UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549​

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.      )

Grocery Outlet Holding Corp.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

We would like to highlight several areas of particular significance for Grocery Outlet during 2022.

Exemplary Financial Performance in 2022, Despite Macroeconomic Conditions

Our Fiscal Year 2022 performance exceeded our expectations on both the top and bottom line. We grew net sales by 16.2%, net income by 4.4%, and adjusted EBITDA by 17.4% (revised definition1 ). Fiscal Year 2022 financial results reflected strong execution and our continued investment in building capabilities to scale our business and deliver on our strategy.

Our value proposition resonates with consumers across economic cycles, but it is particularly strong during times of economic uncertainty when our low prices matter most to our customers. As consumers deal with record inflation, they have turned to us for access to affordable, quality food and industry-leading savings.

In 2022 our compelling WOW! shopping experience allowed us to increase our “share of wallet” with existing customers, attract new shoppers to our brand and maintain high customer satisfaction levels. Our merchandise assortment is better than ever, our pipeline of opportunistic products is healthy, our marketing message of value and savings is resonating with a broad base of consumers and we have a strong pipeline of new potential IOs to fuel our growth.

Key Leadership Changes for the Next Generation

In 2022 Eric Lindberg announced his retirement as the Chief Executive Officer of Grocery Outlet and the Board appointed RJ Sheedy as our new President and Chief Executive Officer, as well as a member of our Board, effective January 1, 2023.

Eric’s seventeen year run as co-CEO and CEO was transformative for Grocery Outlet. Under Eric’s leadership Grocery Outlet grew its store base from 123 to 441 stores, or 259%, and revenues from $612.6 million to $3.58 billion, or 484%, developed a bi-coastal store footprint and began trading shares in the public markets. Concurrent with his retirement, Eric was appointed as Chairman of the Board. The Board believes that Eric’s deep knowledge of our operations, finances, strategies and industry garnered over his 26-year tenure with us makes him well qualified to serve as Chairman of the Board. He also is significantly aligned with our other stockholders given his almost 5% ownership of the Company.

We are also fortunate to have a long-tenured internal successor in RJ stepping into the CEO role. RJ joined Grocery Outlet in 2012 as our Vice President of Strategy and thereafter was promoted three times, including to the role of President in January 2019. Eric and the rest of our Board believe RJ is best suited to lead Grocery Outlet into the next chapter of growth, given his significant experience and expertise in the grocery and retail industries, his deep knowledge of our business through his varied leadership roles, and his long-term strategic approach. In addition, RJ’s leadership style exemplifies our culture and values—he is passionate about the business, and his relentless pursuit of excellence resonates with and inspires our team and our IOs.

As part of this transition, Erik Ragatz (who previously served as Chairman since October 2014) has been appointed to the new role of Lead Independent Director of the Board. In such role, Erik has meaningful and clearly delineated responsibilities and he will undertake significant collaboration and partnership with Eric and RJ. Our Board believes that his significant experience with our Company and as our Chairman of the Board will ensure strong, independent oversight of management and promote effective governance and Board efficiency.

1

See Table of Contents for explanation of “revised definition.”

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Continued Commitment to Our Mission, Values and Culture

For the past 77 years our mission of Touching Lives for the Better has naturally aligned our growth with positive impact to the communities in which we operate. At the heart of this is our opportunistic sourcing model, which serves to provide access to affordable quality food to the communities in which we live and operate. Additionally, our opportunistic sourcing model helps to reduce food waste, thereby reducing the food industry’s impact on the planet, including its greenhouse gas emissions. On top of our sourcing model, our operating model provides opportunities for ownership, entrepreneurship and wealth creation for our Independent Operator partners. We foster a culture grounded in talented and passionate people who live our values: entrepreneurship, integrity, achievement, family, service to others, diversity and fun. Our values translate into our human capital offerings to recruit, engage, develop, reward and retain employees who believe in our mission and emulate our values.

Since our inception, ESG (environmental, social and governance) issues have been integral to our business model, our strategy and our culture. Our focus on corporate responsibility reflects our commitment to our communities, our people and our planet. We believe focusing on the best interests of our stakeholders and engaging with them in a transparent fashion are critical components to generating value for our stockholders. Being a good environmental and social citizen is not just the right thing to do from a moral perspective but the right thing to do for long-term value creation.

Our Board also continues to evolve our governance policies as we mature as a public company. At our 2022 annual meeting, stockholders overwhelmingly approved the elimination of supermajority voting provisions in our charter and bylaws, as well as to declassify our Board by 2026. Further, we have implemented a majority standard for director elections, beginning with this 2023 Annual Meeting.

Looking Ahead to the Future

We believe that our compelling WOW! shopping experience will continue to drive new and existing customers to shop our stores. Propelled by our strong business fundamentals, we are well-positioned for Fiscal Year 2023 and beyond to expand our footprint and grow our customer base. We are executing a long-term growth strategy built on three primary pillars:

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Strengthen our core business model. Our unique buying and selling approach has always been and will continue to be the growth engine of this business. It differentiates us and provides a compelling value proposition to a wide range of customers. We remain focused on deepening our value, strengthening the treasure hunt shopping experience, elevating operator support, and increasing customer awareness, acquisition, and retention. We continually seek to strengthen supplier relationships and further develop opportunistic purchasing with new processes and investments.

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•

Evolve our business. We are focused on advancing our model through expanding our assortment and digitizing our business with more integrated end-to-end technology. We also continue to implement operational initiatives to support IOs in enhancing the customer experience.

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•

Expand our footprint. We believe that new store growth remains our biggest driver of long-term stockholder value. Although our store growth has moderated recently, we expect the pace of openings to accelerate in the second half of 2023 to our 10% annualized new unit growth rate and we continue to believe the success of our stores across a broad range of geographies, population densities and demographic groups creates a significant opportunity to profitably increase our store count in existing and new local regions and states. We intend to continue to expand our reach to additional customers and geographies across the United States.

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We believe that we have the right Board and management team in place to continue our mission that still guides us today: Touching Lives for the Better. We are proud of the work that we have accomplished and look forward to building on this momentum in the coming years. On behalf of Grocery Outlet’s Board and management team, thank you for continuing your support and investment. We look forward to welcoming you at our 2023 Annual Meeting.

Sincerely,

Notice of Annual Meeting of Stockholders

To be held on Tuesday, June 20, 2023
11:00 a.m. Pacific Daylight Time

www.virtualshareholdermeeting.com/GO2023

To the Stockholders of Grocery Outlet Holding Corp.:

Notice is hereby given that the 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) of Grocery Outlet Holding Corp. (the “Company”) will be on Tuesday, June 20, 2023, at 11:00 a.m. Pacific Daylight Time online through a live webcast at www.virtualshareholdermeeting.com/GO2023. At the 2023 Annual Meeting, stockholders will be asked:

1.

Election of Class I Directors. To elect the four Class I directors named in the accompanying proxy statement to hold office until the 2026 annual meeting of stockholders and until their respective successors have been duly elected and qualified, or until such director’s earlier resignation, retirement or other termination of service;

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2.

Ratify the appointment of Deloitte & Touche LLP. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 30, 2023;

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3.

Say-on-Pay. To hold an advisory (non-binding) vote to approve the Company’s named executive officer compensation; and

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4.

To transact such other business as may properly come before the 2023 Annual Meeting or any adjournment or postponement thereof.

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The accompanying proxy statement describes each of these items of business in detail.

Only stockholders of record as of April 24, 2023 will be entitled to attend and vote at the 2023 Annual Meeting and any adjournment or postponement thereof. There will not be a physical location for the 2023 Annual Meeting and you will not be able to attend the meeting in person. We have designed the virtual format of the 2023 Annual Meeting to provide stockholders substantially the same rights and opportunities to participate as they would have at an in-person meeting.

Your vote is important. To be sure your vote counts and assure a quorum, please promptly vote over the Internet or by telephone or by mail as described in the accompanying proxy statement, whether or not you plan to participate in the 2023 Annual Meeting via live webcast. If your common stock is held in the name of your broker, bank or other nominee, you will need to follow the instructions provided to you by the institution that holds your shares of our common stock to instruct them how to vote your shares.

By order of the Board of Directors,

Luke D. Thompson
Senior Vice President,
General Counsel & Secretary

Emeryville, California

April 28, 2023

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 20, 2023:

TABLE OF CONTENTS
 

​	PROXY SUMMARY	​	​	​	​	1	​	​
​	PROXY STATEMENT	​	​	​	​	8	​	​
​	CORPORATE GOVERNANCE AND BOARD MATTERS	​	​	​	​	8	​	​
​	Board of Directors	​	​	​	​	8	​	​
​	Our Environmental, Social and Governance Approach	​	​	​	​	27	​	​
​	Our Commitment to Human Capital Management	​	​	​	​	27	​	​
​	Code of Business Conduct and Ethics	​	​	​	​	30	​	​
​	Director Compensation	​	​	​	​	31	​	​
​	AUDIT AND RISK COMMITTEE REPORT	​	​	​	​	34	​	​
​	OTHER AUDIT AND RISK COMMITTEE MATTERS	​	​	​	​	37	​	​
​	EXECUTIVE OFFICERS	​	​	​	​	38	​	​
​	COMPENSATION DISCUSSION AND ANALYSIS	​	​	​	​	41	​	​
​	Executive Summary	​	​	​	​	41	​	​
​	Elements of Fiscal Year 2022 NEO Compensation Program	​	​	​	​	45	​	​
​	Compensation Levels and Benchmarking	​	​	​	​	51	​	​
​	Process and Roles for Determining Compensation	​	​	​	​	52	​	​
​	Employment Arrangements with NEOs	​	​	​	​	54	​	​
​	Other Compensation	​	​	​	​	54	​	​
​	Other Equity-Related Policies	​	​	​	​	55	​	​
​	Tax and Accounting Implications	​	​	​	​	56	​	​
​	COMPENSATION COMMITTEE REPORT	​	​	​	​	58	​	​
​	NAMED EXECUTIVE OFFICER COMPENSATION TABLES	​	​	​	​	59	​	​
​	Summary Compensation Table in Fiscal Years 2022, 2021 and 2020	​	​	​	​	59	​	​
​	Grants of Plan-Based Awards in Fiscal Year 2022	​	​	​	​	61	​	​
​	Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards	​	​	​	​	62	​	​
​	Outstanding Equity Awards at 2022 Fiscal Year End	​	​	​	​	63	​	​
​	Option Exercises and Stock Vested During Fiscal Year 2022	​	​	​	​	65	​	​
​	Potential Payments Upon Termination or Change in Control	​	​	​	​	66	​	​
​	Pay Versus Performance	​	​	​	​	71	​	​
​	CEO Pay Ratio	​	​	​	​	77	​	​
​	CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	​	​	​	​	79	​	​

