What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-10 compared with 2025-03-11 · 91 added, 81 removed, 323 unchanged (35% of the section changed)

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• changes in relationships with our suppliers;

• our ability to operate, and rely on third parties to operate, reliable and secure technology systems;

• our ability to operate, and rely on third parties to operate, reliable and secure technology systems, and the effectiveness of our business continuity plans in response to an incident impacting our technology systems, such as the unauthorized incident on our technology systems;

• labor and other workforce shortages and challenges;

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• the potential for additional asset impairment charges;

• our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer purchasing habits;

• our sensitivity to general economic conditions including inflation, tariff policy and changes in disposable income levels and consumer purchasing habits;

• our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts;

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and reducing our net working capital position.

The Company is in the process of realigning its commercial wholesale organization into two product-centered divisions that are expected to enhance service to its customers and suppliers.

These two divisions are Conventional Grocery Products and Natural, Organic, Specialty & Fresh Products.

Each division will have focused sales teams aligned to the unique product and service needs of its customers and will be supported by dedicated functional experts in merchandising, operations, procurement and supplier services.

In addition, capability centers of excellence in areas such as supply chain, professional and digital services, and private brands will work across the divisions to help create customized programs to help customers and suppliers accelerate their growth strategies.

We are nearing finalization of the realignment of our commercial wholesale organization into two product-centered divisions, which is enabling enhanced service to our customers and suppliers.

These two divisions, Conventional Grocery Products and Natural, Organic, Specialty & Fresh Products, each have focused sales teams aligned to the unique product and service needs of their customers and are supported by dedicated functional experts in merchandising, operations, procurement and supplier services.

In addition, capability centers of excellence in areas such as supply chain, professional and digital services, and private brands work across the divisions to help create customized programs to help customers and suppliers accelerate their growth strategies.

We expect to continue to use available capital to re-invest in our business and are committed to improving our free cash flow and financial leverage while reducing outstanding debt.

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Trends and Other Factors Affecting Our Business

Our results are impacted by macroeconomic and demographic trends, changes in the food distribution market structure and changes in consumer behavior.

We believe food-at-home expenditures as a percentage of total food expenditures are subject to these trends, including changes in consumer behaviors in response to social and economic trends, such as levels of disposable income and the health of the economy in which our customers and our stores operate.

economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence and behavior.

Consumer spending may continue to be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items or buying fewer items.

Our results are impacted by macroeconomic and demographic trends, changes in the food distribution market structure and changes in consumer behavior, which may result from factors beyond our control, including geopolitical events and other events that may trigger economic volatility and negatively impact discretionary income levels and consumer confidence, social trends, changes in the levels of disposable income and the health of the economy in which our customers and stores operate.

economy continues to experience economic volatility, which has had, and we expect may continue to have, an impact on consumer confidence and behavior.

Consumer spending may continue to be impacted by levels of discretionary income with consumers trading down to a less expensive mix of products for grocery items or buying fewer items.

In addition, inflation continues to affect our business, and fluctuating commodity and labor input costs may continue to impact the prices of products we procure from manufacturers.

We believe our product mix, which ranges from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and may lessen the impact of any further shifts in consumer and industry trends in grocery product mix.

We are actively monitoring the impacts of the evolving macroeconomic and geopolitical landscape, including rapidly evolving tariff and global trade policies, on all aspects of our business.

We are also impacted by changes in food distribution trends affecting our Wholesale customers, such as direct store deliveries and other methods of distribution.

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In the first quarter of fiscal 2025, we consolidated the volume of two distribution centers into other facilities in the Central region.

In the second quarter of fiscal 2025, we announced the closure of a third distribution center in the Central region, which was completed subsequent to the second quarter of fiscal 2025.

In the second quarter of fiscal 2025, we announced the closure of a third distribution center in the Central region, which was completed in the third quarter of fiscal 2025.

We expect to achieve cost savings as a result of these efforts through streamlining operations and delivering efficiencies, including incurring lower operating and shrink expenses, while also improving product assortment and overall customer experience.

Subsequent to the third quarter of fiscal 2025, we came to a mutual agreement with a customer in the East region to terminate our supply agreement, pursuant to which we served as the primary grocery wholesaler to this customer’s locations in the Northeast.

