What the changes say
- Grocery Outlet is restructuring operations and shifting to company-operated stores in fiscal 2026, creating new financial and legal risks.
- The company recorded a massive $149 million goodwill impairment charge in fiscal 2025.
- Expanded private label lines and EBT/SNAP dependence introduce new regulatory and operational exposures.
What changed since the prior 10-K
New
- NewRisks Related to Our Operations
If we fail to successfully implement our long-term growth strategy, our operations, financial condition and operating results would be materially and adversely affected
We may fail to execute our revised near-term growth strategy, including the Restructuring Plan and Optimization Plan, leading to unexpected costs and disrupted operations.
- NewRisks Related to Our Operations
reputation with landlords, employees, IOs, and other stakeholders, and we may not realize the intended benefits from these actions to the extent or as quickly as anticipated
The Optimization Plan may spark lease disputes with landlords, harm our reputation, exceed budget, and fail to deliver anticipated sublease pricing.
- NewRisks Related to Our Operations
We plan to operate certain of our newly opened stores in fiscal 2026 as Company-operated stores and may utilize this approach thereafter, which differs from our historical practice and subjects us to additional risks and uncertainties
Operating certain new 2026 stores as Company-operated rather than through Independent Operators exposes us to direct labor, employment, and general liability claims.
- NewRisks Related to Our Operations
If we fail to maintain our reputation and the value of our brand, the carrying value of our goodwill and other intangible assets may be impaired
We recorded a $149.0 million non-cash goodwill impairment charge in fiscal 2025 and face risks of further asset write-downs if brand value declines.
- NewRisks Related to Our Operations
stores and further invest in the business. Further, our plans to grow our store base may create cash flow pressure if new locations do not perform as projected
Our store expansion plans may create cash flow pressure and force us to seek dilutive equity or restrictive debt financing if new locations underperform.
- NewRisks Related to Our Operations
While we have entered into partnerships with three third party grocery delivery companies to provide online shopping at our stores, certain of our competitors and a number of pure online retailers have established robust online operations and significantly increased their online sales and presence in recent years
Our lack of a robust online retail presence compared to online competitors may reduce sales, and expanding online delivery could yield negative returns.
- NewRisks Related to Our Business Environment
Our private label brands may not be successful and may increase certain risks that we face
Introducing private label products in fiscal 2024 exposes us to potential product liability, labeling, and third-party intellectual property claims.
- NewLegal and Regulatory Risks
regulations related to refrigeration and stormwater, pursuant to which we and/or the IOs could be strictly and jointly and severally liable, regardless of our knowledge of or responsibility
Changes to EBT regulations or SNAP benefits, alongside a fourth-quarter 2025 government shutdown, threaten customer spending and our store registrations.
Dropped
- DroppedRisks Related to Our Operations
business, 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
- DroppedRisks Related to Our Operations
Our Restructuring Plan may have a material adverse impact on our results of operations and our estimated costs may differ substantially from actual costs incurred
- DroppedRisks Related to Our Operations
changed 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
Difficulty in securing sufficient quantities of opportunistic products from suppliers as store base grows.
- DroppedRisks Related to Our Operations
Our failure to participate effectively in the growing online retail marketplace may adversely affect our business
- DroppedRisks Related to Our Business Environment
If 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
Reworded
- 74% rewrittenRisks Related to Our Operations
We 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
Added the operational cost of running Company-operated stores as a potential strain on cash flow alongside existing expansion needs.
- 73% rewrittenRisks Related to Our Operations
We depend on suppliers to consistently supply us with opportunistic products at attractive pricing, which is generally not in our control
Explicitly added gross margin to the potential adverse impacts of failing to source opportunistic products.
- 62% rewrittenRisks Related to Our Operations
Our long-term 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
Updated to reference the newly adopted Optimization Plan alongside the ongoing Restructuring Plan affecting new store growth.
Was: Our 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
- 60% rewrittenLegal and Regulatory Risks
Our 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
Updated credit facility debt figures, showing $273.8 million in term loans and $220.0 million in revolvers outstanding as of January 3, 2026.
- 56% rewrittenLegal and Regulatory Risks
We 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
Retained standard regulatory compliance risk language without substantive alterations.
- 54% rewrittenRisks Related to Our Operations
If 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
Maintained brand reputation and social standards risk language with minor stylistic edits.
Was: If 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
- 53% rewrittenRisks Related to Our Operations
Our success depends upon the successful implementation of our marketing, advertising and promotional efforts
Retained marketing and promotional strategy risk text without substantive changes.
- 52% rewrittenRisks Related to Our Operations
We may incur losses not covered by our insurance or claims may differ from our estimates
Retained insurance coverage limitations and uninsured losses text without substantive changes.
- 44% rewrittenRisks Related to Our Operations
Labor relation difficulties could materially adversely affect our business
- 39% rewrittenRisks Related to Our Operations
Significant disruption in our distribution and transportation network, our timely receipt of inventory, and adequate distribution center capacity and technology have had in recent years, and could continue to have, an adverse impact on our operating performance
Was: Significant 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
- 39% rewrittenRisks Related to Our IO Model
Failure of the IOs to repay IO Notes outstanding to us may materially adversely affect our financial performance
- 38% rewrittenRisks Related to Our Operations
We 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
- 34% rewrittenRisks Related to Our Operations
We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs
- 33% rewrittenRisks Related to Our Operations
If we are not able to continue to achieve comparable store growth over the long term, our profitability and performance could be materially adversely impacted
Was: Our 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
- 32% rewrittenRisks Related to Our IO Model
If we are unable to attract and retain qualified IOs, our financial performance may be negatively affected
- 28% rewrittenRisks Related to Our Operations
If 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
- 26% rewrittenLegal and Regulatory Risks
Legal proceedings from customers, suppliers, employees, governments or competitors could materially impact our business, reputation, financial condition, results of operations and cash flows
- 24% rewrittenRisks Related to Our Operations
Our 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
- 21% rewrittenRisks Related to Our Operations
We may not be able to successfully identify trends to meet consumer demand and maintain an appropriate level of opportunistic products or general inventory
All 46 risk factors
Headings as the filing states them, in filing order.
Risks Related to Legal and Regulatory Risks
- 01Risks Associated with our Indebtedness
Risks Related to Our Operations
- 02We depend on suppliers to consistently supply us with opportunistic products at attractive pricing, which is generally not in our control73% rewritten
- 03We may not be able to successfully identify trends to meet consumer demand and maintain an appropriate level of opportunistic products or general inventory21% rewritten
- 04If we are not able to continue to achieve comparable store growth over the long term, our profitability and performance could be materially adversely impacted33% rewritten
- 05Significant disruption in our distribution and transportation network, our timely receipt of inventory, and adequate distribution center capacity and technology have had in recent years, and could continue to have, an adverse impact on our operating performance39% rewritten
- 06We 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 profits38% rewritten
- 07Our 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 all24% rewritten
- 08Our long-term 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 markets62% rewritten
- 09If we fail to successfully implement our long-term growth strategy, our operations, financial condition and operating results would be materially and adversely affectedNew
- 10reputation with landlords, employees, IOs, and other stakeholders, and we may not realize the intended benefits from these actions to the extent or as quickly as anticipatedNew
- 11We plan to operate certain of our newly opened stores in fiscal 2026 as Company-operated stores and may utilize this approach thereafter, which differs from our historical practice and subjects us to additional risks and uncertaintiesNew
- 12If 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 decline54% rewritten
- 13If we fail to maintain our reputation and the value of our brand, the carrying value of our goodwill and other intangible assets may be impairedNew
- 14We 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 all74% rewritten
- 15stores and further invest in the business. Further, our plans to grow our store base may create cash flow pressure if new locations do not perform as projectedNew
- 16We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs34% rewritten
- 17If 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 personnel28% rewritten
- 18Our success depends upon the successful implementation of our marketing, advertising and promotional efforts53% rewritten
- 19We may incur losses not covered by our insurance or claims may differ from our estimates52% rewritten
- 20Labor relation difficulties could materially adversely affect our business44% rewritten
- 21While we have entered into partnerships with three third party grocery delivery companies to provide online shopping at our stores, certain of our competitors and a number of pure online retailers have established robust online operations and significantly increased their online sales and presence in recent yearsNew
Risks Related to Our Business Environment
- 22Food 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
- 23Our private label brands may not be successful and may increase certain risks that we faceNew
Risks Related to Our IO Model
- 24If we are unable to attract and retain qualified IOs, our financial performance may be negatively affected32% rewritten
- 25If the IOs are not successful in managing their business, our financial results and brand image could be negatively affected
- 26Failure of the IOs to repay IO Notes outstanding to us may materially adversely affect our financial performance39% rewritten
- 27If the IOs are unable to avoid excess inventory shrink, our business and results of operations may be adversely affected
- 28Our 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
- 29Legal proceedings initiated against the IOs could materially impact our business, reputation, financial condition, results of operations and cash flows
- 30Any 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
- 31Our 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
- 32The IOs could take actions that could harm our business
Risks Related to Our Information Technology Systems, Data Protection and Cybersecurity
- 33Any 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
- 34Security 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
- 35Real 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
- 36We 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 performance56% rewritten
- 37regulations related to refrigeration and stormwater, pursuant to which we and/or the IOs could be strictly and jointly and severally liable, regardless of our knowledge of or responsibilityNew
- 38Legal proceedings from customers, suppliers, employees, governments or competitors could materially impact our business, reputation, financial condition, results of operations and cash flows26% rewritten
- 39Our 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 payments60% rewritten
- 40In addition, subject to limited restrictions in our 2023 Credit Agreement, we may be able to incur substantial additional debt in the future
- 41Restrictive 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
- 42Tax 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
- 43Changes 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
- 44Future 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
- 45Provisions in our organizational documents could delay or prevent a change of control
- 46These 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
Other Grocery Outlet Holding 10-Ks
- FY2024 10-K risk factors43 risks
Grocery Outlet relies heavily on independent operators for store execution and opportunistic supplier inventory sourcing. Geographic concentration in California and a new restructuring plan dominate its risk profile.
Filed Feb 26, 2025
About this page
The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.