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Note 12 - Leases

12 Months Ended

Sep. 30, 2025

Lessee, Operating and Finance Leases [Text Block]

12. Leases

The Company leases most of its stores, a bulk food repackaging facility and distribution center and its administrative offices. The Company determines if an arrangement is a lease or contains a lease at inception. Lease terms generally range from 10 to 25 years, with scheduled increases in minimum rent payments.

Operating and finance lease liabilities represent the present value of lease payments not yet paid. Operating and finance lease assets represent the Company’s right to use an underlying asset and are based upon the operating and finance lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of operating and finance lease assets.

Most leases include one or more options to renew, with renewal terms normally expressed in periods of five-to-ten year increments. The exercise of lease renewal options is at the Company’s sole discretion. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that the Company will exercise that option.

Variable payments related to pass-through costs for maintenance, taxes and insurance or adjustments based on an index such as Consumer Price Index are not included in the measurement of the lease liability or asset and are expensed as incurred.

Because the rate implicit in the Company’s lease agreements is typically not readily determinable, the Company uses an estimated incremental borrowing rate, which is derived from third-party lenders, to determine the present value of lease payments. The Company uses other observable market data to evaluate the appropriateness of the rate derived from the lenders. The estimated incremental borrowing rate is based on the borrowing rate for a secured loan with a term similar to the expected term of the lease.

Leases are recorded at the commencement date (the date the underlying asset becomes available for use) for the present value of lease payments, less tenant improvement allowances received or receivable. Leases with a term of 12 months or less (short-term leases) are not presented on the balance sheet. The Company has elected to account for the lease and non-lease components as a single lease component for all current classes of leases.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company subleases certain real estate or portions thereof to third parties. Such subleases have all been classified as operating leases. Remaining sublease terms extend through fiscal year 2031. Although some sublease arrangements provide renewal options, the exercise of sublease renewal options is at the sole discretion of the subtenant. The Company recognizes sublease income on a straight-line basis.

The Company has five operating leases with Chalet Properties, LLC (Chalet), one operating lease with the Isely Family Land Trust LLC (Land Trust) and one operating lease with FTVC, LLC (FTVC), each of which is a related party (see Note 15). The leases began at various times, with the earliest commencing in November 1999, continue for various terms through May 2042 and include various options to renew. The terms and rental rates of these leases have been approved by our audit committee in accordance with our related party transaction policy. As of September 30, 2025, these leases accounted for $10.1 million of operating lease assets and $10.2 million of operating lease liabilities, of which $0.7 million was current, and are included in the disclosures below. Lease expense is recognized on a straight-line basis and was $1.2 million for each of the years ended September 30, 2025, 2024 and 2023.

The components of total lease cost for the years ended September 30, 2025, 2024 and 2023 were as follows, dollars in thousands:

		Year ended September 30,
Lease cost	Classification	2025			2024			2023
Operating lease cost:
	Cost of goods sold and occupancy costs	$	44,340			43,958			43,913
	Store expenses		461			461			319
	Administrative expenses		393			402			327
	Pre-opening expenses		289			420			269
Finance lease cost:
Depreciation of lease assets:	Store expenses		4,284			4,128			3,746
	Pre-opening expenses		69			185			446
Interest on lease liabilities:
	Interest expense, net		2,192			2,052			1,837
	Pre-opening expenses		—			225			482
Short-term lease cost	Store expenses		3,308			3,333			3,071
Variable lease cost	Cost of goods sold and occupancy costs ⁽¹⁾		7,149			6,658			6,429
Sublease income	Store expenses		(443	)		(308	)		(323	)
Total lease cost		$	62,042			61,514			60,516

⁽¹⁾ Immaterial balances related to corporate headquarters and distribution center are included in administrative expenses and store expenses, respectively.

Additional information related to the Company’s leases for the years ended September 30, 2025, 2024 and 2023 was as follows, dollars in thousands:

	Year ended September 30,
	2025		2024			2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	46,188		45,992			45,661
Operating cash flows from finance leases		2,192		2,277			2,320
Financing cash flows from finance leases		3,825		3,610			2,779
Lease assets obtained in exchange for new lease liabilities:
Operating leases		18,412		22,317			15,274
Finance leases		7,419		(45	)		5,724

Additional information related to the Company’s leases as of September 30, 2025 and 2024 was as follows:

	As of September 30,
	2025			2024
Weighted-average remaining lease term (in years):
Operating leases		9.3			9.9
Finance leases		15.1			13.6
Weighted-average discount rate:
Operating leases		4.2	%		4.1
Finance leases		5.1	%		4.8

During the year ended September 30, 2025, the Company early terminated a lease due to a store relocation, and, as a result, the Company wrote off operating lease assets and liabilities of less than $0.1 million each and recorded a gain of less than $0.1 million. During the years ended September 30, 2024 and 2023, the Company paid $0.3 million and $0.2 million in lease termination costs, respectively, to early terminate the leases associated with stores that closed in prior fiscal years, and, as a result, the Company wrote off $0.4 million and $0.1 million in operating lease assets and $0.6 million and $0.2 million in operating lease liabilities and recorded losses of $0.2 million and $0.1 million during the years ended September 30, 2024 and 2023, respectively.

In addition, during the year ended September 30, 2025, the Company purchased a store’s previously leased land and building. This resulted in reductions of $0.2 million and $1.0 million in operating and finance lease liabilities with the offset to their related lease assets, respectively, and the reclassification of less than $(0.1) million and $(0.1) million of operating and finance lease assets, as adjusted by the reduction of their related lease liabilities, respectively, to property and equipment.

Future lease payments under non-cancellable leases as of September 30, 2025 were as follows, dollars in thousands:

Fiscal year	Operating leases			Finance leases			Total
2026	$	47,430			6,270			53,700
2027		46,509			6,508			53,017
2028		43,831			5,421			49,252
2029		39,508			4,273			43,781
2030		34,804			4,290			39,094
Thereafter		132,296			45,304			177,600
Total future undiscounted lease payments		344,378			72,066			416,444
Less imputed interest		(62,080	)		(22,345	)		(84,425	)
Total reported lease liability		282,298			49,721			332,019
Less current portion		(36,495	)		(4,061	)		(40,556	)
Noncurrent lease liability	$	245,803			45,660			291,463

The table above excludes $12.8 million of legally binding minimum lease payments for leases that had been executed as of September 30, 2025 but whose terms had not yet commenced.

Future minimum rental commitments and sublease rental income under the terms of the Company’s operating and finance leases were as follows as of September 30, 2025, dollars in thousands:

Fiscal year	Third parties		Related parties		Sublease rental income			Total leases
2026	$	52,483		1,217		(462	)		53,238
2027		51,851		1,166		(362	)		52,655
2028		48,074		1,178		(258	)		48,994
2029		42,591		1,190		(222	)		43,559
2030		37,900		1,194		(114	)		38,980
Thereafter		169,753		7,847		(14	)		177,586
Total payments	$	402,652		13,792		(1,432	)		415,012

Total rent expense, including common area expenses and warehouse rent, totaled $60.3 million, $58.4 million and $58.4 million for the years ended September 30, 2025, 2024 and 2023, respectively. In addition, $0.3 million, $0.4 million and $0.3 million is included in pre-opening expense associated with rent expense for stores prior to their opening date for the years ended September 30, 2025, 2024 and 2023, respectively.