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INCOME TAXES | 12 Months Ended
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Aug. 02, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 14—INCOME TAXES Income Tax Benefit For fiscal 2025, (loss) income before income taxes consists of $(163) million from U.S. operations and $9 million from foreign operations. (Loss) income before income taxes for fiscal 2024 consists of $(145) million from U.S. operations and $8 million from foreign operations. (Loss) income before income taxes for fiscal 2023 consists of ($1) million from U.S. operations and $8 million from foreign operations. The income tax benefit was allocated as follows:
(in millions) | 2025 |  | 2024 |  | 2023
Income tax benefit | $ | (39) |  |  | $ | (27) |  |  | $ | (23) |
Other comprehensive income (loss) | 2 |  |  | (6) |  |  | (2) |
Total | $ | (37) |  |  | $ | (33) |  |  | $ | (25) |
Total federal, state and foreign income tax benefit consists of the following:
(in millions) | Current |  | Deferred |  | Total
Fiscal 2025 |  |  |  |  |
U.S. Federal | $ | 11 |  |  | $ | (42) |  |  | $ | (31) |
State and Local | 3 |  |  | (14) |  |  | (11) |
Foreign | 3 |  |  | — |  |  | 3 |
| $ | 17 |  |  | $ | (56) |  |  | $ | (39) |
Fiscal 2024 |  |  |  |  |
U.S. Federal | $ | 15 |  |  | $ | (41) |  |  | $ | (26) |
State and Local | 5 |  |  | (8) |  |  | (3) |
Foreign | 2 |  |  | — |  |  | 2 |
| $ | 22 |  |  | $ | (49) |  |  | $ | (27) |
Fiscal 2023 |  |  |  |  |
U.S. Federal | $ | 23 |  |  | $ | (36) |  |  | $ | (13) |
State and Local | (11) |  |  | (1) |  |  | (12) |
Foreign | 1 |  |  | 1 |  |  | 2 |
| $ | 13 |  |  | $ | (36) |  |  | $ | (23) |
Total income tax benefit was different than the amounts computed by applying the statutory federal income tax rate to income before income taxes because of the following:
(in millions) | 2025 |  | 2024 |  | 2023
Computed “expected” tax expense | $ | (32) |  |  | $ | (29) |  |  | $ | 1 |
State and local income tax, net of Federal income tax benefit | (10) |  |  | (9) |  |  | (1) |
Non-deductible expenses | 3 |  |  | 2 |  |  | 3 |
Tax effect of share-based compensation | — |  |  | 5 |  |  | (9) |
General business credits | (4) |  |  | (2) |  |  | (8) |
Unrecognized tax benefits | — |  |  | — |  |  | (16) |
Enhanced inventory donations | (1) |  |  | (1) |  |  | (1) |
Changes in valuation allowance | 7 |  |  | 6 |  |  | 4 |
Other, net | (2) |  |  | 1 |  |  | 4 |
Total income tax benefit | $ | (39) |  |  | $ | (27) |  |  | $ | (23) |
Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
(in millions) | 2025 |  | 2024 |  | 2023
Unrecognized tax benefits at beginning of period | $ | 7 |  |  | $ | 11 |  |  | $ | 19 |
Unrecognized tax benefits added during the period | 2 |  |  | 1 |  |  | 5 |
Decreases in unrecognized tax benefits due to statute expiration | — |  |  | (3) |  |  | (5) |
Decreases in unrecognized tax benefits due to settlements | (1) |  |  | (2) |  |  | (8) |
Unrecognized tax benefits at end of period | $ | 8 |  |  | $ | 7 |  |  | $ | 11 |
In addition, the Company has nothing paid on deposit to any governmental agencies to cover the above liability. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. For fiscal 2025, 2024 and 2023, total accrued interest and penalties was $2 million, $2 million and $1 million, respectively. The Company is currently under examination in several taxing jurisdictions and remains subject to examination until the statute of limitations expires for the respective taxing jurisdiction or an agreement is reached between the taxing jurisdiction and the Company. As of August 2, 2025, the Company is no longer subject to comprehensive federal income tax examinations for fiscal years before 2016 and in most states is no longer subject to state income tax examinations for fiscal years before 2016 for Supervalu and the Company. Due to the implementation of the CARES Act, net operating losses were carried back into fiscal years 2014 and 2015, which extends the federal statute of limitations on those years up to the amount of the carryback claim. Based on the possibility of the closing of pending audits and appeals, or expiration of the statute of limitations, the Company anticipates that the amount of unrecognized tax benefits will decrease by approximately $5 million during the next 12 months. Deferred Tax Assets and Liabilities The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at August 2, 2025 and August 3, 2024 are presented below:
(in millions) | August 2, 2025 |  | August 3, 2024
Deferred tax assets: |  |  |
Compensation and benefits related | $ | 33 |  |  | $ | 35 |
Accounts receivable, principally due to allowances for uncollectible accounts | 9 |  |  | 4 |
Accrued expenses | 39 |  |  | 27 |
Capitalized research and development | 56 |  |  | 49 |
Net operating loss carryforwards | 18 |  |  | 13 |
Other tax carryforwards | 107 |  |  | 59 |
Foreign tax credits | 1 |  |  | 1 |
Intangible assets | 37 |  |  | 45 |
Lease liabilities | 414 |  |  | 381 |
Interest rate swap agreements | 1 |  |  | — |
Other deferred tax assets | 3 |  |  | 1 |
Total gross deferred tax assets | 718 |  |  | 615 |
Less valuation allowance | (17) |  |  | (9) |
Net deferred tax assets | $ | 701 |  |  | $ | 606 |
Deferred tax liabilities: |  |  |
Plant and equipment, principally due to differences in depreciation | $ | 126 |  |  | $ | 133 |
Inventories | 25 |  |  | 25 |
Lease right of use assets | 388 |  |  | 361 |
Total deferred tax liabilities | 539 |  |  | 519 |
Net deferred tax assets | $ | 162 |  |  | $ | 87 |
