Sprouts Farmers Market, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the 2024 fiscal year, filed on February 20, 2025 (“Form 10-K”) with the Securities and Exchange Commission. All dollar amounts included below are in thousands, unless otherwise noted. Business Overview Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. Headquartered in Phoenix with 464 stores in 24 states as of September 28, 2025, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States. Our Growth Strategy We continue to execute on our long-term growth strategy that we believe is transforming our company and driving profitable growth, focusing on the following areas: • Win with Target Customers . We are focusing attention on our target customers, identified through research as ‘health enthusiasts’ and ‘selective shoppers’, where there is ample opportunity to gain share within these customer segments. We believe our business can continue to grow by leveraging existing strengths in a unique assortment of better-for-you, quality products and by providing a full omnichannel offering through delivery or pickup via our website or the Sprouts app. • Market Expansion. We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through September 28, 2025, we have opened 99 new stores and remodeled one store featuring our updated format. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth. • Create an Advantaged Supply Chain. We believe our network of distribution centers can drive efficiencies across the chain and support our growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. We are better leveraging our existing distribution center capacity, and approximately 80% of our stores were within 250 miles of a distribution center as of September 28, 2025. • Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are increasing our use of data analytics and insights. We believe this data-driven intelligence will increase customer engagement through personalization efforts with digital and social connections to drive additional sales growth and loyalty. • Inspire and Engage Our Talent to Make Sprouts a Best Place to Work . Subsequent to the initial launch of our long-term growth strategy, we have added the focus area of inspiring and engaging our talent through our culture, acquisition and development and total rewards program to attract and retain the talent we believe we need to execute on our strategic goals and transform our company into a premier place to work. • Invest in Technology for Scalable Growth . We continue to make investments in technology in support of our strategy, with a focus on enhancing efficiency, scalability, and customer experience. While we are showing positive outcomes on our strategic investments in inventory management and customer personalization, we believe that ongoing investments in our 21 Table of Contents technology foundation will allow us to streamline operations and improve decision making to execute on our strategy. • Deliver on Key Financial Metrics. We are measuring and reporting on the success of this strategy against a number of long-term financial and operational targets. Since the implementation of our strategy beginning in 2020, we have significantly improved our margin structure above our 2019 baseline. Recent Developments On September 3, 2025, we entered into a Distribution Agreement (the “Agreement”) with KeHE Distributors, LLC (“KeHE”), our primary distributor of dry grocery and frozen food products. The Agreement has a ten-year term and replaces our prior distribution agreement dated July 18, 2018 with KeHE. The Agreement includes terms relating to KeHE’s distribution of products to us, including product pricing, service level arrangements, product management and distribution procedures, and other ordinary course operational terms governing our distribution relationship with KeHE. The Agreement is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q. Results of Operations for Thirteen Weeks Ended September 28, 2025 and September 29, 2024 The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted. Thirteen weeks ended September 28, 2025 September 29, 2024 Unaudited Quarterly Consolidated Statement of Income Data: Net sales $ 2,200,430 $ 1,945,735 Cost of sales 1,349,379 1,204,812 Gross profit 851,051 740,923 Selling, general and administrative expenses 653,329 580,332 Depreciation and amortization (exclusive of depreciation included in cost of sales) 38,862 34,408 Store closure and other costs, net 1,462 3,732 Income from operations 157,398 122,451 Interest income, net (690) (1,061) Income before income taxes 158,088 123,512 Income tax provision 37,972 31,902 Net income $ 120,116 $ 91,610 Weighted average shares outstanding - basic 97,672 100,148 Diluted effect of equity-based awards 1,043 877 Weighted average shares and equivalent shares outstanding - diluted 98,715 101,025 Diluted net income per share $ 1.22 $ 0.91 22 Table