Grocery Outlet Holding (GO) risk factors, FY2024 10-K

Risks Related to Legal and Regulatory Risks

1. 01Risks Associated with our Indebtedness

Risks Related to Our Operations

1. 02We depend on suppliers to consistently supply us with opportunistic products at attractive pricing, which is generally not in our control
2. 03business, financial condition and results of operations, including our gross margin. As our store base continues to grow, our ability to secure opportunistic products in sufficient quantities may become more difficult
3. 04We may not be able to successfully identify trends to meet consumer demand and maintain an appropriate level of opportunistic products or general inventory
4. 05Our long-term success depends in part on our ability and the ability of the IOs to maintain or increase comparable store sales, and if we are unable to continue to achieve comparable store growth over the long-term, our profitability and performance could be materially adversely impacted
5. 06Significant disruption in our distribution network, our timely receipt of inventory, and adequate distribution center capacity and technology has had in recent years, and could continue to have, an adverse impact on our operating performance
6. 07We have also experienced ordering and inventory disruptions in recent years related to system issues at our third-party distribution centers. If similar circumstances were to occur and persist, they could have a material adverse impact on our operations and our ability to generate sales and earn profits
7. 08Our newly opened stores may negatively impact our financial results in the short-term and/or may not achieve sales and operating levels consistent with our more mature stores on a timely basis or at all
8. 09Our growth strategy is highly dependent on our ability to identify and open future store locations and relocate or remodel existing store locations in new and existing markets, and we are revising our near-term new store growth strategy as reflected in our Restructuring Plan
9. 10Our Restructuring Plan may have a material adverse impact on our results of operations and our estimated costs may differ substantially from actual costs incurred
10. 11If we fail to maintain our reputation and the value of our brand, including protection of our intellectual property rights, our sales and operating results may decline and the carrying value of our goodwill and other intangible assets may be impaired
11. 12We will require significant capital to fund our expanding business. If we are unable to maintain sufficient levels of cash flow from our operations, we may not be able to execute or sustain our growth strategy or we may require additional financing, which may not be available to us on satisfactory terms or at all
12. 13We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs
13. 14If we or our IOs are unable to attract, train and retain qualified employees, our financial performance may be negatively affected. Additionally, our success depends in part on our executive officers and other key personnel
14. 15Our success depends upon the successful implementation of our marketing, advertising and promotional efforts
15. 16changed shopping behaviors, disruptions to production, supply and delivery of products to our stores, staffing shortages, increased costs or disruptions to our information systems and other systems
16. 17We may incur losses not covered by our insurance or claims may differ from our estimates
17. 18Labor relation difficulties could materially adversely affect our business
18. 19Our failure to participate effectively in the growing online retail marketplace may adversely affect our business

Risks Related to Our Business Environment

1. 20Food retailers provide alternative options for consumers and compete aggressively to win those consumers; our failure to offer a compelling value proposition to consumers could limit our growth opportunities
2. 21If consumer trends move toward private label and away from name-brand products, our competitive position in the market may weaken. Additionally, our private label brands may not be successful and may increase certain risks that we face

Risks Related to Our IO Model

1. 22If we are unable to attract and retain qualified IOs, our financial performance may be negatively affected
2. 23If the IOs are not successful in managing their business, our financial results and brand image could be negatively affected
3. 24Failure of the IOs to repay IO Notes outstanding to us may materially adversely affect our financial performance
4. 25If the IOs are unable to avoid excess inventory shrink, our business and results of operations may be adversely affected
5. 26Our Operator Agreements may be terminated by either party and upon short notice, and any loss or changeover of an IO may cause material business disruptions
6. 27Legal proceedings initiated against the IOs could materially impact our business, reputation, financial condition, results of operations and cash flows
7. 28Any legal actions against the IOs may negatively affect the reputation of our brand, which could result in a reduction of our sales and operating cash flow, which could be material and which could adversely affect our business, financial condition and results of operations
8. 29Our success depends on our ability to maintain positive relationships with the IOs and any failure to maintain our relationships on positive terms could materially adversely affect our business, reputation, financial condition and results of operations
9. 30The IOs could take actions that could harm our business

Risks Related to Our Information Technology Systems, Data Protection and Cybersecurity

1. 31Any material challenges or difficulties in maintaining or updating our existing technology, including developing or implementing new technology could have a material adverse effect on our business or results of operations
2. 32Security breaches and other disruptions to our information technology networks and systems, including a disruption related to cybersecurity, could interfere with our operations and the operations of the IOs and our suppliers, any of which could have a material adverse effect on our business and financial performance

Legal and Regulatory Risks

1. 33Real or perceived concerns that products we and the IOs sell could cause unexpected side effects, illness, injury or death could expose us to lawsuits and harm our reputation, which could result in unexpected costs
2. 34We are subject to laws and regulations generally applicable to retailers. Compliance with, failure to comply with, or changes to such laws and regulations could have a material adverse effect on our business and financial performance
3. 35Legal proceedings from customers, suppliers, employees, governments or competitors could materially impact our business, reputation, financial condition, results of operations and cash flows
4. 36Our substantial indebtedness could materially adversely affect our financial condition and our ability to operate our business, react to changes in the economy or industry or pay our debts and meet our obligations under our debt and could divert our cash flow from operations for debt payments
5. 37In addition, subject to limited restrictions in our 2023 Credit Agreement, we may be able to incur substantial additional debt in the future
6. 38Restrictive covenants in our 2023 Credit Agreement may restrict our ability to pursue our business strategies, and failure to comply with any of these restrictions could result in acceleration of our debt

Risks Related to Accounting, Tax and Financial Statement Matters

1. 39Tax matters, including changes in tax laws, our ability to use deferred tax assets, and the impact of tax audits, could have a material adverse effect on our business, financial condition and results of operations
2. 40Changes in accounting rules or interpretations thereof, changes to underlying legal agreements as well as other factors applicable to our analysis of the IO entities as variable interest entities could significantly impact our ability to issue our financial statements on a timely basis

Risks Related to Our Common Stock

1. 41Future sales, or the perception of future sales, by us or our existing significant stockholders in the public market could cause the market price for our common stock to decline
2. 42Provisions in our organizational documents could delay or prevent a change of control
3. 43These provisions could make it more difficult for a third party to acquire us, even if the third-party's offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares