We initiated a business optimization plan during the first quarter of fiscal 2026, intended to strengthen long-term profitability and cash flow generation, improve operational execution, optimize our existing store footprint and align with our disciplined new store growth strategy (the "Optimization Plan"). The Optimization Plan provides for the closure of 36 financially underperforming stores ("Closure Stores"), including the termination, sublease or assignment of the applicable store leases; the termination, sublease or assignment of a lease for a distribution center facility that we are no longer utilizing (together with the store leases, the "Lease Exits"); and the termination of operator agreements with IOs for the Closure Stores as well as certain other store locations (the "Operator Agreement Terminations").

We estimate that we will incur between $15 million and $24 million in net total restructuring charges in fiscal 2026 and fiscal 2027 related to the Optimization Plan, and we expect these actions to be substantially completed by the first quarter of fiscal 2027. Estimated net restructuring charges incurred or expected to be incurred include bad debt expense and cash expenses for the Operator Agreement Terminations, as well as costs associated with the Lease Exits. We have negotiated, or intend to negotiate, a lease termination, sublease, or assignment with the landlords of the Lease Exits. We expect to incur net restructuring charges for the Lease Exits which primarily include lease termination fees, costs to prepare the premises for surrender to the landlords, sublessee or assignee, and idle property costs, partially offset by the net non-cash write-off of the right-of-use assets and lease liabilities associated with these leases.

During the first half of fiscal 2026, we closed all 36 Closure Stores, and we substantially completed the Operator Agreement Terminations. We also increased the provision for IO notes and IO receivables reserves and wrote off uncollectible IO notes and IO receivables associated with these store locations, as further discussed in Note 2. In addition, we negotiated lease terminations with the landlords for certain of the Lease Exits and wrote-off the right-of-use assets and lease liabilities associated with these leases. We also entered into a sublease for the distribution facility we are no longer using. For the leases associated with the Lease Exits, we incurred costs to prepare the premises for surrender to the landlords and idle property costs, net of proceeds received from sales of assets.

The following table summarizes charges incurred related to the Optimization Plan during the second quarter and first half of fiscal 2026 (amounts in thousands), which are included in Restructuring charges, net on the condensed consolidated statements of operations and comprehensive income (loss):


	13 Weeks Ended		26 Weeks Ended
	July 4, 2026		July 4, 2026
Cash restructuring charges:
Costs associated with the Lease Exits (1)	$	13,066	$	13,856
Costs associated with the Operator Agreement Terminations	1,133		2,742
Legal, professional and other costs	589		845
Total cash restructuring charges	14,788		17,443
Net non-cash restructuring charges (credits):

Non-cash bad debt expense (credit) associated with the Operator Agreement Terminations	(97)		15,439


Net write-off of right-of-use assets and lease liabilities	(8,607)		(8,607)
Other net non-cash restructuring charges (2)	(656)		(656)
Total net non-cash restructuring charges (credits)	(9,360)		$	6,176
Total restructuring charges, net	$	5,428	$	23,619

(1)Cash costs associated with the Lease Exits primarily include lease termination costs, costs to prepare the premises for surrender to the landlords and idle property costs, net of proceeds received for sales of assets.


	Lease Termination Costs		Operator Agreement Termination Costs		Legal, Professional and Other Costs		Total
Balance at January 3, 2026	$	—	$	—	$	—	$	—
Cash restructuring charges	13,856		2,742		845		17,443
Cash payments	(12,632)		(2,742)		(292)		(15,666)
Balance at July 4, 2026	$	1,224	$	—	$	553	$	1,777

We initiated a restructuring plan during the fourth quarter of fiscal 2024, intended to improve our long-term profitability, cash flow generation and return on invested capital, optimize the footprint of new store growth, and lower our cost base (the "Restructuring Plan"). The actions under the Restructuring Plan were substantially completed in the second quarter of fiscal 2025. The Restructuring Plan included (i) the termination of a total of 28 leases for unopened stores in suboptimal locations and the discontinued development of certain future store sites where we had incurred initial costs, but leases had not yet been signed, (ii) the cancellation of certain capital-intensive warehouse projects and (iii) a reduction in headcount in building a more scalable cost structure.

The following table summarizes charges incurred during the second quarter and first half of fiscal 2025 related to the Restructuring Plan, which are included in Restructuring charges, net on the condensed consolidated statements of operations and comprehensive income (loss) (amounts in thousands):


	13 Weeks Ended		26 Weeks Ended
	June 28, 2025		June 28, 2025
Cash restructuring charges:
Lease termination costs	$	5,019	$	34,112
Employee severance and benefit costs	—		1,532
Legal, professional and other costs	—		1,522
Total cash restructuring charges	5,019		37,166

Non-cash impairment and disposal of long-lived assets	6,138		7,866

Total restructuring charges	$	11,157	$	45,032