​	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	​	​	​	​	81	​	​
​	SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS	​	​	​	​	83	​	​
​	PROPSALS FOR CONSIDERATION AT ANNUAL MEETING	​	​	​	​	84	​	​
​	Proposal 1—Election of Class I Directors	​	​	​	​	84	​	​
​	Proposal 2—Ratification of Independent Registered Public Accounting Firm	​	​	​	​	85	​	​
​	Proposal 3—Advisory (Non-Binding) Vote to Approve the Company’s Named Executive Officer Compensation	​	​	​	​	86	​	​
​	ADDITIONAL INFORMATION	​	​	​	​	87	​	​
​	Frequently Asked Questions About the Proxy Materials and the Annual Meeting	​	​	​	​	87	​	​
​	Delinquent Section 16(a) Reports	​	​	​	​	91	​	​
​	OTHER MATTERS	​	​	​	​	92	​	​
​	Availability of Fiscal Year 2022 Annual Report to Stockholders	​	​	​	​	92	​	​
​	Stockholder Proposals and Director Nominations for the 2024 Annual Meeting of Stockholders	​	​	​	​	92	​	​
​	Delivery of Documents to Stockholders Sharing an Address	​	​	​	​	93	​	​
​	Transfer Agent Information	​	​	​	​	93	​	​
​	Forward-Looking Statements	​	​	​	​	93	​	​

PROXY SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement (the “Proxy Statement”). Prior to voting, you should read the entire Proxy Statement and our Annual Report on Form 10-K for Fiscal Year 2022 (the “2022 Annual Report”), which includes our consolidated financial statements and information about our operations and performance. These materials are available at www.proxyvote.com. This Proxy Statement and the accompanying proxy card initially are being made available on or about April 28, 2023.

As used in this Proxy Statement, references to “Grocery Outlet,” the “Company,” “we,” “us,” “our” or “our business” refers to Grocery Outlet Holding Corp. (collectively with its wholly owned subsidiaries), except as expressly indicated or the context otherwise requires. The information available on or through our website and any website referenced herein are not incorporated herein or otherwise part of this Proxy Statement.

Our fiscal year ends on the Saturday closest to December 31. References to Fiscal Year 2022, Fiscal Year 2021, and Fiscal Year 2020 refer to the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021, respectively. Reference to Fiscal Year 2023 refers to the fiscal year ending December 30, 2023.

About Grocery Outlet Holding Corp.

Based in Emeryville, California, Grocery Outlet is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores. Grocery Outlet has more than 440 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, Maryland and New Jersey.

2023 Annual Meeting of Stockholders

To participate in the 2023 Annual Meeting of Stockholders, including any postponement or adjournment thereof (the “2023 Annual Meeting”), you must have the sixteen-digit number that is shown on your Notice of Internet Availability or on your proxy card (if you elected to receive proxy materials by mail).

Proposals and Voting Recommendations

Proxy Summary

Voting Methods

If you are a stockholder of record, you can vote in one of four ways:

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Visit www.proxyvote.com to vote VIA THE INTERNET

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Call 1-800-690-6903 to vote BY TELEPHONE

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✓

If you received a printed copy of the proxy materials, sign, date and return your proxy card in the prepaid enclosed envelope to vote BY MAIL

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Attend virtually to vote DURING THE ANNUAL MEETING

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To reduce our administrative and postage costs and the environmental impact of our 2023 Annual Meeting, we encourage stockholders to vote via the Internet or by telephone, both of which are available 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on June 19, 2023. Stockholders may revoke their proxies at the time and in the manner described on page 91 of this Proxy Statement.

If your shares of our common stock are held in “street name” through a bank, broker or other holder of record, you will receive voting instructions from the holder of record that you must follow in order for your shares to be voted. If you hold shares in this manner and wish to vote in person at the meeting, you must obtain a legal proxy from the bank, broker or other holder of record that holds your shares of our common stock.

Fiscal Year 2022 Highlights

FINANCIAL AND OPERATING HIGHLIGHTS

Fiscal Year 2022 was our third full year as a public company and we were pleased with our performance, which exceeded our expectations on both the top and bottom line. We grew net sales by 16.2%, net income by 4.4%, and adjusted EBITDA by 17.4% (revised definition) or 13.8% (prior definition). As consumers dealt with record inflation, they turned to us for access to affordable, quality food and industry-leading savings. Our compelling WOW! shopping experience attracted new customers and existing customers are spending more of their dollars with us. Our Independent Operators continued to serve customer needs and engaged new customers with their local assortment and value merchandising. Marketing efforts promoting value and savings are resonating with consumers.

Proxy Summary

Our Fiscal Year 2022 results reflect solid execution during a challenging environment while continuing to scale our business in support of our long-term growth objectives. Financial highlights from the Fiscal Year 2022 include:

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(1)

See the Table of Contents for information regarding our non-GAAP financial measures.

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For more complete information regarding our 2022 performance, please review our 2022 Annual Report.

LEADERSHIP TRANSITION

In November 2022, we announced that Eric Lindberg would be transitioning (effective January 1, 2023) from his role as Chief Executive Officer (“CEO” or “Chief Executive Officer”) to Chairman of the Board, and RJ Sheedy would be transitioning from his role of President to President and Chief Executive Officer. Mr. Sheedy also joined the Board effective January 1, 2023. As part of this leadership transition, Mr. Ragatz moved from his role as Chairman of the Board to Lead Independent Director. These changes were the culmination of careful and thoughtful ongoing succession planning considerations with the Board over many years, as well as the strategic implementation of the transition plan in the months leading up to and following the Board’s final approval.

Proxy Summary

CLASS I DIRECTOR NOMINEES AS OF RECORD DATE

The Board has nominated each of the four Class I directors listed below to be elected at the 2023 Annual Meeting for three-year terms.

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•

Mr. Alterman, an independent director since February 2011, is currently retired and most recently served as an Executive Adviser to Savers, Inc., a retail thrift store chain from January 2017 to January 2022. Previously, he served as President and Chief Executive Officer of Savers from January 2004 to January 2017. He has extensive knowledge of the discount industry, as well as substantial experience developing corporate strategy and assessing emerging industry trends and business operations.

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•

Mr. Bachman, an independent director since November 2019, has been an outside director for various public companies since his retirement in 2015. From 1978 to 2015, Mr. Bachman was a certified public accountant at the accounting firm, PricewaterhouseCoopers LLP, most recently as a partner. He is a retired CPA and has extensive background in auditing, as well as business strategy and risk oversight experience from serving in the leadership of one of the world’s largest accounting firms. He has been identified by our Board as an audit committee financial expert.

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•

Mr. Herman, an independent director since 2004, served as the President and Chief Operating Officer of Good Guys, Inc., a consumer electronics retailer from 2003 to 2004, and previously in various management positions. He has significant retail experience and financial expertise based on his years of senior executive experience as well as his prior experience serving on the boards of public companies such as Crdentia Corp. and Good Guys, Inc. Mr. Herman has been identified by our Board as an audit committee financial expert.

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•

Mr. Ragatz, an independent director since October 2014, serves as Senior Advisor at Hellman & Friedman LLC, a private equity firm (“H&F”). A 20+ year member of the firm, he previously served as a Partner of Hellman & Friedman from 2008 through early 2023 leading the firm’s efforts to invest in the consumer, retail and industrial sectors. He has significant strategic, financial, and business development expertise, along with insight into the proper functioning and role of corporate boards of directors, gained through his years of service on the boards of directors of H&F’s portfolio companies.

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Voting, Election and Conditional Resignations. Our Amended and Restated Bylaws provides that in an uncontested director election, a director nominee will be elected to the Board by the stockholders only if the votes cast “FOR” such nominee’s election exceed the votes cast “AGAINST” such nominee’s election. Although counted for quorum purposes, abstentions, withheld votes, and broker non-votes, if any, will not be included in the total number of votes cast or be counted as votes for or against any nominee’s election.

Proxy Summary

If a nominee who currently serves as a director is not re-elected, Delaware law provides that the director would continue to serve on the Board as a “holdover director.” Under our Corporate Governance Guidelines, we maintain a director resignation policy which provides for the contingent resignation of a director who receives more “against” votes than “for” votes in an uncontested director election, as well as the process of the Nominating and Corporate Governance Committee and the Board to review such resignation offer and publicly disclose the Board’s decision on whether to accept such offer.

BOARD OF DIRECTORS

Set forth below are other key skills, experience and qualifications evaluated by our Nominating and Corporate Governance Committee and Board.

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(1)

On April 25, 2023, Mr. Matthews provided notice to the Board of his decision, effective as of the date of the 2023 Annual Meeting, to retire as a Class III member of the Board. The chart above reflects the skills and experience of the Board excluding Mr. Matthews.

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GOVERNANCE PRINCIPLES

Set forth below are certain of our key governance principles:

Proxy Summary

Compensation of our Named Executive Officers

KEY ELEMENTS OF FISCAL YEAR 2022 COMPENSATION

Substantially consistent with prior fiscal years, the key elements of our NEO pay mix in Fiscal Year 2022 consisted of:

•

Base salary

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•

Our annual incentive plan (the “AIP”), an annual performance-based cash bonus, generally based on our achievement of adjusted EBITDA (60% weighted) and comparable store sales performance (40% weighted) goals

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•

Long-term equity incentives, consisting of time-vesting restricted stock units (“RSUs”) and performance vesting stock units (“PSUs”)

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◦

The Committee set the mix of long-term equity incentive value as 70% PSUs and 30% RSUs for our Chief Executive Officer and 60% PSUs and 40% RSUs for the other Named Executive Officers, thereby making a substantial portion of their compensation performance-based

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◦

PSUs were based on our achievement of cumulative revenue and adjusted EBITDA growth goals, equally weighted, over a three-year performance period

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In Fiscal Year 2022, in line with our compensation philosophy that a significant portion of our executive pay be tied to company performance, approximately 83% of our Chief Executive Officer’s and 75% of our other NEO’s target total compensation was variable (or “at risk”), with value ultimately tied to either the achievement of objective corporate goals or stock price performance, or both.

The Compensation Committee believes this pay mix appropriately aligns the interests of executives with those of our stockholders. The charts below illustrate the target mix of pay (excluding benefits and perquisites) for our CEO and other NEOs for Fiscal Year 2022.

Proxy Summary

FISCAL YEAR 2022 DETERMINATIONS AND PERFORMANCE

Our business performance in Fiscal Year 2022 significantly exceeded target performance goals, and resulted in earned AIP payouts above target and contributed to our strong achievement for PSUs in the three-year performance period ended Fiscal Year 2022.

PROXY STATEMENT

2023 Annual Meeting of Stockholders to be held on June 20, 2023

This Proxy Statement is being furnished together with our 2022 Annual Report in connection with the solicitation of proxies by our board of directors (“Board of Directors” or “Board”) for the 2023 Annual Meeting. On or about April 28, 2023, we will mail to each of our stockholders (other than those who previously requested electronic delivery or previously elected to receive delivery of a paper copy of the proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet.

CORPORATE GOVERNANCE AND BOARD MATTERS

Board of Directors

DIRECTORS AS OF RECORD DATE

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(1)

On April 25, 2023, Mr. Matthews provided notice to the Board of his decision, effective as of the date of the 2023 Annual Meeting, to retire as a Class III member of the Board and the above-noted Committees (the “Matthews Retirement”). Mr. Matthews’ retirement was not due to any disagreement with the Company’s operations, policies or practices. Concurrent with such retirement, there will be a reduction of the Board size from 11 directors to 10 directors, the Compensation Committee from four directors to three directors and the Nominating and Corporate Governance Committee from four directors to three directors.

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Corporate Governance and Board Matters​

SPECIFIC SKILLS, EXPERIENCE AND QUALIFICATIONS

Our Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board, subject to any obligations and procedures governing the nomination of directors to the Board that may be set forth in any stockholders agreement of which the Company is a party. The Board, through the Nominating and Corporate Governance Committee, also monitors the mix of specific experience, qualifications and skills of its directors to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. This process has led to significant Board refreshment since our IPO in June 2019, which included an increased focus on director independence and diversity.

In early 2023 we enhanced Board leadership diversity with Mary Kay Haben becoming Chair of our Nominating and Corporate Governance Committee. We will continue to recruit directors from underrepresented communities as we believe the fresh perspectives and breadth of diversity have enhanced, and will continue to enhance, the Board’s overall effectiveness. The recent Board refreshment also greatly increased the breadth of skills and industry experience on the Board.

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(1)

The chart above reflects statistics as of the date of the 2023 Annual Meeting, following the Matthews Retirement.

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Corporate Governance and Board Matters​

Set forth below are other key skills, experience and qualifications evaluated by our Nominating and Corporate Governance Committee and Board.

​

(1)

The chart above reflects the skills and experience of the Board following the Matthews Retirement.

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Corporate Governance and Board Matters​

BOARD DIVERSITY MATRIX (AS OF APRIL 28, 2023)

The chart above reflects diversity of the Board prior to the Matthews Retirement.

DIRECTOR RECRUITMENT, NOMINATIONS AND APPOINTMENTS

The Nominating and Corporate Governance Committee is responsible for facilitating director assessments, identifying skills and expertise that candidates should possess, and screening, selecting and recommending candidates for approval by the Board. The Nominating and Corporate Governance Committee may solicit recommendations for nominees from other members of the Board and management. Our Nominating and Corporate Governance Committee may also retain professional search firms to identify candidates.

The Committee will take into account all factors it considers appropriate in recommending candidates for election to the Board, which will include:

•

ensuring that the Board, as a whole, is appropriately diverse and consists of individuals with various and relevant career experience (including current employment), prior and current service on public company boards, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert”), local or community ties and service, and diversity (age, race, ethnicity and gender, among other factors);

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•

minimum individual qualifications, including integrity, strength of character, mature and good business judgment, familiarity with the Company’s business and industry, independence of thought and ability to work collegially; and

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•

the extent to which the candidate would fill a present need on the Board.

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The Committee will consider the qualifications of nominees recommended by stockholders. We did not receive any recommendations for director nominations from stockholders for the 2023 Annual Meeting.

Corporate Governance and Board Matters​

NOMINATION RIGHTS AND SUPPORT OBLIGATIONS UNDER OUR AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

Our Amended and Restated Stockholders Agreement provides, among other terms, that the Executive Stockholders (as defined in the Amended and Restated Stockholders Agreement) and the Read Trust Rollover Stockholders (as defined in the Amended and Restated Stockholders Agreement), trusts controlled by Mr. Lindberg or members of his immediate family, acting together by majority vote, will have the right to nominate one person (such person, the “Stockholder Nominee”) to our Board for so long as such stockholders collectively own at least 5% of the outstanding shares of our common stock. The Amended and Restated Stockholders Agreement also provides that our Chief Executive Officer will be nominated to our Board. The Stockholder Nominee position was formerly filled by Mr. Read, then a Class II director, and the Chief Executive Officer, Mr. Sheedy, is a Class III director.

Pursuant to the Amended and Restated Stockholders Agreement, we must include the Stockholder Nominee and the Chief Executive Officer nominee on the slate that is included in our proxy statements relating to the election of directors of the class to which such persons belong and provide the highest level of support for the election of each such persons as we provide to any other individual standing for election as a director. In addition, each stockholder party to the Amended and Restated Stockholders Agreement agrees to vote in favor of the Company slate that is included in our proxy statement.

Since Mr. Read (as the former Stockholder Nominee) has ceased to serve as a director, the persons entitled to designate the Stockholder Nominee under the Amended and Restated Stockholders Agreement are entitled to appoint another nominee to that position however, to date, have not done so.

Corporate Governance and Board Matters​

DIRECTOR BACKGROUND AND QUALIFICATIONS

The following biographical information sets forth the business experience during at least the past five years of each director nominee and each other director as of April 28, 2023, together with a brief discussion of the specific experience, skills, expertise, backgrounds and other attributes that led to the conclusion that each director should continue to serve on the Board.

2023 Class I Director Nominees

Corporate Governance and Board Matters​

Corporate Governance and Board Matters​

Corporate Governance and Board Matters​

Class II Directors with Terms Expiring in 2024

Corporate Governance and Board Matters​

Class III Directors with Terms Expiring in 2025

Corporate Governance and Board Matters​

Corporate Governance and Board Matters​

Director Independence

Pursuant to the corporate governance listing standards of The NASDAQ Stock Market LLC (“Nasdaq”), a director employed by us cannot be deemed to be an independent director. Each other director will qualify as independent only if the director satisfies a series of objective tests, including that the director has not engaged in various types of business dealings with us, and that our Board affirmatively determines, on a subjective basis, that he or she has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship.

Upon the recommendation of the Nominating and Corporate Governance Committee, our Board has affirmatively determined (i) all of our current directors are independent in accordance with the Nasdaq rules, other than Mr. Lindberg, who served as our Chief Executive Officer through December 31, 2022, and Mr. Sheedy, who serves as our President and Chief Executive Officer. In making these determinations, the Nominating and Corporate Governance Committee reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities as they may relate to us and our management, and determined that no subjective independence concerns existed. Each member of the Committees is independent under Nasdaq rules.

Additionally, our Board has determined that each of the members of the Audit and Risk Committee and Compensation Committee qualify as independent in accordance with the additional independence rules established by the U.S. Securities and Exchange Commission (“SEC”) and Nasdaq.

Ms. Mejía, who served during Fiscal Year 2022 until February 2022 was also determined by our Board to be independent in accordance with the Nasdaq rules and with the additional independence rules established by the SEC and Nasdaq. Mr. Read, who retired in September 2022, was not determined to be independent due to his former position as our Executive Vice Chairman.

Board Leadership Structure—Former CEO Serving as Chairman of the Board with Empowered Lead Independent Director

In connection with Mr. Lindberg’s retirement, effective December 31, 2022, he was appointed as our Chairman of the Board. The Board believes that Mr. Lindberg’s significant experience as our former Chief Executive Officer and detailed knowledge of our operations, finances, strategies and industry facilitates a strategic vision to set the overall tone and direction of the Company as well as clear leadership through consistency. Concurrent with Mr. Lindberg’s appointment as Chairman, the Board appointed Mr. Ragatz (who previously served as Chairman since October 2014) to the role of Lead Independent Director. Our Corporate Governance Guidelines provide that our independent directors will elect a Lead Independent Director whenever the Chairman is not an independent director. Our Board believes that an effective Lead Independent Director, such as Mr. Ragatz, who has significant and clearly delineated responsibilities as set forth in our Corporate Governance Guidelines and

Corporate Governance and Board Matters​

significant experience after serving as our Chairman of the Board, ensures strong, independent oversight of management and promotes effective governance and Board efficiency. Mr. Ragatz qualifies as independent under applicable rules and regulations of the SEC and Nasdaq. Further, the Committees consist solely of independent directors and provide significant oversight and leadership of key Board functions.

Key Responsibilities of Lead Independent Director:

Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines, which describe the principles and practices that our Board will follow in carrying out its responsibilities. These guidelines cover a number of policies and practices, including certain matters described under “Highlights of Current Corporate Governance Practices.” Additionally, these guidelines address:

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the role and responsibilities, size and composition of the Board;

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the independence of directors;

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the selection of Chairman of the Board and the Lead Independent Director;

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potential and actual conflicts of interest;

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consideration of matters impacting director service, including a change in present job responsibility and retirement age (see below);

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director orientation and continuing education;

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the conduct of Board meetings;

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standing Committees;

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expectations of directors;

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management succession planning;

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Board compensation;

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communications with stockholders and non-employee directors; and

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the process for evaluating Board performance.

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A copy of our Corporate Governance Guidelines is available on our website at https://investors.groceryoutlet.com under the “Corporate Governance” section.

Board and Committee Meetings and Annual Meeting Attendance

The Board and its Committees meet throughout the year at regularly scheduled meetings and also hold special meetings as needed. Additionally, they act by unanimous written consent when needed and appropriate. During the Fiscal Year 2022, there were five meetings of the Board, eight meetings of the Audit and Risk Committee, seven meetings of the Compensation Committee and six meetings of the Nominating and Corporate Governance Committee. Other than María Fernanda Mejía, each of our directors attended more than 90% of the aggregate meetings of the Board and its Committees on which they served during the period they served in Fiscal Year 2022. In connection with her appointment to an executive role with another company, Ms. Mejia delivered a letter of resignation to our Board on January 28, 2022 with a February 2, 2022 effective date of resignation. She did not attend a special meeting of the Board convened on January 31, 2022 due to her impending departure from the Board.

