You should read the following discussion of our financial condition and results
of operations in conjunction with the unaudited condensed consolidated financial
statements and related notes thereto included elsewhere in this report, and the
audited consolidated financial statements and related notes thereto and
management's discussion and analysis of financial condition and results of
operations included in our Annual Report on Form 10-K for the fiscal year
ended January 1, 2022 ("2021 Form 10-K"). This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in other sections of this report.

We operate on a fiscal year that ends on the Saturday closest to December 31st
each year. References to the first quarter of fiscal 2022 and the first quarter
of fiscal 2021 refer to the 13 weeks ended April 2, 2022 and April 3, 2021,
respectively.

As used in this report, references to "Grocery Outlet," "the Company," "the
registrant," "we," "us" and "our," refer to Grocery Outlet Holding Corp. and its
consolidated subsidiaries unless otherwise indicated or the context requires
otherwise.

Overview

We are a high-growth, extreme value retailer of quality, name-brand consumables
and fresh products sold through a network of independently operated stores. Our
flexible buying model allows us to offer quality, name-brand opportunistic
products at prices generally 40% to 70% below those of conventional retailers.
Entrepreneurial independent operators ("IOs") run our stores and create a
neighborhood feel through personalized customer service and a localized product
offering. As of April 2, 2022, we had 418 stores in California, Washington,
Oregon, Pennsylvania, Idaho, Nevada and New Jersey.

COVID-19



The COVID-19 pandemic has significantly impacted the U.S. and global economies,
resulting in business operation slowdowns and additional expenses, changes in
consumer behavior, changes in the mindset and supply of labor, and logistics and
supply chain challenges. During the first quarter of fiscal 2022, many aspects
of our business continued to be affected by the pandemic. For example, our IOs
currently face and expect to continue to face staffing challenges and increased
labor costs. We also have incurred and expect to continue to incur COVID-related
expenses, including cleaning and safety costs, and supplies. The pandemic
additionally continues to create logistical challenges that have increased
delivery costs resulting from higher fuel costs, carrier rates and driver wages
due to driver shortages, decreases in transportation capacity, and slowdowns. As
a result, we have been impacted by varying levels of inflation, resulting in
part from supply disruptions, increased shipping and transportation costs,
increased commodity costs, increased labor costs in the supply chain and other
disruptions, which we have not fully offset through price increases. These
increased costs continued to negatively impact our cost of sales and gross
margin in the first quarter of fiscal 2022, and they may continue throughout
fiscal 2022. Further, planned construction and opening of new stores has been,
and may continue to be, negatively impacted due to increased lead times to
acquire materials such as steel, obtain permits and licenses and other related
factors. Therefore, we continue to plan for lower new store growth in fiscal
2022, compared to our long-term strategic goal of 10%, including with more new
stores weighted towards the second half of the year. The extent and continuing
impact of the pandemic on our operational and financial performance will depend
on many factors, including those outside of our control, however, we believe the
flexibility of our unique buying model, our strong vendor relationships and our
agile approach to inventory management will allow us to maintain healthy
inventory levels, continue to offer a competitive assortment of products for our
customers and to effectively operate our business.

Key Factors and Measures We Use to Evaluate Our Business



We consider a variety of financial and operating measures in assessing the
performance of our business. The key generally accepted accounting principles
("GAAP") financial measures we use are net sales, gross profit and gross margin,
selling, general and administrative expenses ("SG&A") and operating income. The
key operational metrics and non-GAAP financial measures we use are number of new
stores, comparable store sales, EBITDA, adjusted EBITDA, adjusted net income and
adjusted earnings per share.

First Quarter of Fiscal 2022 Overview

Key financial and operating performance results for the first quarter of fiscal 2022 were as follows:



•Net sales increased by 10.5% to $831.4 million from $752.5 million in the first
quarter of fiscal 2021; comparable store sales increased by 5.2% and on a 3-year
stacked basis increased 14.3%(1).
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•We opened four new stores and closed one, ending the first quarter of fiscal 2022 with 418 stores in seven states.