of Contents Thirteen weeks ended September 28, 2025 September 29, 2024 Other Operating Data: Comparable store sales growth 5.9 % 8.4 % Stores at beginning of period 455 419 Closed — — Opened 9 9 Stores at end of period 464 428 Comparison of Thirteen Weeks Ended September 28, 2025 to Thirteen Weeks Ended September 29, 2024 Net sales Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Net sales $ 2,200,430 $ 1,945,735 $ 254,695 13 % Comparable store sales growth 5.9 % 8.4 % Net sales during the thirteen weeks ended September 28, 2025 totaled $2.2 billion, an increase of $254.7 million, or 13%, compared to the thirteen weeks ended September 29, 2024. The sales increase was driven by sales from new stores opened in the last twelve months and a 5.9% increase in comparable store sales. Comparable stores contributed approximately 93% of total sales for the thirteen weeks ended September 28, 2025 and approximately 94% of total sales for the thirteen weeks ended September 29, 2024. Cost of sales and gross profit Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Net sales $ 2,200,430 $ 1,945,735 $ 254,695 13 % Cost of sales 1,349,379 1,204,812 144,567 12 % Gross profit 851,051 740,923 110,128 15 % Gross margin 38.7 % 38.1 % 0.6 % Gross profit totaled $851.1 million during the thirteen weeks ended September 28, 2025, an increase of $110.1 million, or 15%, compared to the thirteen weeks ended September 29, 2024, driven by increased sales volume. Gross margin increased by 0.6% to 38.7% for the thirteen weeks ended September 28, 2025, compared to 38.1% for the thirteen weeks ended September 29, 2024, primarily driven by improved shrink. Selling, general and administrative expenses Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Selling, general and administrative expenses $ 653,329 $ 580,332 $ 72,997 13 % Percentage of net sales 29.7 % 29.8 % (0.1) % Selling, general and administrative expenses increased $73.0 million, or 13%, compared to the thirteen weeks ended September 29, 2024. The increase was primarily due to the increase in new stores opened since the comparable period last year. As a percentage of net sales, selling, general and administrative expenses 23 Table of Contents improved slightly as a result of lower compensation expense, which was partially offset by increased benefit costs and pressure from our new store growth. Depreciation and amortization Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Depreciation and amortization $ 38,862 $ 34,408 $ 4,454 13 % Percentage of net sales 1.8 % 1.8 % 0.0 % Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $38.9 million for the thirteen weeks ended September 28, 2025, compared to $34.4 million for the thirteen weeks ended September 29, 2024. Depreciation and amortization expense primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores. Store closure and other costs, net Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Store closure and other costs, net $ 1,462 $ 3,732 $ (2,270) (61) % Percentage of net sales 0.1 % 0.2 % (0.1) % Store closure and other costs, net decreased $2.3 million to $1.5 million for the thirteen weeks ended September 28, 2025, compared to $3.7 million for the thirteen weeks ended September 29, 2024. Store closure and other costs, net primarily consists of ongoing occupancy costs associated with our closed store locations as well as one-time costs associated with disaster recovery activity. See Note 12, “Store Closures” of our unaudited consolidated financial statements. Interest (income) expense, net Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Long-term debt $ 204 $ 208 $ (4) (2) % Finance leases 337 183 154 84 % Deferred financing costs 370 193 177 92 % Interest income and other (1,601) (1,645) 44 3 % Total interest income, net $ (690) $ (1,061) $ 371 35 % The decrease in interest income, net for the thirteen weeks ended September 28, 2025 compared to the thirteen weeks ended September 29, 2024 was primarily due to lower average debt outstanding. See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements. 24 Table of Contents Income tax provision Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pretax income as a result of the following: Thirteen weeks ended September 28, 2025 September 29, 2024 Federal statutory rate 21.0 % 21.0 % Change in income taxes resulting from: State income taxes, net of federal benefit 5.2 % 5.2 % Enhanced charitable contributions (0.9) % (1.0) % Federal credits (0.4) % (0.3) % Purchase Discount Transferable Tax Credits (1.8) % — % Share-based payment awards (0.8) % (1.4) % Return to Provision (0.2) % 0.2 % Non-deductible Executive Compensation 1.9 % 1.9 % Other, net — % 0.2 % Effective tax rate 24.0 % 25.8 % The effective tax rate decreased to 24.0% for the thirteen weeks ended September 28, 2025 from 25.8% for the thirteen weeks ended September 29, 2024. The decrease in the effective tax rate was primarily due to benefit