In addition, our independent directors regularly meet in executive session, without management present. The Lead Independent Director, currently Mr. Ragatz, chairs these executive sessions of independent directors, which he also led in his prior role as independent Chairman of the Board. Our fully independent Committees also regularly meet in executive session (chaired by the respective Committee Chair).

We strongly encourage our directors to attend our annual meetings of stockholders. Nine of our then eleven members attended our 2022 annual meeting of stockholders.

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Board and Committees’ Role in Risk Oversight

Our Board and its Committees has extensive involvement in overseeing the Company’s risk management through their activities, some of which are noted below. We believe that the leadership structure of our Board and Committees provides appropriate risk oversight.

Enterprise Risk Management Process. Our Audit and Risk Committee oversees our approach to enterprise risk management, which is designed to work across our business to identify, assess, govern and manage risks and our response to those risks. The Senior Director of Corporate Internal Audit & Enterprise Risk, who reports functionally and administratively to our Chief Financial Officer and directly to the Audit and Risk Committee, leads an annual risk assessment process. Through this process, risks are identified through a series of interviews and questionnaires, and then prioritized based on quantitative and qualitative factors that consider the likelihood and impact of the risk. Senior management aligns on critical risks and then identifies risk owners among the executive leadership team. Overall results are reported to and discussed with the Audit and Risk Committee annually and more frequently based on the materiality of specified risks. The Audit and Risk Committee provides updates to the Board, at least annually, on such review.

Cybersecurity, Data Privacy and Data Security. We consider cybersecurity to be an important issue affecting the enterprise both in terms of economic risk and reputational risk. Our Chief Information Officer regularly provides reports to the Audit and Risk Committee regarding cybersecurity and related topics. We have implemented controls in line with the requirements of the International Organization for Standardization and have assessed our cybersecurity maturity levels against the National Institute of Standards and Technology framework to set appropriate standards and guidelines. We monitor and remediate threats through our managed detection and response, and our vulnerability management programs. We provide regular employee communications and training, regularly review our incident response and breach notification plan, and leverage third-party expertise for testing, assessments and improvements.

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We have increased our remote workforce in recent years, and therefore the Audit and Risk Committee and management have focused on ensuring that we have secure remote access with trusted devices, endpoint security controls and infrastructure resiliency. As part of this process, we enhanced our security incident response procedures to address risks specific to remote working conditions. We continue to improve our security posture with process improvement, testing, simulation training and investments where necessary.

We have in place a cybersecurity incident response team, comprised of members of the Company’s information security, legal, human resources and communications teams, and whose function is to respond to any such incident, define and seek to control the extent of the incident, assess and remediate any damage caused, and implement measures designed to prevent future reoccurrences. We also carry cyber risk insurance that provides protection against a breach or other data security incident (see our risk factors in our 2022 Annual Report relating to cybersecurity and cybersecurity insurance).

Annual Board and Committee Self-Evaluations

The Board is committed to an annual self-assessment process led by the Chair of the Nominating and Corporate Governance Committee (which process may from time to time include the engagement of a third-party consultant). This self-assessment process typically involves questionnaires and individual meetings with each director and the Chair of the Nominating and Corporate Governance Committee soliciting each director’s input and comments regarding various board and committee effectiveness topics such as stewardship and board/committee dynamics. Through this process, areas where the Board functions effectively and areas where it believes it can improve are identified and discussed. Improvement opportunities are identified and assigned to develop and drive action plans.

Compensation Risk Analysis

The Compensation Committee reviews management’s annual assessment of our compensation programs and policies for our executive officers as well as for our other employees to determine whether those programs and policies encourage excessive risk taking that are reasonably likely to have a material adverse effect on our Company. Our compensation policies and practices (including those for our executive officers described in more detail under “Compensation Discussion and Analysis” below) balance short- and long-term performance goals and award vehicles, as well as the mix of the cash and equity components. Further, our most significant programs are overseen by the Compensation Committee, directly or through delegation of authority, and have strong risk mitigants, including market-based benchmarking throughout the organization and reasonable payout caps and, for our executives and directors, our clawback policy and stock ownership guidelines. Based upon this review, the Compensation Committee believes the elements of our compensation programs and policies do not encourage unnecessary or excessive risk-taking that are reasonably likely to have a material adverse effect on us.

Committees of the Board

The standing Committees of our Board include: the Audit and Risk Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The composition and responsibilities of each standing Committee are described below, as well as above under “Board and Committees’ Role in Risk Oversight”. Members will serve on these Committees until their resignation, retirement or other termination of service, or until otherwise determined by our Board. Current copies of the charters for each of these Committees are available on our website at https://investors.groceryoutlet.com, under the “Corporate Governance” section.

The following table sets forth the standing Committees and their Chairs and members as of the date of this Proxy Statement. Neither Mr. Lindberg nor Mr. Sheedy served on any standing Committees.

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Ms. Jaros served on the Audit and Risk Committee during Fiscal Year 2022 until July 2022. Mr. York served on the Compensation Committee during Fiscal Year 2022 until July 2022.

In early 2023, Ms. Haben was appointed Chair of the Nominating and Corporate Governance Committee, replacing Mr. Ragatz.

On April 25, 2023, Mr. Matthews provided notice to the Board of his decision, effective as of the date of the 2023 Annual Meeting, to retire as a Class III member of the Board and the above-noted Committees. Concurrent with the Matthews Retirement, there will be a reduction of the Board size from 11 directors to 10 directors, the Compensation Committee from four directors to three directors and the Nominating and Corporate Governance Committee from four directors to three directors.

Audit and Risk Committee.   The Audit and Risk Committee is solely and directly responsible for the appointment, compensation, retention, oversight of the work and termination, if any, of our independent registered accounting firm, Deloitte & Touche LLP (“Deloitte & Touche” or “Deloitte”). The additional primary responsibilities of the Audit and Risk Committee are to provide assistance to the Board regarding:

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oversight of the quality and integrity of the Company’s financial statements, including the oversight of the Company’s accounting and financial reporting processes (including relating to internal control over financial reporting and disclosure controls and procedures) and reviewing reports filed or furnished to the SEC that include financial statements or results;

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oversight of the Company’s compliance with legal and regulatory requirements;

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review and assessment of the independent registered public accounting firm’s qualifications, planned audit procedures performance and independence;

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oversight of the Company’s corporate compliance program, including the Code of Ethics, and investigations of possible violations thereunder;

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oversight of the risk management policies and procedures of the Company;

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the preparation of the Audit and Risk Committee report included in our proxy statement, as well as the review of related disclosures in such proxy statement;

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review of the work plan and performance of the Company’s internal audit function;

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reviewing the Related Persons Transactions Policy and reviewing and, if appropriate, approving proposed related person transactions in accordance with such policy; and

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other responsibilities noted in the Audit and Risk Committee report included in this Proxy Statement.

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The Board has determined that each of Messrs. Bachman and Herman qualifies as an “audit committee financial expert” under SEC rules, and that each member of the Audit Committee has sufficient knowledge in reading and understanding financial statements to serve on such Committee.

Compensation Committee.   The primary responsibilities of the Compensation Committee are to provide assistance to the Board regarding:

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evaluating, with the assistance of the CEO, the performance of the executive officers (other than the CEO);

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annually determining the appropriate peer group and survey data in connection with evaluating executive compensation and benefits;

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approving the compensation program and target compensation of the Company’s executive officers (other than the CEO) and recommending to the full Board the compensation program and compensation of the non-employee members of the Board;

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consider on an annual basis management’s assessment of whether risks arising from the Company’s compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company;

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monitoring or administering incentive and equity-based compensation plans;

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reviewing any compensation-related disclosures in this Proxy Statement, including reviewing and discussing with management our “Compensation Discussion and Analysis” and producing the Compensation Committee Report included in our proxy statement, and reviewing any stockholder proposals related to such matters;

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overseeing certain matters related to human capital management; and

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being solely and directly responsible for the engagement, qualifications, scope of work, performance, independence and fees of the Compensation Committee’s independent compensation consultant.

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The Board has determined that each member of the Compensation Committee qualifies as a non-employee director under applicable rules and regulations of the SEC.

To the extent permitted by applicable law and the Nasdaq rules, the Compensation Committee may delegate its responsibilities to a subcommittee and may authorize members of our Human Resources department to carry out certain administrative duties regarding our compensation programs. Pursuant to delegated authority from the Compensation Committee, the Committee Chair and the Chief Executive Officer approve certain equity awards for non-executive officer employees, subject to specified limitations.

For Fiscal Year 2022, the Compensation Committee determined to re-engage Korn Ferry as its independent consultant. In connection with such engagement, the Committee reviewed the independence of Korn Ferry based on the factors specified by Nasdaq as well as other factors it deemed relevant, and any conflicts of interest raised by the work of Korn Ferry. In Fiscal Year 2022, management engaged Korn Ferry for consulting services regarding certain non-executive compensation matters. The fees for those services were less than $120,000. The Committee determined that there were no conflicts of interest raised by Korn Ferry’s work for management. For information on the processes and roles for determining compensation, including the role of the Compensation Committee’s independent consultant, Korn Ferry, and the role of our Chief Executive Officer, in the consideration and determination of executive compensation, see “Compensation Discussion and Analysis” below.

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Nominating and Corporate Governance Committee.   The primary responsibilities of the Nominating and Corporate Governance Committee are to provide assistance to the Board regarding:

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developing and recommending to the Board a set of corporate governance principles applicable to the Company, including reviewing key governance policies of the Company (including the Corporate Governance Guidelines and Code of Ethics) and monitoring or administering such policies as specified therein;

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identifying and evaluating individuals qualified to become directors (including candidates nominated or recommended by stockholders), consistent with the criteria approved by the Board and set forth in Company policies, and recommending to the Board the director nominees for the next annual meeting of stockholders or to fill vacancies or newly created directorships that may occur between such meetings;

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reviewing director independence;

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evaluating the composition the Board and considerations related to director succession planning;

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reviewing Committee membership and Board and Committee leadership roles;

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overseeing the evaluation of the Board and its Committees;

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review any governance-related disclosures in this Proxy Statement, and reviewing any stockholder proposals related to such matters;

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oversight of management and director engagement with stockholders;

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reviewing matters of corporate responsibility and sustainability, including potential long- and short-term trends and impacts to the Company’s business of environmental, social and governance issues, and the Company’s public reporting on these topics; and

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otherwise taking a leadership role in overseeing and developing the corporate governance of the Company.

