Natural Grocers by Vitamin Cottage, Inc.

Previous wording

We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality guidelines. The sizes of our stores range from approximately 7,000 to 16,000 selling square feet.

Current wording

We offer a variety of natural and organic groceries and dietary supplements that meet our strict quality guidelines. The sizes of our stores range from approximately 7,000 to 17,000 selling square feet.

Previous wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five years ended September 30, 2024, we increased our store count at a compound annual growth rate of 2.0%. In fiscal year 2024, we opened four new stores and relocated/remodeled four existing stores. We plan to open four to six new stores and relocate/remodel two to four stores in fiscal year 2025. Between October 1, 2024 and the date of this Form 10-K, we relocated/remodeled two existing stores and closed two stores.

Current wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five fiscal years ended September 30, 2025, we increased our store count at a compound annual growth rate of 1.2%. In fiscal year 2025, we opened two new stores, relocated/remodeled three existing stores and closed two stores. We plan to open six to eight new stores and relocate/remodel two to three existing stores in fiscal year 2026. We intend to continue to target an annual new store unit growth rate of 4% to 5% for the foreseeable future. Between October 1, 2025 and the date of this Form 10-K, we did not open any new stores or relocate/remodel any existing stores and closed one store.

Previous wording

Our cost of goods sold and occupancy costs include the cost of inventory sold during the period (net of discounts and allowances), shipping and handling costs, distribution and supply chain costs (including the costs of our bulk food repackaging facility), buying costs, shrink expense, third-party delivery fees and store occupancy costs. Store occupancy costs include operating lease expense, common area maintenance and real estate taxes. Depreciation expense included in cost of goods sold relates to depreciation of assets directly used at our bulk food repackaging facility. The components of our cost of goods sold and occupancy costs may not be identical to those of our competitors, and, as a result, our cost of goods sold and occupancy costs data included in this Form 10-K may not be identical to those of our competitors and may not be comparable to similar data made available by our competitors. Occupancy costs as a percentage of net sales typically decrease as new stores mature and sales increase. Lease payments for leases classified as finance lease obligations are not recorded in cost of goods sold and occupancy costs. Rather, these lease payments are recognized as a reduction of the related obligations and as interest expense.

Current wording

Our cost of goods sold and occupancy costs include the cost of inventory sold during the period (net of discounts and allowances), shipping and handling costs, distribution and supply chain costs (including the costs of our bulk food repackaging facility), buying costs, shrink expense, third-party delivery fees and store occupancy costs. Store occupancy costs include rent, common area maintenance and real estate taxes. Depreciation expense included in cost of goods sold relates to depreciation of assets directly used at our bulk food repackaging facility. The components of our cost of goods sold and occupancy costs may not be identical to those of our competitors, and, as a result, our cost of goods sold and occupancy costs data included in this Form 10-K may not be identical to those of our competitors and may not be comparable to similar data made available by our competitors. Occupancy costs as a percentage of net sales typically decrease as new stores mature and sales increase. Lease payments for leases classified as finance lease obligations are not recorded in cost of goods sold and occupancy costs. Rather, these lease payments are recognized as a reduction of the related obligations and as interest expense.

Previous wording

Store expenses consist of store-level expenses, such as salary and benefits, share-based compensation, supplies, utilities, depreciation, advertising, bank credit card charges and other related costs associated with operations and purchasing support. Depreciation expense included in store expenses relates to depreciation for assets directly used at the stores, including depreciation on land improvements, leasehold improvements, fixtures and equipment and technology. Depreciation expenses on the lease assets related to the finance leases of the stores are also considered store expenses. Additionally, store expenses include any gain or loss recorded on the disposal of fixed assets and lease terminations, primarily related to store relocations, as well as store closing costs. Store expenses also include long-lived asset impairment charges. The majority of store expenses consists of labor-related expenses, which we closely manage and which trend closely with sales. Labor-related expenses as a percentage of net sales tend to be higher at new stores compared to comparable stores, as new stores require a minimum level of staffing in order to maintain adequate levels of customer service combined with lower sales. As new stores increase their sales, labor-related expenses as a percentage of net sales typically decrease.