•Net income decreased 38.7% to $11.6 million, or $0.12 per diluted share, compared to net income of $18.9 million, or $0.19 per diluted share, in the first quarter of fiscal 2021.

•Adjusted EBITDA(2) increased 0.8% to $49.3 million compared to $48.8 million in the first quarter of fiscal 2021.

•Adjusted net income(2) decreased 7.0% to $21.5 million, or $0.22 per adjusted diluted share(2), compared to $23.1 million, or $0.23 per adjusted diluted share, in the first quarter of fiscal 2021.

_______________________

(1)Comparable store sales on a 3-year stacked basis represents the sum of the increase or decrease in comparable store sales, as reported, in the first quarters of fiscal 2022, 2021 and 2020.



(2)Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share
are non-GAAP financial measures, which exclude the impact of certain special
items. Please note that our non-GAAP financial measures should be considered as
a supplement to, and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP. See the "Operating Metrics and Non-GAAP
Financial Measures" section below for additional information about these items,
including their definitions, how management utilizes such non-GAAP financial
measures and reconciliations of the non-GAAP measures and the most directly
comparable GAAP measures.

Key Components of Results of Operations

Net Sales



We recognize revenues from the sale of products at the point of sale, net of any
taxes or deposits collected and remitted to governmental authorities. Discounts
provided to customers by us are recognized at the time of sale as a reduction in
net sales as the products are sold. Discounts that are funded solely by IOs are
not recognized as a reduction in net sales as the IO bears the incidental costs
arising from the discount. We do not accept manufacturer coupons. Net sales
consist of net sales from comparable stores and non-comparable stores, described
below under "Comparable Store Sales." Growth of our net sales is generally
driven by expansion of our store base in existing and new markets as well as
comparable store sales growth. Net sales are impacted by the spending habits of
our customers, product mix and supply, as well as promotional and competitive
activities. Our ever-changing selection of offerings across diverse product
categories supports growth in net sales by attracting new customers and
encouraging repeat visits from our existing customers. The spending habits of
our customers are affected by changes in macroeconomic conditions, such as those
experienced due to the COVID-19 pandemic, the recent invasion of Ukraine and
changes in discretionary income. Our customers' discretionary income is
primarily impacted by wages, fuel and other cost-of-living increases including
food-at-home inflation, as well as consumer trends and preferences, which
fluctuate depending on the environment. Because we offer a broad selection of
merchandise at extreme values, historically our business has benefited from
periods of economic uncertainty.
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Cost of Sales, Gross Profit and Gross Margin



Cost of sales includes, among other things, merchandise costs, inventory
markdowns, inventory losses and transportation, and distribution and warehousing
costs, including depreciation. Gross profit is equal to our net sales less our
cost of sales. Gross margin is gross profit as a percentage of our net sales.
Gross margin is a measure used by management to indicate whether we are selling
merchandise at an appropriate gross profit. Gross margin is impacted by product
mix and availability, as some products generally provide higher gross margins,
and by our merchandise costs, which can vary. Gross margin is also impacted by
the costs of distributing and transporting product to our stores, which can
vary. Our gross profit is variable in nature and generally follows changes in
net sales. While our disciplined buying approach has produced consistent gross
margins throughout economic cycles, which we believe has helped to mitigate
adverse impacts on gross profit and results of operations, changes in consumer
demand like we experienced and continue to experience as a result of the
COVID-19 pandemic, including inflationary cost increases for goods, labor and
transportation, supply chain constraints and changes in discretionary income,
have resulted and could continue to result in unexpected changes to our gross
margins. The components of our cost of sales may not be comparable to the
components of cost of sales or similar measures of our competitors and other
retailers. As a result, our gross profit and gross margin may not be comparable
to similar data made available by our competitors and other retailers.