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Stockholder Engagement

Our Board and management value the opportunity to engage with our stockholders and prospective stockholders to better understand and focus on the priorities that matter most to them, and to foster consistent and constructive dialogue. Throughout the year, our Investor Relations team and leaders of our business proactively engage with our stockholders to seek their input, to remain well-informed regarding their perspectives and help increase their understanding of our business, industry and long-term strategy. The feedback received from our stakeholder outreach efforts is communicated to and considered by the Board, and our engagement activities have produced valuable feedback that helps inform our decisions and our strategy, where appropriate. The Board also receives regular reports from management regarding investor sentiment, institutional investor voting and governance policies, and trends in stakeholder issues, which informs the Board’s ongoing evaluation of appropriate governance and other practices.

Compensation Committee Interlocks and Insider Participation

Compensation decisions are made by our Compensation Committee, which in Fiscal Year 2022 consisted of Kenneth W. Alterman, Carey F. Jaros, Norman S. Matthews and Erik D. Ragatz (additionally, Mr. York served on the Compensation Committee during Fiscal Year 2022 until July 2022). None of our current or former executive officers or employees currently serves, or has served during our last completed fiscal year, as a member of our Compensation Committee and, during that period, none of our executive officers served as a member of the Compensation Committee (or other Committee serving an equivalent function) of any other entity whose executive officers served as a member of our Board.

We have entered into indemnification agreements with our directors as described in “Certain Relationships and Related Party Transactions—Indemnification of Directors and Officers.”

Communications with the Board of Directors

Our Board welcomes correspondence from our stockholders. Stockholders may initiate in writing any communication with our Board or any individual director by sending the correspondence to our General Counsel, c/o Grocery Outlet Holding Corp.,

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5650 Hollis Street, Emeryville, CA, 94608. This centralized process assists our Board in reviewing and responding to stockholder communications in an appropriate manner. The General Counsel will initially review and compile all such communications and may summarize such communications prior to forwarding to the appropriate party.

Our General Counsel will not forward communications that are not relevant to the duties and responsibilities of the Board, including spam, junk mail and mass mailings, product or service inquiries, new product or service suggestions, resumes or other forms of job inquiries, opinion surveys and polls, business solicitations or advertisements, or other frivolous communications.

Our Environmental, Social and Governance Approach

At Grocery Outlet, environmental, social and governance (“ESG”) issues are integral to our business model, our strategy and our culture. Our focus on ESG and corporate responsibility reflects our commitment to live out our mission to Touch Lives for the Better, in our communities, with our people and for our planet. We believe focusing on the best interests of our stakeholders and engaging with our stakeholders in a transparent fashion are critical components to our approach to generating value for our stockholders.

We believe that being a good environmental and social citizen is not just the right thing to do from a moral perspective but the right thing to do for long-term value creation. Our unique business model is inherently one of positive impact: (i) our opportunistic sourcing model reduces food waste by providing an efficient distribution channel for excess inventory, which in turn reduces greenhouse gas emissions, (ii) our store footprint delivers healthy, affordable nutrition to underserved communities, (iii) our success and growth provides our employees with meaningful opportunities for professional growth and financial gain, and (iv) our independent operator model provides entrepreneurs with the opportunity to run their own businesses and serve their communities. Having a positive impact on all of those we touch is part of the history and culture of Grocery Outlet and continues to be a guiding principle as we grow our business. We expect these positive impacts will grow as we continue to expand our retail footprint.

The importance of environmental sustainability becomes of increasing focus and importance as we grow. In the energy management area, we have several initiatives underway, including (i) obtaining various levels of green chill certification for new and existing stores, (ii) transitioning from a HFC refrigeration system to a CO2 system for new stores in California, which uses less energy, has lower energy costs and lowers CO2 emissions; (iii) working with local utility companies to formulate educational materials for our IOs regarding various behavioral changes to reduce energy use; and (iv) other initiatives to reduce energy use such as automatic door closure devices and anti-sweat heater control sensors. We and our IOs also participated in a program whereby Tesla backup batteries were installed at a small sampling of California stores, which batteries not only provide power during an outage but also shares the energy load during peak hours. We continue to analyze ways to reduce energy in our stores with alternatives to traditional lighting and have retrofitted certain of our stores with LED lighting. While our unique opportunistic sourcing model results in reduced food waste, for decades our IOs have partnered with local food bank organizations to donate food and other items that would have otherwise been discarded. California Senate Bill 1383 (“California law SB 1383”) now formally requires, among other things, that we and our IOs in California donate a certain amount of edible food that would otherwise have been thrown away to food recovery organizations. Our IOs in California have adopted formal donor partner agreements to ensure that their regular donating activities meets the technical requirements of this new legislation. We continue to actively pursue energy and waste management programs across our stores and in collaboration with our IOs.

Our Nominating and Corporate Governance Committee is responsible for overseeing (and regularly receives reports reflecting) matters of corporate responsibility, sustainability and impacts to our environmental, social and governance issues, as well as our public reporting regarding these matters. To support our efforts in this area, we engaged an outside ESG advisor and, in Fiscal Year 2022, we conducted an initial gap analysis and materiality assessment to evaluate potential ESG risks and opportunities relevant for our Company based on internal interviews and surveys of our key stakeholders. All of our stakeholder groups expressed interest in seeing Grocery Outlet focus on ESG topics that naturally support our business. We plan to publish our first ESG report during Fiscal Year 2023.

Our Commitment to Human Capital Management

At Grocery Outlet, our mission is to Touch Lives for the Better. To do this, we work together to foster and enhance a culture grounded in talented and passionate people who live our values: entrepreneurship, integrity, achievement, family, service to

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others, diversity and fun. Our employees are at the heart of who we are and what we do. Our values translate into our human capital offerings to recruit, engage, develop, reward and retain employees who believe in our mission and emulate our values. As of the end of Fiscal Year 2022, we had 969 employees, 864 of whom were full-time and 105 of whom were part-time. As of December 31, 2022, 470 of our employees were based at our corporate headquarters in Emeryville, California, and our Leola, Pennsylvania office, 144 of which were classified as field employees. As of December 31, 2022, our distribution centers employed 360 persons. The remaining 139 employees were employees in our Company-operated stores.

BOARD INVOLVEMENT IN HUMAN CAPITAL MATTERS

Our Board and Committees provide oversight on human capital matters and risks including employee engagement, equity, diversity and inclusion (“ED&I”), talent development and succession planning. Our full Board provides oversight of our executive management talent development, succession planning and talent acquisition, and has access to key leaders and other key talent throughout the organization through participation in Board and Committee meetings. Our Audit and Risk Committee provides oversight for enterprise risk management. Our Nominating and Corporate Governance Committee oversees the effectiveness of our governance and social responsibility policies, goals and programs. Our Compensation Committee provides oversight of our total rewards offerings for employees and conducts both a yearly compensation benchmarking assessment and yearly compensation risk assessment.

EMPLOYEE DEVELOPMENT

We seek to grow leaders at every level of our organization by creating a culture of mentoring and coaching. As part of our succession planning, we prioritize growing talent internally within our organization and invest resources to develop our employee’s skill sets and career path. As an example, our current Chief Executive Officer, Robert J. Sheedy, Jr., joined Grocery Outlet in 2012 as our Vice President of Strategy and thereafter was promoted three times before becoming President and Chief Executive Officer in January 2023. Some of our offerings during Fiscal Year 2022 (offered virtually and, in some cases, in person) included:

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Certification program opportunities, including offerings in personal growth and professional development;

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Lunch and learn events, featuring a wide variety of personal development topics and industry speakers; and

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Individual coaching for leadership development, and other leadership training on an ad hoc basis.

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During Fiscal Year 2022 we promoted 42 corporate and field employees.

EMPLOYEE COMPENSATION AND BENEFITS

We provide compensation and comprehensive benefits designed to recruit and retain the talent necessary to advance our mission, meet our business goals and execute our long-term growth strategy. Our compensation components vary by employee level and include cash base compensation, cash bonuses, equity awards and a profit-sharing program. As part of our IPO, each of our then current employees, regardless of level, was granted an equity award scheduled to vest in one tranche in June 2023. Our generous and highly competitive health and welfare benefits programs during Fiscal Year 2022, available equitably to full-time employees, include:

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Leading healthcare offered to employees, including medical, vision, dental, life insurance, accidental death and dismemberment, long-term disability, health savings accounts and wellness programs that encourage improved health while having fun;

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Free access to financial planning/training and wellness education, support and health challenges;

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Free access to on demand mental health support, providing confidential coaching and counseling;

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A 401(k) and profit-sharing program available to all employees meeting eligibility requirements (See “Compensation Discussion and Analysis” below for further information); and

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An education assistance program providing tuition reimbursement for eligible employees seeking to improve their job-related skills through additional education (subject to the conditions of the program). We also participate in the California Grocers Association Educational Foundation program to offer scholarships to employees, IOs and dependents.

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CULTURE AND DIVERSITY, EQUITY AND INCLUSION

We report annually on employment data, including ethnicity, in line with Equal Employment Opportunity Commission guidelines and we believe that a diverse and inclusive team is critical to our long-term business success and makes us a better company.

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Ethnicity data includes employees who choose not to disclose or who leave the field blank.

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While all employment related decisions are made based on merit and without any quota requirements, our ongoing diversity commitment has resulted in the hiring and promotion of a diverse workforce. In Fiscal Year 2022, 72% of our newly hired employees were racially and ethnically diverse, and over 35% were women. Also in Fiscal Year 2022, 56% of our promoted employees were racially and ethnically diverse and 44% of our promoted employees were women.

We have several employee resource groups (“ERGs”) that enhance our inclusive and diverse culture, including our overarching ED&I Council, our Black Partnership Network and our WOW! (Winning with Outstanding Women) Network. We also invite the launch of new ERGs with our ERG resource guide. We provide regular training and open employee discussions on diversity topics, including those relating to current events in our communities. In Fiscal Year 2022, we encouraged all employees to participate in an engagement survey, which included a set of ED&I questions. The questions were designed to measure employee beliefs and attitudes about the Company’s progress toward executing its ED&I strategy. We had a response rate of over 90% and the results highlighted both our successes and opportunities with respect to our ED&I practices.

