FND 10-K & 10-Q changes, risk factors and insider trading

If we fail to successfully manage the challenges that our planned new store growth poses or encounter unexpectedhigher-than-expected difficulties or higher costs duringcosts, our expansion,expansion our operating resultsplans and future growth opportunitiesprofitability could be adversely affected.suffer.

We have 251270 warehouse-format stores and five small-format standalone design studios located throughout the United States as of December 26,25, 2024.2025. We plan to continue opening new stores for the next several years. This growth strategy and the investment associated with the development of each new store may cause our operating results to fluctuate and be unpredictable or decrease our profits. We cannot ensure that new store locations will be available to us, or that they will be available on terms acceptable to us. If additional retail store locations are unavailable on acceptable terms, we may not be able to carry out a significant part of our growth strategy or our new stores’ profitability may be lower. Certain of our new store openings are expected to be smaller stores and certain stores will be in smaller markets. We have limited experience executing this strategy, and we cannot guarantee that we will be successful in this strategy. Our future operating results and ability to grow will depend on various other factors, including our ability to successfully select new markets and store locations; drive brand awareness, particularly in new markets; attract, train and retain highly qualified managers and staff; manage store opening costs, including rising construction costs and costs due to delays in obtaining necessary permits and completing construction; manage the impact of cannibalization by new stores on nearby existing store sales; and manage and expand our infrastructure to accommodate growth.

In addition, stores opened more recently have had, and many continue to have, higher construction, occupancy, and operating costs than stores opened in the past, and such stores may have lower profitability than stores opened in the past. Furthermore, laws or regulations may make opening new stores more difficult or cause unexpected delays. For example, we have experienced unexpected delays in opening new stores due to delays in obtaining necessary construction and occupancy permits, which have resulted in higher costs than previously anticipated. As we continue to open new stores, the ultimate cost of future store openings could continue to rise significantly due to delays in obtaining necessary construction and occupancy permits, construction-related costs, or other reasons, including construction and other delays and cost overruns, such as shortages of materials; shortages of skilled labor or work stoppages; unforeseen construction, scheduling, engineering, environmental or geological problems; governmental or permitting delays; weather interference, fires or other casualty losses; and unanticipated cost increases.reasons. We cannot guarantee that any project will be completed on time, and delays in store openings have had, and may continue to have, a negative impact on our business and operating results. In addition, consumers in new markets may be less familiar with our brand, and we may need to increase brand awareness in such markets through additional investments in advertising or higher cost locations with more prominent visibility.

As a result of these factors and other factors that may be outside of our control, newly opened stores may not succeed orsucceed, may not reach profitability at all, or may be slower to reach profitability than we expect. Future markets and newly opened stores may not be successful and, even if they are successful, our comparable store sales may not increase at historical rates or may decrease. To the extent that we are not able to overcome these various challenges, our operating results and future growth opportunities could be adversely affected. Furthermore, we may incur costs associated with the closure of underperforming stores, and such store closures may adversely impact our revenues.

Our ability to negotiate acceptable lease terms for these store locations, to re-negotiate acceptable terms on expiring leases, or to negotiate acceptable terms for suitable alternate locations depends on conditions in the real estate market, competition for desirable properties, our relationships with current and prospective landlords, and other factors that are not within our control. We are required to use a significant portion of cash generated by our operations to satisfy our fixed lease obligations, which could adversely affect our ability to obtain future financing to support our growth or other operational investments. We will require substantial cash flows from operations to make our payments under our operating leases, all of which provide for periodic increases in rent. If we are not able to make payments under our operating leases, this could trigger defaults under other leases or, in certain circumstances, under our credit facilities, which could cause the counterparties or lenders under those agreements to accelerate the obligations due thereunder. We also intend to continue to purchase the real property for certain new locations, and such strategy may not be successful. Any or all of these factors and conditions could adversely affect our growth and profitability.

We believe that our brand image and awareness contribute significantly to the success of our business. We rely on our reputation for offering everyday low prices, superior serviceservice, and a broad assortment of high-quality, trend-forward, safe products. We also believe that maintaining and enhancing our brand image and awareness, particularly in new markets where we have limited brand recognition, is important to preserving and expanding our customer base and growing sales. Our ability to successfully integrate newly opened stores into our surrounding communities, to expand into new markets, and to maintain the strength and distinctiveness of our brand in our existing markets will be adversely impacted if we fail to connect with our existing or target customers. Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality product and customer experience. These efforts may require us to make substantial investments, which could adversely affect our cash flows and which may ultimately be unsuccessful. Failure to successfully market, maintain and grow our brand image and awareness in new and existing markets could harm our business, results of operations, and financial condition.

We operate in the hard surface flooring industry, which is highly fragmented and competitive. We face significant competition from big-box home improvement centers, national and regional specialty flooring retailers, independent flooring retailers, and distributors. Among other things, we compete on the basis of breadth of product assortment, everyday low prices, locations of stores, in-store availability of job-lot quantities, the quality of our products, customer serviceservice, and innovation. We face growing competition from omni-channelomnichannel retailers who may have similar product offerings. In addition, while the hard surface flooring category has a relatively low threat of new internet-only entrants due to the nature of the product, the growth opportunities presented by e-commerce could outweigh these challenges and result in increased competition in this portion of our connected customer strategy. Customers are increasingly able to quickly comparison shop and determine real-time product availability and price using digital tools. We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization and integration of rapidly evolving technologies.technologies, including artificial intelligence. Further, as we expand into new and unfamiliar markets, we may experience different competitive conditions than in the past.

Some of our competitors are organizations that are larger, better capitalized, have existed longer, have product offerings that extend beyond hard surface flooring and related accessories, and have a more established market presence with substantially greater financial, marketing, delivery, customer loyalty, personnelpersonnel, and other resources than we have. Competitors may forecast market developments more accurately than we do, offer similar products at a lower cost, have better delivery offerings, or adapt more quickly to new trends and technologies or evolving customer requirements than we do. Further, because the barriers to entry into the hard surface flooring industry are relatively low, manufacturers and suppliers of flooring and related products, including those whose products we currently sell, could enter the market and start directly competing with us. Intense competitive pressures from any of our present or future competitors could cause price declines, decrease demand for our products, and decrease our market share. Also, as we continue to grow and become more well-known, other companies may change their strategies to present new competitive challenges.

