Income Taxes

6 Months Ended

Jun. 28, 2025

Income Tax Disclosure [Abstract]

Income taxes

INCOME TAXES

The determination of the Company’s overall effective income tax rate requires the use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction.

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 26 weeks ended June 28, 2025 and June 29, 2024, and then recognized the impact of discrete tax items for purposes of determining its year-to-date tax provision.

For the 13 weeks ended June 28, 2025, the Company’s effective income tax rate of 25% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $2 million, primarily related to excess tax benefits associated with share-based compensation.

For the 13 weeks ended June 29, 2024, the Company’s effective income tax rate of 26% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $1 million related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $1 million and primarily related to excess tax benefits associated with share-based compensation.

For the 26 weeks ended June 28, 2025, the Company’s effective income tax rate of 24% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $8 million, primarily related to excess tax benefits associated with share-based compensation.

For the 26 weeks ended June 29, 2024, the Company’s effective income tax rate of 21% was equivalent to the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $16 million, primarily related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $7 million, primarily related to excess tax benefits associated with share-based compensation and a tax expense of $3 million, primarily related to adjustments to prior year tax provision estimates.

On July 4, 2025, the President of the United States signed the One Big Beautiful Bill Act (“the Act”) into law. The Act made changes to the U.S. tax code including, but not limited to, permanently extending bonus depreciation that permits full expensing of qualified property, removal of the requirement to capitalize and amortize domestic research and development expenditures, and changes to limitations on the deductibility of interest expense. The Company is still in the process of evaluating the full impact of this legislation and will begin reflecting its effects in the third quarter of 2025. The impact of the Act is not expected to have a material impact on the Company’s effective tax rate.