Current wording

Store expenses consist of store-level expenses, such as salary and benefits, share-based compensation, supplies, utilities, depreciation, advertising, bank credit card charges and other related costs associated with operations and purchasing support. Depreciation expense included in store expenses relates to depreciation for assets directly used at the stores, including depreciation on land improvements, leasehold improvements, fixtures and equipment and technology. Depreciation expenses on the lease assets related to the finance leases of the stores are also considered store expenses. Additionally, store expenses include any gain or loss recorded on the disposal of fixed assets and lease terminations, primarily related to store relocations, as well as store closing costs. Store expenses also include long-lived asset impairment charges. The majority of store expenses consist of labor-related expenses, which we closely manage and which trend closely with sales. Labor-related expenses as a percentage of net sales tend to be higher at new stores compared to comparable stores, as new stores require a minimum level of staffing in order to maintain adequate levels of customer service combined with lower sales. As new stores increase their sales, labor-related expenses as a percentage of net sales typically decrease.

Previous wording

Administrative expenses consist of home office-related expenses, such as salary and benefits, share-based compensation, office supplies, hardware and software expenses, depreciation and amortization expense, occupancy costs (including rent, common area maintenance, real estate taxes and utilities), professional services expenses, expenses associated with our Board, expenses related to compliance with the requirements of regulations applicable to publicly traded companies, and other general and administrative expenses. Depreciation expense included in administrative expenses relates to depreciation for assets directly used at the home office including depreciation on land improvements, leasehold improvements, fixtures and equipment, and computer hardware and software.

Current wording

Administrative expenses consist of home office-related expenses, such as salary and benefits, share-based compensation, office supplies, hardware and software expenses, depreciation and amortization expense, occupancy costs (including rent, common area maintenance, real estate taxes and utilities), software services expenses, professional services expenses, expenses associated with our Board, expenses related to compliance with the requirements of regulations applicable to publicly traded companies, and other general and administrative expenses. Depreciation expense included in administrative expenses relates to depreciation for assets directly used at the home office including depreciation on land improvements, leasehold improvements, fixtures and equipment, and computer hardware and software.

Previous wording

Pre-opening expenses for new stores and relocations/remodels may include rent expense, salaries, advertising, supplies, and other miscellaneous costs incurred prior to the store opening. Rent expense is generally incurred from three to six months prior to a store’s opening date for store leases classified as operating. For store leases classified as finance leases, we recognize pre-opening interest and depreciation expense. Other pre-opening expenses are generally incurred in the four to seven months prior to the store opening. Certain advertising and promotional costs associated with opening a new store may be incurred both before and after the store opens. All pre-opening costs are expensed as incurred. Pre-opening expenses for remodels are incurred if the store is required to be closed due to the remodel.

Current wording

Pre-opening expenses for new stores and relocations/remodels may include rent expense, salaries, advertising, supplies, and other miscellaneous costs incurred prior to the store opening. Rent expense is generally incurred from three to six months prior to a store’s opening date for store leases classified as operating. For store leases classified as finance leases, we recognize pre-opening depreciation expense. Other pre-opening expenses are generally incurred in the four to seven months prior to the store opening. Certain advertising and promotional costs associated with opening a new store may be incurred both before and after the store opens. All pre-opening costs are expensed as incurred. Pre-opening expenses for remodels are incurred if the store is required to be closed due to the remodel.

Previous wording

Net sales increased $101.0 million, or 8.9%, to $1,241.6 million for the year ended September 30, 2024 compared to $1,140.6 million for the year ended September 30, 2023, due to a $83.0 million increase in comparable store sales and a $22.6 million increase in new store sales, partially offset by a $4.6 million decrease in net sales related to closed stores. Daily average comparable store sales increased 7.0% for the year ended September 30, 2024 compared to an increase of 3.6% for the year ended September 30, 2023. The daily average comparable store sales increase in fiscal year 2024 resulted from a 3.8% increase in daily average transaction count and a 3.1% increase in daily average transaction size. Comparable store average transaction size was $47.31 for the year ended September 30, 2024. The increase in net sales during the year ended September 30, 2024 was driven by increases in transaction counts, retail prices, items per transaction and new store sales. Sales growth was driven by enhanced customer engagement with our {N}power rewards program, compelling offers, marketing initiatives including market-specific campaigns, and the increased sales ofNatural Grocers brand products.

Current wording

Net sales increased $89.3 million, or 7.2%, to $1,330.8 million for the year ended September 30, 2025 compared to $1,241.6 million for the year ended September 30, 2024, due to an $86.1 million increase in comparable store sales and a $12.7 million increase in new store sales, partially offset by a $9.6 million decrease in net sales related to closed stores. Daily average comparable store sales increased 7.3% for the year ended September 30, 2025 compared to an increase of 7.0% for the year ended September 30, 2024. The daily average comparable store sales increase in fiscal year 2025 resulted from a 4.6% increase in daily average transaction count and a 2.6% increase in daily average transaction size. Comparable store average transaction size was $48.62 for the year ended September 30, 2025.

Previous wording

Gross profit increased $37.9 million, or 11.6%, to $364.8 million for the year ended September 30, 2024 compared to $326.9 million for the year ended September 30, 2023. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 29.4% for the year ended September 30, 2024 compared to 28.7% for the year ended September 30, 2023. The increase in gross margin during the year ended September 30, 2024 was primarily driven by store occupancy cost leverage and higher product margin attributed to effective pricing and promotions.

Current wording

Gross profit increased $33.1 million, or 9.1%, to $397.9 million for the year ended September 30, 2025 compared to $364.8 million for the year ended September 30, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 29.9% for the year ended September 30, 2025 compared to 29.4% for the year ended September 30, 2024. The increase in gross margin during the year ended September 30, 2025 was driven by higher product margin primarily attributed to effective promotions, and store occupancy cost leverage.

Previous wording

Store expenses increased $20.1 million, or 7.8%, to $277.4 million for the year ended September 30, 2024 compared to $257.3 million for the year ended September 30, 2023. The increase in store expenses was primarily driven by higher compensation expenses, depreciation expenses and long-lived asset impairment charges. Store expenses as a percentage of net sales were 22.3% and 22.6% for the years ended September 30, 2024 and 2023, respectively. The decrease in store expenses as a percentage of net sales primarily reflects expense leverage. Store expenses included long-lived asset impairment charges of $2.2 million and $1.3 million for fiscal years 2024 and 2023, respectively.

Current wording

Store expenses increased $13.1 million, or 4.7%, to $290.5 million for the year ended September 30, 2025 compared to $277.4 million for the year ended September 30, 2024. The increase in store expenses was primarily driven by higher compensation expenses partially offset by lower long-lived asset impairment charges. Store expenses as a percentage of net sales were 21.8% and 22.3% for the years ended September 30, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales was driven by expense leverage and lower long-lived asset impairment charges. Store expenses included long-lived asset impairment charges of $0.1 million and $2.2 million for fiscal years 2025 and 2024, respectively.

Previous wording

Administrative expenses increased $2.7 million, or 7.6%, to $38.7 million for the year ended September 30, 2024 compared to $36.0 million for the year ended September 30, 2023. The increase in administrative expenses was driven by higher compensation expenses. Administrative expenses as a percentage of net sales were 3.1% and 3.2% for the years ended September 30, 2024 and 2023, respectively.

Current wording

Administrative expenses increased $5.6 million, or 14.6%, to $44.4 million for the year ended September 30, 2025 compared to $38.7 million for the year ended September 30, 2024. The increase in administrative expenses was driven by higher compensation expenses, including costs related to our Chief Financial Officer transition, and technology expenses. Administrative expenses as a percentage of net sales were 3.3% and 3.1% for the years ended September 30, 2025 and 2024, respectively.

Previous wording

Pre-opening expenses were $1.7 million for the year ended September 30, 2024 compared to $2.0 million for the year ended September 30, 2023.

Current wording

Pre-opening expenses were $1.0 million for the year ended September 30, 2025 compared to $1.7 million for the year ended September 30, 2024.

Previous wording

Interest expense, net of capitalized interest, was $4.2 million for the year ended September 30, 2024 compared to $3.3 million for the year ended September 30, 2023.

Current wording

Interest expense, net of capitalized interest, was $3.1 million for the year ended September 30, 2025 compared to $4.2 million for the year ended September 30, 2024.

