Grocery Outlet Holding Corp.

(Unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Description of Business— Based in Emeryville, California, and incorporated in Delaware in 2014, Grocery Outlet Holding Corp. (together with its wholly owned subsidiaries, collectively, "Grocery Outlet," "we," or the "Company") is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold primarily through a network of independently operated stores. As of September 27, 2025, we had 563 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, New Jersey, Ohio, North Carolina, Georgia, Alabama, Delaware, Kentucky and Virginia.

Fiscal Year and Quarters —We operate on a fiscal year that ends on the Saturday closest to December 31st each year. The fiscal years ended January 3, 2026 ("fiscal 2025") and December 28, 2024 ("fiscal 2024") consist of 53 weeks and 52 weeks, respectively. References to the third quarter of fiscal 2025 and the third quarter of fiscal 2024 refer to the 13 weeks ended September 27, 2025 and September 28, 2024, respectively. References to the second quarter of fiscal 2025 refer to the 13 weeks ended June 28, 2025. References to the first quarter of fiscal 2025 refer to the 13 weeks ended March 29, 2025.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission ("SEC") for interim reporting. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2024 (the "2024 Form 10-K"). The condensed consolidated balance sheet as of December 28, 2024 included herein has been derived from those audited consolidated financial statements.

Our unaudited condensed consolidated financial statements include the accounts of Grocery Outlet Holding Corp. and its wholly owned subsidiaries. All intercompany balances and transactions were eliminated. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. The interim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for any future interim or annual period. Prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates—The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can differ from these estimates depending upon certain risks and uncertainties. Changes in these estimates are recorded when known. We consider our accounting policy relating to long-lived asset impairment to be a significant accounting policy that involves management's estimates and judgments.

Merchandise Inventories—Merchandise inventories are valued at the lower of cost or net realizable value. Cost is primarily determined by the weighted-average cost method for warehouse inventories and the retail inventory method for store inventories. We provide for estimated inventory losses between physical inventory counts based on historical averages. This provision is adjusted periodically to reflect the actual shrink results of the physical inventory counts.

Leases—We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current lease liabilities, and long-term lease liabilities in our condensed consolidated balance sheets. Finance leases are included in other assets, current lease liabilities, and long-term lease liabilities in our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease over the same term. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, reduced by landlord incentives. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments based on the information available at the commencement date, to determine the present value of our lease payments. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term while finance lease payments are charged to interest expense and depreciation and amortization expense over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these short-term leases is recognized on a straight-line basis over the lease term.

We generally lease retail facilities for store locations, distribution centers, office space and equipment and account for these leases as operating leases. We account for certain equipment leases as finance leases. Lease and non-lease components are accounted for separately. We sublease certain real estate to unrelated third parties under non-cancelable leases and the sublease portfolio consists of operating leases for retail stores.

Fair Value Measurements—Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of financial instruments is categorized based on the level of judgment associated with the inputs used to measure their fair values. Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

Level 1— Quoted prices in active markets for identical assets or liabilities

Level 2— Quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3— Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions when pricing the financial instruments, such as cash flow modeling assumptions

The assets' or liabilities' fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair value framework requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

There wereno assets or liabilities measured at fair value on a recurring basis as of September 27, 2025 or December 28, 2024. Generally, long-lived assets are recorded at fair value on a non-recurring basis after the asset has been impaired. As of September 27, 2025 and December 28, 2024, certain long-lived assets were determined to be impaired and as such were measured at fair value at the time of the impairment determination. For the 13 and 39 weeks ended September 27, 2025, we recognized $0.7 million and $11.5 million of impairment of long-lived assets, respectively, of which less than $0.1 million and $7.9 million, respectively, resulted from the Restructuring Plan as defined in Note 11. See "Property and Equipment" and "Goodwill and Other Intangible Assets" within Note 1 to the consolidated financial statements in our 2024 Form 10-K for additional information. Therewere no transfers of assets or liabilities between levels within the fair value hierarchy during the 13 and 39 weeks ended September 27, 2025.

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

Cash and cash equivalents, independent operator ("IO") receivables, other accounts receivable and trade accounts payable— The carrying value of such financial instruments approximates their fair value due to factors such as their short-term nature, their variable interest rates or the effect of the related allowance for expected credit losses.

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

The following table sets forth by level within the fair value hierarchy the carrying amounts and estimated fair values of our significant financial liabilities that are not recorded at fair value on the condensed consolidated balance sheets (amounts in thousands):

(1)The carrying amounts of the senior term loan as of September 27, 2025 and December 28, 2024 were net of debt issuance costs of $1.0 million and$1.2 million, respectively.

(2)The estimated fair value of our current senior term loan and revolving credit facility borrowings under the 2023 Credit Agreement, as defined in Note 3, was deemed to approximate the carrying value, excluding unamortized debt issuance costs, because the interest rate is variable with short reset periods and is reflective of the current market rate.

Revenue Recognition

Net Sales — We recognize revenue from the sale of products at the point of sale, net of any taxes or deposits collected and remitted to governmental authorities. For e-commerce related sales in which a third-party provides home delivery service, revenue is recognized upon delivery to the customer. Our performance obligations are satisfied upon the transfer of goods to the customer, at the point of sale, and payment from customers is also due at the time of sale. Discounts provided to customers by us are recognized at the time of sale as a reduction in net sales as the products are sold. Discounts provided by IOs are not recognized as a reduction in net sales as these are provided solely by the IO who bears the incremental costs arising from the discount. We do not accept manufacturer coupons.

We did not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any material performance obligations other than our gift card deferred revenue liability, or any material costs to obtain or fulfill a contract as of September 27, 2025 and December 28, 2024.

Gift Cards — We record a deferred revenue liability when a Grocery Outlet gift card is sold. Revenue related to gift cards is recognized as the gift cards are redeemed, which is when we have satisfied our performance obligation. While gift cards are generally redeemed within 12 months, some are never fully redeemed. We reduce the liability and recognize revenue for the unused portion of the gift cards ("breakage") under the proportional method, where recognition of breakage income is based upon the historical run-off rate of unredeemed gift cards. Our gift card deferred revenue liability was $3.3 million and $4.1 million as of September 27, 2025 and December 28, 2024, respectively. Breakage amounts were immaterial for the 13 and 39 weeks ended September 27, 2025 and September 28, 2024, respectively.

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

(1) Perishable departments include dairy and deli; produce and floral; and fresh meat and seafood.

(2) Non-perishable departments include non-perishable grocery; frozen foods; beer and wine; general merchandise; and health and beauty care.

Variable Interest Entities—In accordance with the variable interest entities sub-section of Accounting Standards Codification ("ASC") Topic 810, Consolidation, we assess at each reporting period whether we, or any consolidated entity, are considered the primary beneficiary of a variable interest entity ("VIE") and therefore required to consolidate the financial results of the VIE in our condensed consolidated financial statements. Determining whether to consolidate a VIE may require judgment in assessing (i) whether an entity is a VIE, and (ii) if a reporting entity is a VIE's primary beneficiary. A reporting entity is determined to be a VIE's primary beneficiary if it has the power to direct the activities that most significantly impact a VIE's economic performance and the obligation to absorb losses or rights to receive benefits that could potentially be significant to a VIE.

We had 522,491 and 486 stores operated by IOs as of September 27, 2025, December 28, 2024 and September 28, 2024, respectively. We have agreements in place with each IO. The IO orders merchandise exclusively from us which is provided to the IO on consignment. Under the independent operator agreement (the "Operator Agreement"), the IO selects a majority of merchandise that we consign to the IO, which the IO chooses from our merchandise order guide according to the IO's knowledge and experience with local customer purchasing trends, preferences, historical sales and similar factors. The Operator Agreement gives the IO discretion to adjust our initial prices if the overall effect of all price changes at any time comports with the reputation of our Grocery Outlet retail stores for selling quality, name-brand consumables and fresh products and other merchandise at extreme discounts. The IO is required to furnish initial working capital and to acquire certain store and safety assets. The IO is also required to hire, train and employ a properly trained workforce sufficient in number to enable the IO to fulfill its obligations under the Operator Agreement. Additionally, the IO is responsible for expenses required for business operations, including all labor costs, utilities, credit card processing fees, supplies, taxes, fines, levies and other expenses. Either party may terminate the Operator Agreement without cause upon 75 days' notice.

As consignor of all merchandise to each IO, the aggregate net sales proceeds from merchandise sales belongs to us. Net sales related to IO stores were $1.11 billion and $1.05 billion for the 13 weeks ended September 27, 2025 and September 28, 2024, respectively, and $3.30 billion and $3.15 billion for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively. We, in turn, pay each IO a commission based on a share of the gross profit of the store. Inventories and related net sales proceeds are our property, and we are responsible for store rent and related occupancy costs. IO commissions are expensed and included in selling, general and administrative expenses. IO commissions were $165.1 million and $157.0 million for the 13 weeks ended September 27, 2025 and September 28, 2024, respectively, and $496.5 million and $484.8 million for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively. IO commissions of $6.2 million and $5.6 million were included in accrued and other current liabilities as of September 27, 2025 and December 28, 2024, respectively.

An IO may fund its initial store investment from existing capital, a third-party loan or most commonly through a loan from us, as further discussed in Note 2. As collateral for IO obligations and performance, the Operator Agreement grants us the security interests in the assets owned by each IO related to the respective store. Since the total investment at risk associated with each IO is not sufficient to permit each IO to finance its activities without additional subordinated financial support, each IO is a VIE that we have a variable interest in. To determine if we are the primary beneficiary of a VIE, we evaluate whether we have (i) the power to direct the activities that most significantly impact the IO's economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the IO that could potentially be significant to the IO. Our evaluation includes identification of significant activities and an assessment of the IO's ability to direct those activities.

Activities that most significantly impact the IO's economic performance relate to sales and labor. Sales activities that significantly impact the IO's economic performance include determining what merchandise the IO will order and sell and the price of such merchandise, both of which the IO controls. The IO is also responsible for all of its own labor. Labor activities that significantly impact the IO's economic performance include hiring, training, supervising, directing, compensating (including wages, salaries and employee benefits) and terminating all of the employees of the IO, activities which the IO controls. Accordingly, the IO has the power to direct the activities that most significantly impact the IO's economic performance. Furthermore, the mutual termination rights associated with the Operator Agreement illustrate the lack of ultimate control over the IO. Therefore, we are not the primary beneficiary of these VIEs.

Our maximum exposure, in accordance with ASC Topic 810, to the IOs is generally limited to the IO notes and IO receivables due from these entities, which were $82.3 million and $71.0 million, gross, as of September 27, 2025 and December 28, 2024, respectively. See Note 2 for additional information.

Recently Adopted Accounting Standards

No recently adopted accounting pronouncements had a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

ASU No. 2023-09 — In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) ("ASU 2023-09"). ASU 2023-09 requires public entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements and disclosures.

ASU No. 2024-03 — In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). ASU 2024-03 requires public entities to disclose, in the notes to financial statements, specified information about certain costs and expenses, including the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each expense caption presented on the face of the income statement, a qualitative description of the amounts remaining in these expense captions that are not separately disaggregated quantitatively, and the total amount of selling expenses and an entity's definition of selling expenses. ASU 2024-03, as clarified by ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Further, the amendments in ASU 2024-03 should be applied either prospectively or retrospectively. We are currently evaluating the impact on our consolidated financial statements and disclosures.

ASU No. 2025-06 — In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) ("ASU 2025-06"). ASU 2025-06 removes all references to prescriptive and sequential software development stages throughout Subtopic 350-40, and therefore requires an entity to start capitalizing software costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 further specify and clarify disclosure requirements for property, plant and equipment and intangibles, as well as supersede the website development costs guidance and incorporate the recognition requirements for website-specific development costs. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. Further, the amendments in ASU 2025-06 should be applied using a transition approach that is prospective, modified based on the project status and whether software costs were capitalized before the adoption date, or retrospective. We are currently evaluating the impact on our consolidated financial statements and disclosures.

Note 2. Independent Operator Notes and Independent Operator Receivables

The amounts included in IO notes and IO receivables consist primarily of funds we loaned to IOs, net of estimated uncollectible amounts. IO notes, which are payable on demand and have no maturity date, typically bear interest at rates between 4.00% and 9.95%. Accrued interest receivable on IO notes is included within the "independent operator receivables and current portion of independent operator notes, net of allowance" line item on the condensed consolidated balance sheets and was $3.6 million and $3.0 million as of September 27, 2025 and December 28, 2024, respectively. There wereno IO notes that were past due or on a non-accrual status due to delinquency as of September 27, 2025 or December 28, 2024. Notes and receivables from our IOs participating in our Temporary Commission Adjustment Program ("TCAP"), as detailed below, are not considered to be past due or on a non-accrual status due to delinquency and are excluded from such measures.

IO notes and IO receivables are financial assets which are measured and carried at amortized cost. An allowance for expected credit losses is deducted from (for expected losses) or added to (for expected recoveries) the amortized cost basis of these assets to arrive at the net carrying amount expected to be collected for such assets.

The allowance is estimated using an expected loss framework, which includes information about past events, current conditions, and reasonable and supportable forecasts that impact the collectibility of the reported amounts of the assets over their lifetime. The allowance is evaluated on a collective basis for assets with shared risk characteristics and credit quality indicators. The primary shared risk characteristic and credit quality indicator pools that we use as a basis for collective evaluation include:

•TCAP — Includes the notes and receivables from IOs with stores that have been open for more than 18 months that are participating in our TCAP as of the end of each reporting period. TCAP allows us to provide a greater commission to participating IOs who require assistance in meeting their working capital needs for various reasons, such as new or increased competition or differences in IO skills and experience.

•Non-TCAP—Includes the notes and receivables from IOs with stores that have been open for more than 18 months that are not participating in TCAP as of the end of each reporting period.

•New store— Includes the notes and receivables from IOs with stores that have been open for less than 18 months as of the end of each reporting period, and may or may not be participating in TCAP.

Assets without such shared risk characteristics or credit quality indicators, such as assets with unique circumstances or with delinquencies and historical losses in excess of their TCAP, non-TCAP or new store peers are evaluated on an individual basis.

Amounts due from IOs and the related allowances as of September 27, 2025 and December 28, 2024 consisted of the following (amounts in thousands):

A summary of activity in the IO notes and IO receivables allowance was as follows (amounts in thousands):

The following table presents the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator as of September 27, 2025 (amounts in thousands):

TCAP IO Notes

Notes of IOs participating in our TCAP represented 45.5% and 49.1% of total IO note balances, gross, as of September 27, 2025 and December 28, 2024, respectively.

A total of $2.0 million of IO notes were added into our TCAP during the 13 weeks ended September 27, 2025. The weighted-average contractual interest rate of these IO notes was 4.00% as of September 27, 2025, a reduction from the standard rate of 9.95%. In addition, $0.3 million of IO notes were transferred from TCAP to Non-TCAP during the 13 weeks ended September 27, 2025.

A total of $5.5 million of IO notes were added into our TCAP during the 39 weeks ended September 27, 2025. The weighted-average contractual interest rate of these IO notes was 4.00% as of September 27, 2025, a reduction from the standard rate of 9.95%. In addition, $2.2 million of IO notes were transferred from TCAP to Non-TCAP during the 39 weeks ended September 27, 2025.

Note 3. Long-term Debt

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

2023 Credit Agreement

We are party to a credit agreement, dated February 21, 2023 (the "2023 Credit Agreement"), with Bank of America, N.A., as administrative agent and collateral agent, and a syndicate of lenders that consists of (i) a senior secured term loan facility (the "senior term loan") and (ii) a senior secured revolving credit facility (the "revolving credit facility" and, together with the senior term loan, the "credit facilities") in an aggregate principal amount of $400.0 million. The revolving credit facility includes sub-commitments for $50.0 million letters of credit and $25.0 million of swingline loans.

Borrowings under the 2023 Credit Agreement bear interest at a rate equal to, at our option, either (a) the base rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the federal funds rate then in effect, plus 0.50%, (ii) the prime rate then in effect and (iii) a specified Term SOFR (as defined in the 2023 Credit Agreement) rate plus 1.00%, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 0.75% to 1.75% based on our Total Net Leverage Ratio (as defined in the 2023 Credit Agreement); and (b) an adjusted Term SOFR rate determined on the basis of a one, three or six month interest period, plus 0.10%, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 1.75% to 2.75% based on our Total Net Leverage Ratio. As of September 27, 2025, interest on borrowings under the credit facilities was based on Term SOFR with interest periods ranging from one month to six months. The applicable margin was 2.25% on all borrowings.

The 2023 Credit Agreement permits us to add incremental term loan facilities, increase any existing term loan facility, increase revolving commitments, and/or add incremental replacement revolving credit facility tranches. The aggregate principal amount of such incremental facilities are limited to (a) an amount not in excess of the sum of the greater of $200.0 million and 100% of Consolidated EBITDA (as defined in the 2023 Credit Agreement), subject to certain limitations, plus (b) voluntary prepayments of any term loan facility, voluntary permanent reductions of the commitments for the revolving credit facility and voluntary prepayments of indebtedness secured by liens on the collateral securing the credit facilities, subject to certain exceptions, plus (c) an amount such that (assuming that the full amount of any such incremental revolving increase and/or incremental replacement revolving credit facility was drawn, and after giving effect to any appropriate pro forma adjustment events) we would be in compliance, on a pro forma basis (but excluding the cash proceeds of such incurrence), with a Total Net Leverage Ratio of 3.00 to 1.00.

Our obligations under the 2023 Credit Agreement are unconditionally guaranteed by Grocery Outlet Holding Corp.'s direct and indirect wholly owned restricted subsidiaries, subject to certain exceptions. All obligations under the 2023 Credit Agreement, and the guarantee of such obligations, are secured, subject to permitted liens and other exceptions, by substantially all of the Company’s assets and those of each subsidiary guarantor.

The 2023 Credit Agreement requires us to make scheduled quarterly amortization payments on the senior term loan, which were $1.875 million from June 2023 through March 2025, and are $3.75 million from June 2025 through December 2027, with the remaining balance due on February 21, 2028. We may voluntarily prepay the credit facilities, in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in applicable cases.

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

Senior Term Loan due 2028

The senior term loan under the 2023 Credit Agreement had an interest rate of 6.57% as of September 27, 2025.

Revolving Credit Facility

The aggregate outstanding principal balance under the revolving credit facility was $220.0 million and $190.0 million as of September 27, 2025 and December 28, 2024, respectively. As of September 27, 2025, we had $5.1 million of outstanding letters of credit and $174.9 million of remaining borrowing capacity available under the revolving credit facility. Borrowings under the revolving credit facility had interest rates ranging from 6.51% to 6.59% as of September 27, 2025.

We are required to pay a quarterly commitment fee ranging from 0.15% to 0.30% on the daily unused amount of the commitment under the revolving credit facility based upon our Total Net Leverage Ratio. We are also required to pay fronting fees and other customary fees for letters of credit issued under the revolving credit facility.

Debt Covenants

The 2023 Credit Agreement contains certain customary representations and warranties, subject to limitations and exceptions, and affirmative and customary covenants. The 2023 Credit Agreement contains certain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; incur additional debt or issue certain disqualified stock and preferred stock; incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of our subsidiaries to pay dividends or make other payments to the borrower. The 2023 Credit Agreement also contains financial performance covenants requiring us to satisfy a maximum total net leverage ratio test and a minimum interest coverage ratio test as of the last day of each fiscal quarter. The maximum total net leverage ratio test requires us to be in compliance with a Total Net Leverage Ratio no greater than 3.50 to 1.00 as of the last day of each test period ending prior to the test period ending on or about December 31, 2025, and no greater than 3.25 to 1.00 as of the last day of each test period ending thereafter, subject to certain adjustments set forth in the 2023 Credit Agreement. The minimum interest coverage ratio test requires us to be in compliance with a Consolidated Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of no less than 1.75 to 1.00 as of the last day of each test period.

As of September 27, 2025, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

Schedule of Principal Maturities

Principal maturities of debt as of September 27, 2025 are as follows (amounts in thousands):

Interest Expense, Net

Interest expense, net, consisted of the following (amounts in thousands):

Note 4. Stockholders' Equity

Share Repurchase Program

In November 2021, our Board of Directors (the "Board") approved a share repurchase program (the "2021 Share Repurchase Program"). This program, which was effective November 5, 2021 and without an expiration date, authorized us to repurchase up to $100.0 million of our outstanding common stock utilizing a variety of methods including open-market purchases, accelerated share repurchase programs, privately negotiated transactions, structured repurchase transactions and under a Rule 10b5-1 plan (which would permit shares to be repurchased when we might otherwise be precluded from doing so under securities laws). Any repurchased shares were constructively retired and returned to an unissued status.

In the fourth quarter of fiscal 2024, the Board approved a new share repurchase program (the "2024 Share Repurchase Program"), which replaced the Company’s 2021 Share Repurchase Program, under which $9.4 million previously remained available for repurchase. The 2024 Share Repurchase Program does not have an expiration date and authorizes us to repurchase up to $100.0 million of our outstanding common stock (inclusive of fees and commissions) utilizing a variety of methods including open-market purchases, accelerated equity repurchase programs, privately negotiated transactions, block trades and under a Rule 10b5-1 plan. Any repurchased shares are constructively retired and returned to an unissued status.

The following table presents activity related to the share repurchase programs (amounts in thousands except share and per share amounts). We repurchased these shares in open-market transactions pursuant to a Rule 10b5-1 plan.

(1)Includes commissions for the shares repurchased during the 13 and 39 weeks ended September 28, 2024 and excludes excise tax due of $0.1 million under the Inflation Reduction Act of 2022 for the 13 and 39 weeks ended September 28, 2024.

As of September 27, 2025, we had $100.0 million of repurchase authority remaining under the 2024 Share Repurchase Program.

Note 5. Share-based Awards

For a discussion of our share-based incentive plans, refer to Note 8 to the consolidated financial statements in our 2024 Form 10-K.

