Good morning everyone and welcome to the BJ’s Wholesale Club Holdings Inc. third quarter 2022 earnings conference call. My name is Adam and I’ll be coordinating your call today. After the speakers’ remarks, there will be a question and answer session. If you wish to ask a question at that time, please press star followed by one on your telephone keypad. I will now pass the call over to your host, Cathy Park to begin. Please go ahead when you are ready.

Good morning and thank you for joining BJ’s Wholesale Club’s third quarter fiscal 2022 earnings conference call. On the call today are Bob Eddy, President and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that during this call, we may make forward-looking statements within the meaning of the federal securities laws. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call. Please see the Risk Factors section of our most recent Form 10-K and Form 10-Q filed with the SEC for a description of those risks and uncertainties. Finally, please note that on today’s call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today’s press release posted on our Investor Relations website for a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, I’ll turn the call over to Bob.

Good morning. Thank you for joining us today. This morning, we reported another quarter of strong results demonstrating the power of our business model. This was the most profitable third quarter in our history. Our consistent focus on delivering value to our members especially when they need it most has put us in a position of strength. Our member base is growing in both size and quality. We are improving our merchandising to deliver unbeatable value. We’re offering more convenience to our members through a great digital experience. We are expanding our footprint into new and existing markets and doing it successfully. We have a great team and a competitive strategy, and the investments we continue to make position us well for long term growth and sustainable value creation. In the third quarter, our comp sales were up 9.7% overall and up 5.3% excluding gas. Our food categories continued to anchor our strength with comps increasing double digits over last year’s performance. When we entered the year, we expected Q3 to be our most challenging quarter from a comp sales perspective given the difficult compare. Our business has exceeded our expectations given the continued strong membership and shopping behaviors. As we have seen all year, traffic growth has been a positive driver of our comp and sales per member have been greater than last year in each of our income cohorts. I’d like to put Q3 in perspective relative to 2019. Our third quarter merchandise comp sales were nearly 30% on a three-year stack, which is a sequential acceleration from last quarter’s results. The combination of membership growth, higher quality of membership and our club growth continues to highlight our company as a structural long term growth story. Adjusted EBITDA grew 19% to $272 million and adjusted EPS grew 9%…

Thank you Bob. Before I begin, I’d like to reiterate Bob’s gratitude for our team members across our clubs, club support center and distribution centers. We are navigating a challenging operating environment and our continued strength is the result of our team members’ hard work. Now let’s dig into our results. Net sales in the third quarter were $4.7 billion, a 12% increase over the prior year. Third quarter comp sales were 9.7%. Merchandise comp sales, which excludes sales of gasoline, increased by 5.3% and was driven by about equal parts traffic and basket growth. Our two-year stack was up 11%, reflecting a three-year stack of up 29.5%. The Q3 effect of inflation was slightly more than last quarter as we passed on a portion of growing input costs while maintaining our strong pricing positions by strategically investing in our key value items. Comps in our grocery, perishables and sundries division grew by approximately 6% in the third quarter, up 12% on a two-year stack and up 31% on a three-year stack. We grew market share during the quarter and our overall market share remains well above pre-COVID levels. Our general merchandise and services division comp grew by 3% in the third quarter. The growth was led by optical, home improvement and tires, where we’ve made tweaks to our offering to provide greater value. Comps in this division were up 7% and up 21% on a two-year and three-year stack respectively as discretionary spending continues to normalize toward a new higher base from the past two years. Our digital offerings have made the member shopping experience more convenient. Digitally-enabled sales for the third quarter grew 43% year-over-year and over 280% on a three-year stack. Over 80% of our digitally enabled sales are fulfilled by our clubs with services like BOPIC…

Thanks Laura. We have made significant progress in strengthening our business and I believe we are well positioned today to drive long term growth by executing on our strategic initiatives and prioritizing value in everything we do. We will continue to allocate our capital towards investments to maximize shareholder value. Our warehouse club model remains a structural advantage with a growing annuity in the form of membership, lower operational costs, and a foundational focus on great value. When the consumer outlook is uncertain, our members find comfort in being able to stretch their dollars with us. I believe that the reliability and loyalty that we have worked hard to build with our members over the years will remain key to our success no matter the circumstances. With that, I will now turn it back over to the Operator to take your questions.

[Operator instructions] Our first question today comes from Mike Baker from DA Davidson. Mike, please go ahead, your line is open.

Thanks guys. Great quarter. I just wanted to ask you about your overall view on the consumer heading into the holidays. I guess you’ve given us guidance, so that helps us, but maybe one way to flesh it out is the pace of sales throughout the third quarter. A lot of retailers saw a big drop-off in October. Did you see anything like that, or maybe another way to think about it is are you seeing consumers just really focus on promotional activity or trade-down, or anything like that, that would give another opinion on what’s going on with the consumer as we head into the holidays? Thanks.

Hey Mike, good morning. Thanks for your questions. I think it’s a good one. Overall, I think our consumer is in very healthy shape, as we’ve seen through the entire year. As we talked about in the prepared remarks, our membership statistics are doing great, we’re gaining market share through the year. The thing I’m most excited about is we continue to gain trips as well as we show our members incredible value. The refrain that we’ve been talking about all year is really throughout the income cohorts that we look at, we’ve seen more sales and more trips per member as well, so I think our consumer is very healthy at this point. If you think about the pace through 3Q, certainly October was lower for us than the preceding two months. A lot of that, I think though, is really the compare that we had last year. We had an incredibly strong October last year, and so if you look at it on a two-year stack, the months were very equal for us, so I don’t see that October performance this year running into November or 4Q. We’re very pleased with where our consumer is. They’re really reacting to the value that we put out there, and hopefully that continues.

Great, thanks. One more quick follow-up, just wondering how that turkey offer went. Did it actually drive new membership growth?

It certainly had a good reaction. We’re still in the period where people are redeeming the offer, so you didn’t get the free turkey on the day that you spent the $150, you have to come back - it’s sort of a bounce back free turkey offer, so we’re still in the redemption period. We’ve got a little ways to go to see how it actually works out, but certainly the number of people that took advantage of the offer, I think is looking higher than our expectations and it certainly drove some traffic into our buildings, too.

Yes, thanks. It was a great idea and great offer for consumers. Thanks for the time.

You bet, thanks.

The next question comes from Edward Kelly from Wells Fargo. Edward, please go ahead, your line is open.

Hi, good morning everyone, and nice quarter once again. Bob, you’ve been, I think, very optimistic around the new co-branded credit card and what that could mean for you over time. Could you maybe just give us a little more color on how we should think about that, both the upfront benefit that you could see, which I would imagine there are some better economics here, but also what it does to the member? Then Laura mentioned a potential impact to member KPIs. Could you just maybe give a little bit more color there in terms of how you are mitigating that risk?

Sure, good morning Ed. Thanks for your questions. Maybe I’ll kick it off and Bill and Laura can fill in. I look at our current co-brand program and see it as a tremendous success. As we talked about, it’s grown over tenfold in the year since we launched it. It is a great source of member value. We think it’s the best value prop in the wholesale club space at this point, and it will only get better as we go forward. As we talk about it as a team, we think it will be tremendously valuable to our members, given we will improve the value prop. The question becomes one of lifetime value, right - we are in the value business, we can use this as a vehicle to provide more value to our members. That has shown to come back to us in better purchasing habits and higher renewal rates, so that’s the game that we’re playing and we’ll continue to play it. I think it could be one of the more valuable things we do in the next set of years, and looking forward to the transition to our new partner. Maybe I’ll hand it over to Bill. He’s the architect of this program and running the transition, so he can give you a few comments as well.

Thanks Bob. Ed, good to speak with you. I’ll just echo what Bob said - as we think about the co-brand program, we’ve talked about this with the street a little bit, we made the strategic decision back when we launched the current version of the program to invest all the economics back into the members with the goal of driving lifetime value, and we’ve been really pleased with how that’s performed over the last several years. As we think about the transition to Capital One, we’re not going to come away from that point of view in strategy in terms of investment. It’s an unbelievable way for us to give value back to our members, and we’ll take some of the enhanced economics and roll them back through the value prop so we can deliver it back to the members. We’re really excited about CapOne. The team across the board at CapOne is incredible in everything that they do, and as we think how that plays through to the growth in the next program, we think that there is a substantial leg higher from here in terms of the growth with the membership base, so there will be a little bit--in term of the KPIs, there will be a little bit of a slowdown here--not a slowdown but a pause as we shut off acquisition in the coming days on the current program as we work through the transition, so you’ll likely see a pause in the higher tier membership penetration as we report Q4, and then as we get the program launched in the first half of next year, you’ll see it then reaccelerate from there as we start acquisition with the new program.

Okay, great. Just a quick follow-up, if I may - Bob, as we think about 2023, and I know it’s still early and the backdrop is uncertain, but the consensus to me looks a little high, especially given that you have the fuel margin compare. Could you just maybe help us with some puts and takes that we should be thinking about for the out year?

Yes, sure. Certainly when we think about next year and the long term positioning of our company, we’re very excited. As we talk about a lot, our membership is growing, the performance and the quality of our membership is much better than it has been and continues to improve, and what we just talked about, co-brand, is just one more lever on improving that count and quality. We’re looking for continued market share gains and the flow-through from those increased trips that we’re seeing here into renewal rates, and we won’t take our eye off the ball from a value perspective either. As we go through whatever happens next year from a macro environment, I feel like we’re well positioned. You point out that we’ve had an incredible tailwind from a gasoline income perspective - that is absolutely true. We’ve also had headwinds all over the business, most notably in margins this year as supply chain costs and general merchandise markdowns really impacted our margins throughout the year, and so I do think it will be tough to lap the gas income that we’ve seen this year. It’s been by far the most profitable gasoline year we’ve ever seen. We’re continuing to see incredible volatility in gas, which could provide more opportunities to get more income next year, but I have long ago stopped trying to predict what would happen in the gasoline market. We’ve got some work to do to figure out whether we can lap the gas profit. I do think it will be tough. I do think some of the margin headwinds that we’ve seen this year may fall away as well, so hopefully we’ve got some avenue to get back towards flat from an EPS perspective. I don’t know that I would project to get flat with this year at this point.

Thank you.

You bet.

The next question comes from Robbie Ohmes from Bank of America. Robbie, your line is open, please go ahead.

Hey, good morning. Thanks for taking my question. Actually, two questions. One was just on the membership fee income decelerated sequentially. Can you remind us what would be driving this sequential growth deceleration and how we should be thinking about that for the fourth quarter?

Robbie, thanks for your question. Certainly you’re right - it did decel a little bit. I guess I would tell you we’re not worried about it. When we started the year, we were thinking about a mid-single digit increase in MFI, and we’re up over 10 for the year, so as we think about that, we look at it and think we’re doing well. A lot of it has to do with the timing from quarter to quarter or when the new clubs come into play and just general membership flows as well, so again nothing to be concerned about there. I think it’s been a great performance all year and kind of right where we want it.

Then the other question, general merchandise, I think you guys said the comps were up 7%. Is that right?

General merchandise and services division, yes.

So that’s a really good number against--you know, it wasn’t an easy comparison last year. Can you talk a little more about the discretionary side of the business? I know it’s relatively small for you guys, but it sounds like you might be outperforming what other retailers are seeing in discretionary. What are you seeing in apparel and some of those areas?

Yes, I think largely we’ve seen what others have seen, Robbie. We saw a very strong performance in our services division if you think about optical and home improvement and tires and some of those businesses, which shows a healthy consumer - those are not small dollar amount purchases. But we have seen our members be a little bit more choosey about what they’re spending on, and some of the themes that our competitors have talked about with lower apparel sales and some of the more discretionary items, we definitely saw that in the third quarter. I think some of that is weather related - I always hate to talk about that, but it’s never 75 in Boston in November, and it was pretty much the entire front part of the month, so certainly that’s had some part of it as well. You’re seeing some meaningful deflation in some key general merchandise categories like televisions. Finally, the last thing I would say is the holiday season seems like it’s going to run a little bit late to us. Last year, consumers were hearing buy it in September and October because it won’t be there in November and December, and it seems like they’re back on a normal purchasing pattern this year, at least in our business. A couple of our competitors have noted it that way too, so. You know, we thought GM did okay in the quarter. We’re looking forward to good performance in the fourth quarter, but we’ve got a lot of room to go in the last part of the quarter here to bring it home.

Hey Robbie, it’s Laura. I’d just clean up one point on that, is that the 7% that I mentioned in the prepared remarks was the two-year stack on GM and services, so on the quarter it was 3% but still positive.

Got it, that’s all super helpful. Thanks so much.

Thanks Robbie.

The next question comes from Peter Benedict from Baird. Peter, your line is open, please go ahead.

Hey, good morning guys. Thanks for taking the question. Maybe I’d like to talk a little bit about the club growth opportunity that you guys see - I know you’re 4% to 5% unit growth. Maybe talk a little more about the new club economics, how they look today compared to where they were historically. I’m curious on your mix of new versus existing market openings, and then longer term, where is the distribution infrastructure, how many stores can the current infrastructure support, at what point would you guys have to start to invest more in that? That’s my first question.

Yes, hey Pete, good morning. Thanks for the question. I’ll just kick it off and Bill can fill it. We have had a great year this year from a new club perspective. We’ve got seven in the bank already. We open hopefully tomorrow in Wayne, New Jersey - we talked about that on the prepared section of the call, and we’ve got a few more before the end of the year to meet our target. Our pipeline is very healthy at this point. We feel like we’re going in the right direction, and all the clubs we’ve opened in the last few years have outperformed what we thought they would do, so that gives us a ton of confidence to continue to keep our foot on the gas from a real estate perspective. We’ve invested behind the capability to move this quickly. As you know, we didn’t do that in the past. That has borne some great openings of late and building a team that is dedicated to making sure those new buildings open on time and in great condition, and looking forward to continuing unit growth. I’ll let Bill talk about economics and some of the other points that you asked about.

Yes, hey Peter, it’s Bill. In terms of the new versus existing markets, right, as you look at our growth this year, you’ve seen continued expansion in the midwest with the build-out of Pittsburgh, of Detroit, the push down in Ohio into Columbus, the entry into Indiana for the first time with our club in Noblesville, which is off to an amazing start. The balance this year is about 50/50; as we look at next year, it will be similar in terms of new and existing markets. In terms of performance within the existing markets, it’s been extremely strong. As we look back on the openings in clubs like Commack, on Long Island, Long Island City and Newburgh, New York, where we’ve added density, where we have a strong membership base to begin with, we see really great member behavior in those clubs where not only are they shopping the new clubs, but for the legacy members that were in those trade areas, they’re also shopping at the legacy clubs as well as the new clubs. We’ve seen really strong incrementality in that performance in the existing markets at levels that we haven’t seen in the past, and that’s really positive as we think about building out our existing networks into the future. In terms of the investments, it’s certainly something that we’re looking at. We expanded our perishable distribution facilities last year with an opening of a facility in Kentucky. We’re looking forward at the build-out of the dry network as we go forward. If you remember when we went public, we talked about the ability for our distribution network to support about 100 incremental clubs, and lo and behold as we’ve done a 30 stack comp over the last three years, we’ve used a lot of that capacity pretty quickly, which is a great problem to have. The dry side is certainly something that we’re looking at going forward. I’d be reluctant not to mention the in-sourcing of our Burris acquisition this year. The perishable facilities, bringing them in-house gives us great capabilities as we continue to grow our network here forward, so we feel good about the pipeline for next year. We’re working now actively on calendar years ’24 and ’25, and we feel good about the results and what we’re seeing.

That’s super helpful, thanks. Just a quick follow-up, just on the general merchandise business. You guys have made some investments in there in personnel. Maybe just a quick update on what the plan is in terms of trying to drive improved execution in that area over the next couple of years. Thank you.

Yes, maybe I’ll take that one, Pete. As you know, improving our general merchandise business is one of our key priorities. To me, the entire game, no matter what you’re talking about but most notably here, it starts with talent, and we’ve made tremendous upgrades in our merchandising team both with new talent and improving the capabilities of our outstanding talent that was already here to allow us to over time improve our general merchandise business. Whether it’s hiring our new Chief Merchant, Rachael Vegas - not so new anymore, it’s about a year at this point, our new Head of General Merchandise, Dion Evans, and their teams have just done outstanding work to really start that process of improving our general merchandise business. As you know, a lot of these categories are long lead time categories and so you really won’t see the fruits of their efforts until next year, probably in the second quarter. You’ll see some benefit in Q3 and Q4, you’ll really start to see some of the benefits of their decision making. I can tell you, we would--as one example, we would not have worked through the general merchandise inventory we had over the summer this year without their help. The quality of the conversations and the execution that we’re seeing from the team, as well as the new planning and allocation folks that we’ve brought in, has really just changed the game for us, so I’m very bullish on our GM prospects over the long term with our team and looking forward to getting into next year, so we can see how the members react to what we’re doing.

The next question comes from Chuck Grom from Gordon Haskett. Chuck, your line is open, please go ahead.

Thank you very much, good morning. Bob, can you talk about the balance between flowing through the excess gas profits that you’ve generated year to date to the bottom line versus taking some of that money and investing in price to showcase value to your customer?

Yes, thanks Chuck. That’s a great question. As you know, we price our gasoline every day to be the best in the market, and generally that is on part with our club competitors and better than everybody else. We have a pretty sophisticated pricing model where we’ll look at data on who’s in the market every single day, sometimes multiple times a day, and make sure that our prices are the best. We do that because it changes member behavior, right? Gas stations--clubs with a gas station perform better than those without - they have more trips, more renewal rate, and the definition of more changes with the price of gas, so over the summer it was even more traffic and more membership benefit. We will add gas stations wherever we can, is that point. But this year has been an interesting one, to the core of your question, where we’ve made so much money on gasoline, we’ve used that to spend into the beat, if you will, so we have made our gas prices a little bit even lower than normal to showcase even more value, and then we’ve taken that gas profit and invested it in other places in the business, so think about helping our members through these inflationary times. Inside the business, we’ve used gas profits to fund investments in price inside the building. We’ve done a tremendous amount of incremental marketing this year that we’ve never done before, both trying to incent purchasing behavior but also acquiring new members as we go. It’s allowed us a tremendous amount of freedom to test things that we’ve never done before with economic consequences, if you will, and that’s been the aim for years. You’ve heard both of my predecessors talk about spending into the beat, and it’s something we’ll continue to do, whether we’re beating inside the box or in gas, or anywhere we do it. It’s sort of a core part of our strategy and dovetails nicely when you’re trying to show value to members every day.

Yes, very smart. My follow-up question is just on the comp. I was wondering if you could maybe unpack the acceleration on a three-year basis from the second quarter to the third quarter, which it looks like it’s about 300 basis points, and then looking ahead, if you do, say, a 4.5% comp on the fourth quarter, that implies a real big drop sequentially relative to the third quarter, close to about 1,000 basis points. Just curious the decision factors behind that comp assumption for 4Q.

Yes, it’s a good question. Maybe I’ll start and Laura can pile on. We had a tremendous quarter, in our view, in the third quarter, far exceeding what we thought. There was a little bit of inflation, so inflation definitely ticked up 3Q over 2Q, not a tremendous amount but certainly was there. It was continued acceleration in our members’ purchasing behaviors. When we started this year, we thought 3Q would be negative comp, given what happened last year, and I mean that in sort of the EBT funding sense, the government stimulus sense and the behavior change we saw in 3Q last year was a dramatic pull forward of primarily our sundries business, but some of the rest of our grocery business as well. As we’ve gone through the year, one of the best things that we’ve seen is the increases in shopping behavior in all of our income cohorts, as I talked about earlier, but most notably at the bottom of the house. In our past data, we have seen a great linkage between increases and decreases in federal EBT budgets and what those folks actually did, so in times where budgets contracted, their shopping behaviors contracted. We have not seen that this year, and as I said earlier, the sales per member and trips per member in each of our cohorts has gone up. I think that’s a tremendous story about value. I think we have convinced that lower end consumer of our proposition and they are using different dollars today than what they get from the government, because they believe our value story. They believe that we are saving them money and we are, so that I think is the real story behind the third quarter performance. It was over our expectations for sure. I don’t…

Great, thanks a lot. Happy Thanksgiving.

You too.

The next question comes from Mark Carden from UBS. Mark, your line is open, please go ahead.

Good morning. Thanks a lot for taking my questions. To start, just given the current inflationary environment and what your two largest warehouse competitors have done to date, has there been any changes to how you’re thinking about the pacing for your next membership fee increase? Thanks.

Hi Mark, thanks for being on the call today, and thanks for the question. You know, we haven’t given a tremendous amount of thought to a fee increase at this point for two reasons: one, our largest competitor hasn’t done it yet, and we would not do it unless they do it; and two, we talked about the co-brand transition, that is the most important thing we will do next year, is get that right. I don’t want to mess that up with a fee increase, so I think at a minimum, we’re waiting until both of those two things happen. Once they do and the smoke clears, we’ll figure out what we will do. The one thing we haven’t talked about so far is the dollars per member we’re seeing already. Over the past few years, we’ve already seen the effect of a fee increase, right - the average dollars per member is well over $60 at this point, it’s up about $5 in the last few years, so we’ve mixed our business up to really look like it has had a fee increase when we haven’t changed the sticker price to our members, so it’s sort of an unappreciated thing that we’ve been able to do over the past few years, and our membership team has done a fantastic job doing that.

That makes sense. Maybe a bit of a follow-up to that, how are you thinking about premium penetration in the current environment? Today, it seems like you have a lot of momentum there, but would you expect shoppers to upgrade less frequently if some of these current economic pressures continue, just given sticker shock? Would you do some market upgrades any more aggressively? How are you thinking about that?

I think that comes back to value, and we look to provide outstanding value every day. IT also comes to one of the core reasons we’re doing the co-brand transition, right - that has been the fastest growing part of our premium tier memberships over the years, and with the new value prop that we’ll announce in January, we only expect that to get better. As Bill mentioned, we’ll probably pause on the growth in Q4 given the federal laws around what we have to do around a card transition - we have to stop acquiring and have to put down our pencils for a little bit, but once we get the conversion done, I expect that the excitement around this program will really help us grow premium tier memberships quite nicely in the future.

Great, thanks so much, and good luck.

Thanks Mark.

The next question comes from Rupesh Parikh from Oppenheimer. Rupesh, your line is open, please ago ahead.

Good morning, thanks for taking my question, and also congrats on a nice quarter. Just on the food inflation front, as you guys look out for the balance of the year and into next year, it sounds like you expect moderation. Any sense whether moderate to, I guess, low single digit type levels, or just any thoughts in terms of how you see it playing out at this point?

Yes, thanks Rupesh. It’s a good question. I’m not sure I have a perfect answer. We’ve certainly seen a ton of inflation this year, as everybody knows, and we have seen a little bit of moderation in the third quarter, as Laura talked about in the prepared remarks. It’s really coming in pockets, but I would tell you on a general basis, we’re seeing less inflation today than we were seeing three months ago, for sure. I don’t know what happens from here. As we talk to our supplier partners, they continue to indicate their desire to raise prices, particularly those with very strong brand names or market shares. Some of the commodities are still above where they were last year, and I don’t know that folks have passed through all of that increase, so I think we’ve got a wait and see approach on it. We are working proactively with our supplier partners to avoid any further price increases - I think as you know, it’s bad for everybody so we’d like to forestall that, but I’m not sure we’re going to be successful in it. We will continue to do what we’ve done all year and invest in price, make sure we have the right value, and we won’t let anything stand in the way of that. I’d be remiss if I didn’t thank our merchandising team for what they have done this year. I think they have done an outstanding job managing double-digit inflation in an environment that many of us haven’t really lived through in the business sense in the past, so our team has done well. We’ll continue to do those things well going forward, and whether we see 10 points more inflation or two points more inflation, I think the company is really well set up to grow.

Great, and then maybe just one follow-up question. In regards to next year, I know you guys have the big headwind related to fuel. With your commentary earlier that you hope with some of the margin headwinds that you’ll be lapping next year, that maybe between the headwinds that may become tailwinds, that could help to make fuel neutral from an EPS perspective? Is that what you were trying to convey earlier?

