and 49.1 % of total IO note balances as of January 3, 2026 and December 28, 2024, respectively.

A total of $ 9.7 million of IO notes were added into our TCAP during the fiscal year ended January 3, 2026.

The weighted-average contractual interest rate of these IO notes was 4.00 % as of January 3, 2026, a reduction from the standard rate of 9.95 %.

In addition, $ 2.5 million of IO notes were transferred from TCAP to Non-TCAP during the fiscal year ended January 3, 2026.

Property and Equipment

Property and equipment consisted of the following (amounts in thousands):

Property and Equipment, At Cost Accumulated Depreciation

and Amortization Property and Equipment, Net

December 28, 2024

January 3, 2026

Leasehold improvements $ 572,641 $ ( 212,035 ) $ 360,606

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Construction in progress is primarily composed of leasehold improvements and fixtures and equipment related to new or remodeled stores where construction had not been completed at year-end.

Depreciation expense on property and equipment for fiscal 2024, fiscal 2023 and fiscal 2022 was as follows (amounts in thousands):

We recognized impairment of property and equipment of $ 90.6 million in fiscal 2025, including $ 82.1 million related to certain underperforming stores which we subsequently determined to close as part of the Optimization Plan, as well as $ 7.0 million related to the Restructuring Plan, and $ 12.1 million in fiscal 2024 related to the Restructuring Plan.

No impairment of property and equipment was recognized in fiscal 2023.

See Note 1 and Note 16 for additional information.

Depreciation expense on property and equipment were as follows (amounts in thousands):

Fiscal Year Ended

Consolidated Statements of Operations and Comprehensive Income Location December 28,

Consolidated Statements of Operations and Comprehensive Income (loss) Location

2026 December 28,

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Total depreciation expense on property and equipment $ 107,610 $ 90,747 $ 76,600

NOTE 4— Leases

As of December 28, 2024 and December 30, 2023, we leased 14 of our store locations and one warehouse location from related parties.

See NOTE 11—Related Party Transactions, for additional information.

As of December 28, 2024, we had executed leases for 69 store locations that we had not yet taken possession of with total undiscounted future lease payments of $ 451.5 million and lease terms through 2043.

For 17 of these store locations, we are pursuing termination of these leases as part of the Restructuring Plan, with total undiscounted future lease payments of $ 66.7 million and lease terms through 2038.

See NOTE 16—Restructuring Plan for further discussion.

As of January 3, 2026 and December 28, 2024, we leased 14 of our store locations and one warehouse location from related parties.

See Note 11 for additional information.

As of January 3, 2026, we had executed leases for 31 store locations that we had not yet taken possession of with total undiscounted future lease payments of $ 206.5 million and lease terms through 2045.

As of January 3, 2026, we had executed leases for 36 underperforming store locations and a distribution center facility where we are pursuing termination or sublease of these leases as part of the Optimization Plan, with total undiscounted future lease payments of $ 101.8 million and lease terms through 2040, following the recognition of impairment of right-of-use assets of $ 27.7 million in fiscal 2025 related to these leases.

See below and Note 16 for further discussion.

Based upon our initial investment in store leasehold improvements, we utilize an initial, reasonably-certain lease life of 15 years for most of our leases.

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Our leases do not include any material residual value guarantees or material restrictive covenants.

We also have non-cancelable subleases with unrelated third parties with future minimum rental receipts as of December 28, 2024 totaling $ 2.7 million ending in various years through 2036, which have not been deducted from the future minimum lease payments.

We also have non-cancelable subleases with unrelated third parties with future minimum rental receipts as of January 3, 2026 totaling $ 4.8 million ending in various years through 2036, which have not been deducted from the future minimum lease payments.

The balance sheet classification of our right-of-use lease assets and lease liabilities was as follows (amounts in thousands):

Leases Classification December 28,

Leases Classification January 3,

2026 December 28,

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(1) Certain supply chain related lease costs herein are included in cost of sales.

Maturities of lease liabilities as of December 28, 2024 were as follows (amounts in thousands):

Maturities of lease liabilities as of January 3, 2026 were as follows (amounts in thousands):

Operating Leases Finance Leases Total

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$ 209 $ 344 $ 344

Finance cash flows from finance leases $ 1,597 $ 1,409 $ 1,279

Financing cash flows from finance leases

$ 1,386 $ 1,597 $ 1,409

Leased assets obtained in exchange for new operating lease liabilities

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Leased assets obtained in exchange for new finance lease liabilities $ 285 $ 917 $ 1,782

NOTE 5— Goodwill and Intangible Assets

Information regarding our goodwill and intangible assets as of December 28, 2024 was as follows (amounts in thousands):

Decrease in operating lease liabilities and right-of-use assets due to lease remeasurement

$ 19,660 $ 975 $ —

Impairment of right-of-use assets (1)

$ 31,106 $ 3,825 $ —

_______________________

(1) Impairment amounts recognized in fiscal 2025 were primarily related to certain underperforming stores, substantially all of which we subsequently determined to close as part of the Optimization Plan, as well as the Restructuring Plan, and impairment amounts recognized in fiscal 2024 were related to the Restructuring Plan.

See Note 1 and Note 16 for additional information.

Goodwill and Intangible Assets

The following table summarizes the changes in the net goodwill balance for the periods presented (amounts in thousands):

Gross Carrying Amount Accumulated Impairment

Net Carrying Amount

Balance at December 30, 2023

$ 747,943 $ — $ 747,943

Acquisition of United Grocery Outlet, net of purchase price adjustments (see Note 15)

34,791 — 34,791

Balance at December 28, 2024

$ 782,734 $ — $ 782,734

Purchase price adjustment

Impairment loss

— ( 149,000 ) ( 149,000 )

Balance at January 3, 2026

$ 782,835 $ ( 149,000 ) $ 633,835

Goodwill is subject to an annual impairment evaluation which is performed during our fourth quarter or when events or changes in circumstances indicate that the value of goodwill may be impaired.

Our annual impairment evaluation concluded that the carrying value of goodwill exceeded its fair value and, therefore, we recorded a goodwill impairment charge of $ 149.0 million during fiscal 2025.

There were no goodwill impairment charges recorded during fiscal 2024 and fiscal 2023.

See Note 1 for additional information.

For our fiscal 2025 impairment evaluation, we determined to bypass the qualitative assessment and performed a quantitative assessment.

For the quantitative impairment assessment, we used a combination of an income approach and a market approach to determine the fair value of the reporting unit, and the income approach and market approach were equally weighted to estimate fair value.

For the income approach, a discounted cash flow model was used that required forecasts of cash flows, assumptions such as revenue growth rates and gross profit margins, among others, and an estimate of weighted-average cost of capital that we believe approximates the assumptions from a market participant’s perspective.

For the market approach, a guideline public company model was used, which required judgment in estimating key assumptions including the selection of guideline companies and multiples of sales revenue and EBITDA.

These estimates incorporated many uncertain factors which could be impacted by changes in market conditions, interest rates, growth rate, tax rates, costs, customer behavior, regulatory environment and other macroeconomic changes.

In addition, we considered the reasonableness of the fair value of the reporting unit by assessing the implied enterprise value control premium based on our market capitalization.

We determined that the implied control premium was reasonable which corroborates our fair value estimates.

We categorized the fair value determination as Level 3 in the fair value hierarchy due to our use of internal projections and unobservable measurement inputs.

Assumptions used in impairment testing are made at a point in time and require significant judgment;

therefore, they are subject to change based on the facts and circumstances present at each impairment test date.

Additionally, these assumptions are generally interdependent and do not change in isolation.

Information regarding our intangible assets was as follows (amounts in thousands):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

January 3, 2026

Trademarks $ 58,400 $ ( 43,684 ) $ 14,716

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Total intangible assets $ 169,454 $ ( 91,079 ) $ 78,375

Goodwill 782,734 — 782,734

Total goodwill and intangible assets $ 935,808 $ ( 74,296 ) $ 861,512

Information regarding our goodwill and intangible assets as of December 30, 2023 was as follows (amounts in thousands):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

December 28, 2024

Trademarks $ 58,400 $ ( 39,791 ) $ 18,609

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Total intangible assets $ 153,074 $ ( 74,296 ) $ 78,778

Goodwill 747,943 — 747,943

Total goodwill and intangible assets $ 884,996 $ ( 58,497 ) $ 826,499

The carrying amount of goodwill increased by $ 34.8 million for the fiscal year ended December 28, 2024 as a result of the acquisition of United Grocery Outlet.

See NOTE 15—Business Combination for additional information.

There were no changes in the carrying amount of goodwill for the fiscal years ended December 30, 2023 and December 31, 2022.

Amortization expense for finite-lived intangible assets was $ 15.7 million, $ 10.1 million, and $ 6.6 million for t he fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

The estimated future amortization expense related to finite-lived intangible assets as of December 28, 2024 is as follows (amounts in thousands):

Amortization expense for finite-lived intangible assets was $ 21.3 million, $ 15.7 million, and $ 10.1 million for t he fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

The estimated future amortization expense related to finite-lived intangible assets as of January 3, 2026 is as follows (amounts in thousands):

Fiscal 2026 $ 21,511

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Total $ 69,091

NOTE 6— Long-term Debt

Long-term Debt

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

2026 December 28,

2023 Credit Agreement:

Senior term loan due 2028 $ 273,750 $ 288,750

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Long-term debt, gross 493,750 478,750

Unamortized debt issuance costs and debt discounts

Unamortized debt issuance costs

( 845 ) ( 1,248 )

Long-term debt, less unamortized debt discounts and debt issuance costs 477,502 292,732

Long-term debt, less unamortized debt issuance costs

492,905 477,502

Current portion ( 15,000 ) ( 15,000 )

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The revolving credit facility includes sub-commitments for $ 50.0 million letters of credit and $ 25.0 million of swingline loans.

On February 21, 2023, we repaid all of the outstanding indebtedness under our Prior First Lien Credit Agreement (as defined below), as well as fees and expenses in connection therewith.

On February 21, 2023, we repaid all of the outstanding indebtedness under a prior first lien credit agreement, as well as fees and expenses in connection therewith.

All obligations of the Company’s subsidiaries under the prior first lien credit agreement were discharged and the agreement was terminated as of such date.

In connection with the closing of the 2023 Credit Agreement and repayment of the Prior First Lien Credit Agreement and in accordance with ASC Topic 470-50, Debt-Modifications and Extinguishments, we wrote off $ 5.1 million of previously unamortized debt issuance costs and debt discounts and incurred $ 0.2 million in debt modification costs, which were recorded within loss on debt extinguishment and modification for the fiscal year ended December 28, 2024.

In connection with the closing of the 2023 Credit Agreement and repayment of the prior first lien credit agreement and in accordance with ASC Topic 470-50, Debt-Modifications and Extinguishments, we wrote off $ 5.1 million of previously unamortized debt issuance costs and debt discounts and incurred $ 0.2 million in debt modification costs, which were recorded within loss on debt extinguishment and modification for the fiscal year ended January 3, 2026.

Furthermore, a total of $ 4.6 million of creditor and third-party debt issuance costs were capitalized or carried over from the prior credit facilities (as defined below), and will be amortized over the term of the new credit facilities.

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

As of January 3, 2026, interest on borrowings under the credit facilities was based on one-month Term SOFR with an applicable margin of 2.25 %.

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.

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.

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 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.

The 2023 Credit Agreement requires us to make scheduled quarterly amortization payments on the senior term loan of $ 1.875 million beginning June 2023 through March 2025, followed by $ 3.75 million beginning June 2025 through December 2027, with the remaining balance due on February 21, 2028.

The 2023 Credit Agreement requires us to make scheduled quarterly amortization payments on the senior term loan, which were $ 1.875 million from June 2023 through March 2025, and are $ 3.75 million from June 2025 through December 2027, with the remaining balance due on February 21, 2028.

We may voluntarily prepay the credit facilities, in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in applicable cases.

The senior term loan and the revolving credit facility under the 2023 Credit Agreement mature on February 21, 2028.

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 6.92 % as of December 28, 2024.

The senior term loan under the 2023 Credit Agreement had an interest rate of 6.27 % as of January 3, 2026.

Revolving Credit Facility

The aggregate outstanding principal balance under the revolving credit facility was $ 190.0 million and zero as of December 28, 2024 and December 30, 2023, respectively.

As of December 28, 2024 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 6.92 % to 6.95 % as of December 28, 2024.

The aggregate outstanding principal balance under the revolving credit facility was $ 220.0 million and $ 190.0 million as of January 3, 2026 and December 28, 2024, respectively.

As of January 3, 2026 we had $ 5.1 million of outstanding letters of credit and $ 174.9 million of remaining borrowing capacity available under the revolving credit facility.

Borrowings under the revolving credit facility had an interest rate of 6.31 % as of January 3, 2026.

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.

The unused commitment fee rate was 0.20 % as of January 3, 2026.

We are also required to pay fronting fees and other customary fees for letters of credit issued under the revolving credit facility.

Prior First Lien Credit Agreement

One of our former wholly owned subsidiaries, which has since been merged with and into Grocery Outlet Holding Corp., was the borrower under a first lien credit agreement (the "Prior First Lien Credit Agreement") with a syndicate of lenders that consisted of a $ 385.0 million senior term loan (the "prior senior term loan") and a revolving credit facility (the "prior revolving credit facility" and, together with the prior senior term loan, the "prior credit facilities") for an amount up to $ 100.0 million.

On April 29, 2022, we prepaid $ 75.0 million of principal on the prior senior term loan outstanding under our Prior First Lien Credit Agreement.

In connection with the payment, we wrote off $ 1.3 million of previously unamortized debt issuance costs and debt discounts.

As discussed above, on February 21, 2023, in connection with the closing of the 2023 Credit Agreement, we repaid the remaining $ 385.0 million of principal on the prior senior term loan outstanding under our Prior First Lien Credit Agreement.

No amounts were outstanding under the prior revolving credit facility as of final repayment of the Prior First Lien Credit Agreement.

Debt Covenants

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The 2023 Credit Agreement also contains financial performance covenants requiring us to satisfy a maximum total net leverage ratio test and a minimum interest coverage ratio test as of the last day of each fiscal quarter.

The maximum total net leverage ratio test requires us to be in compliance with a Total Net Leverage Ratio no greater than 3.50 to 1.00 as of the last day of each test period ending prior to the test period ending on or about December 31, 2025, and no greater than 3.25 to 1.00 as of the

last day of each test period ending thereafter, subject to certain adjustments set forth in the 2023 Credit Agreement.

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

As of January 3, 2026, 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 December 28, 2024 were as follows (amounts in thousands):

Fiscal 2025 $ 15,000

Principal maturities of debt as of January 3, 2026 were as follows (amounts in thousands):

Fiscal 2026 15,000

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

NOTE 7— Stockholders' Equity

As of December 28, 2024, the total amount of the Company’s authorized capital stock consisted of 500,000,000 shares of common stock, par value $ 0.001 per share, and 50,000,000 shares of undesignated preferred stock, par value of $ 0.001 per share.

Stockholders' Equity

As of January 3, 2026, the total amount of the Company’s authorized capital stock consisted of 500,000,000 shares of common stock, par value $ 0.001 per share, and 50,000,000 shares of undesignated preferred stock, par value of $ 0.001 per share.

Holders of our common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors.

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Preferred Stock

We did not have any shares of preferred stock issued or outstanding as of December 28, 2024.

We did not have any shares of preferred stock issued or outstanding as of January 3, 2026.

Our Board of Directors (the "Board") has the authority to issue shares of preferred stock from time to time on terms it may determine, with respect to any series of preferred stock, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof as the Board may from time to time determine, which could affect the relative voting power or other rights of the holders of our common stock.

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In November 2021, our 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.

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.

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.

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_______________________

(1) Includes commissions for the shares repurchased for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 and excludes excise tax due of $ 0.3 million under the Inflation Reduction Act for the fiscal year ended December 28, 2024.

As of December 28, 2024, we had $ 100.0 million of repurchase authority remaining under the 2024 Share Repurchase Program.

NOTE 8— Share-based Awards

(1) Includes commissions for the shares repurchased for the fiscal years ended December 28, 2024 and December 30, 2023 and excludes excise tax due of $ 0.3 million under the Inflation Reduction Act for the fiscal year ended December 28, 2024.

As of January 3, 2026, we had $ 100.0 million of repurchase authority remaining under the 2024 Share Repurchase Program.

Share-based Awards

Share-based Incentive Plans

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A total of 4,597,862 shares of common stock were reserved for issuance under the 2019 Plan at that time.

addition, on the first day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the 2019 Plan provides for an annual automatic increase of the shares reserved for issuance in an amount equal to the positive difference between (i) 4 % of the "outstanding common stock" (as defined in the 2019 Plan) on the last day of the immediately preceding fiscal year and (ii) the plan share reserve on the last day of the immediately preceding fiscal year, or a lesser number as determined by our Board.

As of December 28, 2024, there were a total of 8,443,140 shares of common stock reserved for issuance under the 2019 Plan, which included 1,190,591 shares added effective December 31, 2023 per the above noted annual automatic increase.

As of December 28, 2024, there were 3,183,688 remaining shares available for issuance of new equity awards under the 2019 Plan.

In addition, on the first day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the 2019 Plan provides for an annual automatic increase of the shares reserved for issuance in an amount equal to the positive difference between (i) 4 % of the "outstanding common stock" (as defined in the 2019 Plan) on the last day of the immediately preceding fiscal year and (ii) the plan share reserve on the last day of the immediately preceding fiscal year, or a lesser number as determined by our Board.

As of January 3, 2026, there were a total of 9,269,282 shares of common stock reserved for issuance under the 2019 Plan, which included 836,142 shares added effective December 29, 2024 per the above noted annual automatic increase.

As of January 3, 2026, there were 1,438,637 remaining shares available for issuance of new equity awards under the 2019 Plan.

Long-term incentive programs ("LTIPs") under the 2019 Plan include time-based RSUs, PSUs and stock options.

In fiscal 2024, we granted RSUs and PSUs to our employees.

In fiscal 2025, fiscal 2024 and fiscal 2023, we granted RSUs and PSUs to our employees.

RSUs granted under the LTIPs generally vest over one to three years .

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The number of PSUs ultimately earned will equal the number of PSUs granted multiplied by the applicable percentage of performance target levels achieved, and can range from 0 % to 200 % of the number of PSUs granted.

PSUs granted during fiscal 2024 will vest upon the achievement of certain revenue-based and adjusted EPS-based performance targets, and PSUs granted during fiscal 2023 and fiscal 2022 will vest upon the achievement of certain revenue-based and certain adjusted EBITDA-based performance targets.

PSUs granted during fiscal 2025 and fiscal 2024 will vest upon the achievement of certain revenue-based and adjusted EPS-based performance targets, and PSUs granted during fiscal 2023 will vest upon the achievement of certain revenue-based and certain adjusted EBITDA-based performance targets.

During fiscal 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 fiscal 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 become exercisable three years after the grant date, subject to the achievement of certain price targets of the Company's common stock during the three-year period following the grant date and the recipient's continued employment.

Fair Value Determination

The fair value of stock option, RSU and PSU awards is determined as of the grant date.

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

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.

For performance-based stock options, a Monte Carlo simulation approach implemented in a risk-neutral framework was utilized to estimate the fair value of the awards.

For RSUs and PSUs, the closing price of our common stock as reported on the grant date is utilized to estimate the fair value of the awards.

The respective valuation methods resulted in weighted-average grant date fair values for RSUs and PSUs granted during fiscal 2024, fiscal 2023 and fiscal 2022 as follows:

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.

• Expected volatility — For stock option awards where we have sufficient historical data available from which to derive stock price volatility input assumptions, we calculate the expected stock price volatility for our common stock based on our historical volatility data over a time frame consistent with the expected life of the awards.

Certain stock option awards were granted prior to having sufficient historical data available from which to derive stock price volatility input assumptions.

Consequently, the stock price volatility for these awards was estimated by using a time-weighted average methodology, placing proportional weight on our volatility over our available trading history and the average volatility of industry peers over the expected term.

Industry peers consisted of several public companies in our industry which were 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 fiscal 2025 was estimated using the Black-Scholes valuation model with the following weighted-average assumptions:

Fiscal Year Ended

2024 December 30,

2023 December 31,

RSUs $ 21.59 $ 27.50 $ 29.70

PSUs $ 25.65 $ 27.34 $ 29.16

We did not award any time-based or performance-based stock options during fiscal 2024, fiscal 2023 and fiscal 2022.

Expected volatility

Risk-free interest rate

Dividend yield

Expected term (in years)

For market-based stock options, share-based compensation expense was immaterial during fiscal 2025.

We did not award any performance-based stock options during fiscal 2025, and we did not award any time-based, market-based or performance-based stock options during fiscal 2024 and fiscal 2023.

Share-based Award Activity

The following table summarizes stock option activity under all equity incentive plans during fiscal 2024, fiscal 2023 and fiscal 2022:

Time-Based Stock Options Performance-Based Stock Options

The following table summarizes stock option activity under all equity incentive plans during fiscal 2025 (amounts in thousands, except option, per option and term data):

Number of Options Weighted-Average

Exercise Price Number of Options Weighted-Average

Exercise Price

Options outstanding as of January 1, 2022 3,135,141 $ 12.77 1,696,194 $ 4.58

Granted — — — —

Exercised ( 276,022 ) 9.63 ( 894,559 ) 4.50

Forfeitures ( 296,345 ) 21.25 — —

Exercise Price Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value

Time-Based Stock Options

Options outstanding as of December 28, 2024

879,357 $ 19.98

Granted 1,336,588 12.11

Exercised ( 51,572 ) 10.74

Forfeitures ( 8,279 ) 21.93 — —

( 447,614 ) 17.45

Options outstanding as of January 3, 2026

1,716,759 $ 14.79 7.1 years $ 67

Options vested and expected to vest as of January 3, 2026

1,716,759 $ 14.79 7.1 years $ 67

Options exercisable as of January 3, 2026

579,759 $ 19.96 3.1 years $ 67

Market-Based and Performance-Based Stock Options

Options outstanding as of December 28, 2024

99,384 $ 10.25

Granted 166,667 11.87

Exercised ( 25,655 ) 5.67

Forfeitures ( 54,637 ) 22.00 — —

Options outstanding as of December 28, 2024

879,357 $ 19.98 99,384 $ 10.25

Options vested and exercisable as of December 28, 2024

879,357 $ 19.98 99,384 $ 10.25

Options outstanding as of January 3, 2026

240,396 $ 11.86 7.2 years $ 44

Options vested and expected to vest as of January 3, 2026

240,396 $ 11.86 7.2 years $ 44

Options exercisable as of January 3, 2026

73,729 $ 11.85 2.7 years $ 44

The weighted-average grant date fair value per share unit of time-based stock options and market-based stock options granted during fis cal 2025 was $ 5.80 and $ 4.65 , respec tively.

No stock options were granted during fiscal 2024 and fiscal 2023 .

The total intrinsic value of time-based stock options exercised w as $ 0.2 million, $ 16.3 million and $ 11.7 million for fiscal 2025, fiscal 2024 and fiscal 2023, respectively .

The total intrinsic value of performance-based stock options exercised w as $ 0.2 million, $ 2.2 million and $ 15.9 million for fiscal 2025, fiscal 2024 and fiscal 2023, respectively.

Intrin sic value represents the difference between the current fair value of the underlying stock and the exercise price of the stock option.

The following table summarizes RSU activity under all equity incentive plans during fiscal 2024, fiscal 2023 and fiscal 2022:

No market-based stock options were exercised during fiscal 2025, fiscal 2024 or fiscal 2023.

As of January 3, 2026, unamortized compensation expense for time-based stock options and market-based stock options was $ 4.8 million and $ 0.6 million, respectively, which is expected to be amortized over a weighted-average period of approximately 2.2 years and 2.2 years, respectively.

We had no unamortized compensation cost related to performance-based stock options, as all awards were fully vested as of January 3, 2026.