In connection with this termination, we expect to cease operations at our Allentown, Pennsylvania distribution center in early fiscal 2026 and consolidate the remaining volume into other facilities in the Northeast.

Business with this customer in the Northeast accounted for approximately $1 billion in annual sales.

The termination enables us to accelerate progress toward our longer-term strategic and three-year financial objectives.

In the first quarter of fiscal 2025, we began operating a new distribution center in Manchester, Pennsylvania, which has approximately 1.3 million square feet, optimizes volume from other nearby distribution centers in the East region and primarily distributes natural products.

This distribution center is expected to be automated later in fiscal 2025.

In the third quarter of fiscal 2025, we implemented a full case automation system at the Manchester distribution center and are expanding volume through this new solution.

Also in the first quarter of fiscal 2025, we began the development of a new distribution center in Sarasota, Florida, which has approximately 1.0 million square feet.

We recognized a $118 million right-of-use asset and operating lease liability for this distribution center in the first quarter of fiscal 2025.

We expect to begin operating this facility in the first half of fiscal 2026.

We plan to continue to evaluate our distribution center network to further optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including network optimization and automation initiatives.

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Impact of Product Cost Changes

We experienced a mix of inflation and deflation across product categories during the second quarter of fiscal 2025.

In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately two percent in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024.

We experienced a mix of inflation and deflation across product categories during the third quarter of fiscal 2025.

In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately two percent in the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024.

Cost inflation and deflation estimates are based on individual like items sold during the periods being compared.

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Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation.

We continued to experience fewer and less significant vendor product cost increases in the second quarter of fiscal 2025, which negatively impacted our gross profit rate when comparing to the second quarter of fiscal 2024.

We continued to experience fewer and less significant vendor product cost increases in the third quarter of fiscal 2025, which negatively impacted our gross profit rate when comparing to the third quarter of fiscal 2024.

Composition of Condensed Consolidated Statements of Operations and Business Performance Assessment

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Restructuring, Acquisition and Integration Related Expenses

Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, facility closure costs, share-based compensation acceleration charges and acquisition and integration related expenses.

Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, facility closure costs, contract exit-related costs, share-based compensation acceleration charges and acquisition and integration related expenses.

Integration related expenses include certain professional consulting expenses and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.

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13-Week Period Ended 39-Week Period Ended

(in millions) February 1, 2025 January 27, 2024 Change February 1, 2025 January 27, 2024 Change

(in millions) May 3, 2025 April 27, 2024 Change May 3, 2025 April 27, 2024 Change

Net sales $ 8,059 $ 7,498 $ 561 $ 24,088 $ 22,825 $ 1,263

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13-Week Period Ended 39-Week Period Ended

(in millions) February 1, 2025 January 27, 2024 February 1, 2025 January 27, 2024

(in millions) May 3, 2025 April 27, 2024 May 3, 2025 April 27, 2024

Net loss including noncontrolling interests $ (7) $ (20) $ (29) $ (73)

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Share-based compensation 10 10 28 26

LIFO charge 3 6 10 13

LIFO (benefit) charge (5) 6 5 19

Restructuring, acquisition and integration related expenses

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Adjusted EBITDA $ 157 $ 130 $ 436 $ 375

(1) Fiscal 2024 primarily includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations.

(2) Reflects costs associated with business transformation initiatives, primarily including third-party consulting costs and licensing costs, which are included within Operating expenses in the Condensed Consolidated Statements of Operations.

(1) Fiscal 2025 primarily includes a $24 million non-cash asset impairment charge related to a distribution center in our East region.

Fiscal 2024 primarily includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations and a $7 million non-cash asset impairment charge related to the decision to close certain retail store locations.

(2) Reflects costs associated with business transformation initiatives, primarily including third-party consulting costs and licensing costs, and third-party professional service fees related to the board-led financial review and strategic initiatives, all of which are included within Operating expenses in the Condensed Consolidated Statements of Operations.

(3) Fiscal 2025 primarily reflects certain estimated accrued legal-related costs, which are included within Operating expenses in the Condensed Consolidated Statements of Operations.

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RESULTS OF OPERATIONS

In the second quarter of fiscal 2025, we announced that we are realigning our commercial wholesale organization as discussed in Executive Overview - Business Overview section above.