in the current quarter for purchase discount for transferable tax credits and a favorable return-to-provision adjustment in the current year compared to an unfavorable adjustment in the prior year partially offset by a reduction in the benefit for stock-based compensation in the current year. Net income Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Net income $ 120,116 $ 91,610 $ 28,506 31 % Percentage of net sales 5.5 % 4.7 % 0.8 % Net income increased $28.5 million primarily due to higher gross profit, partially offset by higher selling, general and administrative expenses for the reasons discussed above. Diluted earnings per share Thirteen weeks ended September 28, 2025 September 29, 2024 Change % Change Diluted earnings per share $ 1.22 $ 0.91 $ 0.31 34 % Diluted weighted average shares outstanding 98,715 101,025 (2,310) The increase in diluted earnings per share of $0.31 was driven by higher net income and fewer diluted shares outstanding compared to the prior year due primarily to the share repurchase program. 25 Table of Contents Results of Operations for Thirty-nine Weeks Ended September 28, 2025 and September 29, 2024 The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted. Thirty-nine weeks ended September 28, 2025 September 29, 2024 Unaudited Quarterly Consolidated Statement of Income Data: Net sales $ 6,657,468 $ 5,723,062 Cost of sales 4,057,454 3,541,461 Gross profit 2,600,014 2,181,601 Selling, general and administrative expenses 1,921,682 1,676,470 Depreciation and amortization (exclusive of depreciation included in cost of sales) 110,567 98,129 Store closure and other costs, net 4,679 8,968 Income from operations 563,086 398,034 Interest income, net (2,045) (382) Income before income taxes 565,131 398,416 Income tax provision 131,286 97,417 Net income $ 433,845 $ 300,999 Weighted average shares outstanding - basic 98,023 100,560 Diluted effect of equity-based awards 1,063 909 Weighted average shares and equivalent shares outstanding - diluted 99,086 101,469 Diluted net income per share $ 4.38 $ 2.97 Thirty-nine weeks ended September 28, 2025 September 29, 2024 Other Operating Data: Comparable store sales growth 9.3 % 6.4 % Stores at beginning of period 440 407 Closed — — Opened 24 21 Acquired — — Stores at end of period 464 428 Comparison of Thirty-nine Weeks Ended September 28, 2025 to Thirty-nine Weeks Ended September 29, 2024 Net Sales Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Net sales $ 6,657,468 $ 5,723,062 $ 934,406 16 % Comparable store sales growth 9.3 % 6.4 % 26 Table of Contents Net sales during the thirty-nine weeks ended September 28, 2025 totaled $6.7 billion, an increase of $934.4 million, or 16%, over the same period of the prior fiscal year. The sales increase was primarily due to new stores opened in the last twelve months and a 9.3% increase in comparable store sales. Comparable stores contributed approximately 93% of total sales for the thirty-nine weeks ended September 28, 2025 and approximately 94% of total sales for the thirty-nine weeks ended September 29, 2024. Cost of sales and gross profit Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Net sales $ 6,657,468 $ 5,723,062 $ 934,406 16 % Cost of sales 4,057,454 3,541,461 515,993 15 % Gross profit 2,600,014 2,181,601 418,413 19 % Gross margin 39.1 % 38.1 % 1.0 % Gross profit totaled $2.6 billion during the thirty-nine weeks ended September 28, 2025, an increase of $418.4 million, or 19%, compared to the thirty-nine weeks ended September 29, 2024, driven by increased sales volume. Gross margin increased to 39.1% for the thirty-nine weeks ended September 28, 2025, compared to 38.1% for the thirty-nine weeks ended September 29, 2024, due to improved inventory management and continued promotional optimization efforts as well as leverage on our supply chain from higher sales. Selling, general and administrative expenses Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Selling, general and administrative expenses $ 1,921,682 $ 1,676,470 $ 245,212 15 % Percentage of net sales 28.9 % 29.3 % (0.4) % Selling, general and administrative expenses increased by $245.2 million , or 15%, compared to the thirty-nine weeks ended September 29, 2024. The increase was primarily driven by the increase in new stores opened since the prior year period. As a percentage of net sales, selling, general and administrative expenses improved as a result of leverage gained from store compensation and occupancy costs. Depreciation and amortization Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Depreciation and amortization $ 110,567 $ 98,129 $ 12,438 13 % Percentage of net sales 1.7 % 1.7 % 0.0 % Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $110.6 million for the thirty-nine weeks ended September 28, 2025, compared to $98.1 million for the thirty-nine weeks ended September 29, 2024. Depreciation and amortization expenses (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment. 27 Table of Contents Store closure and other costs, net Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Store closure and other costs, net $ 4,679 $ 8,968 $ (4,289) (48) % Percentage of net sales 0.1 % 0.2 % (0.1) % Store closure and other costs, net decreased $4.3 million to $4.7 million, compared to $9.0 million for the thirty-nine weeks ended September 29, 2024. Store closure and other costs, net primarily consists of ongoing occupancy costs associated with our closed store locations as well as one-time costs associated with disaster recovery activity. Interest (income) expense, net Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Long-term debt $ 629 $ 4,051 $ (3,422) (84) % Finance leases 681 569 112 20 % Deferred financing costs 756 579 177 31 % Interest income and other (4,111) (5,581) 1,470 26 % Total interest income, net $ (2,045) $ (382) $ (1,663) (435) % Interest income, net increased to $2.0 million of income for the thirty-nine weeks ended September 28, 2025, compared to $0.4 million for the thirty-nine weeks ended September 29, 2024 primarily due to lower average debt outstanding and higher interest income earned as a result of higher interest rates. See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements. Income tax provision Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pretax income as a result of the following: Thirty-nine weeks ended September 28, 2025 September 29, 2024 Federal statutory rate 21.0 % 21.0 % Change in income taxes resulting from: State income taxes, net of federal benefit 5.1 % 5.0 % Enhanced charitable contributions (0.9) % (1.0) % Federal Credits (0.2) % (0.3) % Purchase Discount Transferable Tax Credits (0.5) % — % Share-based payment awards (2.8) % (1.7) % Return to Provision (0.1) % 0.1 % Non-deductible Executive Compensation 1.6 % 1.3 % Other, net — % 0.1 % Effective tax rate 23.2 % 24.5 % 28 Table of Contents The effective tax rate decreased to 23.2% for the thirty-nine weeks ended September 28, 2025 from 24.5% for the thirty-nine weeks ended September 29, 2024. The decrease in the effective tax rate was primarily due to an increase in the benefit in the current year for stock-based compensation and benefit for purchase discount for transferable tax credits in the current year, partially offset by an increase in the rate detriment in the current year for nondeductible executive compensation, a reduction in the rate benefit for federal employment credits in the current year, and a reduced benefit impact in the current year for enhanced inventory donations in relation to the increase in pre-tax income. Net income Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Net income $ 433,845 $ 300,999 $ 132,846 44 % Percentage of net sales 6.5 % 5.3 % 1.2 % Net income increased $132.8 million primarily due to higher gross profit and lower store closure and other costs, partially offset by higher selling, general and administrative expenses for the reasons discussed above. Diluted earnings per share Thirty-nine weeks ended September 28, 2025 September 29, 2024 Change % Change Diluted earnings per share $ 4.38 $ 2.97 $ 1.41 47 % Diluted weighted average shares outstanding 99,086 101,469 (2,383) The increase in diluted earnings per share of $1.41 was driven by higher net income and fewer diluted shares outstanding compared to the prior year due primarily to the share repurchase program. Return on Invested Capital In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (referred to as “ROIC”) as additional information about our operating results. ROIC is a non-GAAP financial measure and should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. ROIC is an important measure used by management to evaluate our investment returns on capital and provides a meaningful measure of the effectiveness of our capital allocation over time. We define ROIC as net operating profit after tax (referred to as “NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease. The assumed ownership and associated interest expense are calculated using the discount rate for each lease as recorded as a component of rent expense within selling, general and administrative expenses. Invested capital reflects a trailing four-quarter average. As numerous methods exist for calculating ROIC, our method may differ from methods used by other companies to calculate their ROIC. It is important to understand the methods and the differences in those methods used by other companies to calculate their ROIC before comparing our ROIC to that of other companies. 29 Table of Contents Our calculation of ROIC for the fiscal periods indicated was as follows: Rolling Four Quarters Ended September 28, 2025 September 29, 2024 (dollars in thousands) Net income (1) $ 513,447 $ 351,048 Interest (income) expense, net of tax (2) (2,947) 39 Net operating profit after tax (NOPAT) $ 510,500 $ 351,087 Total rent expense, net of tax (2) 204,225 188,585 Estimated depreciation on operating leases, net of tax (2) (112,661) (103,803) Estimated interest on operating leases, net of tax (2), (3) 91,564 84,782 NOPAT, including effect of operating leases $ 602,064 $ 435,869 Average working capital 165,830 192,891 Average property and equipment 911,604 813,743 Average other assets 605,688 602,865 Average other liabilities (110,141) (98,692) Average invested capital $ 1,572,981 $ 1,510,807 Average operating leases (4) 1,715,590 1,567,876 Average invested capital, including operating leases $ 3,288,571 $ 3,078,683 ROIC, including operating leases 18.3 % 14.2 % (1) Net income amounts represent total net income for the past four trailing quarters. (2) Net of tax amounts are calculated using the normalized effective tax rate for the periods presented. (3) 2025 and 2024 estimated interest on operating leases is calculated by multiplying operating leases by the 7.0% and 7.2% discount rate, respectively, for each lease recorded as rent expense within direct store expense. (4) Average operating leases represents the average net present value of outstanding lease obligations over the past four trailing quarters. Liquidity and Capital Resources The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands): Thirty-nine weeks ended September 28, 2025 September 29, 2024 Cash, cash equivalents and restricted cash at end of period $ 325,480 $ 311,725 Cash flows from operating activities $ 577,471 $ 520,351 Cash flows used in investing activities $ (176,081) $ (161,687) Cash flows used in financing activities $ (343,123) $ (250,809) We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures primarily for opening new stores, remodels and maintenance, repurchases of our common stock and debt service. Our principal contractual obligations and commitments consist of 30 Table of Contents obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Our operating and finance leases for the rental of land, buildings, and for rental of facilities and equipment expire or become subject to renewal clauses at various dates through 2048. We believe that our existing cash, cash equivalents and restricted cash, and cash anticipated to be generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including new store openings, remodel and maintenance capital expenditures at existing stores, store initiatives and other corporate capital expenditures and activities. Our cash, cash equivalents and restricted cash position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within days from the related sale. Operating Activities Cash flows from operating activities increased $57.1 million to $577.5 million for the thirty-nine weeks ended September 28, 2025 compared to $520.4 million for the thirty-nine weeks ended September 29, 2024. The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $152.5 million partially offset by changes in working capital of $91.0 million and $1.0 million increase in payment on our operating lease liabilities. Cash flows provided by operating activities from changes in working capital were $23.2 million in the thirty-nine weeks ended September 28, 2025 compared to $114.2 million in the thirty-nine weeks ended September 29, 2024. The $91.0 million decrease in cash flows from changes in working capital was primarily attributable to the following factors, each of which had a negative impact on working capital: (i) $50.3 million change in inventory related to improving on-shelf availability in certain departments; (ii) $16.7 million change in accounts payable and accrued liabilities primarily due to timing differences of payments for goods and services; (iii) $15.2 million change in accrued salaries and benefits primarily driven by increased corporate bonuses; and (iv) $13.3 million change in prepaid expenses and other current assets primarily driven by lapsing a prepaid income tax position. These decreases were partially offset by a $10.1 million change in accrued income tax. Certain other immaterial items combined to result in an additional $5.6 million net decrease in cash flows from changes in working capital. Investing Activities Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $176.1 million and $161.7 million, for the thirty-nine weeks ended September 28, 2025 and thirty-nine weeks ended September 29, 2024, respectively. We expect capital expenditures to be in the range of $230 - 250 million in 2025, including expenditures incurred to date, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities. Financing Activities Cash flows used in financing activities were $343.1 million for the thirty-nine weeks ended September 28, 2025 compared to $250.8 million for the thirty-nine weeks ended September 29, 2024. During the thirty-nine weeks ended September 28, 2025, cash flows used in financing activities primarily consisted of $341.9 million for stock repurchases and $$2.1 million for payments of excise tax on stock repurchases partially offset by $1.7 million in proceeds from the exercise of stock options. During the thirty-nine weeks ended September 29, 2024, cash flows used in financing activities primarily consisted of $125.0 million in payments on our Credit Agreement, $129.7 million for stock repurchases partially offset by $4.7 million in proceeds from the exercise of stock options. Long-Term Debt and Credit Facilities The Company had no long-term debt outstanding as of September 28, 2025 and December 29, 2024. 