Bob's Discount Furniture, Inc.: Form 10-Q for the period ended Jun 28, 2026

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide readers of our condensed consolidated financial statements with the perspectives of management. MD&A presents in narrative form information regarding our financial condition, results of operations, liquidity and certain other factors that may affect our future results. This is intended to allow the readers of this report to obtain a comprehensive understanding of our businesses, strategies, current trends and future prospects. MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report on Form 10-Q and in the audited consolidated financial statements and thereto as of and for the year ended December 28, 2025 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2025 Annual Report. Some of the information included in MD&A or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” sections included in our 2025 Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

Bob’s Discount Furniture is a rapidly growing, nationally proven omnichannel retailer of value home furnishings with 218 showrooms as of June 28, 2026 across 27 U.S. states. We offer quality, stylish products at everyday low prices below our value-oriented furniture competitors’ lowest promoted prices. Our value proposition is made possible by our curated merchandising strategy, with SKU counts approximately one-third narrower than value-oriented furniture competitors, longstanding sourcing relationships and efficient supply chains.

Our showrooms provide a convenient and fun shopping experience, supported by our trained, tech-enabled guest experience specialists. Our omnichannel capabilities allow customers to shop in-store, online, over the phone and via our mobile app. We leverage efficient fulfillment services to ensure most purchases can be delivered in as few as three days.

We have a proven, profitable and portable store model that has produced consistent financial returns across vintages, geographic regions and population densities. Nearly all of our stores were profitable on a four-wall basis in fiscal year 2025 and we expect new stores to achieve average unit volumes (“AUVs”) of $9.0 million, cash-on-cash returns exceeding 80% by their fifth year of operation, with returns exceeding 60% by year two and a payback period of approximately two years. We believe our business model and new store unit economics, plus the expansive and fragmented home furnishings industry, provides us with an opportunity to expand our store base in both existing and new geographies to over 500 stores by 2035. Our ability to open profitable new stores depends on multiple factors, including our ability to identify suitable markets and sites, negotiate leases with acceptable terms, support new locations with qualified managers and achieve brand awareness in new markets. For further information see “Item 1A. Risk Factors—Risks Related to Our Business” in our 2025 Annual Report.

During the second quarter of fiscal year 2026, we continued to make progress to support our key long-term growth strategies. Accomplishments within the quarter include the following:

• amending our Asset Based Revolving Credit Facility (“Revolving Credit Facility”) increasing the maximum availability from $125.0 million to $200.0 million and extending the maturity date to April 2031;
• opening four new stores and expanding our footprint into South Carolina, our 27th state; and
• delivering comparable sales growth of 2.3% through increases in average order value (“AOV”) and conversion.

Tariffs

In early 2025, the U.S. Government began imposing significant new or increased tariffs on goods imported into the U.S. from numerous countries from which the Company sources merchandise. The global trade environment remains fluid and highly uncertain in 2026. The U.S. Government imposes a 25% tariff on imports of certain upholstered wooden furniture, which is scheduled to increase to 30% on January 1, 2027.

In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the U.S. Government exceeded its statutory authority, thereby invalidating many, but not all, of such tariffs. The U.S. presidential administration has indicated that it may seek to reinstate all or a portion of these tariffs under alternative legal authorities or mechanisms. These rulings have also introduced uncertainty regarding the timing and ultimate realization of potential refunds of tariffs previously paid, although U.S. Customs and Border Protection (“CBP”) has established a process to administer such refund claims. During the second quarter of fiscal year 2026, the Company received approval from the CBP for $45.1 million in

International Emergency Economic Powers Act (“IEEPA”) tariff refund claims. Of this amount, we recognized $37.9 million of tariff refund claims related to inventory previously sold, which reduced costs of sales and favorably impacted gross profit for the period. Additionally, we recognized $1.5 million of related interest income, and a $5.7 million reduction to inventory related to tariff refund claims attributable to inventory on hand at quarter end. At June 28, 2026, we had a receivable of $41.9 million associated with these tariff refund claims, which was received subsequent to fiscal quarter end. The tariff refunds and related interest income recognized during the fiscal quarter materially affected the comparability of our results of operations relative to prior periods and are not indicative of future period results.

