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

CertainThe disclosures in this section reflect our beliefs and opinions as to factors that may have a material adverse effect on our business, financial condition and results of operations. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties we face. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. Any of the following risks could materially and adversely affect our business, results of operations, cash flows, financial condition, or prospects and cause the value of our common stock to decline. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past.

The retail food business is sensitive to changes in general economic conditions. Inflation,Our operating results have been, and will continue to be, impacted by a number of macroeconomic factors, including inflation, recessionary economic cycles, increases in interest rates, higher prices for commodities, raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other macroeconomic factors that affect consumer spending and confidence or buying habitshabits. These factors, which are largely outside of our control, may materially adversely affect the demand for and prices of products we sell in our stores. As a result, consumers have been and may continue to be more cautious about product affordability and could reduce their spending in our stores or shift their spending to lower-priced competition, such as warehouse membership clubs, conventional supermarkets, dollar stores, online retailers or extreme value formats, which could have a material and adverse effect on our operating results and financial condition.

We operate in the competitive retail food industry. Our competitors include specialty grocers, conventional supermarkets, natural food stores, mass or discount retailers, warehouse membership clubs, online retailers and specialty stores, as well as restaurants and home delivery and home meal solution providers. These businesses compete with us for products, customers and locations. We compete on a combination of factors, primarily differentiated product selection, quality, convenience, shopping experience, customer engagement, store format, location, price and delivery options. Our failure to offer products or services that appeal to our customers’ preferences or to effectively market these products or services could lead to a decrease in our sales. To the extent that our competitors offer lower prices or similar products, our ability to maintain profit margins and sales levels may be negatively impacted. In addition, some competitors are aggressively expanding their number of stores or their health and wellness product offerings, increasing the space allocated to fresh, natural and organic foods, and enhancing options of engaging with and delivering their products to customers. Some of these competitors may have greater financial or marketing resources than we do and may be able to devote greater resources to sourcing, promoting and selling their products. As competition in certain areas or platforms intensifies or competitors open stores or expand health and wellness product offerings and delivery options within close proximity to our stores, our results of operations and cash flows may be negatively impacted through a loss of sales, decrease in customer traffic and market share, reduction in margin from competitive price changes or greater operating costs.

We have a significant focus on perishable products, including fresh produce and natural and organic products. Sales of produce accounted for approximately 18%17% and 19%18% of our net sales in fiscal 20242025 and 2023,2024, respectively. We have generally not experienced significant difficulty to date in maintaining the supply of our produce and fresh, natural and organic products that meet our quality standards. However, there is no assurance that these products will be available to meet our needs in the future. The availability of such products at competitive prices depends on many factors beyond our control, including the number and size of farms that grow natural or organic crops or raise livestock that meet our quality, welfare and production standards, animal disease outbreaks (such as avian flu), agricultural workforce availability, tariffs and import regulations or restrictions on foreign-sourced products, stability of the global supply chain and the ability of our vendors to maintain required attributes or organic, non-genetically modified or other applicable third-party certifications for such products. Produce is also vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, storms, frosts, wildfires, earthquakes, hurricanes, pestilences and other extreme or abnormal environmental conditions, including the potential effects of climate change, any of which can lower crop yields and reduce crop size and quality. This could reduce the available supply of, or increase the price of, fresh produce, which may adversely impact sales of our fresh produce and our other products that rely on produce as a key ingredient.

As of December 29,28, 2024,2025, we operated 149156 stores in California, making California our largest market representing 34%33% of our total stores in fiscal 2024.2025. We also have store concentration in Texas, Florida, Arizona, Florida and Colorado, operating 54,60, 47,58, 4748 and 3334 stores in those states, respectively, and representing 13%, 12%, 11%, 11%10% and 8%7% of our total stores in fiscal 2024,2025, respectively. As we continue to execute our long-term growth strategy, we may become even more concentrated in these markets, as well as other identified expansion markets. In addition, we source a large portion of our produce from California, ranging from approximately 40% to approximately 70% depending on the time of year. As a result, our business is currently more susceptible to regional conditions than the operations of more geographically diversified competitors, and we are vulnerable to economic downturns and natural disasters in those regions. Any unforeseen events or circumstances that negatively affect these areas in which we have stores or from which we obtain products could materially adversely affect our revenues and profitability. These factors include, among other things, changes in demographics, population and employee bases; workforce availability, regulation; wage increases; changes in economic conditions; floods, prolonged droughts, diminished water resources, windstorms such as tornados, cyclones, hurricanes and tropical storms, winter storms or other severe weather conditions, which may be caused or exacerbated by climate change; and other catastrophic occurrences, such as pandemics, earthquakes or wildfires. Such conditions may result in reduced customer traffic and spending in our stores, physical damage to our stores, full or partial loss of power in our stores, loss of inventory, closure of one or more of our stores, inadequate work force in our markets, temporary disruption in the supply of products whether from self or third-party distribution, delays in the delivery of goods to our stores and a reduction in the availability of products in our stores. Any of these factors, particularly in areas with significant geographic concentration of our stores or produce growers on which we rely, may disrupt our business and materially adversely affect our financial condition, results of operations and cash flows.

The availability of many products we sell, including produce,produce and proteins, or products with ingredients such as wheat, corn, oils, milk, sugar, cocoa, nuts and other key commodities, may be impacted by weather eventsevents, animal disease outbreaks (such as avian flu) and other catastrophic occurrences. These products and commodities are also subject to significant price fluctuations and may be impacted by economic factors such as tariffs and inflation. For example, on February 1, 2025, the U.S. government announced a 25% tariff on product imports from certain countries, including Mexico and Canada, and 10% tariffs on product imports from certain countries, including China. Although certain of these tariffs were subsequently paused, anyAny increase in prices of such products or key ingredients as a result of tariffstariffs, inflation or otherwise may cause our vendors to seek price increases from us. Price decreases may result in our competitors reducing retail prices on products or items containing such ingredients. If we are unable to mitigate these fluctuations by passing the effects through to our customers, which will largely depend upon competitive market conditions, our profitability may be impacted either through increased costs to us or lower prices and loss of customers due to competitive conditions, which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.