Share-based Award Activity

During the 39 weeks ended September 27, 2025, we granted time-based stock options, which have aten-year term and vest in annual installments over athree-year period, subject to continued employment. In addition, during the 39 weeks ended September 27, 2025, we granted a one-time, special new hire stock option award with aten-year term to our President and Chief Executive Officer. Under this award, one-third of such stock options vest and become exercisable three years after the grant date, subject to continued employment. The remaining two-thirds of those stock options vest based upon the achievement of certain price targets of the Company's common stock during thethree-year period following the grant date. Any options that vest based on achievement of stock price targets, regardless of when such options vest, will not be exercisable until the third anniversary of the grant date, subject to the recipient's continued employment at that time.

The fair value of stock option grants is determined on the grant date. For time-based stock options, a Black-Scholes valuation model is used to estimate the fair value of the awards. For market-based stock options, a Monte Carlo simulation model is used to estimate the fair value of the awards. Time-based stock options and market-based stock options granted during the 39 weeks ended September 27, 2025 had weighted-average grant date fair values per share of $5.80 and $4.65, respectively.

We determine the input assumptions for the Black-Scholes stock option valuation model as follows:

•Expected term — The expected term represents the period that a stock option award is expected to be outstanding. We have limited historical exercise data from which to derive expected term input assumptions. Consequently, we calculate the expected term using the SEC simplified method whereby the expected term of a stock option award is equal to the average of the award's contractual term and vesting term.

•Expected volatility — For stock option awards where we have sufficient historical data available from which to derive stock price volatility input assumptions, we calculate the expected stock price volatility for our common stock based on our historical volatility data over a time frame consistent with the expected life of the awards. Certain stock option awards were granted prior to having sufficient historical data available from which to derive stock price volatility input assumptions. Consequently, the stock price volatility for these awards was estimated by using a time-weighted average methodology, placing proportional weight on our volatility over our available trading history and the average volatility of industry peers over the expected term. Industry peers consisted of several public companies in our industry which were of similar size, complexity and stage of development.

•Risk-free interest rate — The risk-free interest rate is based on the U.S. Treasury yield curve on a stock option award's grant date. Maturities that approximate the expected term of the stock option award were used to interpolate the risk-free rate.

•Dividend yield — Dividend yield is assumed to bezero as we have not historically paid and do not expect to pay cash dividends on our common shares issued.

The grant date fair value of time-based stock options awarded during the 39 weeks ended September 27, 2025 was estimated using the Black-Scholes valuation model with the following weighted-average assumptions:

The following table summarizes stock option activity under all equity incentive plans during the 39 weeks ended September 27, 2025:

The following table summarizes time-based restricted stock unit ("RSU") activity under all equity incentive plans during the 39 weeks ended September 27, 2025:

The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp. 2019 Incentive Plan during the 39 weeks ended September 27, 2025:

(1)Represents initial grant of PSUs based on performance target level achievement of 100%.

(2)Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of September 27, 2025.

(3)Up to an additional 2,319,623 PSUs could potentially be included if the actual performance level achievement exceeds the current expected target performance level of achievement (with 200% being the maximum performance level achievement).

Share-based Compensation Expense (Benefit)

We recognize compensation expense (benefit) for stock options, RSUs and PSUs by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent we determine the achievement of the grant's service or performance vesting requirements is probable. We recognize share-based award forfeitures in the period such forfeitures occur.

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

Note 6. Income Taxes

Our income tax expense and effective income tax rate were as follows (amounts in thousands, except percentages):

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective fiscal quarter. Our effective income tax rate for the 13 weeks ended September 27, 2025 was higher than the combined U.S. federal and state statutory income tax rates primarily due to limitations of deductions for certain employees under Internal Revenue Code Section 162(m) (the "Code"), partially offset by the benefit of certain acquisition related deductions. Our effective income tax rate for the 39 weeks ended September 27, 2025 was lower than the combined U.S. federal and state statutory income tax rates primarily due to changes in our level of earnings and the benefit of certain acquisition related deductions, partially offset by limitations of deductions for certain employees under the Code and a reduction in the tax benefit from share-based compensation.

The change in our effective income tax rate for the 13 weeks ended September 27, 2025 compared to the 13 weeks ended September 28, 2024 was primarily due to the benefit of certain acquisition related deductions, partially offset by a reduction in the tax benefit from share-based compensation. The change in our effective income tax rate for the 39 weeks ended September 27, 2025 compared to the 39 weeks ended September 28, 2024 was primarily driven by the change in earnings, partially offset by a reduction in the tax benefit from share-based compensation.

Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision in our condensed consolidated statements of operations and comprehensive income (loss) and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets. To date, we havenot recognized any interest and penalties, nor have we accrued for or made payments for interest and penalties. We hadno uncertain tax positions as of September 27, 2025 and December 28, 2024, respectively.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. The OBBBA did not have a material impact to the effective tax rate for the 13 and 39 weeks ended September 27, 2025, and we do not expect the OBBBA to have a material impact on our effective tax rate for the current fiscal year.

Note 7. Related Party Transactions

Related Party Leases

As of September 27, 2025 and September 28, 2024, we leased 14 store locations andone warehouse location from entities in which Eric Lindberg, Jr., Chairman of the Board and former Chief Executive Officer (who also served as Interim President and Chief Executive Officer for a portion of fiscal 2024 and the 39 weeks ended September 27, 2025), or his family, had a direct or indirect financial interest. As of September 27, 2025, the right-of-use assets and lease liabilities related to these properties were $45.7 million and $50.8 million, respectively. As of December 28, 2024, the right-of-use assets and lease liabilities related to these properties were $38.7 million and $43.8 million, respectively. These related parties received aggregate lease payments from us of $1.9 million and $1.9 million for the 13 weeks ended September 27, 2025 and September 28, 2024, respectively, and $5.7 million and $5.5 million for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively.

Independent Operator Notes and Independent Operator Receivables

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $82.3 million and $71.0 million as of September 27, 2025 and December 28, 2024, respectively. See Note 2 for additional information.

Note 8. Commitments and Contingencies

From time to time, we may be a party to legal proceedings that arise in the ordinary course of business, some of which may be covered by insurance. We establish an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. We monitor those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjust the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, we do not establish an accrual, but will continue to monitor the matter for developments that could make the loss contingency both probable and reasonably estimable. If there is at least a reasonable possibility that a material loss will occur, we will provide disclosure regarding the contingency. Except as disclosed below, management believes that we do not have any pending legal proceedings that, separately or in the aggregate, would have a material adverse effect on our results of operations, financial condition or cash flows.

On January 30, 2025, a federal securities class action lawsuit, captioned Liberato v. Grocery Outlet Holding Corp., et al., Case No. 25-cv-00957, was filed in the U.S. District Court in the Northern District of California against Grocery Outlet Holding Corp. and certain of its former officers purportedly on behalf of purchasers of our common stock between November 7, 2023 and May 7, 2024 (the "Liberato Lawsuit"). On March 28, 2025, a second and related federal securities class action lawsuit, captioned Cavanaugh v. Grocery Outlet Holding Corp., et al., Case No. 25-cv-2886, was filed in the U.S. District Court in the Northern District of California against the same defendants on behalf of purchasers of our common stock between August 8, 2023 and October 29, 2024 (the "Cavanaugh Lawsuit," and together with the Liberato Lawsuit, the "Class Action Lawsuits"). The Class Action Lawsuits allege that the defendants violated federal securities laws by making materially false and misleading statements and/or failing to disclose material adverse facts regarding our transition to new and upgraded internal systems. The Class Action Lawsuits seek remedies under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including an undisclosed amount of monetary damages, interest, fees and other costs. On March 31, 2025, the plaintiff who filed the Cavanaugh Lawsuit filed a motion to consolidate both actions and to be appointed as lead plaintiff. On June 3, 2025, the Class Action Lawsuits were consolidated in the U.S. District Court in the Northern District of California (the "Consolidated Class Action Lawsuit"). The lead plaintiff filed an amended complaint in the Consolidated Class Action Lawsuit on August 19, 2025, and the Company filed its motion to dismiss on October 21, 2025. A hearing on the Company’s motion to dismiss is scheduled for March 19, 2026.

On April 28, 2025, a federal stockholder derivative lawsuit, captioned Conners v. Sheedy, et al., Case No. 25-cv-03697, was filed in the U.S. District Court in the Northern District of California against certain of the Company’s directors andtwo of its former officers purportedly on behalf of the Company. On May 2, 2025, a second federal stockholder derivative lawsuit, captioned Jackson v. Lindberg, et. al., Case No. 25-cv-03843, was filed in the U.S. District Court in the Northern District of California against certain of the Company’s directors and two of its former officers purportedly on behalf of the Company. These stockholder derivative lawsuits are collectively referred to as the “Derivative Lawsuits.” The Derivative Lawsuits allege claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets and for violations of Sections 10(b), 14(a), and 20(a) of the Exchange Act, based on similar allegations to those at issue in the Class Action Lawsuits. The Derivative Lawsuits seek, among other relief, undisclosed damages, restitution, fees and other costs, and the institution of corporate governance reforms. On July 14, 2025, the parties in the Derivative Lawsuits stipulated to consolidate the Derivative Lawsuits in the U.S. District Court in the Northern District of California and stay the consolidated Derivative Lawsuits pending resolution of the Company’s motion to dismiss in the Consolidated Class Action Lawsuit discussed above. On July 29, 2025, the court granted the parties' stipulation, consolidating the Derivatives Lawsuits and staying the consolidated derivative action pending resolution of the Company's motion to dismiss the Consolidated Class Action Lawsuit.

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

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

Note 9. Earnings (Net Loss) Per Share

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

(1)We are required to include in diluted weighted-average shares outstanding contingently issuable shares that would be exercisable or issued, assuming the end of our reporting period was the end of the relevant market-based option award or PSU award contingency period.

(2)For the 39 weeks ended September 27, 2025, there is no difference in the weighted-average shares outstanding used in the above calculations due to the Company's net loss.

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

Note 10. Segment Information

We are a retailer of quality, name-brand consumables and fresh products sold primarily through a network of independently operated stores. We manage our business on a consolidated basis and haveone reportable segment. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. In addition, all of our sales were made to customers located in the U.S. and all property and equipment is located in the U.S.

The chief operating decision maker ("CODM"), who is our President and Chief Executive Officer, assesses performance for the segment and decides how to allocate resources based on net income (loss) and comprehensive income (loss), which is reported on the condensed consolidated statements of operations and comprehensive income (loss). The CODM uses this measure in deciding where to reinvest profits and to monitor budget versus actual results. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.

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

(1)Cost of sales includes merchandise costs, inventory markdowns, inventory losses, transportation costs and distribution and warehousing costs and excludes depreciation and amortization expenses, which were $1.6 million and $1.1 million for the 13 weeks ended September 27, 2025 and September 28, 2024, respectively, and $4.4 million and $3.1 million for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively.

(2)Commission expenses represent commissions paid to IOs.

(3)Other selling expenses include occupancy for all stores, our portion of maintenance costs for IO stores, the cost of opening new IO stores and payroll, benefits, maintenance, supplies and utilities for company-operated stores.

(4)General and administrative expenses include payroll and benefits for corporate and field support, marketing and advertising, insurance and professional services and operator recruiting and training costs.

(5)Restructuring charges include lease termination costs, non-cash impairment and disposal of long-lived assets, employee severance and benefit costs and legal, professional and other costs related to the Restructuring Plan, as defined in Note 11.

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

Note 11. Restructuring Plan

We initiated a restructuring plan during the fourth quarter of fiscal 2024, with continued implementation in fiscal 2025, intended to improve our long-term profitability, cash flow generation and return on invested capital, optimize the footprint of new store growth, and lower our cost base (the "Restructuring Plan"). Under the Restructuring Plan:

•We are optimizing new store growth in the next several years to increase efficiencies for distribution and optimize brand awareness and marketing. Specifically, we have narrowed our focus on our future new store openings to target existing markets and a smaller set of high-priority adjacent new markets to improve new store sales productivity and return on invested capital. As such we determined to terminate a total of 28 leases for unopened stores in suboptimal locations which we had planned to open in the next several years and to discontinue development of certain future store sites where we had incurred initial costs, but leases had not yet been signed.

•We have shifted our planned investments in our distribution infrastructure in fiscal 2025 and fiscal 2026 away from highly capital-intensive projects. We have instead, and plan to continue to, invest in lower cost distribution centers for dry goods to enhance capacity and improve inventory management and overall execution. During the first quarter of fiscal 2025, we cancelled certain warehouse projects in connection with such strategy.

•We reduced headcount by approximately 40 full-time employees in the first quarter of fiscal 2025.

The following table summarizes charges incurred related to the Restructuring Plan for the 13 and 39 weeks ended September 27, 2025 and for the cumulative-to-date period ended September 27, 2025 since the initiation of the Restructuring Plan (in thousands). The actions under the Restructuring Plan were substantially completed in the second quarter of fiscal 2025.

(1)All costs incurred related to the Restructuring Plan during the 13 and 39 weeks ended September 27, 2025 are included in Restructuring charges on the condensed consolidated statements of operations and comprehensive income (loss).

(2)Cumulative-to-date since the initiation of the Restructuring Plan during the fourth quarter of fiscal 2024.

The following table summarizes the restructuring liability activity for the Restructuring Plan during the 39 weeks ended September 27, 2025 (in thousands):