In April 2026, the President issued a proclamation that reduced the tariff rate on steel and aluminum derivative products from 50% to 25%, while modifying the duty application from applying only the metal content in metal-containing products to applying the duty to the full customs value of the imported product. The proclamation excluded certain products, including the Company's covered products from the Section 232 steel and aluminum duties; as a result, the Company's affected products became subject to the temporary 10% surcharge imposed under Section 122. Effective July 24, 2026, the Section 122 temporary surcharge expired and affected products are now subject to tariffs under Section 301 at rates generally ranging from 10% to 12.5%, depending on country of origin. We will continue to monitor developments related to trade policy, tariffs and tariff refund claims, evaluate their impact on the Company and make appropriate sourcing, pricing and other operational decisions as appropriate to manage the potential impact on our financial condition, results of operations and cash flows.

Geopolitical Events

Since late February 2026, the conflict in Iran has resulted in heightened volatility in fuel prices and geopolitical uncertainty. Geopolitical events, increased fuel prices and geopolitical uncertainty, including changes in U.S. tariff policy, has in the past resulted in supply chain disruptions, increased costs and impacts on consumer spending. Such events could materially increase the cost and reduce or delay the supply of our products and impacted discretionary consumer spending, which may adversely affect our business, financial condition, results of operations, liquidity and stock price. See “Item 1A. Risk Factors” in our 2025 Annual Report, including the risk factor titled “Our business, results of operations and financial condition may be adversely affected by global economic conditions and the effect of economic pressures, including inflation, and other business factors on discretionary consumer spending and consumer preferences.” We will continue to monitor developments in, and the impacts of, such conflicts and geopolitical events and uncertainties and evaluate their impact on the Company, and make appropriate sourcing and pricing decisions in an effort to minimize any impacts on our financial condition and results of operations.

How We Assess the Performance of Our Business

We consider a variety of performance and financial measures in assessing the performance of our business. In addition to our results determined in accordance with U.S. GAAP, we regularly review key performance indicators (“KPIs”) and certain non-GAAP financial measures, including adjusted gross profit, adjusted net income and adjusted earnings before interest, tax expense/(benefit), depreciation and amortization (“adjusted EBITDA”), to evaluate our business, measure our performance, identify trends in our business, prepare projections and make strategic decisions. We believe that these non-GAAP financial measures and KPIs are useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. The non-GAAP financial measures and KPIs presented herein are specific to us and may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating them. The key measures we use to determine how our business is performing are: net revenues, gross profit and gross margin, SG&A, operating income, net income, comparable sales growth, number of new stores, number of stores, adjusted gross profit, adjusted net income and adjusted EBITDA.

Net Revenues

We recognize revenue when merchandise is transferred or services are provided to the customer. This primarily occurs when inventory is delivered and accepted by the customer and also occurs when inventory is purchased and picked up at a retail store or distribution center. The revenue from delivery and the sale of our third-party product protection plan, Goof Proof, net of costs, is recognized at the time of the delivery of the related merchandise to the customer. Net revenues are presented net of returns and sales tax.

Gross Profit and Gross Margin

Gross profit is equal to our net revenues less our cost of sales. Cost of sales consists of actual product cost, the cost of transportation between our warehouses, suppliers, depots and retail stores and to deliver to customers’ homes, warranty costs, the cost of warehousing, inventory reserves and write-downs, and inventory shrinkage. Gross margin is gross profit as a percentage of our net revenues. Our gross margin is impacted by product mix, as some products generally provide higher gross margins, and by our merchandise costs and retail prices. Gross margin is also impacted by freight costs, the costs of distributing and transporting product to our stores, and occupancy costs related to distribution operations.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses include the costs of selling our products and other general and administrative costs. Selling expenses consist primarily of compensation and benefits for our employees performing various sales functions, the occupancy costs of our retail stores and transaction losses. Compensation includes both variable costs, including commissions related to net revenue, and salaries and benefits. We expect certain of these expenses to continue to increase as we open new stores, develop new product categories and otherwise pursue our current business initiatives. General and administrative expenses included in SG&A expenses comprise primarily advertising expense, excluding pre-opening related costs, compensation and benefit costs for administrative employees, stock-based compensation, bank charges, and other administrative costs.

We expect that our SG&A expenses will increase in future periods due to additional legal, finance, insurance and other expenses that we expect to incur as a result of being a public company.

Pre-opening expenses

Pre-opening expenses include costs associated with opening new stores and new distribution centers for the duration of setup and preparation for opening. These costs primarily consist of rent and related occupancy expenses, marketing, payroll, and initial legal, permit, recruiting, and supplies expenses.

Operating Income

Operating income is gross profit less SG&A expenses, pre-opening expenses, loss (gain) on disposal of fixed assets, impairment of long-lived assets, restructuring charges and insurance recoveries. Operating income excludes interest income or expense, and income tax expense. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.

Net Income

Net income is operating income less other expense, net, and income tax expense.

Key Performance Indicators and Non-GAAP Financial Measures

Comparable Sales Growth

Comparable sales growth measures performance during the current reporting period against the performance of the comparable store sales and of the eCommerce sales in the corresponding period of the previous fiscal year. Comparable store sales consist of revenues from our stores beginning on the first day of the 14th full fiscal month following the store’s opening, which is when we believe comparability is achieved. eCommerce sales consist of revenues from online purchases during the current reporting period. Any change in the square footage of an existing comparable store, including for remodels and relocations within the same primary trade area of the existing store being relocated, does not eliminate that store from inclusion in the calculation of comparable store sales.

Opening new stores is a critical component of our growth strategy. Accordingly, comparable sales growth is only one measure we use to assess the success of our growth strategy. Definitions and calculations of comparable sales differ among companies in the retail industry; therefore, comparable sales growth disclosed by us may not be comparable to the metrics disclosed by other companies.

Various factors affect comparable sales growth, including:

• national and regional economic trends;
• adverse weather conditions and other seasonal factors;
• housing affordability;
• the retail sales environment and other retail trends;
• the impact of competition;
• changes in our merchandise mix;
• the ability to identify and respond effectively to regional consumer preferences;
• spending habits of our customers, including levels of discretionary income;
• pricing;
• the growth of our channel mix in eCommerce;
• the ability to source and distribute products efficiently; and
• the use and timing of advertising and holiday events.

Number of Stores and Number of New Stores

The number of stores reflects the number of stores as of a particular date. The number of new stores reflects the number of stores opened during a particular reporting period. New stores require an initial capital investment from us for store build-outs, fixtures and equipment that we amortize over time, as well as cash required for inventory and pre-opening expenses. We expect new store growth to be the primary driver of our net revenue growth over the long-term. We lease all of our store locations. Our typical initial lease terms are approximately 10 to 15 years with options to renew for two successive five-year periods.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted gross profit is defined as gross profit less items that are not indicative of ongoing business operations and performance, including refunds related to duties previously paid under IEEPA. Adjusted gross margin is defined as adjusted gross profit as a percentage of net revenues. We believe that excluding items from gross profit and gross margin that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and is useful for analyzing trends in our business.

Adjusted Net Income and Adjusted EBITDA

Adjusted net income is defined as net income less items that are not indicative of the operating performance of the business, including, but not limited to, IEEPA tariff refunds and related interest income, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long-lived assets, senior executive termination benefits, management fee and other expenses and income not indicative of ongoing business operations and performance.

We define EBITDA as net income before interest expense, interest income, income tax expense/(benefit), and depreciation and amortization expenses. Adjusted EBITDA represents EBITDA as further adjusted for items that are not indicative of the operating performance of the business, including but not limited to, stock-based compensation expense, IEEPA tariff refunds, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long lived assets, senior executive termination benefits, management fee and other expenses or income not indicative of ongoing business operations and performance.

Adjusted net income and adjusted EBITDA are key metrics used by management and our Board of Directors to assess our financial performance. We use these non-GAAP measures to evaluate the effectiveness of our business strategies, to make budgeting decisions, to evaluate our performance in connection with compensation decisions and to compare our performance against that of peer companies using similar measures. These non-GAAP measures are frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. Management believes it is useful for investors and analysts to be able to evaluate these non-GAAP measures to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period-to-period comparisons. We believe that excluding items from net income and adjusted EBITDA that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and is useful for analyzing trends in our business.

Adjusted net income and adjusted EBITDA are non-GAAP financial measures and should not be considered as alternatives to net income as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted net income and adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. There can be no assurance that we will not modify the presentation of adjusted net income and adjusted EBITDA, and any such modification may be material. Our presentation of adjusted net income and adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. In addition, other companies, including companies in our industry, may not calculate adjusted net income and adjusted EBITDA at all or may calculate adjusted net income and adjusted EBITDA differently and accordingly, are not necessarily comparable to similarly entitled measures of other companies, which reduces the usefulness of adjusted net income and adjusted EBITDA as tools for comparison.

Adjusted net income and adjusted EBITDA have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that adjusted net income and adjusted EBITDA:

• do not reflect every expenditure, future requirements for capital expenditures or contractual commitments;
• do not reflect changes in our working capital needs;
• do not reflect income tax expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate;
• do not reflect non-cash equity compensation, which will remain a key element of our overall equity-based compensation package; and
• do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations.

Although depreciation and amortization are eliminated in the calculation of adjusted EBITDA, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any costs of such replacements.

Management compensates for these limitations by primarily relying on our GAAP results, while using adjusted net income and adjusted EBITDA as supplements to the corresponding GAAP financial measures.

Results of Operations

The following tables summarize key components of our results of operations for the periods indicated:

(in thousands)

(1) NM refers to a value that is not meaningful.

Key Performance Indicators and Non-GAAP Financial Measures(1)

(in thousands, except percentages and number of stores)

(1) Our KPIs are discussed and defined in the section titled "—Key Performance Indicators and Non-GAAP Financial Measures."

(2) Adjusted gross profit, adjusted net income and adjusted EBITDA are non-GAAP financial measures. Refer to "—Reconciliation of Non-GAAP Financial Measures" for reconciliation to the most comparable GAAP financial measures.

Comparison of the three-month fiscal periods ended June 28, 2026 and June 29, 2025

Net Revenues

Net revenues increased $50.0 million or 8.8%, in the three months ended June 28, 2026 compared to the corresponding prior year period. Our retail channel increased $29.2 million, or 6.0%, and our eCommerce channel increased $20.8 million, or 24.1% for the three months ended June 28, 2026 compared to the corresponding prior year period. The increase in total net revenues was primarily due to non-comparable sales of $41.0 million and comparable sales growth.

Comparable sales increased 2.3% in the three months ended June 28, 2026, predominately driven by increases in AOV and higher conversion, partially offset by lower in-store traffic.

Gross Profit and Gross Margin

Gross profit increased $54.7 million or 20.7% in the three months ended June 28, 2026 compared to the corresponding prior year period. This increase was primarily driven by $37.9 million in IEEPA tariff refunds and the impact of higher net revenues, partially offset by higher freight costs. Our results in the corresponding prior year benefited from unusually favorable freight rates.

Gross margin increased to 51.5% in the three months ended June 28, 2026, which is inclusive of $37.9 million in IEEPA tariff refunds discussed above. Excluding the tariff refunds, adjusted gross margin was 45.4% compared to 46.4% in the corresponding prior year period. The decrease was primarily due to higher freight costs as discussed above, partially offset by favorable product mix shift into the “Better” product category and, to a lesser extent, the “Best” product category relative to historical levels, as well as higher protection plan and delivery margins.

Selling, General and Administrative Expenses

SG&A increased $20.0 million or 9.3% in the three months ended June 28, 2026 compared to the corresponding prior year period, primarily due to increases in payroll-related expenses of $5.6 million related to new store growth, higher occupancy costs of approximately $5.4 million related to new stores and increases in rent in existing stores, and growth in marketing spend of $6.0 million.

SG&A as a percentage of revenue of 37.9% in the three months ended June 28, 2026 increased slightly compared to 37.7% in the corresponding prior year period. The increase was primarily driven by incremental marketing and occupancy expense associated with new store growth, particularly greenfield expansion, and was partially offset by efficiencies at existing stores.

Insurance Recoveries

The Company did not recognize any insurance recoveries in the second quarter of fiscal year 2026. In the three months ended June 29, 2025, we received $4.5 million in insurance recoveries for lost profits associated with an information technology system outage and the related interruption of our business that occurred at the end of September 2024.

Interest Expense

Interest expense in the three months ended June 28, 2026 increased $0.7 million compared to the corresponding prior year period primarily due to higher amounts outstanding under the Revolving Credit Facility, partially offset by a lower weighted average interest rate.

Interest Income

Interest income in the three months ended June 28, 2026 increased $1.4 million compared to the corresponding prior year period, primarily related to interest earned on duties previously paid under IEEPA.

Other Income, Net

Other income, net in the three months ended June 28, 2026 increased $1.3 million compared to the corresponding prior year period, due to a bankruptcy settlement associated with a former vendor.

Income Tax Expense

Income tax expense in the three months ended June 28, 2026 increased $9.2 million compared to the corresponding prior year period, primarily due to higher pre-tax earnings. The effective income tax rate of 27.3% for the three months ended June 28, 2026 increased from 26.2% in the corresponding prior year period, primarily due to higher state tax costs and an increase in non-deductible executive compensation expense resulting from the Company's transition to a publicly traded company in 2026 and the application of the executive compensation deduction limitations under applicable U.S. tax laws.

(in thousands)

(1) NM refers to a value that is not meaningful.

Key Performance Indicators and Non-GAAP Financial Measures(1)

(in thousands, except percentages and number of stores)

(1) Our KPIs are discussed and defined in the section titled "—Key Performance Indicators and Non-GAAP Financial Measures."

(2) Adjusted gross profit, adjusted net income and adjusted EBITDA are non-GAAP financial measures. Refer to "-Reconciliation of non-GAAP Financial Measures" for reconciliation to the most comparable GAAP financial measures.

Comparison of the six-month fiscal periods ended June 28, 2026 and June 29, 2025

Net Revenues

Net revenues increased $95.4 million or 8.7% in the six months ended June 28, 2026 compared to the corresponding prior year period. Our retail channel increased $63.4 million, or 6.8%, and our eCommerce channel increased $32.0 million, or 18.9% for the six months ended June 28, 2026 compared to the corresponding prior year period. The increase in total net revenues was primarily due to non-comparable sales of $84.3 million and comparable sales growth discussed below.

Comparable sales increased 1.8% in the six months ended June 28, 2026, predominately driven by higher AOV and conversion, partially offset by lower in-store traffic.

Gross Profit and Gross Margin

Gross profit increased $74.6 million or 14.9% in the six months ended June 28, 2026 compared to the corresponding prior year period, primarily driven by $37.9 million in IEEPA tariff refunds and the impact of higher net revenues partially offset by higher freight costs.

Gross margin increased to 48.1% in the six months ended June 28, 2026, which is inclusive of $37.9 million in IEEPA tariff refunds. Excluding the tariff refunds, adjusted gross margin was 44.9% compared to 45.4% in the corresponding prior year period. The decrease was primarily due to higher freight costs, partially offset by customer preference for the “Better” product category mix relative to historical levels, as well as higher protection plan and delivery margins.

Selling, General and Administrative Expenses

SG&A increased $39.5 million or 9.2% in the six months ended June 28, 2026 compared to the corresponding prior year period, primarily due to increases in payroll-related expenses of $11.5 million related to new store growth, higher occupancy costs of approximately $11.4 million related to new stores and increases in rent in existing stores, growth in marketing spend of $10.8 million, and an increase in depreciation expense of $3.6 million. Additionally contributing to higher SG&A was a $2.0 million fee associated with the termination of our advisory agreement with Bain Capital upon consummation of our IPO.

SG&A as a percentage of revenue increased slightly to 39.3% in the six months ended June 28, 2026 compared to 39.1% in the corresponding prior year period due to incremental marketing and occupancy expense associated with new stores, particularly greenfield market expansion, and the $2.0 million termination fee associated with the advisory agreement with Bain Capital, substantially offset by efficiencies at existing stores.

Pre-Opening Expenses

Pre-opening expenses increased $1.9 million in the six months ended June 28, 2026 compared to the corresponding prior year period driven by the timing of new store openings in the current year.

Restructuring Charges

In the first quarter of fiscal year 2025, the Company identified efficiencies to optimize overhead costs resulting in workforce reductions at the corporate headquarters. Restructuring costs of $0.3 million were recognized in the six month fiscal period ended June 29, 2025 for these workforce reductions. No significant restructuring actions were initiated during the six-month fiscal period ended June 28, 2026.

Insurance Recoveries

In the six-month fiscal periods ended June 28, 2026 and June 29, 2025, the Company received $0.7 million and $4.5 million, respectively, in insurance recoveries for lost profits associated with an information technology system outage and the related interruption of our business that occurred at the end of September 2024.

Interest Expense

Interest expense in the six-month fiscal period ended June 28, 2026 increased $15.1 million compared to the corresponding prior year period driven by the acceleration of $10.7 million in debt issuance costs in connection with the pay down of the Term Loan and interest expense associated with higher average outstanding borrowings, partially offset by a lower weighted average interest rate.

Interest Income

Interest income in the six-month fiscal period ended June 28, 2026 increased $1.2 million compared to the corresponding prior year period, primarily related to interest earned on duties previously paid under IEEPA.

Other Income, Net

Other income, net in the six-month fiscal period ended June 28, 2026 increased $0.7 million compared to the corresponding prior year period, primarily due a bankruptcy settlement associated with a former vendor, partially offset by the absence of income earned on our interest rate cap which matured in the third quarter of fiscal year 2025.

Income Tax Expense

Income tax expense increased $4.3 million for the six-month fiscal period ended June 28, 2026, compared to the corresponding prior year period, primarily due to higher pre-tax income. The effective tax rate of 26.2% for the six-month fiscal period ended June 28, 2026 remained flat when compared to the corresponding prior year period, primarily driven by an increase in state tax costs and an increase in non-deductible executive compensation resulting from the Company's transition to a publicly traded company in 2026 and the application of the executive compensation deduction limitations under applicable U.S. tax laws, offset by a larger excess tax benefit from stock-based compensation and an increase in research and development tax credits.

Reconciliation of Non-GAAP Financial Measures

The following tables show a reconciliation of non-GAAP financial measures used in this filing to the most directly comparable GAAP financial measures.

(1) Represents the IEEPA tariff refunds recognized in the three and six-month fiscal periods ended June 28, 2026. See “Note 2, Summary of Significant Accounting Policies” for further information on IEEPA tariff refunds.

(in thousands except percentages)

(1) Represents the IEEPA tariff refunds and $1.5 million in related interest income recognized in the three and six-month fiscal periods ended June 28, 2026. See “Note 2, Summary of Significant Accounting Policies” for further information on IEEPA tariff refunds.

(2) Represents the acceleration of debt issuance costs in connection with the repayment of the Term Loan in the six-month fiscal period ended June 28, 2026. See “Note 3, Long-Term Debt” for further information on the Term Loan.

(3) Represents management fees paid in accordance with our Advisory Agreement with our controlling stockholder, which terminated in connection with the IPO. Included in the activity for the six-month fiscal period ended June 28, 2026 is a termination fee of $2.0 million. See “Item 13. Certain Relationships, Related Transactions and Director Independence—Advisory Agreement” in the 2025 Annual Report for further information on the Advisory Agreement.

(4) Represents the acceleration of a bonus from our financing partner due to the termination of the agreement.

(5) Other (income) expenses, net represents income and costs that are not indicative of ongoing business operations and performance, including, but not limited to, third-party professional fees related to the IPO, litigation matters outside the ordinary course of business, bankruptcy settlements, and senior executive termination benefits.

(6) Represents the IEEPA tariff refunds excluding interest income recognized in the three and six-month fiscal periods ended June 28, 2026. See “Note 2, Summary of Significant Accounting Policies” for further information on IEEPA tariff refunds.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $200.0 million Revolving Credit Facility. Our primary cash needs have historically been for merchandise inventories, payroll, advertising, rent, interest payments, and capital expenditures associated with opening new stores and updating existing stores, as well as the development of our infrastructure and information technology. We expect further investments in inventory to be commensurate with higher sales from new stores and comparable sales growth. We expect that our cash on hand, cash generated from operations and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet our liquidity requirements for at least the next twelve months. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. At June 28, 2026, we had total liquidity of $176.6 million, comprised of cash and cash equivalents of $32.0 million and available borrowing capacity of $144.6 million. This excludes a receivable of $41.9 million associated with IEEPA tariff refunds, which was received subsequent to fiscal quarter end.

Material Cash Commitments

We consider our material contractual obligations when assessing liquidity.

Debt and Related Interest Payments

At June 28, 2026, we had no amounts outstanding under our Revolving Credit Facility. The Company amended its Revolving Credit Facility on April 29, 2026, increasing the maximum availability from $125.0 million to $200.0 million and extending the maturity date to April 2031. Interest payments on our financing arrangements for the fiscal year ending January 3, 2027 (“fiscal year 2026”) will be dependent on our cash flow needs and any short-term borrowing under our Revolving Credit Facility in fiscal year 2026. The interest rate and subsequent payments related to the Revolving Credit Facility are dependent on the Secured Overnight Financing Rate (“SOFR”).

In fiscal year 2025, we entered into a $350.0 million Term Loan having a maturity date of October 31, 2032. The Company was required to prepay the Term Loan with any proceeds received from an IPO of the Company’s common shares. In the first quarter of fiscal year 2026, the Company repaid the Term Loan using net proceeds from the IPO, cash on hand and borrowings under the Revolving Credit Facility. In connection with the Term Loan, we paid $3.3 million in interest payments in the first quarter of fiscal year 2026.

We may be impacted by increases in interest rates on debt outstanding; to mitigate this risk, we evaluate interest rate cap agreements to manage our exposure to interest rate movements.

Leasing

Future rental payments for operating and financing leases total $1.4 billion and $102.2 million, respectively, as of June 28, 2026.

Capital Expenditures

Historically, we have invested significant capital in opening new stores and distribution centers and we anticipate additional capital expenditures as we open more stores and distribution centers. Our capital expenditures are related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received. Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. New stores may require different levels of capital investment on our part in the future. Total capital expenditures, net of tenant allowances, were $47.3 million for the six-month fiscal period ended June 28, 2026. Total estimated capital expenditures, net of tenant allowances for fiscal year 2026 are expected to be in the range of approximately $110.0 million to $115.0 million, the largest portion of which is expected to relate to new and remodeled stores and a new distribution center.

Restricted Cash

The Company maintains certain cash balances that are restricted as to withdrawal or use. Restricted cash is comprised primarily of cash used as collateral with the Company’s insurance carrier related to a portion of our workers’ compensation and automobile insurance obligations. At June 28, 2026 and December 28, 2025, we had $10.2 million and $9.4 million in restricted cash, respectively.

Cash Flow Analysis

The following table provides a summary of our cash provided by operating, investing and financing activities:

Operating Activities

Net cash provided by operating activities in the six months ended June 28, 2026 was $93.1 million, primarily resulting from our net income of $60.3 million and non-cash charges of $91.7 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $58.9 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $41.9 million increase in tariff refunds receivable, a $28.1 million increase in operating leases, a $10.9 million decrease in accrued expenses, a $10.8 million increase in accounts receivable, a $7.1 million increase in prepaid and other current assets, and a $4.4 million increase in other assets, all partially offset by a $21.8 million increase in accounts payable, a $9.6 million increase in customer deposits, an $8.4 million increase in other long-term liabilities and a $4.4 million decrease in inventories.

Net cash provided by operating activities in the six months ended June 29, 2025 was $36.2 million, primarily resulting from our net income of $48.4 million and non-cash charges of $74.2 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $86.4 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $41.8 million decrease in accounts payable, a $24.3 million increase in operating leases, a $14.8 million increase in inventories, a $7.2 million decrease in accrued expenses, a $3.3 million increase in prepaid and other current assets, and a $2.2 million increase in accounts receivable, all partly offset by a $7.3 million increase in customer deposits.

Investing Activities

Net cash used in investing activities in the six months ended June 28, 2026 was $59.9 million, which consisted primarily of purchases of property and equipment associated with new store openings in the six months ended June 28, 2026 together with investments in a new distribution center, trailers, and business information systems.

Net cash used in investing activities in the six months ended June 29, 2025 was $38.0 million, which consisted primarily of purchases of property and equipment associated with new store openings together with investments in business information systems.

Financing Activities

Net cash used in financing activities in the six months ended June 28, 2026 was $53.7 million, primarily consisting of the repayment of our $350.0 million Term Loan, $10.6 million in principal payments on financing lease obligations, and $5.2 million in payments of IPO costs, all partially offset by $310.9 million in proceeds from our IPO, net of underwriting discounts, and $1.3 million in net proceeds related to the exercise of employee stock options.

Net cash used in financing activities in the six months ended June 29, 2025 was $4.8 million, primarily consisting of $5.5 million in principal payments on financing lease obligations and $0.7 million in payments for the acquisition of treasury stock, both offset by $1.4 million in proceeds related to the exercise of employee stock options.

Contractual Obligations and Off-Balance Sheet Arrangements

There have been no material changes outside the ordinary course of business in our contractual obligations or off-balance sheet arrangements during the first six months of fiscal year 2026. See our 2025 Annual Report for a discussion of our contractual obligations and off-balance sheet arrangements.

Critical Accounting Estimates

Preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management’s Discussion and Analysis and the notes to consolidated financial statements in the Company’s 2025 Annual Report describe the critical accounting estimates and significant accounting policies used in preparing the consolidated financial statements. Actual results in these areas could differ from management’s estimates.

Recent Accounting Standards

There have been no changes in accounting standards during the first six months of fiscal year 2026.

There have been no significant changes to the Company's exposure to market risk during the first three and six months of fiscal year 2026. See the Company's 2025 Annual Report for a discussion of the Company's exposure to market risk.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer, Executive Vice President and Treasurer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosures. Our management has evaluated, under the supervision and with the participation of our CEO and CFO, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of June 28, 2026.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 28, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Investing in our common stock involves a high degree of risk. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under the heading “Item 1A. Risk Factors” in the 2025 Annual Report.