Selling, General and Administrative Expenses



SG&A expenses are comprised of both store-related expenses and corporate
expenses. Our store-related expenses include commissions paid to IOs, occupancy
and our portion of maintenance costs and the cost of opening new IO stores.
Company-operated store-related expenses include payroll, benefits, supplies and
utilities. Corporate expenses include payroll and benefits for corporate and
field support, marketing and advertising, insurance and professional services
and operator recruiting and training costs. SG&A generally increases as we grow
our store base and invest in our corporate infrastructure. SG&A expenses related
to commissions paid to IOs are variable in nature and generally increase as
gross profits rise and decrease as gross profits decline. We continue to closely
manage our expenses and monitor SG&A as a percentage of net sales. The
components of our SG&A may not be comparable to the components of similar
measures of our competitors and other retailers. We expect that our SG&A will
continue to increase in future periods as we continue to grow our net sales and
gross profits.

Operating Income

Operating income is gross profit less SG&A, depreciation and amortization and
share-based compensation. Operating income excludes interest expense, net, gain
on insurance recoveries, debt extinguishment and modification costs and income
tax expense. We use operating income as an indicator of the productivity of our
business and our ability to manage expenses.
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Results of Operations

The following tables summarize key components of our results of operations both
in dollars and as a percentage of net sales (amounts in thousands, except for
percentages):

                                             13 Weeks Ended
                                        April 2,       April 3,
                                          2022           2021
Net sales                              $ 831,427      $ 752,466
Cost of sales                            580,538        520,539
Gross profit                             250,889        231,927
Operating expenses:
Selling, general and administrative      207,433        188,598
Depreciation and amortization             18,233         15,543
Share-based compensation                   5,795          3,939
Total operating expenses                 231,461        208,080
Income from operations                    19,428         23,847
Other expenses:
Interest expense, net                      3,682          3,906

Total other expenses                       3,682          3,906
Income before income taxes                15,746         19,941
Income tax expense                         4,172          1,049

Net income and comprehensive income $ 11,574 $ 18,892





                                              13 Weeks Ended
                                          April 2,         April 3,
                                            2022             2021
Percentage of net sales (1)
Net sales                                     100.0  %      100.0  %
Cost of sales                                  69.8  %       69.2  %
Gross profit                                   30.2  %       30.8  %
Operating expenses:
Selling, general and administrative            24.9  %       25.1  %
Depreciation and amortization                   2.2  %        2.1  %
Share-based compensation                        0.7  %        0.5  %
Total operating expenses                       27.8  %       27.7  %
Income from operations                          2.3  %        3.2  %
Other expenses:
Interest expense, net                           0.4  %        0.5  %

Total other expenses                            0.4  %        0.5  %
Income before income taxes                      1.9  %        2.7  %
Income tax expense                              0.5  %        0.1  %
Net income and comprehensive income             1.4  %        2.5  %


_______________________

(1)Components may not sum to totals due to rounding.


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Operating Metrics and Non-GAAP Financial Measures

Number of New Stores



The number of new stores reflects the number of stores opened during a
particular reporting period. New stores require an initial capital investment in
the 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 sales growth over
the long term. We lease substantially all of our store locations. Our initial
lease terms on stores are typically ten years with options to renew for two or
three successive five-year periods.

Comparable Store Sales



We use comparable store sales as an operating metric to measure performance of a
store during the current reporting period against the performance of the same
store in the corresponding period of the previous year. Comparable store sales
are impacted by the same factors that impact net sales.

Comparable store sales consists of net sales from our stores beginning on the
first day of the fourteenth full fiscal month following the store's opening,
which is when we believe comparability is achieved. Included in our comparable
store definition are those stores that have been remodeled, expanded, or
relocated in their existing location or respective trade areas. Excluded from
our comparable store definition are those stores that have been closed for an
extended period as well as any planned store closures or dispositions. When
applicable, as was the case with fiscal 2020, we exclude the net sales in the
non-comparable week of a 53-week year from the same store sales calculation
after comparing the current and prior year weekly periods that are most closely
aligned.

Opening new stores is a primary component of our growth strategy and, as we continue to execute on our growth strategy, we expect that a significant portion of our net sales growth will be attributable to non-comparable store sales. Accordingly, comparable store sales is only one of many measures we use to assess the success of our growth strategy.

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share



EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share are
supplemental key metrics used by management and our Board of Directors to assess
our financial performance. EBITDA, adjusted EBITDA, adjusted net income and
adjusted earnings per share are also frequently used by analysts, investors and
other interested parties to evaluate us and other companies in our industry. We
use EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share
to supplement GAAP measures of performance to evaluate the effectiveness of our
business strategies, to make budgeting decisions and to compare our performance
against that of other peer companies using similar measures. In addition, we use
adjusted EBITDA to supplement GAAP measures of performance to evaluate our
performance in connection with compensation decisions. Management believes it is
useful to investors and analysts to evaluate these non-GAAP measures on the same
basis as management uses to evaluate our operating results. We believe that
excluding items from operating income, net income and net income per diluted
share 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 provides additional information for analyzing trends in our
business.

We define EBITDA as net income before net interest expense, income taxes and
depreciation and amortization expenses. Adjusted EBITDA represents EBITDA
adjusted to exclude share-based compensation expense, non-cash rent, asset
impairment and gain or loss on disposition, provision for accounts receivable
reserves and certain other expenses that may not be indicative of, or are
unrelated to, our core operating results, and that may vary in frequency or
magnitude. Adjusted net income represents net income adjusted for the previously
mentioned adjusted EBITDA adjustments, further adjusted for costs related to
amortization of purchase accounting assets and deferred financing costs, tax
adjustment to normalize the effective tax rate, and tax effect of total
adjustments. Basic adjusted earnings per share is calculated using adjusted net
income, as defined above, and basic weighted average shares outstanding. Diluted
adjusted earnings per share is calculated using adjusted net income, as defined
above, and diluted weighted average shares outstanding. EBITDA, adjusted EBITDA,
adjusted net income and adjusted earnings per share are non-GAAP measures and
may not be comparable to similar measures reported by other companies. EBITDA,
adjusted EBITDA, adjusted net income and adjusted earnings per share have
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. We
address the limitations of the non-GAAP measures through the use of various GAAP
measures. In the future we will incur expenses or charges such as those added
back to calculate adjusted EBITDA or adjusted net income. Our presentation of
EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share
should not be construed as an inference that our future results will be
unaffected by the adjustments we have used to derive our non-GAAP measures.
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The following table summarizes key operating metrics and non-GAAP financial
measures for the periods presented (amounts in thousands, except for percentages
and store counts):

                                                        13 Weeks Ended
                                                   April 2,       April 3,
                                                     2022           2021
Other Financial and Operations Data
Number of new stores                                     4             10
Number of stores open at end of period                 418            389
Comparable store sales increase (decrease) (1)         5.2  %        (8.2) %
EBITDA (2)                                        $ 38,418       $ 39,991
Adjusted EBITDA (2)                               $ 49,250       $ 48,837
Adjusted net income (2)                           $ 21,507       $ 23,124


_______________________

(1)Comparable store sales consist of net sales from our stores beginning on the
first day of the fourteenth full fiscal month following the store's opening,
which is when we believe comparability is achieved.

(2)See "GAAP to Non-GAAP Reconciliations" section below for the applicable reconciliations.


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GAAP to Non-GAAP Reconciliations

The following tables provide a reconciliation from our GAAP net income to EBITDA and adjusted EBITDA, GAAP net income to adjusted net income, and our GAAP earnings per share to adjusted earnings per share for the periods presented (amounts in thousands, except per share data):



                                                              13 Weeks Ended
                                                          April 2,      April 3,
                                                            2022          2021
Net income                                               $ 11,574      $ 18,892
Interest expense, net                                       3,682         3,906
Income tax expense                                          4,172         1,049
Depreciation and amortization expenses (1)                 18,990        

16,144


EBITDA                                                     38,418        

39,991


Share-based compensation expenses (2)                       5,795         

3,939


Non-cash rent (3)                                           1,936         

2,908

Asset impairment and gain or loss on disposition (4) 363 452 Provision for accounts receivable reserves (5)

              1,233           955
Other (6)                                                   1,505           592
Adjusted EBITDA                                          $ 49,250      $ 48,837



                                                                            13 Weeks Ended
                                                                     April 2,            April 3,
                                                                       2022                2021
Net income                                                         $   11,574          $   18,892
Share-based compensation expenses (2)                                   5,795               3,939
Non-cash rent (3)                                                       1,936               2,908
Asset impairment and gain or loss on disposition (4)                      363                 452
Provision for accounts receivable reserves (5)                          1,233                 955
Other (6)                                                               1,505                 592

Amortization of purchase accounting assets and deferred financing costs (7)

                                                               3,112               2,943
Tax adjustment to normalize effective tax rate (8)                       (176)             (4,256)
Tax effect of total adjustments (9)                                    (3,835)             (3,301)
Adjusted net income                                                $   21,507          $   23,124

GAAP earnings per share
Basic                                                              $     0.12          $     0.20
Diluted                                                            $     0.12          $     0.19
Adjusted earnings per share
Basic                                                              $     0.22          $     0.24
Diluted                                                            $     0.22          $     0.23
Weighted average shares outstanding
Basic                                                                  96,148              95,195
Diluted                                                                99,434              99,570


___________________________

(1)Includes depreciation related to our distribution centers, which is included
within the cost of sales line item in our condensed consolidated statements of
operations and comprehensive income. See Note 1 to the condensed consolidated
financial statements for additional information about the components of cost of
sales.

(2)Includes non-cash share-based compensation expense and cash dividends paid on
vested share-based awards as a result of dividends declared in connection with
recapitalizations that occurred in fiscal 2018 and 2016. See "Share-based
Compensation Expense" in the "Comparison of the 13 weeks ended April 2, 2022 and
April 3, 2021" section below for additional information.

(3)Consists of the non-cash portion of rent expense, which represents the
difference between our straight-line rent expense recognized under GAAP and cash
rent payments. The adjustment can vary depending on the average age of our lease
portfolio.
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(4)Represents impairment charges with respect to planned store closures and gains or losses on dispositions of assets in connection with store transitions to new IOs.



(5)Represents non-cash changes in reserves related to our IO notes and accounts
receivable. See Note 2 to the condensed consolidated financial statements for
additional information.

(6)Represents other non-recurring, non-cash or non-operational items, such as
store closing costs, costs related to employer payroll taxes associated with
equity awards, technology upgrade implementation costs, legal settlements and
other legal expenses, certain personnel-related costs, and miscellaneous costs.

(7)Represents the amortization of debt issuance costs and incremental amortization of an asset step-up resulting from purchase price accounting related to our acquisition in 2014 by an investment fund affiliated with Hellman & Friedman LLC, which included trademarks, customer lists, and below-market leases.



(8)Represents adjustments to normalize the effective tax rate for the impact of
unusual or infrequent tax items that we do not consider in our evaluation of
ongoing performance, including excess tax benefits related to stock option
exercises and vesting of RSUs that are recorded in earnings as discrete items in
the reporting period in which they occur.

(9)Represents the tax effect of the total adjustments. We calculate the tax effect of the total adjustments on a discrete basis excluding any non-recurring and unusual tax items.

Comparison of the 13 weeks ended April 2, 2022 and April 3, 2021 (amounts in thousands, except percentages)

Net Sales

                                13 Weeks Ended
             April 2,       April 3,
               2022           2021         $ Change      % Change
Net sales   $ 831,427      $ 752,466      $ 78,961         10.5  %


The increase in net sales for the 13 weeks ended April 2, 2022 compared to the
same period in fiscal 2021 was attributable to non-comparable store sales growth
from the net 29 new stores opened over the last 12 months as well as in increase
in comparable store sales.

Comparable store sales increased 5.2% for the 13 weeks ended April 2, 2022 compared to the same period in fiscal 2021. The increase in comparable store sales for the 13 weeks ended April 2, 2022 was driven by increases in both average transaction size and number of transactions.



Cost of Sales

                                       13 Weeks Ended
                    April 2,        April 3,
                      2022            2021         $ Change      % Change
Cost of sales     $ 580,538       $ 520,539       $ 59,999         11.5  %
% of net sales         69.8  %         69.2  %


The increase in cost of sales for the 13 weeks ended April 2, 2022 compared to
the same period in fiscal 2021 was primarily the result of new store growth and
higher costs as a percentage of net sales combined with an increase in
comparable store sales (as discussed above).

Costs as a percentage of net sales increased for the 13 weeks ended April 2,
2022 compared to the same period in fiscal 2021 due in large part to
inflationary cost increases for goods, labor and transportation as well as the
impact of supply chain constraints.

Gross Profit and Gross Margin

                                    13 Weeks Ended
                 April 2,        April 3,
                   2022            2021         $ Change      % Change
Gross profit   $ 250,889       $ 231,927       $ 18,962          8.2  %
Gross margin        30.2  %         30.8  %


The increase in gross profit for the 13 weeks ended April 2, 2022 compared to
the same period in fiscal 2021 was primarily the result of new store growth and
an increase in comparable store sales, partially offset by higher costs as a
percentage of sales (as discussed above). Our gross margin decreased for the 13
weeks ended April 2, 2022 compared to the same period in fiscal 2021 primarily
due to the higher cost of sales as a percentage of net sales, as discussed
previously.
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Selling, General and Administrative Expenses ("SG&A")



                                      13 Weeks Ended
                   April 2,        April 3,
                     2022            2021         $ Change      % Change
SG&A             $ 207,433       $ 188,598       $ 18,835         10.0  %
% of net sales        24.9  %         25.1  %


The increase in SG&A for the 13 weeks ended April 2, 2022 compared to the same
period in fiscal 2021 was primarily driven by increases in commission payments
to IOs, higher store occupancy and maintenance costs due to a higher store
count, as well as higher personnel and incentive compensation expenses.

As a percentage of net sales, SG&A decreased slightly for the 13 weeks ended
April 2, 2022 compared to the same period in fiscal 2021 due to lower commission
payments to IOs as a percentage of net sales, partially offset by higher accrued
incentive compensation expenses.

Depreciation and Amortization Expense



                                                     13 Weeks Ended
                                  April 2,       April 3,
                                    2022           2021         $ Change      % Change
Depreciation and amortization    $ 18,233       $ 15,543       $  2,690         17.3  %
% of net sales                        2.2  %         2.1  %


The increase in depreciation and amortization expenses for the 13 weeks ended
April 2, 2022 compared to the same period in fiscal 2021 was primarily driven by
new store growth and existing store investments.

Share-based Compensation Expense



                                              13 Weeks Ended
                            April 2,      April 3,
                              2022          2021        $ Change      % Change
Share-based compensation   $ 5,795       $ 3,939       $  1,856         47.1  %
% of net sales                 0.7  %        0.5  %

The increase in share-based compensation expenses for the 13 weeks ended April 2, 2022 compared to the same period in fiscal 2021 was primarily driven by the impact of RSUs granted in March and October of fiscal 2021.



Interest Expense, Net

                                           13 Weeks Ended
                         April 2,      April 3,
                           2022          2021        $ Change       % Change
Interest expense, net   $ 3,682       $ 3,906       $    (224)        (5.7) %
% of net sales              0.4  %        0.5  %

The decrease in net interest expense for the 13 weeks ended April 2, 2022 compared to the same period in fiscal 2021 was primarily driven by increased interest income on outstanding IO notes. See Note 3 to the condensed consolidated financial statements for additional information.



Income Tax Expense

                                        13 Weeks Ended
                      April 2,      April 3,
                        2022          2021        $ Change      % Change
Income tax expense   $ 4,172       $ 1,049       $  3,123        297.7  %
% of net sales           0.5  %        0.1  %
Effective tax rate      26.5  %        5.3  %


The increase in income tax expense for the 13 weeks ended April 2, 2022 compared
to the same period in fiscal 2021 was primarily driven by a reduction in excess
tax benefits related to the exercise of stock options and vesting of
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RSUs. Such excess tax benefits totaled $0.1 million for the 13 weeks ended
April 2, 2022 compared to $4.3 million for the 13 weeks ended April 3, 2021.

Net Income

                                     13 Weeks Ended
                  April 2,       April 3,
                    2022           2021         $ Change      % Change
Net income       $ 11,574       $ 18,892       $ (7,318)       (38.7) %
% of net sales        1.4  %         2.5  %

As a result of the foregoing factors, net income decreased for the 13 weeks ended April 2, 2022 compared to the same period in fiscal 2021.



Adjusted EBITDA

                                     13 Weeks Ended
                   April 2,      April 3,
                     2022          2021        $ Change       % Change
Adjusted EBITDA   $ 49,250      $ 48,837      $     413          0.8  %


The slight increase in adjusted EBITDA for the 13 weeks ended April 2, 2022
compared to the same period in fiscal 2021 was primarily due to higher net sales
resulting from new store growth and an increase in comparable store sales for
the 13 weeks ended April 2, 2022, partially offset by a decrease in gross margin
and an increase in SG&A, each as discussed previously.

Adjusted Net Income

                                           13 Weeks Ended
                         April 2,      April 3,
                           2022          2021        $ Change      % Change
Adjusted net income     $ 21,507      $ 23,124      $ (1,617)        (7.0) %


The decrease in adjusted net income for the 13 weeks ended April 2, 2022
compared to the same period in fiscal 2021 was primarily due to an increase in
SG&A along with depreciation and amortization expense as well as a decrease in
gross margin, partially offset by an increase in net sales resulting from new
store growth and an increase in comparable store sales for the 13 weeks ended
April 2, 2022.
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Liquidity and Capital Resources

Sources of Liquidity



Based on our current operations and new store growth plans, we expect to satisfy
our short-term and long-term cash requirements through a combination of our
existing cash and cash equivalents position, funds generated from operating
activities, and the borrowing capacity available in the revolving credit
facility under our first lien credit agreement (the "First Lien Credit
Agreement"). If cash generated from our operations and borrowings under our
revolving credit facility are not sufficient or available to meet our liquidity
requirements, then we will be required to obtain additional equity or debt
financing in the future. There can be no assurance equity or debt financing will
be available to us when we need it or, if available, the terms will be
satisfactory to us and not dilutive to our then-current stockholders.
Additionally, we may seek to take advantage of market opportunities to refinance
our existing debt instruments with new debt instruments at interest rates,
maturities and terms we deem attractive.

As of April 2, 2022, we had cash and cash equivalents of $138.0 million, which
consisted primarily of cash held in checking and money market accounts with
financial institutions. In addition, we have a revolving credit facility with
$100.0 million in borrowing capacity under our First Lien Credit Agreement. As
of April 2, 2022, we had $3.5 million of outstanding standby letters of credit
and $96.5 million of remaining borrowing capacity available under this revolving
credit facility. We did not borrow under this revolving credit facility during
the 13 weeks ended April 2, 2022.

We may also, from time to time, at our sole discretion, prepay or retire all or
a portion of our outstanding debt. Subsequent to quarter end, in April 2022 we
prepaid $75.0 million of principal on the senior term loan outstanding under our
First Lien Credit Agreement.

Material Cash Requirements

There has been no material change in our material cash requirements since the end of fiscal 2021. See our 2021 Form 10-K for additional information.

Capital Expenditures



Capital expenditures include purchases of capital assets such as property and
equipment as well as intangible assets and licenses. Capital expenditures for
the 13 weeks ended April 2, 2022, before the impact of tenant improvement
allowances, were $34.8 million, and, net of tenant improvement allowances, were
$27.2 million. We continue to expect total capital expenditures, net of tenant
improvement allowances, to be approximately $115.0 million for fiscal 2022.

Debt Covenants



The First Lien Credit Agreement contains certain customary representations and
warranties, subject to limitations and exceptions, and affirmative and customary
covenants. The First Lien Credit Agreement restricts us from entering into
certain types of transactions and making certain types of payments including
dividends and stock repurchases and other similar distributions, with certain
exceptions. Additionally, borrowing availability under the revolving credit
facility under our First Lien Credit Agreement is subject to a first lien
secured leverage ratio of 7.00 to 1.00 (as defined in the First Lien Credit
Agreement), tested quarterly if, and only if, the aggregate principal amount
outstanding and/or issued, as applicable, from the revolving facility, letters
of credit (to the extent not cash collateralized or backstopped or, in the
aggregate, not in excess of the greater of $10.0 million and the stated face
amount of letters of credit outstanding on the closing date) and swingline loans
exceeds 35% of the total amount of the revolving credit facility commitments.

As of April 2, 2022, we were in compliance with all applicable financial covenant requirements for our First Lien Credit Agreement.


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Cash Flows

The following table summarizes our cash flows for the periods presented (amounts in thousands, except percentages):

13 Weeks Ended


                                            April 2, 2022           April 3, 2021           $ Change               % Change

Net cash provided by operating activities $ 36,329 $ 26,413 $ 9,916

                     37.5  %
Net cash used in investing activities            (35,522)                (39,164)              3,642                     (9.3) %
Net cash provided by (used in) financing
activities                                        (2,896)                  2,717              (5,613)                  (206.6) %

Net decrease in cash and cash equivalents $ (2,089) $ (10,034) $ 7,945

                    (79.2) %


Cash Provided by Operating Activities



Net cash provided by operating activities was $36.3 million for the 13 weeks
ended April 2, 2022 compared to $26.4 million for the same period in fiscal
2021. The increase in net cash provided by operating activities of $9.9 million
for the 13 weeks ended April 2, 2022 compared to the same period in fiscal 2021
was primarily driven by changes to our working capital balances. Changes to
accrued compensation and trade accounts payable provided increases to net cash
flow provided by operating activities, which were partially offset by changes to
merchandise inventories.

Cash Used in Investing Activities



Net cash used in investing activities was $35.5 million for the 13 weeks ended
April 2, 2022 compared to $39.2 million for the same period in fiscal 2021. The
decrease in net cash used in investing activities of $3.6 million for the 13
weeks ended April 2, 2022 compared to the same period in fiscal 2021 was
primarily related to decreased capital expenditures related to the timing of
construction of newly opened stores and stores under development as well as
existing store capital investments. We had four new store openings and two store
relocations during the 13 weeks ended April 2, 2022 compared to 10 new store
openings and two store relocation for the same period of fiscal 2021.

Cash Provided by (Used in) Financing Activities



Net cash used in financing activities of $2.9 million for the 13 weeks ended
April 2, 2022 was primarily due to the repurchase of $3.5 million worth of
common stock, partially offset by $0.9 million in proceeds from the exercise of
stock options. Net cash provided by financing activities of $2.7 million for the
13 weeks ended April 3, 2021 was primarily due to $3.0 million in proceeds from
the exercise of stock options, partially offset by $0.2 million in principal
payments on finance leases.

Critical Accounting Policies and Estimates



Our condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America and the
applicable rules and regulations of the SEC for interim reporting. The
preparation of these condensed consolidated financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses and related disclosures. We evaluate our
estimates and assumptions on an ongoing basis. Our estimates are based on
historical experience and various other assumptions that we believe to be
reasonable under the circumstances. With respect to critical accounting
policies, even a relatively minor variance between actual and expected results
can potentially have a materially favorable or unfavorable impact on subsequent
results of operations.

There have been no material changes to our critical accounting policies and estimates during the 13 weeks ended April 2, 2022 from those disclosed in our 2021 Form 10-K.

Recent Accounting Pronouncements

Refer to Note 1 to the condensed consolidated financial statements included elsewhere in this report.


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