Previous wording

Income tax expense increased $3.7 million to $8.9 million for the year ended September 30, 2024 compared to $5.1 million for the year ended September 30, 2023. The Company’s effective income tax rate was 20.7% and 18.1% for the years ended September 30, 2024 and 2023, respectively. The increase in the effective income tax rate was primarily attributable to lower food donation deductions recorded during fiscal year 2024.

Current wording

Income tax expense increased $3.6 million to $12.5 million for the year ended September 30, 2025 compared to $8.9 million for the year ended September 30, 2024. The Company’s effective income tax rate was 21.2% and 20.7% for the years ended September 30, 2025 and 2024, respectively.

Previous wording

Net income was $33.9 million, or $1.47 diluted earnings per share, for the year ended September 30, 2024 compared to $23.2 million, or $1.02 diluted earnings per share, for the year ended September 30, 2023.

Current wording

Net income was $46.4 million, or $2.00 diluted earnings per share, for the year ended September 30, 2025 compared to $33.9 million, or $1.47 diluted earnings per share, for the year ended September 30, 2024.

Previous wording

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation and non-recurring items.

Current wording

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP. We define EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA as adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance, including certain items such as impairment charges, store closing costs, share-based compensation, amortization of software hosting arrangement (SaaS) implementation costs and non-recurring items.

Previous wording

EBITDA increased 28.6% to $77.9 million for the year ended September 30, 2024 compared to $60.6 million for the year ended September 30, 2023. EBITDA as a percentage of net sales was 6.3% and 5.3% for the years ended September 30, 2024 and 2023, respectively.

Current wording

EBITDA increased 20.4% to $93.8 million for the year ended September 30, 2025 compared to $77.9 million for the year ended September 30, 2024. EBITDA as a percentage of net sales was 7.0% and 6.3% for the years ended September 30, 2025 and 2024, respectively.

Previous wording

Adjusted EBITDA increased 31.4% to $83.3 million for the year ended September 30, 2024 compared to $63.4 million for the year ended September 30, 2023. Adjusted EBITDA as a percentage of net sales was 6.7% and 5.6% for the years ended September 30, 2024 and 2023, respectively.

Current wording

Adjusted EBITDA increased 17.5% to $97.9 million for the year ended September 30, 2025 compared to $83.3 million for the year ended September 30, 2024. Adjusted EBITDA as a percentage of net sales was 7.4% and 6.7% for the years ended September 30, 2025 and 2024, respectively.

Previous wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service, cash dividends, share repurchases and corporate taxes. As of September 30, 2024, we had $8.9 million in cash and cash equivalents and $72.8 million available for borrowing under our Credit Facility.

Current wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of merchandise inventory, operating expenses, SaaS implementation costs, capital expenditures predominantly in connection with opening, relocating and remodeling stores, property acquisitions, debt service, cash dividends, share repurchases and corporate taxes. As of September 30, 2025, we had $17.1 million in cash and cash equivalents and $70.1 million available for borrowing under our Credit Facility.

Previous wording

We paid quarterly cash dividends of $0.10 per share of common stock in each quarter of fiscal year 2024 and a special cash dividend of $1.00 per share of common stock in the first quarter of fiscal year 2024. The special cash dividend was funded through available cash and borrowings under our Credit Facility. On November 20, 2024, our Board approved the payment of a quarterly cash dividend of $0.12 per share of common stock, which will be paid on December 18, 2024 to stockholders of record as of the close of business on December 2, 2024.

Current wording

We paid a quarterly cash dividend of $0.12 per share of common stock in each quarter of fiscal year 2025. On November 19, 2025, our Board approved the payment of a quarterly cash dividend of $0.15 per share of common stock, which was paid on December 10, 2025 to stockholders of record as of the close of business on December 1, 2025.

Previous wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation, and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities increased $9.2 million, or 14.2%, to $73.8 million for the year ended September 30, 2024 compared to $64.6 million for the year ended September 30, 2023. The increase in cash provided by operating activities was due to an increase in cash provided by net income as adjusted for non-cash items, partially offset by a decrease in cash provided by operating assets and liabilities.

Current wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities decreased $18.5 million, or 25.0%, to $55.3 million for the year ended September 30, 2025 compared to $73.8 million for the year ended September 30, 2024. The decrease in cash provided by operating activities was due to a decrease in cash provided by operating assets and liabilities, primarily attributable to the timing of accounts payable payments and merchandise inventory purchases, and higher capitalized SaaS implementation costs, partially offset by an increase in cash provided by net income as adjusted for non-cash items.

Previous wording

Net cash used in investing activities increased $0.7 million, or 1.7%, to $38.6 million for the year ended September 30, 2024 compared to $38.0 million for the year ended September 30, 2023. This increase was primarily the result of an increase in property and equipment of $1.0 million, partially offset by a decrease in other intangibles of $0.4 million during the year ended September 30, 2024 compared to the year ended September 30, 2023, and was attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Current wording

Net cash used in investing activities decreased $7.6 million, or 19.8%, to $31.0 million for the year ended September 30, 2025 compared to $38.6 million for the year ended September 30, 2024. This decrease was primarily the result of decreases in acquisitions of property and equipment of $6.3 million and other intangibles of $1.0 million during the year ended September 30, 2025 compared to the year ended September 30, 2024, and was attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Previous wording

We plan to spend approximately $36.0 million to $44.0 million on capital expenditures during fiscal year 2025 primarily in connection with expected new store openings and store relocations/remodels.

Current wording

We plan to spend approximately $50.0 million to $55.0 million on capital expenditures during fiscal year 2026 primarily in connection with expected new store openings and store relocations/remodels.

Previous wording

Acquisition of property and equipment not yet paid decreased $2.3 million to $3.7 million in fiscal year 2024 compared to $6.0 million in fiscal year 2023 primarily due to the timing of payments related to new store openings and relocations/remodels.

Current wording

Acquisition of property and equipment not yet paid decreased $1.3 million to $2.4 million in fiscal year 2025 compared to $3.7 million in fiscal year 2024 primarily due to the timing of payments related to new store openings and relocations/remodels.

Previous wording

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash used in financing activities was $44.6 million for the year ended September 30, 2024 compared to $20.4 million for the year ended September 30, 2023. During fiscal year 2024, we paid cash dividends of $31.9 million, including a special cash dividend to stockholders of $22.7 million.

Current wording

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash used in financing activities was $16.1 million for the year ended September 30, 2025 compared to $44.6 million for the year ended September 30, 2024. During fiscal year 2024, we paid a special cash dividend to stockholders of $22.7 million.

Previous wording

The revolving commitment amount under the Credit Facility is $72.5 million, including a $5.0 million sub-limit for standby letters of credit. We borrowed $35.0 million under a term loan in December 2020 (the Term Loan). As of September 30, 2024, we had fully repaid all remaining amounts outstanding under the Term Loan. Our wholly owned subsidiary, Vitamin Cottage Natural Food Markets, Inc. (the operating company), is the borrower under the Credit Facility, and its obligations under the Credit Facility are guaranteed by us (the holding company) and Vitamin Cottage Two Ltd. Liability Company (VC2). The Credit Facility is secured by a lien on substantially all of the Company’s assets. The Company has the right to borrow, prepay and re-borrow revolving amounts under the Credit Facility at any time prior to the maturity date without premium or penalty. On November 16, 2023, we amended the Credit Facility to: (i) increase our aggregate revolving commitments from $50.0 million to $75.0 million; (ii) extend the maturity date of the revolving commitments under the Credit Facility to November 16, 2028; (iii) permit payment of a one-time cash dividend of up to $25.0 million no later than December 31, 2023; and (iv) increase the Company’s restricted payment capacity by $2.5 million, allowing the Company to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $15.0 million during any fiscal year. The aggregate revolving commitment amount will be automatically and permanently reduced by $2.5 million on each anniversary date until the Credit Facility matures on November 16, 2028, unless we have previously exercised our option to reduce the aggregate revolving commitments to a lower amount.

Current wording

The aggregate revolving commitment amount under the Credit Facility, as of the date of this report, is $70.0 million, including a $5.0 million sub-limit for standby letters of credit. Our wholly owned subsidiary, Vitamin Cottage Natural Food Markets, Inc. (the operating company), is the borrower under the Credit Facility, and its obligations under the Credit Facility are guaranteed by us, the holding company. The Credit Facility is secured by a lien on substantially all of the Company’s assets. The Company has the right to borrow, prepay and re-borrow revolving amounts under the Credit Facility at any time prior to the maturity date without premium or penalty. On November 16, 2023, we amended the Credit Facility to: (i) increase our aggregate revolving commitments from $50.0 million to $75.0 million; (ii) extend the maturity date of the revolving commitments under the Credit Facility to November 16, 2028; (iii) permit payment of a one-time cash dividend of up to $25.0 million no later than December 31, 2023; and (iv) increase the Company’s restricted payment capacity by $2.5 million, allowing the Company to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $15.0 million during any fiscal year. The aggregate revolving commitment amount will be automatically and permanently reduced by $2.5 million on each anniversary date until the Credit Facility matures on November 16, 2028, unless we have previously exercised our option to reduce the aggregate revolving commitments to a lower amount.

Previous wording

We had no revolving loan amounts outstanding under the Credit Facility as of September 30, 2024 and 2023. We had no amounts and $7.7 million outstanding under the Term Loan as of September 30, 2024 and 2023, respectively. As of September 30, 2024 and 2023, we had undrawn, issued and outstanding letters of credit of $2.2 million and $1.5 million, respectively, which were reserved against the amount available for borrowing under the Credit Facility. We had $72.8 million and $48.5 million available for borrowing under the Credit Facility as of September 30, 2024 and 2023, respectively.

Current wording

We had no revolving loan amounts outstanding under the Credit Facility as of September 30, 2025 and 2024. As of September 30, 2025 and 2024, we had undrawn, issued and outstanding letters of credit of $2.4 million and $2.2 million, respectively, which were reserved against the amount available for borrowing under the Credit Facility. We had $70.1 million and $72.8 million available for borrowing under the Credit Facility as of September 30, 2025 and 2024, respectively.

Previous wording

We assess our goodwill and indefinite-lived intangible assets, primarily consisting of trademarks, for possible impairment on an annual basis during our fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. There are significant judgments and estimates within the processes; it is therefore possible that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.* *The Company has determined that its business, for purposes of impairment evaluation for goodwill and indefinite-lived intangible assets, consists of a single reporting unit. As of September 30, 2024, the Company has recorded no impairment charges related to goodwill and indefinite-lived intangible assets.

Current wording

We assess our goodwill and indefinite-lived intangible assets, primarily consisting of trademarks, for possible impairment on an annual basis during our fourth fiscal quarter, and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. There are significant judgments and estimates within the processes; it is therefore possible that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.* *The Company has determined that its business, for purposes of impairment evaluation for goodwill and indefinite-lived intangible assets, consists of a single reporting unit. As of September 30, 2025, the Company has recorded no impairment charges related to goodwill and indefinite-lived intangible assets.

Previous wording

We assess our long-lived assets, principally property and equipment, lease assets, and intangible and other assets subject to amortization, primarily internal-use software and implementation costs for software hosting arrangements, respectively, for possible impairment at least annually, or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These events or changes primarily include a significant change in current period performance combined with a history of losses and a projection of continuing losses, or a decision to close or relocate a store. The Company assesses the recoverability of the property and equipment and lease assets at the individual store level, and the intangible and other assets at the consolidated entity level. If the carrying value of such assets over their respective remaining lives is not recoverable through projected undiscounted future cash flows, impairment is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value of the asset group is estimated based on either: (i) discounted future cash flows; (ii) an appropriate third-party market appraisal; or (iii) other valuation technique.

Current wording

We assess our long-lived assets, principally property and equipment, lease assets, and intangible and other assets subject to amortization, primarily internal-use software and implementation costs for software hosting arrangements, respectively, for possible impairment at least annually, and whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These events or changes primarily include a significant change in current period performance combined with a history of losses and a projection of continuing losses, or a decision to close or relocate a store. The Company assesses the recoverability of the property and equipment and lease assets at the individual store level, and the intangible and other assets at the consolidated entity level. If the carrying value of such assets over their respective remaining lives is not recoverable through projected undiscounted future cash flows, impairment is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value of the asset group is estimated based on either: (i) discounted future cash flows; (ii) an appropriate third-party market appraisal; or (iii) other valuation technique.