To support our growth strategy, we must have sufficient capital to continue to make significant investments in our new and existing stores and advertising.stores. If cash flows from operations are not sufficient, we may need additional equity or debt financing to provide the funds required to expand our business. If such financing is not available on satisfactory terms or at all, we may be unable to expand our business or to develop new business at the rate desired. Debt financing increases expenses, may contain covenants that restrict the operation of our business, and must be repaid regardless of operating results. Equity financing, or debt financing that is convertible into equity, could result in additional dilution to our existing stockholders. Our inability to obtain adequate capital resources to fund our business and growth strategy may require us to delay, scale back or eliminate some or all of our operations or the expansion of our business, which may have a material adverse effect on our business, operating results, financial condition or prospects.

In fiscal 2025, we opened 37 new stores. In fiscal 2024, we opened 33 new stores. In fiscal 2023, we opened 30 new stores and acquired two stores. We currently expect to achieve approximately 10% annual unit growth and to open atmore leastthan 3540 new stores in 2025,2026, including penetration of new markets with a greater concentration of new stores. However, we may not achieve this expected level of new store growth due to inability to find suitable sites, supply chain disruptions or otherwise. We may not have the level of cash flow or financing necessary to support our growth strategy. Additionally, our proposed expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our existing business less effectively, which in turn could cause deterioration in the financial performance of our existing stores. Further, new store openings in markets where we have existing stores may result in reduced sales volumes at our existing stores in those markets.markets, while new store openings in new markets may not perform as well as our established markets for a number of reasons, including lack of customer awareness of our offering. If we experience a decline in performance, we may slow or discontinue store openings, or we may decide to close stores that we are unable to operate in a profitable manner. If we fail to successfully implement our growth strategy, including by opening new stores, our financial condition, results of operations and cash flows may be adversely affected.

Any significant interruption in the operations of our distribution centers or supply chain network could disrupt our ability to deliver our produceproduce, meat and seafood, and other products in a timely manner.

We self-distribute our produceproduce, a portion of our meat and seafood and certain of our other products through six distribution centers located in Arizona, Texas, northern California, southern California, Colorado and Florida. We also have entered into a partnership with a third-party produce distributor in Pennsylvania to supply fresh produce to our Mid-Atlantic stores. As we further expand our geographic footprint or self-distribute additional product categories, we may require additional distribution centers or expansion of our existing distribution centers. Any unanticipated or unusual expenses or significant interruption or failure in the operation of our distribution center infrastructure, such as disruptions due to fire, severe weather or other catastrophic events, cyberattacks, network or power outages, labor shortages or disagreements, shipping or infrastructure problems, food safety concerns, integration of new distribution centers or product categories into our supply chain network, inability of our new distribution centers to perform as expected or contractual disputes with third-party service providers could result in increased expenses and adversely impact our ability to distribute produce and other products to our stores. Such interruptions could result in lost sales and a loss of customer loyalty to our brand, as well as increased costs from third-party service providers. While we maintain business interruption and property insurance, if the operation of our distribution centers or transportation network were interrupted for any reason, causing delays in shipment of product to our stores, our insurance may not be sufficient to cover losses we experience, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Disruption of significant supplierdistributor relationships could negatively affect our business.

KeHE is our primary supplierdistributor of dry grocery and frozen food products, accounting for approximately 50%52% and 47%50% of our total purchases in fiscal 20242025 and 2023,2024, respectively. Our current primary contractual relationship with KeHE continues through July 18,31, 20252035 and provides that KeHE will be our primary supplierdistributor for all of our stores. OurAnother primary distributor of meat12% and seafood products accounted for approximately 14%3% of our total purchases in eachfiscal 2025 and 2024, respectively, were made through our secondary distributor of fiscaldry 2024grocery and 2023.frozen food products, UNFI. Our current primary contractual relationship with UNFI continues through July 31, 2026. Due to this concentration of purchases from a small number of third-party suppliers,distributors, the cancellation or interruption of our distribution arrangements or the disruption, delay or inability of our suppliersdistributors to timely deliver product to our stores in quantities or within service parameters that meet our requirements may materially and adversely affect our operating results while we establish alternative supply chain channels due to lost sales, as well as increased costs from alternative distribution arrangements. In addition, in 2025 we are currently inbegan the process of transitioning from our primary meat and seafood distributor. We expect to initially transition to an intermediary third-party distributor and ultimately to a self-distribution model underfor whichmeat weand will deal directly with our suppliers.seafood. As with complex transitions of this magnitude, therewe areexperienced associatedand may continue to experience short-term risks,challenges, including in particular, potential product supply disruptions resulting in lost sales at our stores and customer disruption and transition-related expenses that exceed our expectations. Another 3% of our total purchases in both fiscal 2024 and 2023 were made through our secondary supplier of dry grocery and frozen food products, UNFI. We expect to extend our current contractual relationship with UNFI through December 31, 2025. There is no assurance KeHE, UNFI or other distributors will be able to fulfill our needs on favorable terms or at all. If KeHE, UNFI or any of our other distributors or suppliers fail to fulfill their financial or contractual obligations or the products they distribute fail to comply with food safety, labeling or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted and we could incur substantial related costs. Further, the food distribution and manufacturing industries are dynamic. Consolidation or dissolution of distributors or the manufacturers that supply them could reduce our supply options and detrimentally impact the terms under which we purchase products. We may not be able to find replacement distributors or suppliers on commercially reasonable terms, which would have a material adverse effect on our financial condition, results of operations and cash flows.

We rely extensively on information technology systems for point-of-sale processing in our stores, supply chain, financial reporting, human resources, store operations, ecommerce and various other processes and transactions. Our information technology systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, including tampering with hardware and breaches of our transaction processing or other systems that could result in the compromise of confidential customer or team member data, ransomware attacks, catastrophic events, and usage errors by our team members. Phishing attacks have emerged as particularly pervasive, including as a means for ransomware attacks, which have increased both in frequency and breadth. Point-of-sale hardware in our stores has also been targeted by individuals attempting to install skimmer devices or conduct other tampering to illicitly obtain payment card information. In response to these wide-ranging cybersecurity and data privacy risks, we have implemented numerous security protocols in order to strengthen security, and we maintain a customary cyber insurance policy, but there can be no assurance breaches will not occur in the future, be detected in a timely manner or be covered by our insurance policy. Significant expenditures could be required to remedy future cybersecurity problems and protect against future breaches.breaches, and such threats may continue to increase and evolve with the rapid evolution of artificial intelligence and machine learning technologies. Additionally, compliance with current and future applicable federal and state privacy, cybersecurity and related laws, including for example the California Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), can be costly and time-consuming, and we could be subject to enforcement actions or penalties for non-compliance. These costs could have a material adverse effect on our business, and our efforts may not meaningfully limit the success of future attempts to breach our information technology systems.

Our information technology systems may also fail to perform as we anticipate, and we may encounter difficulties or significant expenses in implementing new systems, adapting these systems to changing technologies or legal requirements or expanding them to meet the future needs and growth of our business. Emerging technologies, including artificial intelligence and machine learning, may not deliver expected efficiencies and could introduce new risks. If our systems are improperly implemented, breached, damaged, cease to function properly, do not function or provide benefits as anticipated or are perceived to have failed, we may have to make significant investments to fix or replace them; suffer interruptions in our operations; experience data loss; incur liability to our customers, team members and others; face costly litigation, enforcement actions and penalties; and our brand and reputation with our customers may be harmed. Various third parties, such as our service providers and suppliers, including our most significant suppliers,distributors, and payment processors and their suppliers (i.e., our fourth parties), also rely heavily on information technology systems, and any failure of these systems for any reason (e.g., cybersecurity attack, software glitch, human or system error or omission), could also cause loss of sales, transactional or other data, compromise of customer or team member data and significant interruptions to our business. Any security breach or other material interruption in the information technology systems we rely on, particularly those required for point-of-sale payment processing in our stores, may have a material adverse effect on our business, operating results and financial condition.

Consumer preferences often change rapidly and without warning, moving from one trend to another among many product or retail concepts. Our performance is impacted by trends regarding healthy lifestyles, product attributes, dietary preferences, convenient options, fresh, natural and organic products, meal solutions, ingredient transparency and sustainability, and vitamins and supplements, as well as new and evolving methods of engaging with and delivering our products to our customers. Consumer preferences towards our offering of vitamins, supplements orand fresh, natural and organic food products might shift as a result of, among other things, economic conditions, food safety perceptions, consumption patterns (including changes in behavior arising from the increased use of prescription weight-loss therapies such as GLP-1), scientific research or findings regarding the benefits or efficacy of such products, national media attention and the cost, attributes or sustainability of these products. A change in consumer preferences away from our offerings would have a material adverse effect on our business. Additionally, negative publicity over the safety, efficacy or benefits of any such items, in particular our Sprouts Brand products, may adversely affect demand for our products, and could result in lower customer traffic, sales, results of operations and cash flows.

We may not be able to achieve or improve the levels of comparable store sales that we have experienced in the past. Our comparable store sales growth could be lower than our historical average for many reasons, including general economic conditions, competition, cycling prior year performance and the other matters discussed in these Risk Factors. These factors have caused and may continue to cause our comparable store sales results to be materially lower than in recent periods, which could harm our business and result in a decline in the price of our common stock.

If we are unable to successfully manage the potential difficulties associated with store growth, we may not be able to capture the efficiencies of scale that we expect from expansion. If we are not able to capture efficiencies of scale related to our smaller store format, improve our systems, sustain cost discipline, optimize promotional activity and maintain appropriate store labor levels and disciplined product selection, our customer traffic and operating margins may stagnate or decline. In addition, competition and pricing pressures from competitors and our inability to timely pass on product cost increases due to inflation or otherwise to our customers through retail price increases may also adversely impact our operating margins. Both our inability to capture the efficiencies from scale and the impact of competition could have a material adverse effect on our business, financial condition, results of operations and cash flows and adversely affect the price of our common stock.

The food retail industry is labor intensive. Our continued success and ability to grow through new store openings is dependent upon our ability to attract, develop and retain qualified team members in our stores and at our store support officesoffice who understand and appreciate our culture and values and are able to represent our brand effectively and establish credibility with our business partners and customers.customers, particularly as we expand into new markets. We face intense competition for qualified team members, many of whom are subject to offers from competing employers.members. Due to a tight labor market, availability of talent and other factors, we have experienced, and could continue to experience, a shortage of labor for store positions. Our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which we are located, unemployment levels within those markets, unionization of the available work force, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation. In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our customer engagement to suffer, while increasing our wages could cause our earnings to decrease. If we are unable to hire, train and retain team members capable of meeting our business needs and expectations, our business and brand image may be impaired. Any failure to meet our staffing needs or any material increase in turnover rates of our team members or team member wages may adversely affect our business, results of operations, cash flows or financial condition.

We have been and will continue to be subject to litigation and other legal proceedings that may adversely affect our business, including claims brought by team members, customers, government agencies, suppliers, distributors, stockholders, job applicants or others. Our operations, which are characterized by a high volume of customer traffic and data collection for transactions involving a wide variety of product selections, carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in some other industries. Consequently, we have been and may in the future be a party to individual personal injury, product liability, intellectual property, data security and privacy, accessibility and other legal actions in the ordinary course of our business, including litigation arising from food-related illnessillness, product labeling or productmarketing labeling.and advertising claims. In addition, our team members may, from time to time, bring lawsuits against us regarding injury, hostile work environment, discrimination, wage and hour disputes, sexual harassment, or other employment issues. In recent years, there has been an increase in the number of discrimination and harassment claims across the United States generally. Additionally, we could be exposed to industry-wide or class-action claims or governmental enforcement actions arising from products we carry or industry-specific business or employment practices. The outcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. While we maintain insurance against many types of claims, insurance coverage may not be adequate, and the cost to defend against future litigation may be significant. There may also be adverse publicity associated with litigation that may decrease consumer confidence in or perceptions of our business and impact our ability to hire and retain team members, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may materially adversely affect our business, financial condition, results of operations and cash flows. See Note 17, “Commitments and Contingencies” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for information regarding certain legal proceedings in which we are involved.

Enforcement. Both FDA and USDA have broad authority to enforce their applicable statutes and regulations relating to the registration and listing of products, safety, labeling, manufacturing, distribution and promotion of foods, cosmetics, homeopathic and CBD products, and dietary supplements, including powers to issue a public warning letter to a company, publicize information about adulterated or misbranded products, institute an administrative detention of products, request or order a recall from the market, impose import restrictions and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution. Enforcement actions may also lead to follow-on consumer class action litigation. Regulatory enforcement actions could interrupt the marketing and sales of products in our stores, including our private label products, severely damage our brand reputation and public image, increase the cost of products in our stores, result in product recalls or costly litigation, and impede our ability to deliver merchandise in sufficient quantities or quality to our stores, which could result in a material adverse effect on our business, financial condition, results of operations and cash flows.

Foods, Dietary Supplement,Supplements, CBD and Homeopathic Product Risks. Our sales of dietarythese supplementsproducts are regulated by FDA. However, other public and private actors are increasingly targeting food and dietary supplement retailers and manufacturers for selling products that fail to adhere to requirements under the FDCA, as amended by DSHEA.FDCA. While the FDCA provides FDA with the authority to remove products from the market that are adulterated or misbranded, state actors,governments and the Plaintiffs’ Bar have been targeting retailers and manufacturers of dietarythese supplementsproducts for failing to adhere to current good manufacturing practices and for false or misleading product statements.claims Asrelating ato retailer of certain topicalnutritional or ingestibletherapeutic CBDvalue products,or thestructure FDAor function claims. States may also hasnarrow thetheir authoritylaws to remove from the market any CBD product if it is adulterated, its labeling is false or misleading, it is otherwise misbranded, or if it violates any other FDCA or FDA requirement or regulation. This enforcement authority extends to states that have legalized and regulated the distribution of CBD products. States in which we operate have also imposed restrictions or permitting requirements foron the sale of various CBD products. The FDCA also provides FDA with the authority to remove homeopathic products from the market that are adulterated or misbranded or contain improper or excessive amounts of active ingredients. Further, companies have also been targets for litigation on the basis of marketing homeopathic and CBD products within misbranding,their misleadingstates claimsto orconform qualityto issues.new federal laws.

Advertising and Product Claims Risks. In connection with the marketing and advertisement of products we sell, we could be the target of claims relating to false or deceptive advertising, including under the oversight of the FTC and pursuant to the FTC Act and consumer protection statutes of some states. Furthermore,Further, instate recentgovernments years,and theprivate FDAplaintiffs hastarget beenfood, aggressivedrug, inand enforcingcosmetic itsretailers regulationsand withmanufacturers respectfor false and misleading advertising and product compliance, including but not limited to nutrientnatural, contentorganic and GMO claims (e.g.,and “lowstatements, fat,”which “goodcould source of,” “calorie free,” etc.), unauthorized “health claims” (claims that characterize the relationship between a food or food ingredientmaterially and aadversely disease or health condition), and other claims that impermissibly suggest therapeutic benefits for certain foods or food components. Regulatory enforcement actions could interrupt the marketing and sales of products inaffect our stores, including our private label products, severely damage our brand reputation and publicprofitability image,and increasecause consumers to lose confidence in the quality and safety of our products. The cost of productsdefending inagainst ourany stores,such result in product recalls or costly litigation, and impede our ability to deliver merchandise in sufficient quantities or quality to our stores, whichclaims could resultbe in a material adverse effect on our business, financial condition, results of operations and cash flows.significant.

Food Packaging and FSMA Implementation Costs.PFAS. While the FDA has authorized certain per and polyfluoroalkyl substances ("PFAS") for use in specific food contact applications, a growing number of states have passed legislation or issued policies restricting food contact articles with intentionally added PFAS, such as certain single-use food packaging and foodware items. For example, a California law that became effective in 2023 bans intentionally added PFAS in fiber-based food packaging, mandates online chemical disclosures, and limits claims about PFAS-free and other hazard groups. As more states impose similar restrictions, it is possible that additional states in which we operate will also implement bans on PFAS.

Ecommerce Platform and Third-Party Risks. Our online order ecommerce platform is subject to the same laws and regulations as our retail operations. Product statements made on our website must be in accordance with labeling requirements. As is common in our industry, we rely on our suppliers and contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legal requirements. In general, we seek representations and warranties, indemnification and/or insurance from our suppliers and contract manufacturers. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in products we sell. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from our stores. In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products and we have revised certain provisions of our sales and marketing program.

We are subject to laws and regulations more generally applicable to retailers, including those related to labor and employment, taxation, zoning and land use, environmental protection, workplace safety, public health, community right-to-know, data privacy, waste diversion and hazardous waste disposal, packaging labels and content, consumer protection and alcoholic beverage sales, as well as other voluntary safety protocols. Our stores are subject to unscheduled inspections on a regular basis, which, ifIf violations are found, it could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated “critical” violations, closure of the store until a re-inspection demonstrates that we have remediated the problem. Further, our new store openings could be delayed or prevented, or our existing stores could be impacted by difficulties or failures in our ability to obtain or maintain required permits, approvals or licenses. In addition, we are subject to federal, state and local environmental lawslaws, including those pursuant to which we could be held responsible for all of the costs or liabilities relating to any contamination at our or our predecessors’ past or present facilities and at third-party waste disposal sites, regardless of our knowledge of, or responsibility for, such contamination, and such costs may exceed our environmental liability insurance coverage.

Our business and reputation may be adversely impacted by evolving environmental, social and governancesustainability matters.

Increasingly, investors, customers, government agencies, non-governmental organizations, team members, communities and other stakeholders are focusing on environmental, social and governance ("ESG") matters and related disclosures. Many of these stakeholders evaluate and measure the performance of companies based on a variety of ESG metrics. As a fresh, natural and organic specialty retailer, we believe that many stakeholders hold us to higher standards with respect to ESGsustainability matters. As a result, we disclose certain ESG-relatedsustainability-related metrics, initiatives and goals in our SEC filings and other public disclosures. Execution against these ESG initiatives may be costly, and we may be unable to achieve our goals due to factors outside of our control. If our ESG-relatedsustainability-related reporting is incomplete or inaccurate or fails to comply with regulatory requirements, or if we fail to achieve significant progress with respect to our ESG goals on a timely basis, or at all, our business, financial performance, growth and reputation with our investors, customers and other stakeholders could be adversely affected. In addition, there also exists certain “anti-ESG” sentiment among some individuals and government institutions, and we may also face scrutiny and reputational harm from these parties regarding our ESGsustainability initiatives or goals.

There is no guarantee that our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. TheIf our operating results or outlook fall below the expectations of stock market analysts and investors, the market price of our common stock could decline substantially. In addition, the trading price of our common stock may be volatile and subject to wide price fluctuations in response to various factors, many of which are beyond our control. Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the price or liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. IfAny anycurrent ofor ourfuture stockholdersstockholder were to bring a lawsuitsuits against us, weus could cause us to incur substantial costs defending the lawsuit or paying for settlements or damages. Such a lawsuit could also divert the time and attention of our management. See Note 17, “Commitments and Contingencies” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for information regarding certain legal proceedings in which we are involved.

•a classified board of directors (referred to as the “Board”) whose members serve staggered three-year terms until our classified board structure is fully phased out at our 2028 annual meeting of stockholders pursuant to a measure adopted by our stockholders at our 2025 annual meeting of stockholders;

•Create an Advantaged Supply Chain. We believe our network of distribution centers can drive efficiencies across the chain and support growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. FollowingAs a step to improve our fresh supply chain, in 2025 we began the openingtransition ofto twoa self-distribution model for meat and seafood through our fresh distribution centerscenters. in fiscal 2021 and the relocation of our Southern California distribution center, closure of our Georgia distribution center and partnership withAs a third-party fresh distribution center in the Northeast in fiscal 2023,result, we are better leveraging our existing distribution center capacity, and approximately 80% of our stores were within 250 miles of a distribution center as of December 29,28, 2024.2025.

•Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are increasing our use of data analytics and insights.insights, including through the nationwide launch of our Sprouts Rewards loyalty program in 2025. We believe this data-driven intelligence will increase customer engagement through personalization efforts with digital and social connections to drive additional sales growth and loyalty.

We report our results of operations on a 52- or 53-week fiscal year ending on the Sunday closest to December 31, with each fiscal quarter generally divided into three periods consisting of two four-week periods and one five-week period. Fiscal 2024,2025, fiscal 20232024 and fiscal 20222023 were 52-week years ending on December 28, 2025, December 29, 2024,2024 and December 31, 2023 and January 1, 2023, respectively.

We recognize sales revenue at the point of sale, with discounts provided to customers reflected as a reduction in sales revenue. Proceeds from sales of gift cards are recorded as a liability at the time of sale and recognized as sales when they are redeemed by the customer. During 2025, we implemented a customer loyalty program. As a customer earns points, we allocate a portion of the transaction price to a deferred loyalty liability. See Note 3, “Significant Accounting Policies” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for additional information on revenue recognition related to gift cards.cards and our loyalty program. We do not include sales taxes in net sales.

Cost of sales includes the cost of inventory sold during the period, including direct costs of purchased merchandise (net of discounts and allowances), distribution and supply chain costs, and depreciation and amortization expense for distribution centers and supply chain-related assets. Merchandise incentives received from vendors, which are reflected in the carrying value of inventory when earned or as progress is made toward earning the rebate or allowance, and are reflected as a component of cost of sales as the inventory is sold. Inflation and deflation in the prices of food and other products we sell may periodically affect our gross profit and gross margin. Tariffs, such as those recently proposed by the U.S. government on goods imported from Mexico, Canada, China and certain other countries,Tariffs may result in cost increases on products such as produce that we import from impacted countries, as well as products containing ingredients imported from these countries. While we are still evaluating the potential impact of these tariffs, theThe short-term impact of tariffs, inflation, and deflation is largely dependent on whether or not we pass the effects through to our customers, which will largely depend upon competitive market conditions.

Net sales during 20242025 totaled $7.7$8.8 billion, increasing 13%,14%, over the prior fiscal year. The sales increase was drivenprimarily bydue to new stores opened since the prior year and a 7.6%7.3% increase in comparable store sales, in part due to an increase in basket value due to retail price inflation, in addition to sales from new stores opening since the prior year, partially offset by a slight reduction in the number of items per basket and the impact of store closures. See "Impact of Inflation and Deflation."sales. Comparable store sales contributed approximately 93% of total sales in 2025 and 94% of total sales in 2024 and 95% of total sales in 2023.2024.

Gross profit increased during 20242025 compared to 20232024 by $419.7$474.9 million to $2.9$3.4 billion driven by increased sales volume for the reasons discussed above.volume. Gross margin increased by 1.2%0.7% to 38.1%38.8% compared to 36.9%.38.1%. The increase was a result of favorableimproved shrink, continued promotional optimization,shrink and positive results from our selling, general and administrative expense investments wein haveinventory made over the past few years.management.

Selling, general and administrative expenses increased $290.9$283.3 million, or 15%,12%, compared to 20232024. dueThe toincrease was primarily driven by the net increase in new stores opened since the prior yearyear. As a percentage of net sales, selling, general, and higheradministrative payrollexpenses andimproved as a result of sales leverage from strong performance early in the year as well as lower incentive compensation costs. In addition, we experienced the effects of higher credit card and ecommerce fees resulting from an increase in sales compared to the prior year.compensation.

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $150.0 million in 2025, compared to $132.7 million in 2024, compared to $131.9 million in 2023.2024. Depreciation and amortization expense (exclusive of depreciation included in cost of sales) primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores. Depreciation and amortization in 2023 was inclusive of $5.9 million in accelerated depreciation in connection with the closing of certain underperforming stores during 2023. See Note 26, “Store Closures” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

The decreaseincrease in interest (income) expense,income, net was primarily due to higher interest income earned as a result of higher interest rates and lower credit facility fees due to lower average debt outstanding. See Note 13,12, “Long-Term Debt and Other Finance Lease LiabilitiesObligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

Income tax provision increased by $41.2$39.0 million to $165.1 million for 2025 from $126.1 million for 2024 from $84.9 million for 2023,2024, and the effective income tax rate increaseddecreased to 24.0% in 2025 from 24.9% in 20242024. fromThe 24.7%decrease in 2023the effective tax rate was primarily due to aan reductionincrease in federalthe benefit for stock-based compensation and benefit for purchase discount for transferable tax credits andin reducedthe impactcurrent ofyear, other permanent items due to higher pre-tax income,partially offset by aan reduction in state taxes due to a state valuation allowance recordedincrease in the priorrate year.detriment in the current year for nondeductible executive compensation.

The increase in diluted earnings per share of $1.25$1.56 was driven by higher net income as well as fewer diluted shares outstanding compared to the prior year,year due to our repurchase of approximately 2.74.0 million shares for a total cost of $240.6$476.2 million, including excise tax of 1%, under our share repurchase program.

(2)Special items related to store closure, supply chain transition costs related to our new and recently expanded distribution centers and acquisition related charges net of tax.

Cash flows from operating activities increased $180.1$70.8 million to $716.0 million in 2025 compared to $645.2 million in 2024 compared to $465.1 million in 2023.2024. The increase in cash flows from operating activities was primarily a result of higher net income adjusted for non-cash items of $130.3$171.4 million and favorablea changes$2.3 million reduction in working capital of $80.9 million, partially offset by higher payments on our operating lease liabilities partially offset by changes in working capital of $29.7$97.7 million due to growth.million.

Cash flows provided by operating activities from changes in working capital were $14.6 million in 2025, compared to $112.3 million in 2024,2024. comparedThis to $31.4$97.7 million in 2023. This $80.9 million increasedecrease in cash flow from changes in working capital was primarily attributable to the following factors, each of which had a positivenegative impact on working capital: (i) a $26.8$63.6 million change in accountsinventories receivableprimarily drivendue byto theimproving timingon-shelf ofavailability collectionsin ascertain welldepartments; as(ii) a $43.3$30.9 million change in accounts payable and accrued liabilities, primarily due to timing differences of payments for goods and services; (iiiii) a $9.7$25.2 million change in accrued salaries and benefits due to decreased incentive compensation accruals in the current year and (iv) a $2.8 million change in accounts receivable driven by the timing of collections. These decreases were partially offset by a $24.8 million change in prepaid expenses and other current assets primarily due toour timing differences of tax payments; and (iii)purchased afederal $10.4tax million change in accrued salaries and benefits due to increased incentive compensation accruals in the current year. These increases were partially offset by a a $9.3 million change in inventories primarily due to inflationary cost increases in the prior year.credits.

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $230.4$248.3 million and $238.3$230.4 million for 20242025 and 2023,2024, respectively. The increase in purchases of property and equipment was primarily due to more stores under construction in 20242025 as compared to 20232024 and heavier investment in upgraded equipment to support our initiatives. Cash flows used in investing activities in 2023 also included our acquisition of Ronald Cohn, Inc. See Note 27, "Business Combination" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

We expect capital expenditures to be in the range of $230$280 -million $250to $310 million in 2025,2026, net of estimated landlord tenant improvement allowances, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities. We do not have any material contractual commitments for future capital expenditures as of December 29,28, 2024.2025.

Cash flows used in financing activities were $474.1 million for 2025 compared to $351.5 million for 20242024. comparedDuring to2025, $318.0cash flows used in financing activities primarily consisted of approximately $471.9 million for 2023.share repurchases and $2.1 million for payments of excise tax on share repurchases partially offset by $2.6 million in proceeds from the exercise of stock options. During 2024, cash flows used in financing activities primarily consisted of approximately $228.5 million for share repurchases and $125.0 million in payments on our Former Credit Agreement,Facility, $1.8 million for payments of excise tax on share repurchases partially offset by $4.9 million in proceeds from the exercise of stock options. During 2023, cash flows used in financing activities primarily consisted of approximately $203.5 million for share repurchases and $125.0 million in payments on our Credit Agreement, partially offset by $11.5 million in proceeds from the exercise of stock options.

The Company had no long-term debt outstanding as of December 28, 2025 and December 29, 2024. Long-term debt outstanding as of December 31, 2023 was $125.0 million.

See Note 13,12, “Long-Term Debt and Other Finance Lease LiabilitiesObligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for a description of our Credit Agreement.

We can currently borrow under our Credit Agreement,Agreement up to an initial aggregate commitment of $700.0$600.0 million, which may be increased from time to time pursuant to an expansion feature set forth in the Credit Agreement. We have previously utilized borrowings under our Credit Agreement to fund our share repurchase program as described above. The interest rate we pay on our borrowings increases as our net leverage ratio increases and may increase or decrease based upon the achievement of certain diversity and sustainability-linked metric thresholds.

Our Credit Agreement is defined and more fully described in Note 13,12, “Long-Term Debt and Other Finance Lease LiabilitiesObligations” to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

Our principal contractual obligations and commitments consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. See Note 7, "Leases," Note 13,12, “Long-Term Debt and Other Finance Lease Liabilities,Obligations,” Note 15,14, "Self-Insurance Programs" and Note 18,17, "Commitments and Contingencies" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of these obligations.

The future amount and timing of interest payments are expected to vary with the outstanding amounts and then prevailing contractual interest rates. Interest and fee payments through the MarchJuly 25, 20272030 maturity date of our Credit Agreement based on the outstanding amounts as of December 29,28, 20242025 and interest rates in effect at the time of this filing, are estimated to be approximately $1.9$3.6 million. These payments are estimated to be approximately $0.8 million in 20252026 and approximately $1.1$2.8 million thereafter.

We believe that all inventories are saleablesellable and no allowances or reserves for obsolescence were recorded as of December 29,28, 20242025 and December 31,29, 2023.2024.

No impairment was recorded during fiscal 2025. We recorded an impairment loss of $0.4 million, $30.5 million and $8.1$30.5 million in fiscal 2024, 20232024 and 2022,2023, respectively. See Note 3, “Significant Accounting Policies,” Note 6, “Property and Equipment" and Note 26,23, "Store Closures" to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.

There have been no material changes to the Risk Factors described under “Part I – Item 1A. Risk Factors” in our Annual Report on2025 Form 10-K for the fiscal year ended December 28, 2025.10-K.

You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the 2025 fiscal year, filed with the Securities and Exchange Commission ("SEC") on February 19, 2026 (“2025 Form 10-K”) with the Securities and Exchange Commission.. All dollar amounts included below are in thousands, unless otherwise noted.

Sprouts Farmers Market offers a unique specialty grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts inspires wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people. We continue to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free. From our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. Headquartered in Phoenix with 483490 stores in 25 states as of MarchJune 29,28, 2026, we are one of the largest and fastest growing specialty retailers of fresh, natural and organic food in the United States.

•Market Expansion. We are delivering unique smaller stores with expectations of stronger returns, while maintaining the approachable, fresh-focused farmer’s market heritage Sprouts is known for. From 2021 through MarchJune 29,28, 2026, we have opened 118125 new stores and remodeled one store featuring our updated format. Our geographic store expansion and new store placement will intersect where our target customers live, in markets with growth potential and supply chain support, which we believe will provide a long runway of approximately 10% annual unit growth.

•Create an Advantaged Supply Chain. We believe our network of distribution centers can drive efficiencies across the chain and support our growth plans. To further deliver on our fresh commitment and reputation, as well as to increase our local offerings and improve our financial results, we aspire to ultimately position fresh distribution centers within a 250-mile radius of stores. As a step to improve our fresh supply chain, in 2025 we began the transition to a self-distribution model for meat and seafood through our fresh distribution centers. As a result, we are better leveraging our existing distribution center capacity, and approximately 80% of our stores were within 250 miles of a distribution center as of MarchJune 29,28, 2026.

Results of Operations for Thirteen Weeks Ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025

The following tables set forth our unaudited results of operations and other operating data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods. All dollar amounts are in thousands, unless otherwise noted.

Comparison of Thirteen Weeks Ended MarchJune 29,28, 2026 to Thirteen Weeks Ended MarchJune 30,29, 2025

Net sales during the thirteen weeks ended MarchJune 29,28, 2026 totaled $2.3 billion, an increase of $92.7$105.2 million, or 4%,5%, compared to the thirteen weeks ended MarchJune 30,29, 2025. The sales increase was driven by sales from new stores opened in the last twelve months, partially offset by a 1.7%1.0% decrease in comparable store sales. Comparable stores contributed approximately 93% of total sales for the thirteen weeks ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025.

Gross profit totaled $917.3$900.6 million during the thirteen weeks ended MarchJune 29,28, 2026, an increase of $30.9$38.0 million, or 3%,4%, compared to the thirteen weeks ended MarchJune 30,29, 2025, driven by increased sales volume from new stores. Gross margin decreased by 0.2%0.1% to 39.4%38.7% for the thirteen weeks ended MarchJune 29,28, 2026, compared to 39.6%38.8% for the thirteen weeks ended MarchJune 30,29, 2025, primarily driven by the impact from our loyalty program asand wellelevated asfuel unfavorablecosts. shrink.This was partially offset by benefits from self-distribution and vendor participation.

Selling, general and administrative expenses during the thirteen weeks ended June 28, 2026 increased $35.6$37.5 million, or 6%, compared to the thirteen weeks ended MarchJune 30,29, 2025. The increase was primarily due to the increase in new stores opened since the comparable period last year. As a percentage of net sales, selling, general and administrative expenses increased slightly, primarily due to lower comparable store sales and investments in the business made during the period,period. whileThis fixedwas partially offset by cost components,control including payrollinitiatives and occupancyoperating expenses,expense remained relatively consistent.management.

Depreciation and amortization expense (exclusive of depreciation included in cost of sales) was $42.0$43.1 million for the thirteen weeks ended MarchJune 29,28, 2026, compared to $35.1$36.6 million for the thirteen weeks ended MarchJune 30,29, 2025. Depreciation and amortization expense primarily consists of depreciation and amortization for buildings, store leasehold improvements, and equipment for new stores as well as remodel initiatives in older stores.

Store closure and other costs, net decreased $0.5$0.8 million to $1.2$0.8 million for the thirteen weeks ended MarchJune 29,28, 2026, compared to $1.7$1.5 million for the thirteen weeks ended MarchJune 30,29, 2025. Store closure and other costs, net primarily consistsconsist of ongoing occupancy costs associated with our closed store locations as well as one-time costs associated with disaster recovery activity. See Note 12, “Store Closures” of our unaudited consolidated financial statements.

Interest expense/(income) expense,, net

The decreasechange into interest income,expense/(income), net for the thirteen weeks ended MarchJune 29,28, 2026 compared to interest expense/(income), net in the thirteen weeks ended MarchJune 30,29, 2025 was primarily due to lower interest rates and invested cash. See Note 4, “Long-Term Debt and Other Finance Obligations” of our unaudited consolidated financial statements.

The table below provides the updated requirements of ASU no. 2023-09 for the thirteen weeks ended MarchJune 29,28, 2026.

The effective tax rate increased to 24.0%25.8% for the thirteen weeks ended MarchJune 29,28, 2026 from 20.8%25.6% for the thirteen weeks ended MarchJune 30,29, 2025. The increase in the effective tax rate was primarily driven by a reduction in the benefit for stock-basedshare-based compensation and amended return true up in the currentprior year quarter, partially offset by a decrease in non-deductible executive compensation.

The decreaseincrease in diluted earnings per share of $0.10$0.02 was driven by lowerfewer netoutstanding income.shares largely due to share repurchase activity during the thirteen weeks ended June 28, 2026 under our share repurchase program.