31 Table of Contents See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements for a description of our Credit Agreement and our Former Credit Facility (each as defined therein). Share Repurchase Program Our board of directors from time to time authorizes share repurchase programs for our common stock. The following table outlines the share repurchase program authorized by our board, and the related repurchase activity and available authorization as of September 28, 2025: Effective date Expiration date Amount authorized Cost of repurchases Authorization available May 22, 2024 May 22, 2027 $ 600,000 $ 457,408 $ — August 13, 2025 N/A $ 1,000,000 $ 33,994 $ 966,006 The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. Our board’s authorization of the share repurchase program does not obligate our Company to acquire any particular amount of common stock, and the repurchase program may be commenced, suspended, or discontinued at any time. Share repurchase activity under our repurchase program for the periods indicated was as follows (total cost in thousands): Thirteen weeks ended Thirty-nine weeks ended September 28, 2025 September 29, 2024 September 28, 2025 September 29, 2024 Number of common shares acquired 364,852 264,135 2,399,289 1,861,453 Average price per common share acquired $ 137.49 $ 96.60 $ 143.76 $ 70.22 Total cost of common shares acquired $ 50,162 $ 25,516 $ 344,911 $ 130,708 Shares purchased under our repurchase programs were subsequently retired and the excess of the repurchase price over par value was charged to retained earnings. The cost of common shares repurchased included the 1% excise tax imposed as part of the Inflation Reduction Act of 2022. Subsequent to September 28, 2025 and through October 27, 2025, we repurchased an additional 0.1 million shares of common stock for $10.0 million, excluding excise tax. Contractual Obligations Our principal contractual obligations and commitments arising in the normal course of business consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Except as otherwise disclosed in Note 4, “Long-Term Debt and Finance Lease Liabilities” and Note 6, "Commitments and Contingencies" of our unaudited consolidated financial statements, there have been no material changes outside the normal course of business as of September 28, 2025 in our contractual obligations and commitments from those reported in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. 32 Table of Contents Impact of Inflation and Deflation Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross margin. Food inflation, when combined with reduced consumer spending, could also reduce sales, gross profit margins and comparable store sales. Inflationary pressures on compensation, utilities, commodities, equipment and supplies may also impact our profitability. Food deflation or declining levels of inflation across multiple categories, particularly in produce, could reduce sales growth and earnings, particularly if our competitors react by lowering their retail pricing and expanding their promotional activities, which can lead to retail deflation higher than cost deflation that could reduce our sales, gross profit margins and comparable store sales. The short-term impact of inflation and deflation is largely dependent on whether or not the effects are passed through to our customers, which is subject to competitive market conditions. Food inflation and deflation is affected by a variety of factors and our determination of whether to pass on the effects of inflation or deflation to our customers is made in conjunction with our overall pricing and marketing strategies, as well as our competitors’ responses. Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, cash flow and related disclosure of contingent assets and liabilities. Our critical accounting estimates include inventories, lease assumptions, self-insurance reserves, goodwill and intangible assets, impairment of long-lived assets, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. There have been no substantial changes to these estimates, or the policies related to them during the thirteen and thirty-nine weeks ended September 28, 2025. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. Recently Issued Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies” to our accompanying unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.