RisingOngoing geopolitical tensions could adversely affect our business, financial condition, and results of operations. In particular, in recent years, tensions between mainland China and Taiwan have further escalated, with China accelerating the development of military capabilities in order to “reunite Taiwan by force.”escalated. In case of a military conflict between China and Taiwan, our ability to import products from ChinaAsia could be limited. Similarly, the ongoing warswar between Russia and Ukraine and in the Middle East could impact our ability to import products and result in further increases in energy costs, and attacks on shipping in the Red Sea have impacted and may continue to increase our supply chain costs. The uncertain nature, magnitude, and duration of hostilities stemming from such conflicts, including the potential effects of sanctions and countersanctions, and retaliatory cyberattacks on the world economy and markets, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business and operations.

Our operating results may be affected by the wholesale prices of hard surface flooring products, setting and installation materials, and the related accessories that we sell. These prices may increase based on a number of factors beyond our control, including the price of raw materials used in the manufacture of our products, transportation costs, energy costs, changes in supply and demand, concerns about inflation, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates, government regulation, geopolitical or military conflicts, the impact of natural disasters, including those due to the effects of climate change, and other import costs. A material component of the cost of our products includes transportation costs to move the products from the manufacturer to our stores, and, as we have experienced, these costs could increase due to the factors listed above and in the other riskrisks factors,described in this report, which can have a material impact on inventory and cost of sales. We may not be able to adjust the prices of our products, especially in the short-term, to recover these cost increases, and a continual rise in such costs could adversely affect consumer spending and demand for our products, which could adversely affect our business, financial condition, and operating results.

Our success depends substantially uponon the continued retentionservice of our key personnel, includingand ourwe executiveare officers.undergoing a significant leadership transition.

We believe that our success has dependedhistorically depended, and continueswill continue to dependdepend, to a significant extent onupon the effortsskills, experience, and abilitiesleadership of our key personnel, including our executive officers,officers and theother key management personnel. The loss of the services of one or more of ourthese executiveindividuals, officersor any failure to successfully manage leadership transitions, could have a material adverse effect on usour business, financial condition, and wouldoperating be potentially disruptive to our business until such time as a suitable replacement is hired. For example,results. Trevor Lang, who initially joined the Company in 2011 and served as our President since 2022, has announced his retirementretired effective March 1, 2025. AsIn connection with this transition, we announced in January 2025, we have appointed aBradley Paulsen as our new President, Bradley Paulsen, who will join the CompanyPresident in March 2025. AlthoughSubsequently, Mr. Paulsen assumed the role of Chief Executive Officer in fiscal 2026, succeeding Thomas V. Taylor, who became Executive Chairman of the Board of Directors (the “Board”). This represents the first change in our previousChief executiveExecutive transitionsOfficer haveposition beensince smooth, any future changes to our key personnel, including our executive officers, or our failure to successfully manage the transition or engage in effective succession planning, may be disruptive to our business, including by distracting management from our core business and impacting employee productivity. Further, we may have difficulty identifying, attracting and integrating new executives to replace any losses of our other existing or future executive officers, all of which could adversely affect our business, financial condition, and operating results.2012.

Our success depends in part on our ability to attract, hire, train, and retain qualified managers and staff. Purchasing hard surface flooring is an infrequent event for consumers, and the typical consumer has limited knowledge of the range, characteristicscharacteristics, and suitability of the products available before starting the purchasing process. Therefore, consumers in the hard surface flooring market expect to have sales associates serving them who are knowledgeable about the entire assortment of products offered by the retailer and the process of choosing and installing hard surface flooring.

Each of our stores is managed by a store manager who has the flexibility, with the support of regional managers, to use knowledge of local market dynamics to customize each store in a way that is most likely to increase net sales and profitability. Our store managers are also expected to anticipate, gaugegauge, and quickly respond to changing consumer demands in these markets. Further, it generally takes a substantial amount of time for our store managers to develop the entrepreneurial skills we expect to make our stores successful.

We procure the majority of our products from suppliers located outside of the United States, and as a result, we are subject to risks associated with obtaining products from abroad that have previously and could adversely affect our business, financial condition, and results of operations.

We procure the majority of our products from suppliers located outside of the United States. As a result, we are subject to a number of risks associated with obtaining products from abroad. These risks include the imposition of new or different duties (including antidumping and countervailing duties), tariffs, taxestaxes, and/or other charges on exports or imports, including as a result of errors in the classification of products upon entry or changes in the interpretation or application of rates or regulations relating to the import or export of our products; political unrest, acts of war, terrorism and economic instability resulting in the disruption of trade from foreign countries where our products originate; disruption due to public health crises; currency exchange fluctuations; the imposition of new or more stringent laws and regulations, including those relating to environmental, health and safety matters andmatters, climate change issues, labor conditions, quality and safety standards, trade restrictions, and restrictions on funds transfers; the risk that one or more of our suppliers will not adhere to applicable legal requirements, including fair labor standards, the prohibition on child labor, environmental, product safety or manufacturing safety standards, anti-bribery and anti-kickback laws such as the Foreign Corrupt Practices Act (the “FCPA”), and sourcing laws such as the Lacey Act; or disruptions or delays in production, shipments, delivery or processing through ports of entry, including those resulting from strikes, lockouts, work-stoppages or slowdowns, or other forms of labor unrest. These and other factors beyond our control could adversely affect our business, financial condition, and operating results.

We depend on our suppliers to deliver quality products to us on a timely basis at attractive prices. We source our products from over 240 domestic and international suppliers. Although we purchase from a diverse supplier base, purchases from our largest supplier, which has operations in China,supplier accounted for approximately 11%10% of our net sales in fiscal 2024.2025. No other singular vendor supplied products representing 10% or more of net sales in fiscal 2024.2025. Our ability to receive adequate quantities of our products from suppliers depends on our ability to identify and develop relationships with qualified suppliers who can satisfy our responsible product sourcing criteria, and can be impacted by economic or political instability, sanctions, tariffs or other trade-related actions, the financial instability of suppliers, supplier noncompliance with applicable law, contract disputes, disruptions in our suppliers’ logistics or supply chain networks or information technology systems, raw material or other shortages, and other factors beyond our control. If we are unable to acquire desired merchandise in sufficient quantities on terms acceptable to us, or if we experience a change in business relationship with any of our major suppliers, it could impair our relationship with our customers, impair our ability to attract new customers, reduce our competitiveness, and adversely affect our business, financial condition, and operating results.