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we provide information regarding Return on Invested Capital (referred to as “ROIC”) as additional information about our operating results. ROIC is a non-GAAP financial measure and should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. ROIC is an important measure used by management to evaluate our investment returns on capital and provides a meaningful measure of the effectiveness of our capital allocation over time.

We define ROIC as net operating profit after tax (referred to as “NOPAT”), including the effect of capitalized operating leases, divided by average invested capital. Operating lease interest represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as a finance lease. The assumed ownership and associated interest expense are calculated using the discount rate for each lease as recorded as a component of rent expense within selling, general and administrative expenses. Invested capital reflects a trailing four-quarter average.

(4)Average operating leases representsrepresent the average net present value of outstanding lease obligations over the past four trailing quarters.

The following table sets forth the major sources and uses of cash for each of the periods set forth below, as well as our cash, cash equivalents and restricted cash at the end of each period (in thousands):

We have generally financed our operations principally through cash generated from operations and borrowings under our credit facilities. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures primarily for opening new stores, remodels and maintenance, repurchases of our common stock and debt service. Our principal contractual obligations and commitments consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Our operating and finance leases for the rental of land, buildings, and for rental of facilities and equipment expire or become subject to renewal clauses at various dates through 2049. We believe that our existing cash, cash equivalents and restricted cash, and cash anticipated to be generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.months and going forward. Our future capital requirements will depend on many factors, including new store openings, remodel and maintenance capital expenditures at existing stores, store initiatives and other corporate capital expenditures and activities. Our cash, cash equivalents and restricted cash position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within days from the related sale.

Cash flows from operating activities decreased $63.8by $41.3 million to $235.3$369.0 million for the thirteentwenty-six weeks ended MarchJune 29,28, 2026 compared to $299.1$410.3 million for the thirteentwenty-six weeks ended MarchJune 30,29, 2025. The decrease in cash flows from operating activities was primarily a result of lowerchanges in working capital of $72.5 million partially offset by a $19.6 million decrease in payment on our operating lease liabilities, higher net income adjusted for non-cash items of $4.3$6.0 million, and a $5.5 million and changesincrease in workinglong capitalterm of $60.6 million.liabilities.

Cash flows (used in)/provided by operating activities from changes in working capital were $17.3$(56.9) million in the thirteentwenty-six weeks ended MarchJune 29,28, 2026 compared to $77.9$15.6 million in the thirteentwenty-six weeks ended MarchJune 30,29, 2025. The $60.6$72.5 million decrease in cash flows from changes in working capital was primarily attributable to the following factors, each of which had a negative impact on working capital: (i) $56.8$59.5 million change in accounts payable and accrued liabilities primarily due to timing differences of payments for goods and services;services, (ii) $17.5 million change in accrued income tax, (iii) $7.9$14.9 million change in accounts receivable driven by the timing of collections, and (iviii) $4.8$12.7 million change in accrued salaries and benefits primarily driven by increasedthe payout of annual corporate bonuses.bonuses, and (iv) $1.9 million change in inventory largely driven by increased store count. These decreases were partially offset by a $21.5$16.4 million change in prepaid expenses andprimarily otherdriven currentby assetstax andexpense $4.9exceeding milliontax change in inventory.payments.

Cash flows used in investing activities consist primarily of capital expenditures in new stores, including leasehold improvements and store equipment, capital expenditures to maintain the appearance of our stores, sales enhancing initiatives and other corporate investments as well as cash outlays for acquisitions. Cash flows used in investing activities were $101.2$189.9 million and $59.5$120.3 million, for the thirteentwenty-six weeks ended MarchJune 29,28, 2026 and thirteenthe twenty-six weeks ended MarchJune 30,29, 2025, respectively.

We expect capital expenditures to be in the range of $280 million toapproximately $310 million in fiscal year 2026, including expenditures incurred to date, net of estimated landlord tenant improvement allowances,reimbursements, primarily to fund investments in new stores, remodels, maintenance capital expenditures and corporate capital expenditures. We expect to fund our capital expenditures with cash on hand and cash generated from operating activities.

Cash flows used in financing activities were $140.2$213.5 million for the thirteentwenty-six weeks ended MarchJune 29,28, 2026 compared to $219.1$293.7 million for the thirteentwenty-six weeks ended MarchJune 30,29, 2025. In both periods, the cash flows used in financing activities primarily consisted of stockrepurchases repurchases.of our common stock.

The Company had no long-term debt outstanding as of MarchJune 29,28, 2026 and December 28, 2025.

Our board of directors from time to time authorizes share repurchase programs for our common stock. The following table outlines the share repurchase program authorized by our board, and the related repurchase activity and available authorization as of MarchJune 29,28, 2026:

The shares under our current repurchase program may be purchased on a discretionary basis from time to time through the applicable expiration date,time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. Our board’s authorization of the share repurchase program does not obligate our Company to acquire any particular amount of common stock, and the repurchase program may be commenced, suspended, or discontinued at any time.

Subsequent to MarchJune 29,28, 2026 and through AprilJuly 27, 2026, we repurchased an additional 0.5 million shares of common stock for $40.0 million, excluding excise tax.

Our principal contractual obligations and commitments arising in the normal course of business consist of obligations under our Credit Agreement, interest on our Credit Agreement, operating and finance leases, purchase commitments and self-insurance liabilities. Except as otherwise disclosed in Note 4, “Long-Term Debt and Other Finance Obligations” and Note 6, "Commitments and Contingencies" of our unaudited consolidated financial statements, there have been no material changes outside the normal course of business as of MarchJune 29,28, 2026 in our contractual obligations and commitments from those reported in our Annual Report on2025 Form 10-K for the fiscal year ended December 28, 2025.10-K.

Food inflation and deflation isare affected by a variety of factors and our determination of whether to pass on the effects of inflation or deflation to our customers is made in conjunction with our overall pricing and marketing strategies, as well as our competitors’ responses. Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy.

There have been no substantial changes to these estimates, or the policies related to them during the thirteen and twenty-six weeks ended MarchJune 29,28, 2026. For a full discussion of these estimates and policies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in Part II — Item 7 of our Annual Report on2025 Form 10-K for the fiscal year ended December 28, 2025.10-K.