We have made concerted efforts to expand the diversity of our Board and our executive leadership. Currently, of the nine non-executive members of our Board, three are women, one member is Black and one of the chairs of the Board’s Committees is a woman. Following the Matthews Retirement, our Board will be comprised of 30% women and have eight non-executive members. Our senior leadership team consists of twelve individuals, four of whom are women, two of whom are Black, one of whom is an Indigenous person, and one of whom is Asian.

We will continue to focus on recruiting and retaining women and historically underrepresented populations. We will also continue to focus on cultivating an inclusive and diverse corporate culture through continued education for all our employees, ERGs and talent development across our organization.

We strive to nurture and uphold an inclusive, diverse environment free from discrimination of any kind, including sexual or other discriminatory/ harassing behavior. We do this by setting an appropriate tone at the top with an open-door policy and robust policies/procedures such as our Code of Business Conduct and Ethics (the “Code of Ethics”) (which includes access to an anonymous hotline) as well as an internal audit function—all of which support compliance with regulations and ethical behavior. We conduct regular training on all of our corporate policies, including on our Code of Ethics and Insider Trading policies, and on topics such as workplace harassment and cybersecurity.

COMMUNITY INVOLVEMENT

The commitment by Grocery Outlet to our communities extends well beyond our offices and storefronts. We pride ourselves on giving back to local communities. In Fiscal Year 2022, through a coordinated effort with our independent operators and suppliers involving food, cash and online donations, we held our 11th Annual Independence from Hunger food drive, which supported over 400 non-profit agencies and helped reduce food insecurity and food waste within the communities in which we operate. In the eleven years Grocery Outlet has run this food drive, we and our IOs have raised over $16 million to fight food insecurity.

As an additional part of our efforts to fight hunger and minimize food waste, for decades our IOs have partnered with local food bank organizations to donate food and other items that would have otherwise been thrown away. California law SB 1383

Corporate Governance and Board Matters

now formally requires, among other things, that we and our IOs in California donate a certain amount of edible food that would otherwise have been thrown away to food recovery organizations. Our IOs in California have adopted formal donor partner agreements to ensure that their regular donating activities meets the technical requirements of this new legislation.

COMPANY FOUNDATION

In 2011 we established the Touching Lives Foundation, a 501(c)(3) non-profit organization. The Foundation’s purpose is to help people within the Grocery Outlet family (i.e. employees and immediate family members of Grocery Outlet or independent operators) who have financial need resulting from a catastrophic life event. The Foundation has covered expenses, among others, related to illness, funeral expense, emergency travel, temporary housing and relocation. The Touching Lives Foundation receives financial support from the Board members, management and employees of Grocery Outlet, independent operators, an annual corporate endowment from Grocery Outlet, Inc., as well as outside donors.

Code of Business Conduct and Ethics

We have adopted a Code of Ethics applicable to all employees, executive officers and directors that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities, including the requirement to report any conduct they believe to be a violation of the Code of Ethics. The Code of Ethics is available under the Corporate Governance tab of our Investor Relations page of our website at https://investors.groceryoutlet.com. If we ever were to amend or waive any provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations with respect to any such waiver or amendment by posting such information on our Internet website set forth above rather than by filing a Form 8-K.

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Director Compensation

Pursuant to our non-employee director compensation policy, cash and equity compensation is paid or made, as applicable, to each member of our Board who is not an employee of us or any parent or subsidiary of us, (each, a “Non-Employee Director”). In April 2022, our Board (following benchmarking analysis from and consultation with Korn Ferry) approved an amendment to the non-employee director compensation policy (the “2022 NED Compensation Policy Amendment”).

Non-Employee Director Cash Compensation

Under our Non-Employee Director compensation policy in effect for Fiscal Year 2022, Non-Employee Directors receives the following cash compensation:

The annual retainers are earned on a quarterly basis based on a calendar quarter.

Under our current Non-Employee Director compensation policy, none of our directors receive separate compensation for attending meetings of our Board or any Committees. All directors are reimbursed for travel and other expenses directly related to director activities and responsibilities.

Non-Employee Director Equity Compensation

The current non-employee director compensation policy provides that each Non-Employee Director will be granted an RSU award under our 2019 Incentive Plan (the “2019 Incentive Plan”) with respect to a number of shares of our common stock having a grant date fair market value of $125,000 (rounded up to the next whole share). The number of shares underlying the annual RSU grant is calculated by dividing $125,000 by the fair market value of our common stock (which is the closing price of a share of our common stock on Nasdaq) on the annual RSU grant date. Non-Employee Directors who join the Board mid-year receive a prorated grant.

Subject to the Non-Employee Director’s continued service with us on the applicable vesting date, the annual RSU awards will generally vest in full over twelve months or in full upon a change in control. Upon vesting, the annual RSU grant will be settled in shares of our common stock within 30 days of the date on which the relevant vesting date occurs.

Corporate Governance and Board Matters

Director Equity Ownership Guidelines

Our director equity ownership guidelines provide that our Non-Employee Directors are expected to achieve and maintain ownership of equity with a total value equal to five times the annual cash retainer for Board service ($75,000 for Fiscal Year 2022). Non-Employee Directors are expected to initially satisfy such guidelines within a five-year initial compliance period. As of December 31, 2022, all non-employee directors in service were either in compliance with the guidelines or within the compliance period and making appropriate progress.

For purposes of the guidelines, a director’s holdings include: (i) shares of our common stock owned separately by the director or owned either jointly or with, or separately by, his or her immediate family; (ii) shares of our common stock held in trust for the benefit of the director or his or her immediate family members; (iii) shares of our common stock purchased in the open market; (iv) shares of our common stock obtained through stock option exercises (and not thereafter sold); (v) vested but unexercised in-the-money stock options; and (vi) shares of restricted stock and RSUs, in each case, whether vested or unvested. Directors must hold 50% “net shares” ​(shares of our common stock remaining after any tax liability is settled) received from their equity awards until the guidelines are met.

Fiscal Year 2022 Director Compensation Table

The following table summarizes the compensation paid to or earned by our directors in Fiscal Year 2022, excluding Mr. Lindberg whose compensation is disclosed in the Summary Compensation Table.

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(1)

This column represents the dollar amount of retainers either actually paid in cash or voluntarily deferred into cash accounts under the director Deferral Plan (defined below) for Board and committee service by each director for Fiscal Year 2022. Messrs. Matthews and Read deferred all of their Fiscal Year 2022 cash compensation pursuant to the Deferral Plan. Accordingly, Mr. Matthews received 2,834 Deferred Stock Units (“DSUs”) and Mr. Read received 2,580 DSUs with respect to their Fiscal Year 2022 cash compensation. Mr. Read retired as Vice Chairman and a member of the Board effective September 1, 2022.

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(2)

Amounts reported in this column represent the grant date fair value of RSUs granted. RSU awards listed in this column may be deferred under the Deferral Plan. These amounts do not reflect actual amounts that may be paid to or realized by the director. The grant date fair value of the RSUs are calculated as of the closing price of our common stock as quoted on Nasdaq on the grant date multiplied by the number of shares of our common stock subject to the award. See Note 8, Share-based Awards to our consolidated financial statements contained in our 2022 Annual Report for a discussion of all assumptions made by us in determining the grant date fair value in accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 718. Each of our non-employee directors was granted an RSU award on March 3, 2022 (with a vesting commencement date of March 1, 2022) for 3,448 shares of our common stock, pursuant to our Non-Employee Director compensation policy and the terms of the 2019 Incentive Plan. Additionally, for Fiscal Year 2022, each non-employee director was granted an additional 705 shares on May 12, 2022 in connection with the 2022 NED Compensation Policy Amendment. Pursuant to our Deferral Plan, Ms. Haben, and Messrs. Matthews, Read and Ragatz each made elections in 2021 to defer the issuance of all of their RSUs granted during Fiscal Year 2022, and in March 2023, they each received 3,448 DSUs upon vesting. As of December 31, 2022, each of our then current non-employee directors held 4,153 unvested RSUs. No option awards were held by this group.

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Corporate Governance and Board Matters

(3)

Ms. Mejía resigned from our Board in February 2022 in connection with her appointment to an executive role with another company.

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(4)

Mr. Ragatz elected to forgo the additional annual cash retainer fee of $100,000 payable to him in connection with his service as Chairman of the Board and elected to donate the other Board and Committee annual cash retainer fees payable to him (equal to $95,000) to Grocery Outlet’s Touching Lives Foundation.

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(5)

Mr. Read retired from the Board in September 2022. Accordingly, the amount shown for Mr. Read under the “Stock Awards” column was forfeited.

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Director Deferral Program

On November 6, 2020, the Compensation Committee approved the Grocery Outlet Holding Corp. Directors Deferral Plan (the “Deferral Plan”). All of our current Non-Employee Directors are eligible to participate in the Deferral Plan. Under the terms of the Deferral Plan, Non-Employee Directors may elect to defer all of their annual cash compensation and/or all of the shares of our common stock issued upon settlement of their annual RSU award, in each case, in the form of DSUs credited to an account maintained by us. The number of DSUs credited in respect of annual cash compensation is determined by dividing the dollar amount of the deferred cash compensation by the fair market value of a share of our common stock on the date the cash compensation would otherwise have been paid to the director. DSUs are awarded from, and remain subject to the terms of, the 2019 Incentive Plan.

Each DSU represents the right to receive a number of shares of our common stock equal to the number of DSUs initially credited to the director’s account plus the number of DSUs credited as a result of any dividend equivalent rights (to which DSUs initially credited to a director’s account are entitled). Directors may elect that settlement of DSUs be made or commence on (i) the first business day in a year following the year for which the deferral is made, (ii) following termination of service on the Board or (iii) the earlier of (i) or (ii). Directors may elect that DSUs be settled in a single one-time distribution or in a series of up to 5 annual installments. In addition, DSU accounts will be settled upon a Change in Control (as defined in the 2019 Incentive Plan) or upon a director’s death. Notwithstanding the foregoing, with respect to Mr. Read only, he will forfeit the right to settlement of his DSUs to the extent that the DSUs would otherwise be settled upon a Change in Control that occurred prior to a specified date.

AUDIT AND RISK COMMITTEE REPORT

Committee Membership

The Audit and Risk Committee of the Board (solely for the purpose of this report, the “Committee”) consists of John E. Bachman (Chair), Thomas F. Herman, Gail Moody-Byrd, and Jeffery R. York. The Board has determined, in accordance with applicable Nasdaq and SEC rules and regulations, that all of the Committee members are independent and able to read and understand fundamental financial statements, and Messrs. Bachman and Herman are audit committee financial experts.

Charter and Responsibilities

The Committee operates under a written charter adopted by the Board, which is available on our website at https://investors.groceryoutlet.com. The Committee reviews the charter annually and works with the Board to make any necessary amendments that may be appropriate to reflect the evolving role of the Committee.

Among other responsibilities set forth in its charter, the Committee assists the Board in overseeing our financial reporting, internal control and audit processes, monitoring our compliance with significant legal and regulatory requirements related to financial reporting and internal control, overseeing the Company’s major financial, enterprise, and certain other risk exposures and related risk mitigation policies, and evaluating the qualifications, scope of work, performance and independence of our independent registered public accounting firm. The Committee also is responsible for the engagement and establishing the terms of retention, including compensation, of our independent registered public accounting firm.

Management has the primary responsibility to establish and maintain a system of internal control over financial reporting, for the preparation, presentation and integrity of the financial statements, the reporting process and related disclosure controls and procedures, and accounting and financial reporting principles, and compliance with applicable laws and regulations. Our independent registered public accounting firm, Deloitte & Touche, LLP, is responsible for performing an independent audit of our financial statements and the effectiveness of internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and to issue reports thereon. The Committee does not provide any expert or other special assurance as to the Company’s financial statements or any expert or professional certification as to the work of our independent registered public accounting firm.

Fiscal Year 2022 Financial Statements

In the performance of its oversight function, the Committee reviewed and discussed our audited consolidated financial statements included in our 2022 Annual Report and the reporting process with the Company’s management and Deloitte, as well as Deloitte’s audit report. The Committee also reviewed and discussed Deloitte’s overall audit scope and work plan throughout the course of the audit for Fiscal Year 2022. Further, the Committee discussed with Deloitte, with and without management present, the effectiveness of our internal control over financial reporting, and reviewed and discussed Deloitte’s report on internal control. The Committee also discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. These required communications included Deloitte’s perspective on the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates and judgments made by management, including related disclosures regarding critical accounting policies and significant accounting policies included in our 2022 Annual Report on, and critical audit matters addressed in Deloitte’s audit report. The Committee also met with senior management to discuss the processes they undertook to evaluate the accuracy and fair presentation of the Company’s consolidated financial statements and the effectiveness of the Company’s systems of disclosure controls and procedures.

Based on the review and discussions with management and Deloitte described above, the Committee recommended to the Board that the audited consolidated financial statements be included in our 2022 Annual Report on Form 10-K.

Other Reporting Matters

During Fiscal Year 2022, the Committee reviewed and discussed with management and Deloitte the unaudited quarterly financial statements included in our Quarterly Reports on Form 10-Q filed with the SEC and the matters required to be

Audit and Risk Committee Report​

discussed for an interim review by the applicable requirements of the PCAOB and SEC, our earnings press releases, our earnings guidance, and the use and presentation of non-GAAP financial information. Further, during Fiscal Year 2022, the Committee considered our critical accounting policies and significant judgements and estimates, and changes in the Company’s accounting practices, principles, controls and methodologies applicable to its financial statements. The Committee also reviewed with management and Deloitte the Company’s enterprise risk management framework, including significant risks and exposures identified by management, including cybersecurity risk, and strategies to mitigate identified risks, and the overall adequacy of effectiveness of the Company’s legal, regulatory and compliance programs.

Independence and Pre-Approval Policy

The Committee received and reviewed the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB regarding Deloitte’s communications with the Committee concerning independence. As part of its ongoing independence evaluation of Deloitte, the Committee also evaluated the amount of non-audit service requests and approved services that we obtain from Deloitte and whether it was compatible with its independence, as well as the PCAOB’s oversight of Deloitte through the establishment of audit, quality, ethics, and independence standards and conducting audit inspections. Based on the foregoing considerations and other matters, the Committee concurred with Deloitte’s conclusion that it was independent under applicable standards.

The Committee’s policy is to pre-approve all audit and permissible non-audit services provided by Deloitte. For each proposed service, Deloitte provides the Committee with a description of the service and sufficient information to confirm Deloitte’s determination that the provision of such service will not impair independence. The Committee reviewed and pre-approved all audit and non-audit services performed by Deloitte during Fiscal Year 2022 in accordance with established procedures.

Independent Registered Public Accounting Firm Tenure and Rotation

As part of its engagement process, the Committee considers whether to rotate the independent registered public accounting firm. Deloitte has been our independent registered public accounting firm since 2007, and the Committee approved the appointment of Deloitte as our independent registered public accounting firm for the Fiscal Year 2023. In addition, the Committee oversees the process for evaluation and selection of the lead audit engagement partner every five years. In determining that the re-appointment of Deloitte was in the best interests of the Company and its stockholders, the Committee considered the following, among other matters:

•

The significant benefits from Deloitte’s extensive historical experience, including higher quality audit work and accounting advice due to Deloitte’s institutional knowledge of and familiarity with our business and operations, accounting policies and financial systems, and internal control framework;

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•

Operational efficiencies and a resulting fee structure that is appropriate and reasonable relative to scope of services because of Deloitte’s history and familiarity with our business;

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•

The positive assessment by management and the Committee regarding Deloitte’s performance of services during Fiscal Year 2022;

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•

Deloitte’s qualifications, capabilities and expertise, evident through its audit planning and reports, industry knowledge, resources (including its subject matter experts and investment in auditing technologies) and staffing (including annual assessment of the adequacy of personnel on our account, objectivity and professional skepticism);

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•

Deloitte’s rigorous process for monitoring and maintaining independence, and its transparent disclosure regarding related considerations; and

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•

The quality and frequency of Deloitte’s communications to and interactions with the Committee, including the Chair, at meetings and between meetings.

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Audit and Risk Committee Report​

The foregoing report of the Audit and Risk Committee does not constitute soliciting material and shall not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent the Company specifically incorporates such report by reference therein.

OTHER AUDIT AND RISK COMMITTEE MATTERS

FEE INFORMATION

The following table sets forth fees in connection with services rendered by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, for Fiscal Year 2022 and Fiscal Year 2021.

Audit Fees

Audit fees include fees for professional services rendered in connection with the annual audit of the Company’s financial statements and the review of the Company’s interim financial statements included in quarterly reports, as well as fees for services that generally only the independent registered public accounting firm can be reasonably expected to provide, including comfort letters, consents, and review of registration statements filed with the SEC.

Tax Fees

Tax fees include fees for professional services rendered for tax compliance and tax consultation.

All Other Fees

All other fees include fees for a technical research tool subscription service.

AUDIT AND RISK COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

Under our Audit and Risk Committee’s charter, the Audit and Risk Committee must pre-approve all audit and other permissible non-audit services proposed to be performed by the Company’s independent registered public accounting firm. In pre-approving such services, the Committee considers whether the provision of services is consistent with maintaining the independence of the independent registered public accounting firm, including under applicable law. The Committee may delegate authority to one or more independent members to grant pre-approvals of audit and permitted non-audit services, provided that any such preapprovals will be presented to the full Committee at its next scheduled meeting.

All of the services provided by Deloitte & Touche LLP described above were approved by our Audit and Risk Committee. The Audit and Risk Committee approved a pre-approval policy for services provided by the independent registered public accounting firm. Under the policy, our Audit and Risk Committee has pre-approved the provision by the independent registered public accounting firm of certain services that fall within specified categories. Any services exceeding pre-approved cost levels or budgeted amounts, or any services that fall outside of the general pre-approved categories, require specific pre-approval by the Audit and Risk Committee.

EXECUTIVE OFFICERS

The following table sets forth information about our executive officers as of April 24, 2023:

Set forth below is a brief description of the business experience of our executive officers. See “Board of Directors—Director Backgrounds and Qualifications” for biographical and other information for Mr. Sheedy. Our executive officers are appointed by our Board and serve until their successors have been duly appointed and qualified or their earlier resignation, retirement or other termination of service.

Executive Officers​

Executive Officers​

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides an overview of the philosophy, objectives, process and components of our compensation program for the following named executive officers (collectively, our “Named Executive Officers” or “NEOs”) in Fiscal Year 2022. The compensation program for our NEOs generally is consistent with the compensation program for our other executive officers, and the Compensation Committee generally evaluates compensation programs for executive officers, including NEOs, as a group. The Compensation Committee administers our Named Executive Officer compensation program, except certain matters are administered by the full Board regarding our Chief Executive Officer.

Our Named Executive Officers are as follows:

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(1)

Effective December 31, 2022, Mr. Lindberg retired as our Chief Executive Officer, but continued his service on the Board. Effective January 1, 2023, Mr. Sheedy was appointed as President and Chief Executive Officer and Mr. Lindberg was appointed as Chairman of the Board.

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(2)

Ms. Burke also served as Interim General Counsel and Secretary from January 2022 to June 2022.

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(3)

Mr. Wilson was appointed as EVP, Chief Purchasing Officer effective January 1, 2023.

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Executive Summary

FISCAL YEAR 2022 COMPANY PERFORMANCE

Fiscal Year 2022 was our third full year as a public company and we were pleased with our performance, which exceeded our expectations on both the top and bottom line. We manage our business for long-term sustainable growth and we are executing a strategy built on three primary growth pillars to help us achieve our mission of Touching Lives for the Better: (i) strengthening our core model; (ii) evolving our business; and (iii) expanding our reach. During Fiscal Year 2022, we made progress against these initiatives as we invested in purchasing capabilities and IO support, expanded our product assortment, increased our “share of wallet” with existing customers, and attracted new shoppers to our brand.

Our financial performance reflects strong execution as well as our continued focus on building capabilities to scale and reinvesting in our business. Financial highlights from Fiscal Year 2022 include:

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Net sales increased by 16.2% over the prior fiscal year to $3.58 billion.

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•

Comparable store sales increased 11.8%, driven by a 5.9% increase in the number of transactions combined with a 5.6% increase in average transaction size.

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•

We opened 27 new stores and closed one store during the year, ending the year with 441 locations.

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•

Net income increased 4.4% over the prior fiscal year to $65.1 million, or $0.65 per diluted share.

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•

Adjusted EBITDA(1) (under our prior definition), increased 13.8% over the prior fiscal year to $225.9 million. Under the revised definition, adjusted EBITDA increased 17.4% to $214.7 million.

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•

Adjusted net income(1) (under our prior definition) increased 13.5% over the prior fiscal year to $102.0 million, or $1.02 per adjusted diluted share. Under the revised definition, adjusted net income increased 19.4% to $93.9 million, or $0.94 adjusted diluted share.

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(1)

See the Table of Contents for information regarding our non-GAAP financial measures.

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Compensation Discussion and Analysis

Our business performance in Fiscal Year 2022 significantly exceeded target performance goals, and resulted in earned AIP payouts above target and contributed to our strong achievement for PSUs in the three-year performance period ended Fiscal Year 2022.

KEY ELEMENTS OF FISCAL YEAR 2022 COMPENSATION

Substantially consistent with Fiscal Year 2021, the key elements of our NEO compensation program in Fiscal Year 2022 consisted of:

•

Base salary;

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•

The AIP, an annual performance-based cash bonus generally based on our achievement of adjusted EBITDA and comparable store sales performance goals (other than for Mr. Wilson, as discussed below); and

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•

Long-term equity incentives, consisting of time-vesting restricted stock units (“RSUs”) and performance-vesting stock units (“PSUs”), with the PSUs based on our achievement of revenue and adjusted EBITDA growth goals over a three-year performance period.

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COMPENSATION MIX FOR NEOS

In Fiscal Year 2022, in line with our compensation philosophy that a significant portion of our executive pay be tied to company performance, approximately 83% of our Chief Executive Officer’s and 75% of our other NEO’s target total compensation was variable (or “at risk”), with value ultimately tied to either the achievement of objective corporate goals or stock price performance, or both.

The Compensation Committee believes this pay mix appropriately aligns the interests of executives with those of our stockholders. The charts below illustrate the target mix of pay (excluding benefits and perquisites) for our CEO and other NEOs for Fiscal Year 2022.

Compensation Discussion and Analysis

FISCAL YEAR 2022 COMPENSATION DETERMINATIONS

THE ROLE OF STOCKHOLDER SAY-ON-PAY VOTES

We provide our stockholders with the annual opportunity to cast an advisory vote on our NEO compensation (a Say-on-Pay proposal). The Compensation Committee considered stockholder support for our NEO compensation policies and practices based on the results of our most recent Say-on-Pay proposal at the 2022 annual meeting of stockholders, and no material changes were made to such policies and practices in Fiscal Year 2022 or 2023 as a result. The Compensation Committee will continue to consider the results of future Say-on-Pay votes, including results for the current year when available, when making future compensation decisions for our NEOs.

EXECUTIVE COMPENSATION PHILOSOPHY

Our compensation philosophy is the foundation for designing our executive compensation program, as well as evaluating and improving the effectiveness of the program, and is regularly reviewed by the Compensation Committee. The following are the core elements of our executive compensation philosophy:

Compensation Discussion and Analysis

By incorporating these philosophies, we believe our executive compensation program is both responsive to our investors’ objectives and effective in attracting, motivating and retaining the level of talent necessary to lead, grow and manage our business successfully.

KEY PRINCIPLES OF EXECUTIVE COMPENSATION PROGRAM

When aligning our executive compensation program with our compensation philosophy, the Compensation Committee and the Company steadfastly adhere to the following best pay principles:

Compensation Discussion and Analysis

Elements of Fiscal Year 2022 NEO Compensation Program

The following is a summary of the primary elements and objectives of our Fiscal Year 2022 NEO compensation program:

In addition to these key compensation elements, our Named Executive Officers are provided certain other compensation as set forth in “—Other Compensation” below.

Set forth below is detailed information regarding each element of our Fiscal Year 2022 NEO compensation program, key considerations in establishing NEO target pay, developing Fiscal Year 2022 performance goals, and determining earned pay.

Compensation Discussion and Analysis

BASE SALARY

We pay our Named Executive Officers base salaries to compensate them for services rendered each year. Base salary is a regular, cash payment, the amount of which is based on position, experience and performance after considering the following primary factors: internal review of the executive’s compensation and the Compensation Committee’s assessment (or in the case of the Chief Executive Officer, the Board’s assessment) of the executive’s individual prior performance, as well as benchmarking data. Salary levels are typically considered annually as part of our performance review process but can be adjusted in connection with a promotion or other change in job responsibility. Merit-based increases to salaries of our Named Executive Officers are determined and approved each January or February by the Compensation Committee (or in the case of the Chief Executive Officer, by the Board) after an assessment of the performance of each executive for the completed fiscal year and effective as of the new fiscal year.

The following table summarizes the increase in annual base salaries for our Named Executive Officers for Fiscal Year 2022.

In addition to a regular market-based adjustment, Ms. Burke’s base salary increase reflected her promotion from Chief Administrative Officer and General Counsel to her current role of Chief Stores Officer, effective January 1, 2022.

FISCAL YEAR 2022 ANNUAL INCENTIVE PLAN

Our Named Executive Officers, other senior members of our management team, as well as certain other employees of the Company, are eligible to receive an annual cash bonus pursuant to our Annual Incentive Plan, referred to as our “AIP”. Our AIP is designed to create a performance-based link between executive compensation and our short-term annual financial performance. The AIP provides metrics for the calculation of annual incentive-based cash compensation against pre-determined quantitative measures within the context of our overall performance. Actual annual cash incentive awards are calculated by multiplying each Named Executive Officer’s target bonus opportunity (which is a percentage of base salary) by an overall achievement factor based on the combined weighted achievement of the applicable performance goals.

When establishing the performance goals for the AIP, the Compensation Committee approves targets that it believes are both challenging to achieve and reasonable, and that fairly incentivize participants. The Compensation Committee also establishes what it believes are stretch goals for payouts higher than target that would incentivize and reward participants for exceptional performance without any guarantee that we would meet or exceed any such metrics in the prevailing business environment. As reflected in the Summary Compensation Table of this Proxy Statement, AIP payments have varied significantly over the last three years for our Named Executive Officers and are highly correlated with Company financial performance.

We continue to deploy a unique design feature in the AIP for all participants. During Fiscal Year 2022 and prior fiscal years, we provided for the potential of interim quarterly bonus payments based on specific performance goals being achieved during the performance period that align to the AIP performance goals, with a holdback such that the aggregate quarterly payouts are less than the full year target. This feature is used to engage and retain our employees, especially in this competitive talent environment. Following the end of the performance year, any remaining earned AIP is paid. Beginning with Fiscal Year 2023, our executive officers will not participate in our quarterly payment program and will receive their respective bonus payments (if any) in the first quarter of the subsequent year.

Bonus amounts (including any interim quarterly payments thereof) are payable in a lump sum cash amount and the payments with respect to any bonus amount under the AIP are generally subject to a participant’s continued employment through the payment date. At the discretion of the Compensation Committee bonuses can also be paid in shares of our common stock, although the Compensation Committee has not utilized that feature previously and has no current plans to do so.

Compensation Discussion and Analysis

Fiscal Year 2022 Target Bonus Opportunity

For each fiscal year, the NEOs’ annual target incentive bonuses are determined as a percentage of their base salaries and typically determined with the same timing and based on the same factors that the Compensation Committee considers in setting base salary. The following table summarizes the annual cash incentive opportunity for each of our Named Executive Officers for Fiscal Year 2022, which was unchanged from Fiscal Year 2021.

Fiscal Year 2022 Achievement Factors

Overall Achievement Factor for NEOs. Consistent with our compensation risk framework, the actual bonus payout under the Fiscal Year 2022 AIP that any Named Executive Officer is eligible to receive is capped at a maximum of 200% of the NEO’s bonus target. Further, for Fiscal Year 2022, a minimum achievement of 95% of the adjusted EBITDA goal needed to be achieved before any participant could earn over 100% payout, regardless of the achievement under other AIP performance metrics.

Overall Achievement Factor for NEOs (except Mr. Wilson). Consistent with the AIP in Fiscal Year 2021, the Compensation Committee utilized adjusted EBITDA and comparable store sales growth as the two performance metrics for the Fiscal Year 2022 AIP.

(1)

See the Table of Contents for information regarding our non-GAAP financial measures. Our prior definition for adjusted EBITDA was used to establish the performance goals for the Fiscal Year 2022 AIP.

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(2)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Metrics and Non-GAAP Financial Measures” included in our Annual Report on Form 10-K for Fiscal Year 2022 for a definition of comparable stores sales growth and supplemental information.

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Compensation Discussion and Analysis

The following table sets forth the corporate performance goals that were used to calculate the annual bonus achievement factors under the Fiscal Year 2022 AIP for each of our Named Executive Officers other than Mr. Wilson.

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*

For actual performance between the specified minimum, target and maximum levels, the resulting achievement percentage is adjusted on a linear interpolation basis and separately rounded.

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Overall Achievement Factor for Mr. Wilson. Mr. Wilson had an additional performance metric related to a department goal, as well as different weighting of such performance metrics. For Mr. Wilson’s Fiscal Year 2022 AIP, the performance metrics and weightings were: (i) adjusted EBITDA (20% target bonus weighting), (ii) comparable store sales growth (40% target bonus weighting) and (iii) a department goal of buyer-controlled gross margin dollars (40% target bonus weighting), which is calculated by multiplying comparable store sales dollars by the portion of gross margin that is controlled by our buying group which excludes distribution costs and other adjustments. The department goal had a threshold of 96% achievement (20% payout), a target of 100% achievement (100% payout), and a maximum achievement of 103% (200% payout). For actual performance between the specified minimum, target and maximum levels, the resulting achievement percentage is adjusted on a linear interpolation basis. Beginning with Fiscal Year 2023, Mr. Wilson will participate in the same AIP as the other executive officers.

Fiscal Year 2022 Earned AIP

Fiscal Year 2022 adjusted EBITDA (as defined for the AIP) was $225.9 million, which resulted in a 101% payout for such weighted metric, and Fiscal Year 2022 comparable store sales growth was 11.8%, which resulted in a 200% payout for such weighted metric, which aggregated to an overall achievement factor of 141%. For Mr. Wilson, Fiscal Year 2022 buyer-controlled gross margin dollars were 174.1%, which resulted in a 101.3% payout for that weighted metric (which was capped at the 101% Adjusted EBITDA payout level). Accordingly, Mr. Wilson’s overall achievement factor was also 141%.

The following table summarizes Fiscal Year 2022 annual incentive awards earned based on actual performance, as compared to the target opportunity, for each of our Named Executive Officers: