What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2023-02-02 · 125 added, 78 removed, 131 unchanged (61% of the section changed)

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Coronavirus (COVID-19) Pandemic Impact

The COVID-19 pandemic which began in March 2020 and has continued through the three months ended December 24, 2022, has impacted supermarket operations.

The effects of the COVID-19 pandemic, which began in March 2020, have eased considerably over the six months ended March 25, 2023, but the earlier portion of the pandemic substantially impacted supermarket operations, and some effects have continued through the six months ended March 25, 2023.

At the onset of the COVID-19 pandemic, the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe and has continued to monitor and update its protocols as the pandemic has evolved.

Since March 2020, the Company’s stores have experienced increased customer traffic and occasional product shortages due to supply chain issues.

Recently, an extremely tight labor market has impacted the Company’s ability to attract and retain qualified store personnel, but these impacts have not materially affected our operations.

Finally, as the economy recovers, inflation has reached levels not seen in decades.

Inflation impacts product costs, labor costs and other goods used by the Company.

The currently tight labor market has impacted the Company’s ability to attract and retain qualified store personnel, but these impacts have not materially affected our operations.

Finally, as the economy continues to recover from the effects of the pandemic, inflation has recently reached levels not seen in decades.

Inflation impacts product costs, labor costs and the cost of other goods used by the Company, which could negatively impact our results of operation.

At the present time, we do not know how long and to what extent the ongoing effects of the pandemic and inflation could impact our sales and financial performance.

Critical Accounting Policies

Critical Accounting Policies and Estimates

Critical accounting policies are those accounting policies that management believes are important to the presentation of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain.

Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about

the carrying values of assets and liabilities that are not readily apparent from other sources.

Management estimates, by their nature, involve judgments regarding future uncertainties, and actual results may therefore differ materially from these estimates.

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The majority of the Company’s properties are self-insured for casualty losses and business interruption;

however, liability coverage is maintained.

At December 24, 2022 the Company’s self-insurance reserves totaled $31.1 million.

This amount is inclusive of $4.1 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

however, the Company maintains liability coverage.

At March 25, 2023 the Company’s self-insurance reserves totaled $31.1 million.

This amount was inclusive of $4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

Asset Impairments

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The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred.

There were no asset impairments during the three-month period ended December 24, 2022.

There were no asset impairments during the six-month period ended March 25, 2023.

Vendor Allowances

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The purpose of these incentives and allowances is generally to help defray the costs incurred by the Company for stocking, advertising, promoting and selling the applicable vendor’s products.

These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.

These allowances generally relate to short term arrangements with vendors, often relating to a period of one month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.

Whenever practical, vendor discounts and allowances that relate to buying and merchandising activities are recorded as a component of item cost in inventory and recognized in merchandise costs when the item is sold.

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In those instances, the allowances are applied as a reduction of merchandise costs using a rational and systematic methodology, which results in the recognition of these incentives when the inventory related to the vendor consideration received is sold.

Vendor allowances applied as a reduction of merchandise costs totaled $34.4 million and $31.9 million for the fiscal quarters ended December 24, 2022 and December 25, 2021, respectively.

Vendor allowances applied as a reduction of merchandise costs totaled $29.8 million and $26.2 million for the fiscal quarters ended March 25, 2023 and March 26, 2022, respectively.

For the six-month periods ended March 25, 2023 and March 26, 2022, vendor allowances applied as a reduction of merchandise costs totaled $64.6 million and $58.0 million, respectively.

Vendor advertising allowances that represent a reimbursement of specific identifiable incremental costs of advertising the vendor’s specific products are recorded as a reduction to the related expense in the period in which the related expense is incurred.

Vendor advertising allowances recorded as a

reduction of advertising expense totaled $2.0 million and $2.1 million for the fiscal quarters ended December 24, 2022 and December 25, 2021, respectively.

Overall, v endor allowances decreased significantly at the onset of the COVID-19 pandemic as vendors reduced support for promotional activities.

Vendor promotional support subsequently increased, but has not reached pre-pandemic levels.

Vendor advertising allowances recorded as a reduction of advertising expense totaled $1.9 million and $1.7 million for the fiscal quarters ended March 25, 2023 and March 26, 2022, respectively.

For the six-month periods ended March 25, 2023 and March 26, 2022, vendor advertising allowances recorded as a reduction of advertising expense totaled $3.9 million and $3.7 million, respectively.

Overall, vendor allowances decreased significantly at the onset of the COVID-19 pandemic as vendors reduced support for promotional activities.

Vendor promotional support subsequently increased, but has not returned to pre-pandemic levels.

If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising, as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.

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Ingles operates on a 52 or 53-week fiscal year ending on the last Saturday in September.

The Condensed Consolidated Statements of Income for the three-month periods ended December 24, 2022 and December 25, 2021 both include 13 weeks of operations.

The Condensed Consolidated Statements of Income for the three and six month periods ended March 25, 2023 and March 26, 2022 both include 13 and 26 weeks of operations, respectively.

Comparable store sales are defined as sales by retail stores in operation for five full fiscal quarters.

Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date thereof.

Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales

calculation from the date thereof.

A replacement store is a newly-opened store that replaces an existing nearby store that has closed.

A major remodel entails substantial remodeling of an existing store and includes additional retail square footage.

For the three-month period ended December 24, 2022, comparable store sales included 197 stores.

For the three-month period ended December 25, 2021, comparable store sales included 196 stores.

For the three- and six-month periods ended March 25, 2023, comparable store sales included 198 stores.

For the three- and six-month periods ended March 26, 2022, comparable store sales included 196 stores.

The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.

For information regarding the business’ segments, see Note K “Segment Information” to the Condensed Consolidated Financial Statements.

For information regarding the various business’ segments, see Note K “Segment Information” to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Three Months Ended

Six Months Ended

Operating and administrative expenses

Gain from sale or disposal of assets

Income from operations

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Income tax expense

Three Months Ended December 24, 2022 Compared to the Three Months Ended December 25, 2021

Net income for the first quarter of fiscal 2023 totaled $69.4 million, compared with net income of $66.2 million for the first quarter of fiscal 2022.

Retail grocery sales increased due to continued consumer trends seen since the beginning of the COVID-19 pandemic, as well as the effects of inflation.

Corresponding operating expenses did not increase as much as sales, resulting in higher pre-tax income.

Net sales increased by $101.8 million, or 7.3%, to $1.5 billion for the three months ended December 24, 2022 compared with $1.4 billion for the three months ended December 25, 2021.

Three Months Ended March 25, 2023 Compared to the Three Months Ended March 26, 2022

Net income for the second quarter of fiscal 2023 totaled $40.5 million, compared with net income of $68.6 million for the second quarter of fiscal 2022.

The decrease primarily resulted from significant inventory cost increases and higher costs to retain and keep associates.

Net sales increased by $3.5 million, or 0.25%, to $1.381 billion for the three months ended March 25, 2023 compared with $1.377 billion for the three months ended March 26, 2022.

Excluding fuel sales, total grocery comparable store sales increased 3.4% over the comparative fiscal quarter.

Ingles operated 198 stores at both December 24, 2022 and December 25, 2021.

Inflation in the prices of food and fuel has also positively impacted the dollar amount of sales.

Changes in retail grocery sales for the quarter ended December 24, 2022 are summarized as follows (in thousands):

Total retail sales for the three months ended December 25, 2021

Comparable store sales increase (including fuel)

Impact of stores opened in fiscal 2021

Impact of stores closed in fiscal 2021

Total retail sales for the three months ended December 24, 2022

Ingles operated 198 stores at both March 25, 2023 and March 26, 2022.

Sales by product category (in thousands) were as follows:

Three Months Ended

Total retail grocery

The “Grocery” category includes grocery, dairy, and frozen foods.

The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products.

The “Perishables” category includes meat, produce, deli and bakery.

Changes in retail grocery sales for the quarter ended March 25, 2023 are summarized as follows (in thousands):

Total retail sales for the three months ended March 26, 2022

Comparable store sales decrease (including fuel)

Total retail sales for the three months ended March 25, 2023

Gross Profit.

Gross profit for the three-month period ended December 24, 2022 totaled $371.2 million, an increase of $20.7 million, or 5.9%, compared with gross profit of $350.5 million for the three-month period ended December 25, 2021.

Gross profit as a percentage of sales was 24.9% and 25.2% for the three months ended December 24, 2022 and December 25, 2021, respectively.

Gross profit for the three-month period ended March 25, 2023 totaled $325.9 million, a decrease of $22.6 million, or 6.5%, compared with gross profit of $348.6 million for the three-month period ended March 26, 2022.

Gross profit as a percentage of sales was 23.6% and 25.3% for the three months ended March 25, 2023 and March 26, 2022, respectively.

The decrease in gross profit as a percentage of sales resulted primarily from inflation and raw material shortages, which have increased the cost of products.

Retail segment gross profit, excluding fuel decreased 84 basis points for the quarter ended December 24, 2022, as compared with the quarter ended December 25, 2021.

Operating and Administrative Expenses.

Operating and administrative expenses increased $16.1 million, or 6.2%, to $276.2 million for the three months ended December 24, 2022, as compared to $260.1 million for the three months ended December 25, 2021.

As a percentage of sales, operating and administrative expenses were 18.5% and 18.7% for the December 2022 and December 2021 quarters, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.0% of sales for the first fiscal quarter of fiscal 2023 compared with 21.5% for the first fiscal quarter of 2022.

Operating and administrative expenses increased $14.2 million, or 5.6%, to $268.9 million for the three months ended March 25, 2023, from $254.7 million for the three months ended March 26, 2022.

As a percentage of sales, operating and administrative expenses were 19.5% and 18.5% for the March 2023 and March 2022 quarters, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the second fiscal quarter of 2023 compared with 21.5% for the second fiscal quarter of 2022.

A breakdown of the major changes in operating and administrative expenses is as follows:

(Decrease) as a

Salaries and wages

Taxes and licenses

Repairs and maintenance

Advertising and promotion

Salaries and wages increased in dollars due to increased labor market competition, which has increased the Company’s cost to attract and retain associates in the Company’s market area.

Taxes and licenses expense increased due to system improvements that provided us the ability to separately account for use tax during invoice processing.

Repairs and maintenance increased due to higher refrigerant costs and the cost of other supply items, as well as increased wear and tear on equipment to accommodate sales volume.

Advertising and promotion costs decreased due to absorbing some of the activity in-house and movement towards lower-cost types of advertising.

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $0.6 million for the three months ended March 25, 2023.

Gain from the sale or disposal of assets totaled $1.3 million for the three months ended March 26, 2022, primarily from the sale of rolling stock.

Interest Expense.

Interest expense totaled $5.3 million for the three-month period ended March 25, 2023 compared with $5.4 million for the three-month period ended March 26, 2022.

Total debt at March 2023 was $556.7 million compared with $578.5 million at March 2022.

Income Taxes.

Income tax expense totaled $13.5 million for the three months ended March 25, 2023, reflecting an effective tax rate of 25.0% of pretax income.

Income tax expense totaled $22.4 million for the three months ended March 26, 2022, reflecting an effective tax rate of 24.6% of pretax income.

Net income totaled $40.5 million for the three-month period ended March 25, 2023 compared with $68.6 million for the three-month period ended March 26, 2022.

Basic and diluted earnings per share for Class A Common Stock were $2.18 and $2.13, respectively, for the March 2023 quarter, compared to $3.70 and $3.61, respectively, for the March 2022 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $1.98 for the March 2023 quarter compared with $3.36 for the March 2022 quarter.

Six Months Ended March 25, 2023 Compared to the Six Months Ended March 26, 2022

Net income for the first half of fiscal 2023 totaled $109.9 million, compared with net income of $134.8 million for the first half of fiscal 2022.

Retail grocery sales increased, but inflation and the labor market increased salary and wage expense, resulting in lower pre-tax income.

Net sales increased by $105.3 million, or 3.8%, to $2.87 billion for the six months ended March 25, 2023 compared with $2.77 billion for the six months ended March 26, 2022.

Excluding fuel sales, total grocery comparable store sales increased 4.67% over the comparative six-month period.

Sales by product category (in thousands) were as follows:

Six Months Ended

Total retail grocery

Changes in retail grocery sales for the quarter ended March 25, 2023 are summarized as follows (in thousands):

Total retail sales for the six months ended March 26, 2022

Comparable store sales increase (including fuel)

Total retail sales for the six months ended March 25, 2023

The “Grocery” category includes grocery, dairy, and frozen foods.

The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products.

The “Perishables” category includes meat, produce, deli and bakery.

Gross Profit.

Gross profit for the six-month period ended March 25, 2023 totaled $697.1 million, a decrease of $2.0 million, or 0.3%, compared with gross profit of $699.1 million for the six-month period ended March 26, 2022.

Gross profit as a percentage of sales was 24.3% and 25.3% for the six months ended March 25, 2023 and March 26, 2022, respectively.

Inflation and supply chain pressures have increased the cost of goods sold.

Operating and Administrative Expenses.

Operating and administrative expenses increased $30.3 million, or 5.9%, to $545.1 million for the six months ended March 25, 2023, from $514.8 million for the six months ended March 26, 2022.

As a percentage of sales, operating and administrative expenses were 19.0% and 18.6% for the March 2023 and March 2022 six-month periods, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the first six months of 2023 compared with 21.5% for the first six months of 2022.

A breakdown of the major changes in operating and administrative expenses is as follows:

Salaries and wages

Repairs and maintenance

Utilities and fuel

Store supplies

Salaries and wages increased in dollars due to increased competition in the labor market in the Company’s market area.

Insurance expense decreased due to lower claims under the Company’s self-insurance programs.

Repairs and maintenance increased due to wear and tear of equipment due to increased sales volume, increased costs of parts and refrigeration.

Store supplies, which include customer packaging containers, increased as a result of increased sales and market costs of certain supplies and supply chain issues for certain raw materials.

Bank charges increased due to increased sales and a greater portion of sales settled with credit/debit cards instead of cash or check.

Other Income.

Other income totaled $1.4 million for the three months ended December 24, 2022 compared with $1.6 million for the three months ended December 25, 2021.

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume and continued labor market pressures.

Repairs and maintenance expense increased due to higher refrigerant costs and the cost of other supply items, as well as increased wear and tear on equipment to accommodate sales volume.

Utilities and fuel expense increased due to higher costs of energy.

Store supplies are up for the year due to raw material shortages and inflation, especially in packaging materials.

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $1.4 million for the six months ended March 25, 2023.

For the six months ended March 26, 2022, the gain from the sale or disposal of assets totaled $1.2 million.

Interest Expense.

Interest expense totaled $5.3 million for the three-month period ended December 24, 2022 compared with $5.4 million for the three-month period ended December 25, 2021.

Total debt at December 24, 2022 was $564.5 million compared with $586.1 million at December 25, 2021.

Interest expense totaled $10.7 million for the six-month period ended March 25, 2023 compared with $10.8 million for the six -month period ended March 26, 2022.

Total debt at March 2023 was $556.7 million compared with $578.5 million at March 2022.

Income Taxes.

Income tax expense totaled $22.5 million for the three months ended December 24, 2022, reflecting an effective tax rate of 24.5% of pretax income.

Income tax expense totaled $20.4 million for the three months ended December 25, 2021, reflecting an effective tax rate of 23.6% of pretax income.

Net income totaled $69.4 million for the three-month period ended December 24, 2022 compared with $66.2 million for the three-month period ended December 25, 2021.

Basic and diluted earnings per share for Class A Common Stock were $3.73 and $3.65, respectively, for the December 2022 quarter, compared to $3.57 and $3.48, respectively, for the December 2021 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $3.40 for the December 2022 quarter compared with $3.24 for the December 2021 quarter.

Income tax expense totaled $36.0 million for the six months ended March 25, 2023, reflecting an effective tax rate of 24.7% of pretax income.

Income tax expense totaled $42.8 million for the six months ended March 26, 2022, reflecting an effective tax rate of 24.1% of pretax income.

Net income totaled $109.9 million for the six-month period ended March 25, 2023 compared with $134.8 million for the six-month period ended March 26, 2022.

Basic and diluted earnings per share for Class A Common Stock were $5.92 and $5.79, respectively, for the six months ended March 25, 2023, compared to $7.26 and $7.10, respectively, for the six months ended March 26, 2022.

Basic and diluted earnings per share for Class B Common Stock were each $5.38 for the six months ended March 25, 2023 compared with $6.60 for the six months ended March 26, 2022.

Liquidity and Capital Resources

Capital Expenditures

Capital expenditures totaled $59.3 million for the three-month period ended December 24, 2022.

Capital expenditures totaled $91.4 million for the six-month period ended March 25, 2023.

The Company’s capital expenditures include the construction of new stores, the expansion and remodeling of existing stores, the acquisition of sites, new technology, and upgrades of the Company’s transportation fleet and facilities .

The Company’s capital expenditure plans for fiscal 2023 currently include investments of approximately $140 to $180 million.

At this time the Company does not anticipate that the continually evolving COVID-19 environment will have an adverse impact on its long-term capital expenditure plans.

The Company currently plans to dedicate the majority of its fiscal 2023 capital expenditures to continued improvement of its store base and continued investment in one store expected to open in fiscal 2023, as well as technology improvements, upgrading and replacing existing store, warehouse and transportation equipment and improvements to the Company’s milk processing plant.

The Company currently expects that its annual capital expenditures will be in the range of approximately $100 to $160 million going forward in order to maintain a modern store base.

Among other things, planned expenditures for any given future fiscal year will be

affected by the availability of financing, which can affect both the number of projects pursued at any given time and the cost of those projects.

Among other things, planned expenditures for any given future fiscal year will be affected by the availability of financing, which can affect both the number of projects pursued at any given time and the cost of those projects.

The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and major remodel/expansions.

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The Company does not generally enter into commitments for capital expenditures other than on a store-by-store basis at the time it begins construction on a new store or begins a major or minor remodeling project.

The Company generated $57.3 million net cash from operations for the December 2022 three-month period compared with $95.0 million for the December 2021 three-month period.

The decrease was primarily attributable to higher working capital needs .

Cash used by investing activities for the three-month periods ended December 24, 2022 and December 25, 2021 totaled $58.2 million and $131.1 million, respectively.

Excess cash of approximately $110 million was invested in short-term financial instruments in the prior year offset by higher capital expenditures through the first quarter of fiscal 2023.

Cash used by financing activities totaled $10.7 million for the three-month period ended December 24, 2022, compared with $6.5 million for the three-month period ended December 25, 2021.

During the quarter ended December 24, 2022, the Company repaid $4.2 million of mortgage debt.

The Company generated $94.4 million net cash from operations for the March 2023 six-month period compared with $155.5 million for the March 2022 six-month period.

Cash from operations decreased by $61.1 million due to lower net income and more working capital needs during the March 2023 six-month period compared with the March 2022 six-month period.

Cash used by investing activities for the six-month periods ended March 25, 2023 and March 26, 2022 totaled $89.6 million and $142.6 million, respectively, consisting primarily of capital expenditures and purchases of short term investments.

Higher current year capital expenditures and no purchases of short term investments as compared to the prior year period accounted for the difference in investing activities between the two six-month periods.

Cash used by financing activities totaled $21.7 million for the six-month period ended March 25, 2023, compared with $17.6 million for the six-month period ended March 26, 2022.

The increase was primarily related to principal payments on long-term debt.

In June 2021, the Company issued $350.0 million aggregate principal amount of senior notes due 2031 (the “Notes”).

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The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or LIBOR.

The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at December 24, 2022.

The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at March 25, 2023.

The Company is not required to maintain compensating balances in connection with the Line.

At December 24, 2022, the Company had no borrowings outstanding under the Line.

At March 25, 2023, the Company had no borrowings outstanding under the Line.

In December 2010, the Company completed the funding of $99.7 million of Bonds (the “Bonds”) for the construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”).

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Mandatory redemption of the Bonds by the Company in the annual amount of $4.5 million began on January 1, 2014.

The outstanding balance of the Bonds is $59.0 million as of December 24, 2022.

The outstanding balance of the Bonds was $54.4 million as of March 25, 2023.

The Company may redeem the Bonds without penalty or premium at any time prior to December 17, 2029.

The Covenant Agreement was amended during the three months ended December 25, 2021 to extend the holding period from September 2026 to December 2029 and reduce the interest rate on the Bonds.

In September 2017, the Company refinanced approximately $60 million secured borrowing obligations with a LIBOR-based amortizing floating rate loan secured by real estate maturing in October 2027.

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Included among the triggering factors permitting the termination or withdrawal of the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents.

As of December 24, 2022, the Company was in compliance with these

Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $2.3 billion of additional borrowings (including borrowings under the Line) as of December 24, 2022.

As of March 25, 2023, the Company was in compliance with these covenants.

Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $2.2 billion of additional borrowings (including borrowings under the Line) as of March 25, 2023.

The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term debt financing.

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It is possible that, in the future, the Company’s results of operations and financial condition will be different from that described in this Quarterly Report on Form 10-Q based on a number of factors.

These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery, changing demographics, and the ongoing impact of the COVID-19 pandemic, as well as the additional factors discussed below under “Forward Looking Statements.” It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this Quarterly Report on Form 10-Q.

These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery, changing demographics, as well as the additional factors discussed below under “Forward- Looking Statements.” It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this Quarterly Report on Form 10-Q .

Quarterly Cash Dividends

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Impact of Inflation

As the economy continues to recover from the initial impact of the COVID-19 pandemic, inflation has recently reached levels not experienced in decades.

Food and energy costs have increased, reflecting a tight labor market and supply chain/transportation disruptions.

As the economy continues to recover from the impact of the COVID-19 pandemic, inflation has reached levels not experienced in decades.

Food costs remain high, reflecting a tight labor market and supply chain transportation disruptions, while energy costs have decreased.

The following table from the United States Bureau of Labor Statistics lists annualized changes in the Consumer Price Index that could have an effect on the Company’s operations.

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Twelve Months Ended

December 2022

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The words “expect”, “anticipate”, “intend”, “plan”, “likely”, “goal”, “believe”, “seek”, “will”, “may”, “would”, “should” and similar expressions are intended to identify forward-looking statements.

While these forward-looking statements and the related assumptions are made in good faith and reflect the Company’s current judgment regarding the direction of

the Company’s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements.

While these forward-looking statements and the related assumptions are made in good faith and reflect the Company’s current judgment regarding the direction of the Company’s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements.

Such statements are based upon a number of assumptions and estimates which are inherently subject to significant risks and uncertainties many of which are beyond the Company’s control.

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changes in accounting policies, standards, guidelines or principles as may be adopted by regulatory agencies as well as the Financial Accounting Standards Board;

and those factors contained under the heading “Risk Factors” in Item 1A of Part I of our most recent Annual Report on Form 10-K for the year ended September 24, 2022, filed by the Company under the Securities Exchange Act of 1934, on November 23, 2022 .

Consequently, actual events affecting the Company and the impact of such events on the Company’s operations may vary significantly from those described in this Quarterly Report on Form 10-Q or contemplated or implied by statements in this Quarterly Report on Form 10-Q.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis