6.Leases

The Company primarily leases its distribution facilities, corporate offices and retail stores under operating lease agreements expiring on various dates through January 2029, most of which contain options to extend. In addition to payment of base rent, the Company is also required to pay property taxes, insurance, and variable common area maintenance expenses. The Company records lease expense on a straight-line basis over the term of the lease. Effective May 15, 2026, the Company’s new corporate headquarters relocated to a leased facility in Chico, California. In connection with the new lease, the Company recognized an operating lease right-of-use asset of $0.5 million and a corresponding operating lease liability of $0.5 million. Our prior corporate headquarters were also located in a different leased facility in Chico, California, and the lease agreement for that facility was terminated on May 31, 2026.

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The Company also leases equipment under finance lease agreements expiring on various dates through April 2029. During the twenty-six weeks ended June 28, 2026, the Company executed a renewal to extend the lease term of certain finance leases related to equipment by 1.2 years. The extension was not previously considered reasonably certain and was accounted for as a lease modification in the first quarter of 2026. As a result, the Company remeasured the associated lease liabilities using an updated incremental borrowing rate of 5.91%. In addition the lease liabilities were remeasured with a corresponding adjustment to the right-of-use asset of $1.1 million.

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In early 2025, the Company consolidated two of its distribution facilities by moving operations from its former distribution facility in Chico, California to its existing distribution facility in Ontario, California. During the twenty-six weeks ended June 29, 2025, the Company modified the terms and discount rate of two of its operating leases. As a result of the modification, the Company derecognized the related right-of-use asset and lease liability of $3.1 million and $3.2 million, respectively. The modification resulted in the recognition of a gain of $0.1 million.

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As of June 28, 2026, the future minimum lease payments for the Company’s operating and finance leases for each of the fiscal years were as follows (in thousands):

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Under the terms of the remaining lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability, including non-lease components such as common area maintenance fees, taxes, and insurance.