Tax Credits and Valuation Allowances At August 2, 2025, the Company had gross deferred tax assets of approximately $718 million. The Company regularly reviews its deferred tax assets for recoverability to evaluate whether it is more likely than not that they will be realized. In making this evaluation, the Company considers the statutory recovery periods for the assets, along with available sources of future taxable income, including reversals of existing taxable temporary differences, tax planning strategies, history of taxable income, and projections of future income. The Company gives more significance to objectively verifiable evidence, such as the existence of deferred tax liabilities that are forecast to generate taxable income within the relevant carryover periods, and a history of earnings. A valuation allowance is provided when the Company concludes, based on all available evidence, that it is more likely than not that the deferred tax assets will not be realized during the applicable recovery period. The Company has reviewed these factors in evaluating the recoverability of its deferred tax assets. As of August 2, 2025, the Company anticipates sufficient future taxable income to realize all of its deferred tax assets within the applicable recovery periods with the exception of certain foreign tax credits, charitable contribution carryovers and state net operating losses. Accordingly, the Company has established valuation allowances against that portion of its charitable contribution carryovers, state net operating losses and foreign tax credits that, in the Company’s judgment, are not likely to be realized within the applicable recovery periods. At August 2, 2025, the Company had net operating loss carryforwards of approximately $0.2 million for federal income tax purposes that are subject to an annual limitation of approximately $0.1 million under Internal Revenue Code Section 382. These Section 382-limited carryforwards expire at various times through fiscal year 2027. As of August 2, 2025, the Company anticipates sufficient future taxable income over the periods in which the net operating losses can be utilized. The Company also has the availability of future reversals of taxable temporary differences that are expected to generate taxable income in the future. Therefore, the ultimate realization of net operating losses for federal purposes appears more likely than not at August 2, 2025 and correspondingly no valuation allowance has been established. At August 2, 2025, the Company had gross disallowed charitable contribution carryforwards of approximately $76 million that are available for carryforward over five years. As of August 2, 2025, the Company anticipates sufficient future taxable income to utilize $37 million of these gross charitable contribution carryovers within the applicable five-year carryforward periods. The Company has established a valuation allowance against the gross $39 million of charitable contribution carryovers that, in the Company’s judgment, are not likely to be realized within the applicable recovery period. The retained earnings of the Company’s non-U.S. subsidiary were subject to deemed U.S. repatriation and taxation during fiscal 2017 pursuant to the Tax Cuts and Jobs Act, and existing foreign tax credits were utilized to offset the resulting liability. We have established a deferred tax asset for the remaining U.S. foreign tax credits of $1 million. Such credits are offset by a valuation allowance. One Big Beautiful Bill Act The One, Big, Beautiful Bill Act (“OBBBA”), was signed into law on July 4, 2025. ASC 740, “Income Taxes”, requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. The OBBBA includes numerous provisions that affect corporate taxation, including the immediate expensing of domestic research and development costs and modifying the interest expense limitation. The Company has analyzed the impacts of the OBBBA and reflected them in the current period. The impact of these changes required the Company to re-evaluate its deferred taxes and subsequently record an increase in the valuation allowance of $7 million in the quarter related to future anticipated expirations of charitable carryovers. The provisions in the legislation are generally effective for the Company beginning in fiscal 2026 and is ultimately expected to decrease its fiscal 2026 cash tax payments, due to the increase in the interest expense limitation to tax EBITDA and the current expensing of domestic research costs. Effective Tax Rate The Company’s effective tax rate was a benefit rate of 25.3% on pre-tax loss for fiscal 2025 as compared to benefit rate of 19.7% on pre-tax loss for fiscal 2024 and a benefit rate of 328.6% on pre-tax income for fiscal 2023. For fiscal 2023, the effective tax rate was impacted by solar credits, including the tax credit impact of a fiscal 2023 investment in an equity method partnership and solar credits associated with a solar array installation at the Company’s Howell Township, New Jersey facility. The effective tax rate was also impacted by the recognition of previously unrecognized tax benefits and excess tax deductions attributable to share-based compensation. The combined impact of these fiscal 2023 tax benefits exceeded pre-tax income, generating an overall tax benefit rate for fiscal 2023. For fiscal 2024, the effective tax rate was impacted by non-deductible share-based compensation and the establishment of valuation allowances against deferred tax assets with limited lives. For fiscal 2025, the effective tax rate was impacted by the establishment of valuation allowances against deferred tax assets with limited lives resulting from the OBBBA, partially offset by the tax credit impact of a fiscal 2025 investment in an equity method partnership.

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