The failure of our suppliers to adhere to the quality standards that we set for our products could lead to investigations, litigation, write-offs, recallsrecalls, or boycotts of our products, which could damage our reputation and our brand, increase our costs, and otherwise adversely affect our business.

We do not control the operations of our suppliers. Although we conduct due diligence prior to engaging our suppliers, require our suppliers to certify compliance with applicable laws and regulations, and have in place ongoing quality assurance and compliance programs, we cannot guarantee that our suppliers will comply with applicable laws and regulations or operate in a legal, ethical and responsible manner.manner, or otherwise meet our quality assurance requirements. Violation of applicable laws and regulations by our suppliers, or their failure to operate in a legal, ethical or responsible manner, could expose us to legal risks, cause us to violate laws and regulations and reduce demand for our products if, as a result of such violation or failure, we attract negative publicity. In addition, the failure of our suppliers to adhere to the quality standards that we set for our products has led to and could lead to mitigation costs, government investigations, litigation, write-offs and recalls, which could damage our reputation and our brand, increase our costs, and otherwise adversely affect our business.

The effects of weather conditions, natural disastersdisasters, or other unexpected events, including public health crises, may disrupt our operations and have a negative impact on our business.

The effects of extreme weather conditions and natural disasters occurring more frequently or with more intense effects, or the occurrence of unexpected events including wildfires, tornadoes, hurricanes, earthquakes, floods, tsunamis, and other severe hazards, could adversely affect our business, financial condition, results of operations, and cash flows. Extreme weather, natural disasters, power outagesoutages, or other unexpected events have in the past disrupted and could in the future disrupt our operations by, among other things, impacting the availability and cost of materials needed for manufacturing and causing physical damage and partial or complete closure of supplier manufacturing sites, our retail stores, our store support centercenter, or our distribution centers; causing loss of human capital; causing temporary or long-term disruption in the manufacturing and supply of products and services; and causing disruption in our ability to deliver products and services to customers. These events and disruptions could also adversely affect our customers’ and suppliers’ financial condition or ability to operate, resulting in reduced customer demand, delays in payments, or supply chain disruptions, including adverse effects on our ability to stock our stores and deliver products to our customers. Further, these events and disruptions could increase insurance and other operating costs, including impacting our decisions regarding construction of new stores and distribution centers to select areas less prone to climate change risks and natural disasters, which could result in indirect financial risks passed through the supply chain or other price modifications to our products and services.

Public health crises in the U.S. or countries where we source or sell products could adversely affect our operations and financial performance. Further, any national, statestate, or local government mandates or other orders taken to minimize the spread of a public health crisis could restrict our ability to conduct business as usual, as well as the business activities of our key customers and suppliers, including the potential for labor shortages. In particular, the ultimate extent of the impact of any epidemic, pandemicpandemic, or other public health crisis on our business, financial condition, and results of operations will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the duration and severity of such public health crisis, actions taken to contain or prevent its further spread, and the pace of global economic recovery following containment of the spread.

In connection with the installation or delivery of our products, customers may engage third parties associated with us to enter their homes. In addition, we are providing in-home design services. While we believe we have appropriate indemnification and risk management practices in place, such activities involve liability and reputational risk, which could adversely affect us.

Federal, statestate, or local laws and regulations, or our failure to comply with such laws and regulations, could increase our expenses, restrict our ability to conduct our business and expose us to legal risks.

We are subject to a wide range of general and industry-specific laws and regulations imposed by federal, statestate, and local authorities in the countries in which we operate, including those related to customs, foreign operations (such as the FCPA), truth-in-advertising, consumer protection (such as the California Consumer Privacy Act and Telephone Consumer Protection Act), privacy, product safety (such as the Formaldehyde Standards in Composite Wood Products Act), the environment (such as the Lacey Act), import and export controls (such as the Uyghur Forced Labor Prevention Act), intellectual property infringement, immigration, the use, storage, generation, transportation, treatment, emission, release and disposal of certain hazardous materials and wastes, zoning and occupancy matters, and the operation of retail stores and distribution facilities. In addition, various federal and state laws govern our relationship with, and other matters pertaining to, our associates, including wage and hour laws, laws governing independent contractor classifications, requirements to provide meal and rest periods or other benefits, paid and unpaid leave mandates, requirements regarding working conditions and accommodations to certain associates, citizenship or work authorization and related requirements, insurance and workers’ compensation rulesrules, and anti-discrimination laws.

In recent years, we and other parties in the flooring industry have been or currently are parties to litigation involving claims that allege violations of these laws,laws and other personal injury claims, including claims related to product safety and patent claims. Similarly, we and other retailers have in recent years experienced an increase in the number of wage and hour class action claims that allege misclassification of overtime eligible workers and/or failure to pay overtime-eligible workers for all hours worked. In addition, if more stringent laws or regulations are adopted in the future, we may have difficulty complying with the new requirements imposed by such laws and regulations, and in turn, our business, financial condition, and operating results could be adversely affected.

Our business, like that of most retailers, involves the receipt, use, storagestorage, and transmission of customers’ personal information, consumer preferences and payment card data, as well as other confidential information related to us, our associates, job applicants, our supplierssuppliers, and other third parties, some of which is entrusted to third-party service providers and vendors that provide us with technology, systemssystems, and services that we use in connection with the receipt, use, storagestorage, and transmission of such information. Techniques used for cyberattacks designed to gain unauthorized access to these types of sensitive information by breaching or sabotaging critical systems of organizations, including those that use artificial intelligence, are constantly evolving and generally are difficult to recognize and react to effectively. We or our third-party service providers may be unable to anticipate these techniques or to implement adequate preventive or reactive security measures. High profile electronic security breaches leading to unauthorized release of sensitive information have occurred in recent years with increasing frequency at a number of major U.S. companies, including several large retailers, notwithstanding widespread recognition of the cyberattack threat and improved data protection methods.

Despite our security measures and those of third parties with whom we do business, our respective systems and facilities may be vulnerable to criminal cyberattacks or security incidents due to malfeasance, intentional or inadvertent security breaches by associates, or other vulnerabilities such as defects in design or manufacture. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud, trickerytrickery, or other forms of deception or coercion targeted at our customers, associates, supplierssuppliers, and service providers. Any such,such incidents could compromise our networks, and the information stored there could be accessed, misused, publicly disclosed, lostlost, or stolen.

We rely on our information systems to process transactions, summarize our results of operations and manage our business. In particular, our website is an important part of our integrated connected customer strategy, and customers use our website as an information source on the range of products available to them and as a way to order our products. In addition, we rely on our enterprise resource planning, telecommunications, inventory tracking, billing and other information systems to track transactions, billing, payments, inventoryinventory, and a variety of day-to-day business decisions. Therefore, the reliability and capacity of our information systems is critical to our operations and the implementation of our growth initiatives. However, our information systems are subject to damage or interruption from upgrades in technology interfaces, power outages, computer and telecommunications failures, computer viruses, cyberattacks or other security breaches, and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and misconduct or usage errors by our associates. Furthermore, not all of our systems are fully redundant, and our disaster recovery planning may not be sufficient, despite our testing, to meet our business needs in the event of a material disruption. If our information systems are damaged or cease to function properly, we may have to make a significant investment to fix or replace them, and we may suffer losses of critical data and/or interruptions or delays in our operations.

Some of our information technology systems are currently outsourced to, or using cloud-based services provided by, third parties. If these third parties are unable, unwilling, or otherwise experience interruptions in their ability to provide services to us or to provide us access to the systems on which we rely, or if these third parties are unable to secure our data from cyberattacks and other cyber incidents, our operations may be disrupted, and we may incur significant costs, harm to our reputation or relationships with our customers, associates, and suppliers, or otherwise experience a material adverse effect on our business, financial condition or operating results. In addition, cybersecurity threat actors are increasingly sophisticated and are targeting employees, contractors, service providersproviders, and third parties through various techniques that involve social engineering and/or misrepresentation (such as phishing attempts and similar techniques). The increased use of associate-owned devices for communications as well as work-from-home arrangements may exacerbate cybersecurity risk, including presenting additional operational risks to our information technology systems and increased risks of cyberattacks.

The cybersecurity threat landscape is vast, and techniques used to obtain unauthorized access, disable, degrade service or sabotage information technology systems evolve frequently.frequently, including as a result of artificial intelligence. Cybersecurity threat actors may attempt to intrude, damage, or disrupt our information technology systems through a number of techniques, including via computer viruses or worms, malware (including ransomware), phishing attacks, spyware, and denial of service attacks, among others. Data breaches and other cybersecurity events have become increasingly commonplace, including as a result of emerging technologies, such as artificial intelligence and machine learning. As a result, these techniques may be difficult to detect and are often not recognized until launched against a target. Accordingly, we may be unable to anticipate these techniques or implement adequate countermeasures. To keep pace with changing technology and the increasing risk posed by cybersecurity threat actors, we must continuously implement new information technology systems as well as enhance our existing systems, including an upgrade to our existing core financial and merchandising systems that began in fiscal 2024. Moreover, the successful execution of some of our growth strategies, in particular the expansion of our connected customer and online capabilities, is dependent on the design and implementation of new systems and technologies and/or the enhancement of existing systems. If we encounter implementation or usage problems with these new systems or other related systems and infrastructure, or if the systems do not operate as intended, do not give rise to anticipated benefits, or fail to integrate properly with our other systems or software platforms, then the costs of such new information technology systems may be more than we anticipate. Any material disruption in our information systems, or delays or difficulties in implementing or integrating new systems or enhancing or expanding current systems, could result in our increased vulnerability to cybersecurity events, which could have an adverse effect on our business and our operating results and could lead to reduced net sales and reputational damage.

We accept payments using a variety of methods, including credit cards, debit cards, gift cards, cash, and physical bank checks. These payment options subject us to many compliance requirements, including, but not limited to, compliance with the Payment Card Industry Data Security Standards, which represents a common set of industry tools and measurements to help ensure the safe handling of sensitive information,Standards and compliance with contracts with our third-party processors. These payment options also subject us to potential fraud by criminal elements seeking to discover and take advantage of security vulnerabilities that may exist in some of these payment systems.

Our intellectual property rights are valuable, and anyAny failure to protect themour intellectual property rights could reduce the value of our products and brand and harm our business.business, and we may be involved in disputes relating to our intellectual property and the intellectual property of third parties.

WeIn areaddition, we have been and may continuein tothe future become parties to disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in these disputes. Third parties have raised and may raise future claims against us alleging infringement or violation of the intellectual property of such third-party. Some third-party intellectual property rights may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid violating any such intellectual property rights. Any such intellectual property claim, regardless of whether such claim has merit, could subject us to material and costly disputes or litigation and impose a significant strain on our financial resources and management personnel.

We may, from time to time,may consider or engage in strategic transactions. Any such strategic transactions would involve risks, which could have an adverse impact on our financial condition and results of operation, and we may not realize the anticipated benefits of these transactions.

FromWe time to time, wemay consider strategic transactions, including mergers, acquisitions, investments, joint ventures, alliances, and other growth and market expansion strategies, with the expectation that these transactions will result in increases in sales, cost savings, synergiessynergies, and/or various other benefits. Assessing the viability and realizing the benefits of these transactions is subject to significant uncertainty. Additionally, in connection with evaluating potential strategic transactions and assets, we may incur significant expenses for the evaluation, due diligence investigation, and negotiation of any potential transaction. We have limited experience acquiring companies, and any future acquisitions may not be successful. If we complete an acquisition, we would need to determine the appropriate level of integration of the target company’s products, services, associates, and systems into our business operations, and then successfully manage that integration into our corporate structure. The integration of businesses may create increased complexity in our financial systems, internal controls, technology and cybersecurity systems, and operations, and may make them more difficult to manage. Integration can be a complex and time-consuming process, and if any such integration is not fully successful or is delayed for a material period of time, we may not achieve the anticipated synergies or benefits of the acquisition. Furthermore, even if a target company is successfully integrated, an acquisition may fail to further our business strategy as anticipated, expose us to increased competition or challenges with respect to our products or services, and expose us to additional liabilities. Any impairment of goodwill or other intangible assets acquired in a strategic transaction may reduce our earnings.

Founded in 2000, Floor & Decor is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces with 251270 warehouse-format stores across 3839 states as of December 26,25, 2024.2025. We believe our unique approach to selling hard surface flooring and our consistent and disciplined culture of innovation and reinvestment create a differentiated business model in the hard surface flooring category. We believe that we offer the broadest in-stock assortment of laminate and vinyl, tile, wood, and natural stone flooring and installation materials and decorative accessories, as well as adjacent categories, at everyday low prices. This positions us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including Pros and homeowners, which are comprised of DIY and BIY customers. Our warehouse-format stores, which average approximately 77,00076,000 square feet, carry on average approximately 4,4004,200 SKUs, approximately 1.0 million square feet of flooring products, and $2.7 million of inventory at cost as of December 26,25, 2024.2025. We believe that our inspiring design centers and creative and informative visual merchandising also greatly enhance our customers’ renovation experience. In addition to our stores, our website, FloorandDecor.com,website showcases our products.

During fiscal 2024,2025, we opened 3020 new warehouse-format stores,stores and closed one warehouse-format store, ending the year with 251270 warehouse-format stores and five design studios. Additionally, we opened a new distribution center near Seattle, ending the year with five distribution centers.

The housing market continued to be impacted by a number of macroeconomic factors during fiscal 2024,2025, including elevated interest rates and higher home prices putting pressure on housing affordability.affordability, Thiswhich resulted in a decline inlow existing home sales, inflation, and a continued shift in consumer spending toward services.sales. We believe these factors directly contributed to a slowdown in demand for flooring resulting in a year-over-year declinesdecline in our comparable store sales and net income.sales. These factors, coupled with rising construction costs, have made it difficult to achieve new store initial sales and profitability targets compared with those opened in prior years. Consequently, our classmore of 2022, 2023, and 2024recent new storesstore classes are experiencing lower first year sales and initial returns compared to new stores opened in years prior years.to 2022. To optimize our return on investment, we focusedfocus on strategically reducing the construction costs and operating expenses. Despite these macroeconomic challenges, we believe that our continued focus on providing exceptional value to customers through our broad assortment and everyday low price strategy, while remaining disciplined to maintain profitability through cost control and strategic growth investments, have been instrumental in helping us to navigate this challenging housing market. However, the potential significance and duration of these macroeconomic difficulties is uncertain, and further pressures on the housing market could have an adverse impact on our business.

Our comparable store sales growth is a significant driver of our net sales, profitability, cash flow, and overall business results. We believe that comparable store sales growth is generated by continued focus on providing a dynamic and expanding product assortment in addition to other merchandising initiatives, quality of customer service, enhancing sales and marketing strategies, improving visual merchandising and overall aesthetic appeal of our stores and our website, effectively serving our Pro customers, continued investment in store staff and infrastructure, growing our proprietary credit offering, and further integrating connected customer strategies and other key information technology enhancements.

Comparable store sales refer to period-over-period comparisons of our net sales at the time of sale among the comparable store base. A store is included in the comparable store sales calculation on the first day of the thirteenth full fiscal month following a store’s opening, which is when we believe comparability has been achieved. Changes in our comparable store sales between two periods are based on net sales at the time of sale for stores that were in operation during both of the two periods. Any change in the square footage of an existing comparable store, including for remodels and relocations within the same primary trade area of the existing store being relocated, does not eliminate that store from inclusion in the calculation of comparable store sales. Stores that are closed for a full fiscal month or longer are excluded from the comparable store sales calculation for each full fiscal month that they are closed. Since our e-commerce, regional account manager, and design studio sales are fulfilled by individual stores, they are included in comparable store sales only to the extent the fulfilling store meets the above mentioned store criteria. Sales through our Spartan subsidiary do not involve our stores and are therefore excluded from the comparable store sales calculation. When a fiscal year includes a 53rd week, we exclude the 53rd week of sales from our calculation.

The number and timing of new store openings, and the costs and fixed lease obligations associated with those openings, have had, and are expected to continue to have, a significant impact on our results of operations. The number of new stores reflects the number of stores opened during a particular reporting period. Before we open new stores, we incur pre-openingoperating expenses,expenditures, which are defined belowas underpre-opening expenses. The majority of pre-opening expenses are incurred during the headingthree “Othermonths Keybefore Financiala Definitions.”store opens. A new store’s operating performance is excluded from the comparable store base until the first day of the thirteenth full fiscal month following a store’s opening. Net sales at new stores are generally lower than net sales at our stores that have been open for more than one year. Our ability to open new, profitable stores is important to our long-term sales and profit growth goals.

Our gross profit is variable in nature and generally follows changes in net sales. Our gross profit and gross margin can also be impacted by changes in our prices, our merchandising assortment, customer preferences, shrink, damage, selling of discontinued products, the cost to transport our products from the manufacturer to our stores, and our distribution center costs. With respect to our merchandising assortment, certain of our products generate higher margins than other products within the same product categories or among different product categories. We have experienced inflation increases in certain of our product categories but historically have been able to source from a different manufacturer or pass increases on to our consumers. Our gross profit and gross margin, which reflect our net sales and our cost of sales and any changes to the components thereof, allow us to evaluate our profitability and overall business results.

Gross profit is calculated as net sales less cost of sales. Gross profit as a percentage of net sales is referred to as gross margin. Cost of sales consists of merchandise costs, as well as freight costs to transport inventory to our distribution centers and stores, and duty and other costs that are incurred to distribute the merchandise to our stores. Cost of sales also includes costs for shrink, damage, warehousingwarehousing, costs, sourcingsourcing, and compliance costs.compliance. We receive cash consideration from certain vendors related to vendor allowances and volume rebates, which is recorded as a reduction of costs of sales as the inventory is sold or as a reduction of the carrying value of inventory while the inventory is still on hand. Costs associated with arranging and paying for freight to deliver products to customers is included in cost of sales. The components of our cost of sales may not be comparable to the components of cost of sales, or similar measures, of other retailers. As a result, data in this filing regarding our gross profit and gross margin may not be comparable to similar data made available by other retailers.

Operating income, EBITDA, and Adjusted EBITDA are key metrics used by management and our Board to assess our financial performance and enterprise value. We believe that operating income is a useful measure as it is an indicator of the productivity of our business and our ability to manage expenses. We also believe that EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain expenses that are not indicative of our core operating performance and facilitate comparisons on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine covenant compliance with respect to our Credit Facilities, to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. Operating income, EBITDAEBITDA, and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties as performance measures to evaluate companies in our industry.