In the second quarter of fiscal 2025, we announced that we are realigning our commercial wholesale organization as discussed in the Executive Overview - Business Overview section above.

We updated our presentation of disaggregated revenue to align with how management evaluates our top-line commercial and financial performance.

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Increase (Decrease)

(in millions, except percentages) February 1,

2025 January 27,

2024 $ % February 1,

2025 January 27,

(in millions, except percentages) May 3,

2025 April 27,

2024 $ % May 3,

2025 April 27,

Natural $ 4,160 $ 3,713 $ 447 12.0 % $ 12,019 $ 11,005 $ 1,014 9.2 %

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Total net sales $ 8,059 $ 7,498 $ 561 7.5 % $ 24,088 $ 22,825 $ 1,263 5.5 %

Second Quarter

Our Net sales for the second quarter of fiscal 2025 increased approximately 4.9% from the second quarter of fiscal 2024.

Third Quarter

Our Net sales for the third quarter of fiscal 2025 increased approximately 7.5% from the third quarter of fiscal 2024.

The increase in Net sales was primarily driven by an increase in Natural unit volumes, including new business with existing and new customers, as well as inflation.

Retail Net sales decreased primarily due to a 0.4% decrease in identical store sales from lower volume, and store closures.

Retail Net sales increased primarily due to a 1.5% increase in identical store sales and inflation, partially offset by lower volume and store closures.

Our Net sales for fiscal 2025 year-to-date increased approximately 5.5% from fiscal 2024 year-to-date.

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Cost of Sales and Gross Profit

Our Gross profit increased $37 million, or 3.6%, to $1,072 million for the second quarter of fiscal 2025, from $1,035 million for the second quarter of fiscal 2024.

Our Gross profit as a percentage of Net sales decreased to 13.1% for the second quarter of fiscal 2025 compared to 13.3% for the second quarter of fiscal 2024.

The LIFO charge was $3 million and $6 million in the second quarters of fiscal 2025 and 2024, respectively.

E xcluding the non-cash LIFO charge, gross profit rate was 13.2% of Net sales and 13.4% of Net sales for the second quarter of fiscal 2025 and 2024 , respectively.

The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower product margin rates and customer and product mix, which were partially offset through supplier programs, the benefit of lower shrink expense and a higher retail gross margin rate.

Our Gross profit increased $62 million, or 6.1%, to $1,082 million for the third quarter of fiscal 2025, from $1,020 million for the third quarter of fiscal 2024.

Our Gross profit as a percentage of Net sales decreased to 13.4% for the third quarter of fiscal 2025 compared to 13.6% for the third quarter of fiscal 2024.

The LIFO (benefit) charge was $(5) million and $6 million in the third quarters of fiscal 2025 and 2024, respectively.

E xcluding the non-cash LIFO (benefit) charge, gross profit rate was 13.4% of Net sales and 13.7% of Net sales for the third quarter of fiscal 2025 and 2024 , respectively.

The decrease in gross profit rate, excluding the LIFO (benefit) charge, was primarily driven by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense.

Our Gross profit increased $107 million, or 3.5%, to $3,192 million for fiscal 2025 year-to-date, from $3,085 million for fiscal 2024 year-to-date.

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Operating Expenses

Operating expenses increased $21 million, or 2.1%, to $1,031 million, or 12.6% of Net sales, for the second quarter of fiscal 2025 compared to $1,010 million, or 13.0% of Net sales, for the second quarter of fiscal 2024.

Operating expenses increased $33 million, or 3.3%, to $1,025 million, or 12.7% of Net sales, for the third quarter of fiscal 2025 compared to $992 million, or 13.2% of Net sales, for the third quarter of fiscal 2024.

The decrease in Operating expenses as a percentage of Net sales was primarily driven by the leveraging impact of higher sales and the benefits from cost saving initiatives.

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Restructuring, Acquisition and Integration Related Expenses

Restructuring, acquisition and integration related expenses increased $5 million to $9 million for the second quarter of fiscal 2025, compared to $4 million for the second quarter of fiscal 2024.

The increase was primarily driven by higher costs associated with certain employee severance and other employee separation costs in the second quarter of fiscal 2025.

Restructuring, acquisition and integration related expenses increased $5 million to $14 million for the third quarter of fiscal 2025, compared to $9 million for the third quarter of fiscal 2024.

The increase was primarily driven by increased costs associated with outsourcing certain corporate functions under restructuring initiatives in the third quarter of fiscal 2025.

Restructuring, acquisition and integration related expenses increased $18 million to $35 million for fiscal 2025 year-to-date, compared to $17 million for fiscal 2024 year-to-date.

The increase was primarily driven by higher costs associated with certain employee severance and other employee separation costs in fiscal 2025 year-to-date.

The increase was primarily driven by increased costs associated with outsourcing certain corporate functions under restructuring initiatives, higher closed property charges and costs and an increase in certain employee severance and other employee separation costs in fiscal 2025 year-to-date.

Loss on Sale of Assets and Other Asset Charges

Loss on sale of assets and other asset charges was $5 million for the second quarters of fiscal 2025 and 2024.

The second quarters of fiscal 2025 and 2024 primarily included losses on the sales of receivables under the accounts receivable monetization program.

Loss on sale of assets and other asset charges decreased $13 million to $11 million for fiscal 2025 year-to-date, from $24 million for fiscal 2024 year-to-date.

Fiscal 2024 year-to-date primarily included a $21 million asset impairment charge related to one of our corporate-owned office locations.

Loss on sale of assets and other asset charges increased $15 million to $28 million for the third quarter of fiscal 2025, from $13 million for the third quarter of fiscal 2024.

The third quarter of fiscal 2025 primarily included a $24 million non-cash asset impairment charge related to the Allentown, Pennsylvania distribution center.

The third quarter of fiscal 2024 primarily included a $7 million asset impairment charge related to certain retail store locations.

The third quarters of fiscal 2025 and 2024 included losses on the sales of receivables under the accounts receivable monetization program.

Loss on sale of assets and other asset charges increased $2 million to $39 million for fiscal 2025 year-to-date, from $37 million for fiscal 2024 year-to-date.

Fiscal 2025 year-to-date primarily included a $24 million non-cash asset impairment charge related to the Allentown, Pennsylvania distribution center.

Fiscal 2024 year-to-date primarily included $28 million in asset impairment charges related to one of our corporate-owned office locations and certain retail store locations.

Fiscal 2025 and 2024 year-to-date included losses on the sales of receivables under the accounts receivable monetization program.

Operating Income

Reflecting the factors described above, Operating income increased $11 million to $27 million for the second quarter of fiscal 2025, compared to Operating income of $16 million for the second quarter of fiscal 2024.

The increase in Operating income was primarily driven by an increase in Gross profit, partially offset by an increase in Operating expenses and Restructuring, acquisition and integration related expenses in the second quarter of fiscal 2025, each as described above.

Reflecting the factors described above, Operating income increased $9 million to $15 million for the third quarter of fiscal 2025, compared to Operating income of $6 million for the third quarter of fiscal 2024.

The increase in Operating income was primarily driven by an increase in Gross profit, partially offset by an increase in Operating expenses, Loss on sale of asset and other asset charges and Restructuring, acquisition and integration related expenses in the third quarter of fiscal 2025, each as described above.

Reflecting the factors described above, Operating income increased $41 million to $47 million for fiscal 2025 year-to-date, compared to Operating income of $6 million for fiscal 2024 year-to-date.

The increase in Operating income was primarily driven by an increase in Gross profit and a decrease in Loss on sale of asset and other asset charges, partially offset by an increase in Operating expenses and Restructuring, acquisition and integration related expenses in fiscal 2025 year-to-date, each as described above.

The increase in Operating income was primarily driven by an increase in Gross profit, partially offset by an increase in Operating expenses, Restructuring, acquisition and integration related expenses and Loss on sale of assets and other asset charges in fiscal 2025 year-to-date, each as described above.

Interest Expense, Net

13-Week Period Ended 39-Week Period Ended

(in millions) February 1, 2025 January 27, 2024 February 1, 2025 January 27, 2024

(in millions) May 3, 2025 April 27, 2024 May 3, 2025 April 27, 2024

Interest expense on long-term debt, net of capitalized interest $ 35 $ 35 $ 106 $ 105

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Interest expense, net $ 36 $ 37 $ 110 $ 112

The decrease in interest expense, net, in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily driven by lower outstanding debt balances.

The decrease in interest expense, net, in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was primarily driven by lower outstanding debt balances.

The decrease in interest expense, net, in fiscal 2025 year-to-date compared to fiscal 2024 year-to-date was primarily driven by lower outstanding debt balances.

Benefit for Income Taxes

The effective tax rate for the second quarter of fiscal 2025 was a benefit rate of 60.0% on pre-tax loss compared to a benefit rate of 26.3% on pre-tax loss for the second quarter of fiscal 2024.

The change from the second quarter of fiscal 2024 is primarily driven by a reduction in pre-tax loss combined with discrete tax benefits resulting from share award vestings in the second quarter of fiscal 2025.

The effective tax rate for the third quarter of fiscal 2025 was a benefit rate of 56.3% on pre-tax loss compared to a benefit rate of 23.1% on pre-tax loss for the third quarter of fiscal 2024.

The change from the third quarter of fiscal 2024 is primarily driven by the impact of a partnership investment entered into in the third quarter of fiscal 2025 as well as a discrete tax benefit recorded in the third quarter of fiscal 2025 for return to provision tax credits, combined with a reduction in pre-tax loss.

The effective tax rate for fiscal 2025 year-to-date was a benefit rate of 35.6% on pre-tax loss compared to a benefit rate of 21.5% on pre-tax loss for fiscal 2024 year-to-date.

The change from fiscal 2024 year-to-date is primarily driven by a reduction in pre-tax loss for fiscal 2025 year-to-date and a decrease in discrete tax expenses resulting from share award vestings through the second quarter of fiscal 2025.

The change from fiscal 2024 year-to-date is primarily driven by the impact of a partnership investment entered into in the third quarter of fiscal 2025 combined with a reduction in pre-tax loss.

Net Loss Attributable to United Natural Foods, Inc.

Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc.

was $3 million, or $0.05 per diluted common share, for the second quarter of fiscal 2025, compared to Net loss attributable to United Natural Foods, Inc.

of $15 million, or $0.25 per diluted common share, for the second quarter of fiscal 2024.

was $7 million, or $0.12 per diluted common share, for the third quarter of fiscal 2025, compared to Net loss attributable to United Natural Foods, Inc.

of $21 million, or $0.34 per diluted common share, for the third quarter of fiscal 2024.

Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc.

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13-Week Period Ended 39-Week Period Ended

(in millions) February 1, 2025 January 27, 2024 Change February 1, 2025 January 27, 2024 Change

(in millions) May 3, 2025 April 27, 2024 Change May 3, 2025 April 27, 2024 Change

Wholesale $ 7,776 $ 7,236 $ 540 $ 23,238 $ 22,004 $ 1,234

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Total Adjusted EBITDA $ 157 $ 130 $ 27 $ 436 $ 375 $ 61

Second Quarter

Wholesale’s Net sales increased in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024 primarily due to a 3% increase in unit volumes, including new business with existing and new customers, as well as inflation, as discussed in Results of Operations - Net Sales section above.

Retail’s Net sales decreased in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024 primarily due to a 0.4% decrease in identical store sales from lower volume, and store closures.

Lower eliminations of Net sales in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024 were primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.

Third Quarter

Wholesale’s Net sales increased in the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024 primarily due to a 4% increase in unit volumes, including new business with existing and new customers, as well as inflation, as discussed in Results of Operations - Net Sales section above.

Retail’s Net sales increased in the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024 primarily due to a 1.5% increase in identical store sales and inflation, partially offset by lower volume and store closures.

Lower eliminations of Net sales in the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024 were primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.

Wholesale’s Net sales increased for fiscal 2025 year-to-date as compared to fiscal 2024 year-to-date primarily due to an increase in unit volumes, including new business with existing and new customers, as well as inflation, as discussed in Results of Operations - Net Sales section above.

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Adjusted EBITDA

Second Quarter

Wholesale’s Adjusted EBITDA increased $18 million, or 15.3%, for the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024.

The increase was driven by gross profit growth excluding the LIFO charge, partially offset by an increase in operating expenses.

Wholesale’s Gross profit excluding the LIFO charge for the second quarter of fiscal 2025 increased $36 million and gross profit rate decreased approximately 11 basis points driven primarily by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense.

Third Quarter

Wholesale’s Adjusted EBITDA increased $33 million, or 26.4%, for the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024.

The increase was driven by gross profit growth excluding the LIFO (benefit) charge, partially offset by an increase in operating expenses.

Wholesale’s Gross profit excluding the LIFO (benefit) charge for the third quarter of fiscal 2025 increased $50 million and gross profit rate decreased approximately 19 basis points driven primarily by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense.

Wholesale’s Operating expense increased $17 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 13—Business Segments.

Wholesale’s operating expense rate decreased 50 basis points primarily due to benefits from cost saving initiatives and the leveraging impact of higher sales.

Retail’s Adjusted EBITDA decreased $2 million, or 25.0%, for the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024.

The decrease was driven primarily by a decline in gross profit primarily due to lower sales volume, which was partially offset by the benefit of lower shrink expense which favorably impacted margin rate.

Retail’s Adjusted EBITDA increased $4 million for the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024.

The increase was driven primarily by lower operating expenses from operating efficiencies.

Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 13—Business Segments.

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The increase was driven by gross profit growth excluding the LIFO charge, partially offset by an increase in operating expenses.

Wholesale’s Gross profit excluding the LIFO charge for fiscal 2025 year-to-date increased $46 million and gross profit rate increased approximately 24 basis points driven primarily by supplier programs and the benefit of lower shrink expense, which were partially offset by lower product margin rates and customer and product mix.

Wholesale’s Gross profit excluding the LIFO charge for fiscal 2025 year-to-date increased $96 million and gross profit rate decreased approximately 22 basis points driven primarily by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense.

Wholesale’s Operating expense increased $31 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 13—Business Segments.

Wholesale’s operating expense rate decreased 42 basis points primarily due to benefits from cost saving initiatives and the leveraging impact of higher sales.

Retail’s Adjusted EBITDA decreased $1 million, or 14.3%, for fiscal 2025 year-to-date as compared to fiscal 2024 year-to-date.

The decrease was driven primarily by a decline in gross profit primarily due to lower sales volume, which was largely offset by lower operating expenses from operating efficiencies.

Retail’s Adjusted EBITDA increased $3 million, or 75.0%, for fiscal 2025 year-to-date as compared to fiscal 2024 year-to-date.

The increase was driven primarily by lower operating expenses from operating efficiencies, which was largely offset by a decline in gross profit primarily due to lower sales volume and store closures.

Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 13—Business Segments.

LIQUIDITY AND CAPITAL RESOURCES

• Total liquidity as of February 1, 2025 was $1,312 million and consisted of the following:

◦ $1,268 million of unused credit under our asset-based revolving credit facility (the “ABL Credit Facility”), which increased $33 million from $1,235 million as of August 3, 2024, primarily due to an increase in the borrowing base and a reduction of net borrowings under the ABL Credit Facility;

• Total liquidity as of May 3, 2025 was $1,494 million and consisted of the following:

◦ $1,442 million of unused credit under our asset-based revolving credit facility (the “ABL Credit Facility”), which increased $207 million from $1,235 million as of August 3, 2024, primarily due to a reduction of net borrowings under the ABL Credit Facility and an increase in the borrowing base;

◦ $52 million of cash and cash equivalents, which increased $12 million from $40 million as of August 3, 2024.

• Total debt decreased $14 million to $2,071 million as of February 1, 2025 from $2,085 million as of August 3, 2024, primarily related to a reduction in net borrowings under the ABL Credit Facility due to net cash provided by operating activities, partially offset by payments for capital expenditures.

• Working capital increased $50 million to $1,087 million as of February 1, 2025 from $1,037 million as of August 3, 2024, primarily due to increases in accounts receivable and inventory levels, partially offset by an increase in accounts payable related to inventories.

• Total debt decreased $123 million to $1,962 million as of May 3, 2025 from $2,085 million as of August 3, 2024, primarily related to a reduction in net borrowings under the ABL Credit Facility due to net cash provided by operating activities, partially offset by payments for capital expenditures.

• Working capital decreased $36 million to $1,001 million as of May 3, 2025 from $1,037 million as of August 3, 2024, primarily due to an increase in accounts payable to support higher purchasing levels and a decrease in prepaid expenses and other current assets, partially offset by increases in accounts receivable from higher sales.

• Subsequent to the third quarter of fiscal 2025, on May 5, 2025, we made a voluntary prepayment of $100 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility.

• In connection with the contract termination described in Note 15—Subsequent Events, we expect to pay $53 million in installment payments over a transition period commencing in the fourth quarter of fiscal 2025 and ending in the first quarter of fiscal 2026.

Sources and Uses of Cash

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If we fail to comply with any of these covenants, we may be in default under the applicable debt agreement, and all amounts due thereunder may become immediately due and payable.

The potential amount of prepayment under the Term Loan Facility from Excess Cash Flow (as defined in the Term Loan Agreement) in fiscal 2025 that may be required in fiscal 2026 is not reasonably estimable as of February 1, 2025.

Derivatives and Hedging Activity

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Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.

As of February 1, 2025, we had an aggregate of $750 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the Secured Overnight Financing Rate (“SOFR”) component of our floating interest payments through pay fixed and receive floating interest rate swap agreements.

As of May 3, 2025, we had an aggregate of $750 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the Secured Overnight Financing Rate (“SOFR”) component of our floating interest payments through pay fixed and receive floating interest rate swap agreements.

These fixed rates range from 2.475% to 4.130%, with maturities between October 2025 and June 2028.

The fair values of these interest rate derivatives represent a total net asset of $5 million as of February 1, 2025, and are subject to volatility based on changes in market interest rates.

The fair values of these interest rate derivatives represent a total net liability of $1 million as of May 3, 2025, and are subject to volatility based on changes in market interest rates.

From time to time, we enter into fixed price fuel supply agreements and foreign currency hedges.

As of February 1, 2025, we had fixed price fuel contracts and foreign currency forward agreements outstanding.

As of May 3, 2025, we had fixed price fuel contracts and foreign currency forward agreements outstanding.

Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant.

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39-Week Period Ended

(in millions) February 1, 2025 January 27, 2024 Change

Net cash provided by (used in) operating activities

(in millions) May 3, 2025 April 27, 2024 Change

Net cash provided by operating activities

$ 310 $ 54 $ 256

4 unchanged sentences

Effect of exchange rate on cash — — —

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, at beginning of period 40 37 3

1 unchanged sentence

The increase in net cash provided by operating activities in fiscal 2025 year-to-date compared to fiscal 2024 year-to-date was primarily due to lower levels of cash utilized in net working capital.

The decrease in net cash used in investing activities in fiscal 2025 year-to-date compared to fiscal 2024 year-to-date was primarily due to lower payments for capital expenditures in fiscal 2025 year-to-date.

The increase in net cash used in financing activities in fiscal 2025 year-to-date compared to fiscal 2024 year-to-date was primarily due to an increase in net repayments of borrowings under the ABL Credit Facility resulting from the increase in net cash provided by operating activities and the decrease in net cash used in investing activities, as described above.

1 unchanged sentence

Our principal contractual obligations and commitments consist of obligations under our long-term debt, interest on long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawal liabilities.

Except as otherwise disclosed in Note 14—Commitments, Contingencies and Off-Balance Sheet Arrangements and Note 8—Long-Term Debt, there have been no material changes in our contractual obligations since the end of fiscal 2024.

Except as otherwise disclosed in Note 15—Subsequent Events, Note 14—Commitments, Contingencies and Off-Balance Sheet Arrangements and Note 8—Long-Term Debt, there have been no material changes in our contractual obligations since the end of fiscal 2024.

Refer to Item 7 of the Annual Report for additional information regarding our contractual obligations.

16 unchanged sentences

Our contributions to these plans could increase in the near term.

However, the amount of any increase or decrease in contributions will depend on a variety of factors, including the results of our collective bargaining efforts, investment returns on the assets held in the plans, actions taken by the trustees who manage the plans and requirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and Section 412(e) of the Internal Revenue Code.

Furthermore, if we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, we could trigger a partial or complete withdrawal that could require us to record a withdrawal liability obligation and make withdrawal liability payments to the fund.

12 unchanged sentences

We did not repurchase any shares of our common stock in fiscal 2025 year-to-date.

As of February 1, 2025, we had $138 million remaining authorized under the 2022 Repurchase Program.

As of May 3, 2025, we had $138 million remaining authorized under the 2022 Repurchase Program.

We will manage the timing of any repurchases of our common stock in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.

8 unchanged sentences

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