The following table summarizes RSU activity under all equity incentive plans during fiscal 2025:

Number of Shares Weighted-Average

Grant Date Fair Value

Unvested balance as of January 1, 2022 836,496 $ 30.14

Granted 449,438 29.70

Vested ( 499,696 ) 27.38

Forfeitures ( 95,884 ) 30.61

Unvested balance as of December 31, 2022 690,354 $ 31.79

Granted 552,372 27.50

Vested ( 345,887 ) 32.50

Forfeitures ( 39,019 ) 29.87

Grant Date Fair Value Weighted-Average Remaining Contractual Term

Unvested balance as of December 28, 2024

1,179,071 $ 22.93

Granted 1,286,380 12.21

Vested ( 494,183 ) 24.30

Forfeitures ( 253,830 ) 26.14

Unvested balance as of December 28, 2024

( 450,013 ) 16.91

The following table summarizes PSU activity under the 2019 Plan during fiscal 2024, fiscal 2023 and fiscal 2022:

Number of Shares Weighted-Average

Grant Date Fair Value

Unvested balance as of January 3, 2026

404,382 29.16

Adjustment for expected performance achievement (2)

423,347 31.86

Forfeitures ( 72,651 ) 33.79

Unvested balance as of December 31, 2022 1,331,803 $ 32.89

451,077 27.34

Adjustment for expected performance achievement (2)

432,774 28.84

Vested ( 441,346 ) 36.84

Forfeitures ( 20,319 ) 29.83

1,521,255 $ 15.20 1.5 years

The weighted-average grant date fair value per share unit of RSUs granted during fiscal 2025, fiscal 2024 and fiscal 2023 was $ 12.21 , $ 21.59 and $ 27.50 , respectively.

RSUs vested during fiscal 2025, fiscal 2024 and fiscal 2023 had grant date fair values totaling $ 12.0 million, $ 13.0 million, and $ 11.2 million, respectively.

Unamortized compensation expense for RSUs was $ 13.1 million as of January 3, 2026, which is expected to be amortized over a weighted-average period of approximately 1.8 years.

The following table summarizes PSU activity under the 2019 Plan during fiscal 2025:

Number of Shares Weighted-Average

Grant Date Fair Value Weighted-Average Remaining Contractual Term

Unvested balance as of December 28, 2024

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Vested ( 320,430 ) 29.18

Forfeitures ( 475,068 ) 27.00

Unvested balance as of December 28, 2024 (3)

( 193,688 ) 16.74

Unvested balance as of January 3, 2026 (3)

151,400 $ 27.29 — years

_______________________

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(2) Represents the adjustment to previously granted PSUs based on performance expectations as of the end of each respective reporting period.

(3) An additional 1,283,626 PSUs could potentially be included if the maximum performance level of 200 % is reached for all PSUs outstanding as of December 28, 2024.

(3) Up to an additional 2,659,421 PSUs could potentially be included if the actual performance level achievement exceeds the current expected target performance level of achievement (with 200 % being the maximum performance level achievement).

The weighted-average grant date fair value per share unit of PSUs granted during fiscal 2025, fiscal 2024 and fiscal 2023 was $ 12.04 , $ 25.65 and $ 27.34 , respectively.

PSUs vested during fiscal 2025, fiscal 2024 and fiscal 2023 had grant date fair values totaling $ 9.4 million, $ 10.7 million, and $ 16.3 million, respectively.

We had no unamortized compensation cost related to the expected level of achievement of unvested PSUs as of January 3, 2026.

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 compensation expense for time-based and market-based 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 achievement of the grant's service or performance vesting requirements is probable.

Share-based compensation expense and the related tax benefit consisted of the following (amounts in thousands):

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Time-based stock options $ 1,784 $ 11 $ 770

Market-based stock options

RSUs 12,428 12,805 11,327

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(2) Total recognized income tax benefit related to share-based compensation expense was $ 2.8 million, $ 2.9 million and $ 8.3 million for fiscal 2025, fiscal 2024 and fiscal 2023, respectively.

Share-based compensation expense qualifying for capitalization was insignificant for each of the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.

Share-based compensation expense qualifying for capitalization was insignificant for each of the fiscal years ended January 3, 2026, December 28, 2024 and December 30, 2023.

Accordingly, no share-based compensation expense was capitalized during these years.

Stock Options

We had no unamortized compensation cost related to time-based stock options and performance-based stock options, as all awards were fully vested as of December 28, 2024.

Time-Based RSUs

Unamortized compensation expense for RSUs was $ 17.7 million as of December 28, 2024, which is expected to be amortized over a weighted average period of approximately 1.7 years.

Performance-Based RSUs

Unamortized compensation cost related to the expected level of achievement of unvested PSUs was $ 4.3 million as of December 28, 2024, which is expected to be amortized over a weighted average period of approximately 1.4 years.

For time-based stock options and RSU share-based awards that were outstanding on the dividend date of October 22, 2018 and that vested in fiscal 2023, fiscal 2022, and fiscal 2021, we made dividend payments as these awards vested.

We paid $ 0.1 million of d ividends during the fiscal year ended December 31, 2022, which was included in share-based compensation expense.

We paid less than $ 0.1 million of dividends during the fiscal year ended December 30, 2023.

There was no unamortized compensation cost related to future dividend payments on unvested time-based stock options and RSU share-based awards as of December 28, 2024.

NOTE 9— Retirement Plans

There was no unamortized compensation cost related to future dividend payments on unvested time-based stock options, market-based stock options and RSU share-based awards as of January 3, 2026.

Retirement Plans

We make contributions to the UFCW—Northern California Employers Joint Pension Trust Fund (the "Pension Fund") and the UFCW—Benefits Trust Fund ("Benefits Fund"), each a multiemployer plan, established for the benefit of union employees at two company operated stores under the terms of a collective bargaining agreement.

We currently operate under a collective bargaining agreement that expires on February 28, 2026.

We currently operate under a collective bargaining agreement, which was extended on a day-to-day basis and is subject to a 72 hour notice of cancellation.

Minimum contributions outside of the agreed upon contractual rates are not required for the Pension Fund.

Payments into the Pens ion Fun d were $ 0.8 million, $ 0.6 million, and $ 0.5 million for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

Payments into the Pens ion Fun d were $ 0.8 million, $ 0.8 million, and $ 0.6 million for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

We paid no surcharges to the Pension Fund.

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However, we are unable to separate contribution amounts to the postretirement benefit part of the Benefits Fund from contribution amounts paid to the active employee part of the Benefits Fund.

Payments into the Benefits Fund were $ 1.4 million, $ 1.4 million, and $ 1.2 million for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

Payments into the Benefits Fund were $ 1.9 million, $ 1.4 million, and $ 1.4 million for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

For our nonunion employees, we offered the following plans during fiscal 2025, fiscal 2024 or fiscal 2023:

For fiscal 2022, a defined contribution retirement plan for warehouse employees, which required an annual contribution of 15 % of eligible salaries.

This defined contribution retirement plan was available to nonunion employees who met certain service criteria.

For fiscal 2022, a noncontributory profit-sharing plan for administrative personnel and, for fiscal 2023 and fiscal 2024, for administrative and warehouse personnel, in each case under which the Board may authorize an annual contribution of up to 15 % of eligible salaries.

A noncontributory profit-sharing plan for administrative and warehouse personnel under which the Board may authorize an annual contribution.

This profit-sharing plan is available to nonunion employees who meet certain service criteria.

We expensed zero , $ 6.8 million and $ 6.9 million for contributions to the two plans described above in (a) and (b) for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

We expensed zero , zero and $ 6.8 million for contributions to this plan for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

A 401(k) retirement plan for warehouse employees, which is available to those employees who meet certain service criteria.

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We are not obligated to match any employee contributions for the 401(k) retirement plans.

NOTE 10— Income Taxes

Components of income tax expense

Income before income taxes consisted entirely of income from domestic operations of $ 56.2 million, $ 104.1 million, and $ 75.7 million for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

The components of income tax expense consisted of the following (amounts in thousands):

Income (loss) before income taxes consisted entirely of income (loss) from domestic operations of $( 249.2 ) million, $ 56.2 million, and $ 104.1 million for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively.

The components of income tax expense (benefit) consisted of the following (amounts in thousands):

Fiscal Year Ended

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Total deferred ( 22,995 ) 12,123 18,819

Income tax expense $ 16,706 $ 24,644 $ 10,697

Income tax expense (benefit)

$ ( 24,273 ) $ 16,706 $ 24,644

Statutory rate reconciliation

A reconciliation of the U.S.

federal statutory income tax rate to our effective income tax rate is as follows:

federal statutory income tax rate to our effective income tax rate after the adoption of ASU 2023-09 is as follows (amounts in thousands):

Fiscal Year Ended

2024 December 30,

January 3, 2026

Amount Percent

Income tax benefit at U.S.

federal statutory rate

$ ( 52,329 ) 21.0 %

State and local income taxes, net of federal income tax effect (1)

( 4,509 ) 1.8 %

Nontaxable or nondeductible items:

Goodwill impairment

31,290 ( 12.6 ) %

Share-based compensation, including shortfalls and excess tax benefits

3,042 ( 1.2 ) %

( 1,767 ) 0.7 %

Income tax expense (benefit) and effective tax rate

$ ( 24,273 ) 9.7 %

_______________________

(1) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.

A reconciliation of the U.S.

federal statutory income tax rate to our effective income tax rate for fiscal years before the adoption of ASU 2023-09 is as follows (amounts in thousands):

Fiscal Year Ended

2024 December 30,

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Acquisition and integration costs (1)

1.2 % — % — %

Other ( 0.1 ) % 0.4 %

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(1) Represents costs related to the acquisition and integration of United Grocery Outlet.

See NOTE 15—Business Combination, for additional information.

See Note 15 for additional information.

Deferred income taxes

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Net operating loss and other carryforwards 34,988 26,269

Debt transaction costs — 369

Accruals and reserves

11,970 10,233

Other 647 3,375

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Goodwill ( 53,182 ) ( 53,379 )

Software development costs

Other — ( 1,360 )

Total deferred tax liabilities ( 463,713 ) ( 443,800 )

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There are also net operating loss carryforwards of $ 19.6 million for state income tax purposes, which begin to expire in 2035.

Utilization of some of the federal net operating loss and state net operating loss and credit carryforward are subject to annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions.

The Company believes that no such limitation has occurred through December 28, 2024.

Utilization of some of the federal net operating loss and state net operating loss carryforward are subject to annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions.

The Company believes that no such limitation has occurred through January 3, 2026.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets.

A significant piece of objective positive evidence was the cumulative income incurred over the three-year period ended December 28, 2024.

Significant objective positive evidence exists such as the cumulative income incurred over the three-year period ended January 3, 2026 as well as future reversals of existing taxable temporary differences.

Based on our current assessment, we anticipate it is more likely than not that we will generate sufficient taxable income to realize all of our material deferred tax assets.

As such we did not record a valuation allowance against these material deferred tax assets as of December 28, 2024.

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

As such we did not record a valuation allowance against these material deferred tax assets as of January 3, 2026.

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

We had no uncertain tax positions as of December 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 January 3, 2026 and December 28, 2024, respectively, and do not anticipate having any material uncertain tax positions within the next 12 months.

We are subject to taxation in the United States and various state jurisdictions.

As of December 28, 2024, our tax returns remain open to examination by the tax authorities for tax years 2012 to 2023 for U.S.

As of January 3, 2026, our tax returns remain open to examination by the tax authorities for tax years 2012 to 2025 for U.S.

federal and for various state jurisdictions.

NOTE 11— Related Party Transactions

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law.

The OBBBA includes several changes to U.S.

federal tax law, including reinstatement of 100% bonus depreciation on qualified property and immediate expensing of domestic research and development expenses.

The tax impacts of the OBBBA are reflected in the tax provision for the fiscal year ended January 3, 2026, and there was no material impact to the effective tax rate for the fiscal year ended January 3, 2026.

Cash paid for income taxes (net of refunds) consisted of the following (amounts in thousands):

Fiscal Year Ended

January 3, 2026

Cash paid (net of refunds) for federal income taxes

Cash paid for state and local income taxes:

Total cash paid for state and local income taxes

Total cash paid for income taxes

Related Party Transactions

Related Party Lease s

As of December 28, 2024 and December 30, 2023, we leased 14 store locations and one warehouse 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 MacGregor Read, Jr., who served as Vice Chairman of our Board until September 1, 2022, or their respective families, had a direct or indirect financial interest .

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.

As of January 3, 2026 and December 28, 2024, we leased 14 store locations and one warehouse 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 2025 and fiscal 2024), or his family, had a direct or indirect financial interest .

As of January 3, 2026, the right-of-use assets and lease liabilities related to these properties were $ 44.7 million and $ 49.8 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 us of $ 7.4 million, $ 6.8 million, and $ 6.8 million for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively.

These related parties received aggregate lease payments from us of $ 7.6 million, $ 7.4 million, and $ 6.8 million for the fiscal years ended January 3, 2026, December 28, 2024, and December 30, 2023, 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 $ 71.0 million and $ 59.2 million as of December 28, 2024 and December 30, 2023, respectively.

See NOTE 2—Independent Operator Notes and Independent Operator Receivables, for additional information.

NOTE 12— Commitments and Contingencies

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

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $ 88.3 million and $ 71.0 million as of January 3, 2026 and December 28, 2024, respectively.

See Note 2 for additional information.

Commitments and Contingencies

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.

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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 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.

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.

See NOTE 17—Subsequent Events, for information on a federal securities class action lawsuit filed on January 30, 2025.

NOTE 13— Earnings Per Share

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

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., Case No.

25-cv-00957, was filed in the U.S.

District Court in the Northern District of California against Grocery Outlet Holding Corp.

and certain of its former officers purportedly 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., Case No.

25-cv-2886, was filed in the U.S.

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 (the "Exchange Act"), 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.

On June 3, 2025, the Class Action Lawsuits were consolidated in the U.S.

District Court in the Northern District of California (the "Consolidated Class Action Lawsuit") and lead plaintiff was appointed.

The lead plaintiff filed an amended complaint in the Consolidated Class Action Lawsuit on August 19, 2025, and the Company filed its motion to dismiss on October 21, 2025.

A hearing on the Company’s motion to dismiss is scheduled for March 19, 2026.

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

Sheedy, et al., Case No.

25-cv-03697, was filed in the U.S.

District Court in the Northern District of California against certain of the Company’s current and former directors and one 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.

al., Case No.

25-cv-03843, was filed in the U.S.

District Court in the Northern District of California against certain of the Company’s current and former directors and one 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.

On July 14, 2025, the parties in the Derivative Lawsuits stipulated to consolidate the Derivative Lawsuits in the U.S.

District Court in the Northern District of California and stay the consolidated Derivative Lawsuits pending resolution of the Company’s motion to dismiss in the Consolidated Class Action Lawsuit discussed above.

On July 29, 2025, the court granted the parties' stipulation, consolidating the Derivatives Lawsuits and staying the consolidated derivative action pending resolution of the Company's motion to dismiss the Consolidated Class Action Lawsuit.

We intend to defend the Consolidated Class Action Lawsuit and the Derivative Lawsuits vigorously.

We are unable to determine the probability of the outcome of the Consolidated Class Action Lawsuit or the Derivative Lawsuits, and the possible range of losses is not reasonably estimable.

Earnings (Net Loss) Per Share

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

Fiscal Year Ended

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2024 December 30,

Net income and comprehensive income $ 39,465 $ 79,437 $ 65,052

Net income (loss) and comprehensive income (loss)

$ ( 224,912 ) $ 39,465 $ 79,437

Weighted-average shares outstanding - basic 97,985 98,707 98,709

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97,985 99,615 100,831

Earnings per share:

Earnings (net loss) per share:

Basic $ ( 2.30 ) $ 0.40 $ 0.80

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_______________________

(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):

(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) For the fiscal year ended January 3, 2026, there is no difference in the weighted-average shares outstanding used in the above calculations due to the Company's net loss.

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

Fiscal Year Ended

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Stock options

RSUs 691 34 98

PSUs and RSUs

Total 2,460 1,061 34

NOTE 14— Segment Information

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.

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

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

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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 and comprehensive income, which is reported on the consolidated statements of operations and comprehensive income.

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 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 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):

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

Fiscal Year Ended

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223,357 209,960 177,645

Impairment of long-lived assets (5)

Restructuring charges (6)

45,903 15,888 —

Goodwill impairment (7)

Other segment items (8)

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Loss on debt extinguishment and modification — — 5,340

Income tax expense 16,706 24,644 10,697

Net income and comprehensive income $ 39,465 $ 79,437 $ 65,052

Income tax expense (benefit)

( 24,273 ) 16,706 24,644

(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 $ 4.5 million, $ 3.3 million and $ 3.0 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

(2) Commission expenses represent commissions paid to IOs.

Net income (loss) and comprehensive income (loss)

$ ( 224,912 ) $ 39,465 $ 79,437

_______________________

(1) Cost of sales includes merchandise costs, inventory markdowns, inventory losses, transportation costs and distribution and warehousing costs and excludes depreciation and amortization expenses, which were $ 6.1 million, $ 4.5 million and $ 3.3 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively.

(2) Commission expenses represent commissions earned by 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) Other segment items represent share-based compensation expenses and impairment of long-lived assets related to the Restructuring Plan, as defined in NOTE 16—Restructuring Plan.

(5) Impairment of long-lived assets include non-cash asset impairment charges related to certain underperforming stores, substantially all of which we subsequently determined to close as part of the Optimization Plan.

See Note 16 for further discussion.

(6) 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 16 for further discussion.

(7) See Note 1 and Note 5 for additional information.

(8) Other segment items represents share-based compensation expense.

(9) Interest expense primarily includes interest on loans, amortization of debt issuance costs and debt discounts, and interest on finance leases, less capitalized interest.

See Note 6 for further discussion.

Fiscal Year Ended

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$ 220,322 $ 206,916 $ 191,990

NOTE 15— Business Combination

Business Combination

Acquisition of United Grocery Outlet

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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 and is a platform for potential future 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 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 December 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 consolidated financial statements were subject to adjustment during the measurement period of up to one year from the acquisition date.

The valuation of the acquired assets and assumed liabilities was completed as of March 29, 2025.

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

Cash and cash equivalents $ 2,003

18 unchanged sentences

During the fiscal year ended December 28, 2024, we recogniz ed $ 8.6 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 consolidated statements of operations and comprehensive income.

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

United Grocery Outlet's financial statements constituted 3 % of net sales and less than 1 % of net income and comprehensive income of the consolidated financial statement amounts as of and for the year ended December 28, 2024.

NOTE 16— Restructuring Plan

During the fourth quarter of fiscal 2024, we began to initiate a restructuring plan that is intended to improve our profitability and cash flow generation, optimize the footprint of new store growth, and lower our cost base (the "Restructuring Plan").

We currently estimate that we will incur total costs of between $ 52 million and $ 61 million, of which between $ 36 million and $ 45 million are expected to be cash expenditures.

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

Under the Restructuring Plan:

• We have determined to terminate leases for unopened stores in suboptimal locations, 15 of which we had planned to open in fiscal 2025 and eight of which we had planned to open in fiscal 2026.

We incurred $ 9.2 million of non-cash impairment of long-lived assets related to lease terminations in the fourth quarter of fiscal 2024, which is included in selling, general and administrative expenses.

We estimate we will incur an additional $ 30 million to $ 37 million of cash lease termination expense in the first half of fiscal 2025.

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

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

In connection with such strategy, we cancelled certain warehouse projects, resulting in $ 6.7 million of non-cash impairment of long-lived assets in the fourth quarter of fiscal 2024, which is included in selling, general and administrative expenses.

• We reduced headcount by approximately 40 full-time employees in the first quarter of fiscal 2025 with total cash costs incurred of $ 1.6 million, including employee severance, employee benefit and related costs.

• In connection with the Restructuring Plan, we estimate that we will incur cash costs of between $ 4.5 million and $ 6.5 million in legal and other professional fees in the first half of fiscal 2025.

NOTE 17— Subsequent Events

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

Pro forma results were not presented as the impact of this acquisition was not material to our consolidated financial results.

United Grocery Outlet's financial statements constituted 3 % of net sales and less than 1 % of net income (loss) and comprehensive income (loss) of the consolidated financial statement amounts as of and for the fiscal year ended December 28, 2024.

Restructuring

Restructuring Plan

During the first quarter of 2025, we actioned certain initiatives under the Restructuring Plan, as more fully described in NOTE 16—Restructuring Plan.

Securities Class Action Litigation

On January 30, 2025, a federal securities class action lawsuit 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 lawsuit alleges 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 lawsuit seeks remedies under the Securities Exchange Act of 1934, as amended, including an undisclosed amount of monetary damages, interest, fees and other costs.

We intend to defend the lawsuit vigorously.

It is reasonably possible that a loss may be incurred;

however, the possible range of losses is not reasonably estimable given the pending status of the case.

See NOTE 12—Commitments and Contingencies, for additional information.

We initiated a restructuring plan during the fourth quarter of fiscal 2024 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 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 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 and to discontinue development of certain future store sites where we had incurred initial costs, but leases had not yet been signed.

• 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 fiscal year ended January 3, 2026 and for the cumulative-to-date period ended January 3, 2026 since the initiation of the Restructuring Plan (in thousands).

The actions under the Restructuring Plan were substantially completed in the second quarter of fiscal 2025.

Cumulative (2)

2026 January 3,

Cash restructuring charges:

Lease termination costs

$ 35,398 $ 35,398

Employee severance and benefit costs

Legal, professional and other costs

Total cash restructuring costs

38,218 38,218

Non-cash impairment and disposal of long-lived assets (3)

Total restructuring charges $ 45,903 $ 61,791

_______________________

(1) All costs incurred related to the Restructuring Plan during fiscal 2025 are included in Restructuring charges on the 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.

(3) Substantially all non-cash impairment and disposal of long-lived assets relate to the termination of unopened stores and discontinued development of certain future store sites as discussed above.

The following table summarizes the restructuring liability activity for the Restructuring Plan during the fiscal year ended January 3, 2026 (in thousands):

Lease Termination Costs

Employee Severance and Benefit Costs

Legal, Professional and Other Costs

Balance at December 28, 2024

$ — $ — $ — $ —

Cash restructuring charges

35,398 1,532 1,288 38,218

Cash payments

( 35,398 ) ( 1,532 ) ( 1,288 ) ( 38,218 )

Balance at January 3, 2026

$ — $ — $ — $ —

Optimization Plan

To strengthen long-term profitability and cash flow generation, improve operational execution, optimize our existing store footprint and align with our disciplined new store growth strategy, in the first quarter of fiscal 2026 we conducted a strategic, financial and operational analysis of our store fleet.

Following that review, on March 2, 2026, our Board adopted a business optimization plan (the "Optimization Plan") that provides for the closure of 36 financially underperforming stores ("Closure Stores"), including the termination or sublease of the applicable store leases;

the termination or sublease of a lease for a distribution center facility that we are no longer utilizing (together with the store lease terminations and subleases, the "Lease Exits");

and the termination of operator agreements with IOs for the Closure Stores as well as certain other store locations (the "Operator Agreement Terminations").

These actions under the Optimization Plan are expected to be substantially completed during fiscal 2026.

In addition, preceding the adoption of the Optimization Plan, during the reporting process for the audited consolidated financial statements for fiscal 2025, we determined that the long-lived assets of the Closure Stores were impaired, and recognized $ 110 million of non-cash charges in Impairment of long-lived assets on the consolidated statements of operations and comprehensive income (loss).

We estimate that we will incur between $ 14 million and $ 25 million in net total restructuring charges in fiscal 2026 related to the Optimization Plan approved in the first quarter of fiscal 2026.

Estimated restructuring charges expected to be incurred include bad debt expense and cash expenses for the Operator Agreement Terminations, as well as costs associated with the Lease Exits.

We intend to negotiate lease terminations with the landlords of the Closure Stores and one distribution center facility during fiscal 2026.

If we are successful in negotiating these lease terminations, we expect to incur restructuring charges which primarily include lease termination fees, costs to prepare the premises for surrender to the landlords and idle property costs, partially offset by the net non-cash write-off of the right-of-use assets and lease liabilities associated with these leases.

Subsequent Events

Optimization Plan

During the first quarter of fiscal 2026, our Board adopted the Optimization Plan, as more fully described in Note 16.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data