Selling, General and Administrative Expenses

GeneralSelling, general and administrative (“SG&A”) expenses consist primarily of costs incurred outside of our stores and include administrative personnel wages in our store support center and regional functions, bonuses and benefits, supplies, depreciation and amortization, and store support center expenses.wages, Insurance,incentive legalcompensation expenses,and benefits, store and store support center occupancy costs, depreciation and amortization, advertising costs, credit card fees, pre-opening costs, information technology costs, consulting, and other miscellaneous operating costs are also included.costs. We expect that our general and administrativeSG&A expenses will increase in future periods with future growth. General and administrativeSG&A expenses include fixedvariable as well as variablefixed components, which may not directly correlate with net sales. The components of our general and administrativeSG&A expenses may not be comparable to the components of similar measures of other retailers.

Results of operations for priorany periodsperiod should not be considered indicative of future results. For information about the potential impacts that risks, such as declines in economic conditions that affect the residential housing market and consumer spending for hard surface flooring, interest rates, inflation, global supply chain disruptions, regulatory and political conditions, tariffs and trade policy, and geopolitical instability, among others, may have on our results of operations and overall financial performance for future periods, see “Overview” further above and Item 1A, “Risk Factors” in Part I of this Annual Report.

(1) Refer to “Reconciliation of Non-GAAP Financial Measures” further below for a reconciliation of Adjusted EBITDA to net income.

Net sales during fiscal 20242025 increased $41.9$228.3 million, or 0.9%,5.1%, compared to fiscal 20232024 primarily due to sales from the 3020 new warehouse-format stores that we opened during the year and growth in Spartan,year, partially offset by a decrease in comparable store sales of 7.1%.1.8%. The comparable store sales decline during the period of 7.1%,1.8%, or $299.1$77.4 million, was due to a 4.7%3.5% decrease in comparable transactionstransactions, andpartially offset by a 2.5%1.8% decreaseincrease in comparable average ticket. We believe the decrease in comparable transactions was largely driven by the continued impact of lowerlow existing home sales. The decreaseincrease in comparable average ticket was primarily due to smallerchanges averagein projectsales sizes.mix. Non-comparable sales ofincreased $341.0$305.7 million duringcompared theto samefiscal period were2024 primarily driven by new stores and, to a lesser extent, revenue from Spartan.stores.

We estimate that retail sales during both fiscal 2025 and fiscal 2024 were approximately 51%50% from homeowners and 49%50% from Pros compared to approximately 55% from homeowners and 45% from Pros during fiscal 2023.Pros.

Gross profit during fiscal 20242025 increased $69.9$115.7 million, or 3.8%,6.0%, compared to fiscal 2023.2024. The increase in gross profit was primarily driven by the 0.9%5.1% increase in net sales and an increase in gross margin to 43.3%,43.6%, up approximately 12030 basis points from 42.1%43.3% in fiscal 2023.2024. The increase in gross margin was primarily driven by favorable product margin due to a decrease in supply chain costs, partially offset by an increase in distribution center costs.

Selling, General and Administrative Expenses

Net interest expense during fiscal 20242025 decreasedincreased $7.1$0.6 million, or 72.0%,22.9%, compared to fiscal 20232024 primarily due to a decrease in capitalized interest, partially offset by lower average amountsinterest rates and lower average outstanding under our ABL Facility and higher interest income as a result of higher cash balances.borrowings.

Income tax expense was $58.0 million in fiscal 2025 compared to $47.5 million in fiscal 2024 compared to $65.6 million in fiscal 2023.2024. The effective tax rate was 21.8% for fiscal 2025 compared to 18.8% for fiscal 2024 compared to 21.0% for fiscal 2023.2024. The effective tax rate decreaseincrease was primarily due to a decrease in state income taxes and an increase in excess tax benefits related to stock-based compensation awards that were partially offset by limitations on deductions for compensation to certain employees under Internal Revenue Code Section 162(m).awards.

(a1) Excludes amortization of deferred financing costs, which is included as part of interest expense, net.

(b2)Represents Non-cashnon-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and forfeitures.

(c3)Represents Netnet proceeds received related to the derivative litigation settlement in fiscal 2024.

(d4) Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both fiscal 20242025 and fiscal 20232024 relate to changes in the fair value of contingent earn-out liabilities.

Total capital expenditures in fiscal 20252026 are planned to be between approximately $330$250 million to $400$300 million and are expected to be funded primarily by cash generated from operations and borrowings under the ABL Facility.operations. Our capital needs may change in the future due to changes in our business, new opportunities that we choose to pursue, or other factors. We currently expect the following for capital expenditures in fiscal 20252026:

•invest approximately $200$160 million to $245$190 million to open 2520 warehouse-format storesstores, relocate stores, and begin construction on stores opening after fiscal 20252026;

•invest approximately $50$60 million to $60$70 million in existing stores and new and existing distribution centers; and

Cash provided by operating activities consists primarily of (i) net income adjusted for non-cash items, including depreciation and amortization, stock-based compensation, and deferred income taxes, and changes in the fair values of contingent earn-out liabilitiestaxes and (ii) changes in working capital.

Net cash provided by operating activities was $381.8 million for fiscal 2025 and $603.2 million for fiscal 2024 and $803.6 million for fiscal 2023.2024. The decrease in net cash provided by operating activities was primarily driven by the change in inventory and a decline in cash earnings after adjusting net income for non-cash items, which were partially offset by an increasechanges in trade accounts payable, accrued expenses and other current liabilities, and income taxes.payable.

Net cash used in investing activities was $317.8 million for fiscal 2025 and $446.8 million for fiscal 2024 and $565.0 million for fiscal 2023.2024. The decrease in net cash used in investing activities was due to a decrease in capital expenditures and cash paid for an acquisition in fiscal 2023. The year-over-year decline in capital expenditures wasprimarily driven by the timing of construction payable settlements for recently completed stores and a decrease in new stores under construction.

Financing activities consist primarily of borrowings and related repayments under our creditCredit agreements,Facilities, tax payments related to the vesting or exercise of stock-based compensation awards, proceeds from the exercise of stock options and our employee sharestock purchase program, and payments of contingent earn-out consideration.

As of December 26,25, 2024,2025, total Term Loan Facility debt outstanding was $200.3$198.2 million, and no amounts were outstanding under our ABL Facility. For additional information regarding our Term Loan Facility and ABL Facility, including applicable covenants and other details, please refer to Note 10, “Debt” of the notes to the consolidated financial statements included in this Annual Report.

Purchase Obligations. Purchase obligations include agreements to purchase goods or services that are legally binding and non-cancellable.non-cancelable. Our purchase obligations primarily relate to certain software and license commitments, advertising programs, and enterprise resource planning system costs. The reported amounts exclude liabilities included in our Consolidated Balance Sheet. As of December 26,25, 2024,2025, purchase obligations totaled $82.2$63.4 million, of which $44.5$36.4 million is due within 12 months. We issue inventory purchase orders in the normal course of business, which are typically cancellable by their terms and are excluded from the amounts above.

Judgments and uncertainties involved in the estimate. We provide provisions for losses related to shrinkshrink, net realizable value, aged inventory, special order merchandise, and other amounts that are otherwise not expected to be fully recoverable. These provisions are calculated based on historical shrink, selling prices, margins, and current business trends. The estimates have calculations that require management to make assumptions based on the current rate of sales, age, salability and profitability of inventory, historical percentages that can be affected by changes in our merchandising mix, customer preferences, and changes in actual shrink trends.

Founded in 2000, Floor & Decor is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces with 276281 warehouse-format stores and five small-format standalone design studios across 39 states as of MarchJune 26,25, 2026. We believe our unique approach to selling hard surface flooring and our consistent and disciplined culture of innovation and reinvestment create a differentiated business model in the hard surface flooring category. We believe that we offer the broadest in-stock assortment of laminate and vinyl, tile, wood, and natural stone flooring and installation materials and decorative accessories, as well as adjacent categories, at everyday low prices. This positions us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including Pros and homeowners, which are comprised of DIY and BIY customers.

During the thirteentwenty-six weeks ended MarchJune 26,25, 2026, we opened six11 new warehouse-format stores, ending the quarter with 276281 warehouse-format stores and five design studios.

We operate on a 52- or 53-week fiscal year ending the Thursday on or preceding December 31. The following discussion contains references to the thirteen and twenty-six weeks ended MarchJune 26,25, 2026 and MarchJune 27,26, 2025, respectively.

Net sales during the thirteen weeks ended MarchJune 26,25, 2026 decreasedincreased $8.5$36.1 million, or 0.7%,3.0%, compared to the corresponding prior year period primarily due to a decrease in comparable store sales of 3.7%, partially offset by sales from the 2224 new warehouse-format stores that we opened since MarchJune 27,26, 2025.2025, partially offset by a decrease in comparable store sales of 2.1%. The comparable store sales decline during the period of 3.7%,2.1%, or $40.8$24.4 million, was due to a 5.5%2.9% decrease in comparable transactions, partially offset by a 1.9%0.8% increase in comparable average ticket. We believe the decrease in comparable transactions was largely driven by the continued impact of low existing home sales and low consumer sentiment, as well as adverse weather conditions. The increase in comparable average ticket was primarily due to strategic price increases. Non-comparable sales increased $32.3$60.5 million from the corresponding prior year period primarily driven by new stores.

We estimate that retail sales during the thirteen and twenty-six weeks ended MarchJune 26,25, 2026 were approximately 45% from homeowners and 55% from Pros compared to approximately 50% from homeowners and 50% from Pros during the thirteen and twenty-six weeks ended MarchJune 27,26, 2025.

Gross profit during the thirteen weeks ended MarchJune 26,25, 2026 decreasedincreased $0.7$70.4 million, or 0.1%,13.2%, compared to the corresponding prior year period. The decrease in gross profit was primarily driven by the 0.7% decrease in net sales, partially offset by an increase in grossGross margin increased to 44.0%,48.2%, up approximately 20430 basis points from 43.8%43.9% in the corresponding prior year period. The increase in gross profit and gross margin was primarily driven by strategica pricing$56.2 initiatives,million, partiallyor offset450 bybasis anpoints, one-time benefit from the recognition of IEEPA tariff refunds. The remaining increase in supplygross chainprofit costs.was primarily attributable to the 3.0% increase in net sales.

SG&A expenses during the thirteen weeks ended MarchJune 26,25, 2026 increased $11.1$28.3 million, or 2.5%,6.3%, compared to the corresponding prior year period. The increase in SG&A expenses was primarily driven by the 2224 new stores that we opened since MarchJune 27,26, 2025, which increased compensation and occupancy costs. The increase also reflects higher incentive compensation related to the recognition of IEEPA tariff refunds. SG&A expenses for non-comparable stores increased $21.4$26.7 million and for comparable stores decreased $9.0$13.7 million. As a percentage of net sales, SG&A expenses increased by approximately 120 basis points to 39.5%38.3% from 38.3%37.1% in the corresponding prior year period. This increase was primarily attributable to incentive compensation related to the recognition of IEEPA tariff refunds, as well as the addition of new stores and deleverage from a decrease in comparable store sales.

Interest (Income) Expense, Net

Net interest expenseincome during the thirteen weeks ended MarchJune 26,25, 2026 decreasedwas $0.4$2.3 million, or 26.8%,million compared to net interest expense of $1.1 million during the corresponding prior year periodperiod. The change was primarily dueattributable to higherstatutory interest on refunded IEEPA tariffs and increased interest income asearned aon result of higherlarger cash balances.

Income tax expense was $11.6$29.1 million during the thirteen weeks ended MarchJune 26,25, 2026 compared to $13.8$17.6 million during the thirteen weeks ended MarchJune 27,26, 2025. The effective tax rate was 22.5%23.3% for the thirteen weeks ended MarchJune 26,25, 2026 compared to 22.0%21.8% in the corresponding prior year period. The effective tax rate increase during the thirteen weeks ended MarchJune 26,25, 2026 was primarily due to a decrease in excessfederal tax benefits related to stock-based compensation awards.credits.

EBITDA and Adjusted EBITDA are key metrics used by management and our Board of Directors to assess our financial performance and enterprise value. We believe that EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain items that are not indicative of our core operating performance and facilitate comparisons on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine covenant compliance with respect to our 2026 ABL Facility and 2026 Term Loan Facility (together, the “2026 Credit Facilities”), to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties as performance measures to evaluate companies in our industry.

EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by or presented in accordance with GAAP. We define EBITDA as net income before interest, loss on extinguishment of debt, taxes, and depreciation and amortization. We define Adjusted EBITDA as net income before interest, loss on extinguishment of debt, taxes, and depreciation and amortization adjusted to eliminate the impact of non-cash stock-based compensation expense and certain items that we do not consider indicative of our core operating performance. See below for a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

EBITDA and Adjusted EBITDA are non-GAAP measures of our financial performance and should not be considered as alternatives to net income as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of liquidity or free cash flow for management’s discretionary use. In addition, these non-GAAP measures exclude certain non-recurring and other charges. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses or realize benefits that are the same as or similar to some of the items eliminated in the adjustments made to determinecalculating EBITDA and Adjusted EBITDA, such as stock-based compensation expense, fair value adjustments related to contingent earn-out liabilities, tariff refunds, and other adjustments. Definitions and calculations of EBITDA and Adjusted EBITDA differ among companies in the retail industry, and therefore EBITDA and Adjusted EBITDA disclosed by us may not be comparable to the metrics disclosed by other companies.

(1)Excludes amortization of deferred financing costs, which is included as part of interest (income) expense, net.

(35)Other adjustments include amounts management does not consider indicative of our core operating performance. The amount for the thirteentwenty-six weeks ended MarchJune 27,26, 2025 relates to the change in the fair value of the contingent earn-out liability.

Liquidity is provided primarily by cash flows from operations and our $800.0 million 2026 ABL Facility. Unrestricted liquidity as of MarchJune 26,25, 2026 was $1,007.2$942.4 million, consisting of $293.6$320.6 million in cash and cash equivalents and $713.6$621.8 million immediately available for borrowing under the 2026 ABL Facility without violating any covenants thereunder. Our liquidity is generally not seasonal.

Our primary cash needs are for merchandise inventories, payroll, store rent, and other operating expenses and capital expenditures associated with opening new stores and remodeling existing stores as well as information technology, e-commerce, store support center, and distribution center infrastructure. We also use cash for the payment of taxes and interest and, as applicable, share repurchases and acquisitions. We expect that cash generated from operations together with cash on hand, the availability of borrowings under our 2026 Credit Facilities, and if necessary, additional funding through other forms of external financing, will be sufficient to meet liquidity requirements, anticipated capital expenditures, discretionary share repurchases, and payments due under our 2026 Credit Facilities for the next twelve months and the foreseeable future.

On April 23, 2026, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $400$400.0 million of the Company’s common stock. Repurchases will be made at the Company’s discretion and will depend on a variety of factors, including business, economic, and market conditions. The share repurchase program has no expiration date and does not obligate the Company to repurchase any shares under the program. As of June 25, 2026, the Company had remaining authorization under the share repurchase program of $334.3 million. For additional information related to the Company’s share repurchase program, refer to Note 6, “Stockholders’ Equity” to our condensed consolidated financial statements included in this Quarterly Report.

Net cash provided by operating activities during the thirteentwenty-six weeks ended MarchJune 26,25, 2026 and MarchJune 27,26, 2025 was $109.2$278.4 million and $71.2$155.3 million, respectively. The increase in net cash provided by operating activities was primarily driven by changes in inventory and trade accounts payable.payable, partially offset by an increase in receivables, net.

Net cash used in investing activities during the thirteentwenty-six weeks ended MarchJune 26,25, 2026 and MarchJune 27,26, 2025 was $63.4$136.7 million and $66.7$160.8 million, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures primarily driven by an increasechanges in the type of new storesstore being constructed at second-use sitesconstruction and store size optimization.

Financing activities consist primarily of borrowings and related repayments under our Creditterm Facilities,loan and ABL facilities, payments for repurchase of common stock, tax payments related to the vesting or exercise of stock-based compensation awards, proceeds from the exercise of stock options and our employee stock purchase program, and payments of contingent earn-out consideration.

Net cash used in financing activities during the thirteentwenty-six weeks ended MarchJune 26,25, 2026 and MarchJune 27,26, 2025 was $1.5$70.5 million and $5.2 million, respectively. The decreaseincrease in net cash used in financing activities was primarily driven by arepurchases decreaseof incommon tax payments for stock-based compensation awards.stock.

As of MarchJune 26,25, 2026, total 2026 Term Loan Facility debt outstanding was $197.7$200.0 million, and no amounts were outstanding under our 2026 ABL Facility. For additional information regarding our 2026 Term Loan Facility and 2026 ABL Facility, including applicable covenants and other details, please refer to Note 3, “Debt” to our condensed consolidated financial statements included in this Quarterly Report.

Our credit ratings are periodically reviewed by rating agencies. As of MarchJune 26,25, 2026, our Standard & Poor’s issuer credit rating of BB with a stable outlook and Moody’s issuer credit rating of Ba3 with a stable outlook remain unchanged from December 25, 2025. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including an increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, result in a credit rating downgrade or change in outlook, or otherwise increase our cost of borrowing.

The current geopolitical environment, particularly related to existing and potential changes in global trade and tariffs, has created uncertainty surrounding the future state of the global economy and related impacts to our supply chain. In 2025, the U.S. government imposed significant additional tariffs on products from most countries where we source products. InOn earlyFebruary 20, 2026, the U.S. Supreme Court invalidated tariffs previously implementedimposed under the authority of IEEPA. On March 4, 2026, the U.S. Court of International EmergencyTrade Economicordered PowersCBP Act.to Thebegin rulingrefunding did not specifically require theseall tariffs toimposed beunder refunded,IEEPA. resultingOn April 20, 2026, CBP launched a formal process for submitting IEEPA refund claims, through which the Company filed its refund claims. As of June 25, 2026, the Company had received approximately $7 million in uncertaintytariff regardingrefund potentialpayments. Subsequent to June 25, 2026, the Company has received substantially all expected IEEPA tariff refunds. AsFor aadditional resultinformation ofregarding thethese ruling,tariff therefunds, U.S.please governmentrefer hasto implementedNote 5, “Commitments and continues workingContingencies” to implementour newcondensed tariffsconsolidated usingfinancial otherstatements authorities to maintain continuityincluded in itsthis tariffQuarterly policy.Report.

WhileAs wea continueresult of the Supreme Court IEEPA ruling, the U.S. government has implemented and continues working to takeimplement stepsnew tariffs using other authorities to mitigatemaintain continuity in its tariff policy. While the overall effectelimination of increased tariffs, theseIEEPA tariffs havehas increasedhad a favorable impact on gross margin, the imposition of additional tariffs may offset such benefits and willcould continueadversely to increaseaffect our inventoryfinancial costs and associated cost of sales, which have resulted in and in the future may result in increased retail prices and may adversely impact sales.results. Furthermore, the impact of increased tariffs on the economy, as well as the broader geopolitical environment, including recent tensions in the Middle East, have and in the future may negatively impact consumer demand for our products, which may also have an adverse impact on sales.