Rupesh, I don’t think we will be able to get back to flat, right? We’ve got a tremendous gas tailwind this year. We’ve had other headwinds this year that we’ve talked about, and some of them are almost the same thing, right - think about the cost of diesel fuel running through our supply chain, we’ve got both headwinds and tailwinds in this year, but the gas income headwind has been bigger than any of the tailwinds, right? So as we think about next year, it looks hard to create that same level of gasoline income next year. That doesn’t mean we won’t have some of these headwinds flip to tailwinds, right? If diesel goes down, we will have a tremendous tailwind next year from a margin perspective. There are other things under the covers as well that should help, but at this point as we’re modeling next year, we do not see us getting back to our full year EPS that we’ll put up this year. I don’t think we’ll be too far away from it, either, but I don’t see us getting flat at this point.

Okay, great. Thank you for all the color.

You bet.

The next question comes from Paul Lejuez from Citi. Paul, your line is open, please go ahead.

Hey everyone, this is Brandon Cheatham on for Paul. I’d like to go back to the commentary about the income cohort. It sounds like your low income consumer was particularly strong in 3Q, and I think that’s a change from the second quarter, when I think you all said the higher income consumer was really the bright spot. I’m just wondering, did you see an inflection in the lower income consumer cohort behavior, are you gaining more share of wallet - that’s kind of what it sounds like, but any category or anything that you all are doing or communicating that really drove that inflection?

Yes, morning Brandon, thanks for the question. You know, we’ve seen growth in all of our [indiscernible] this year, as we’ve talked about. The beginning of the year, we were seeing a ton of higher income folks come into the business or buy more. We are still seeing that. We’re also seeing good purchasing behavior out of our lower income cohorts, and that’s been the real story for us. In every other down market, we’ve seen the higher income cohorts come in and try and search for value, and as I talked about earlier, we’ve seen lower income cohorts trade-out or trade down as EBT budgets dried up. That certainly has not happened this year - they have performed very, very well, and continue to. I think they will continue to, so we’re very happy with how we see our purchasing behaviors going. Both higher and lower income cohorts are showing us very healthy behaviors and we’re looking forward to that continuing. I think the reason why you’re scratching after is value, right - we are showing the best pricing that we’ve ever shown to folks, we’re showing better prices that some of our competitors, and people are believing it. We’ve got some credibility with our members as we continue to prioritize value in everything we do, so we’ll continue to do that and hopefully they continue to reward us.

Got it, and then one follow-up, if I may, on digital sales. It seems like a meaningful driver of comp these days. Anything different about how that consumer engages with you? What percentage of your members are shopping with you digitally, and is there anything to call out on the margin side from the digital sales business? Thanks.

Yes, thanks for bringing that up, we haven’t talked about digital all day. It’s been a growing part of our business over the years. As you remember, the longer term story four years ago or so, we didn’t really have a digital business to speak of, and we’ve spent a bunch of time building the infrastructure, and lo and behold now we’re well over a billion dollars and 9%-ish of our business. Our members are really reacting to that, most particularly in the BOPIC and curbside parts of our business, where we’re really saving them time. Our aim is to save people money - we keep going back to value, but it’s also to save our members time. If I can have them not spend time walking around our clubs, throwing things in their basket for their routine shops, that’s great. We still want to get them in the clubs for their opportunistic shops, but we’ve not seen that behavior fall off either. We have done things like our express pay product, where you can skip the lines if you are in our clubs, you check out on your phone, that saves you 10 minutes. It’s been pretty popular. We’ve also changed the way that we market and promote from a digital perspective, so a huge amount of our member acquisition is now coming from digital, where three or four years ago I would tell you that was zero or close to it. Five years ago, we were worried about the fact that our primary promotional product was paper coupons, and nobody loves paper coupons, so now well over two-thirds, I think it may have even been three-quarters of our promotion is done digitally - you click your coupons on our app or online versus clipping the paper. We’ve made tremendous strides both in product promotion and convenience as we’ve invested in digital, and we’ll continue to do that. The members that engage with us digitally are our best members. They shop with us most often, they buy more when they do so, and they really are starting to sort of prove the case to us on the combination of saving people time and money. Both of those are important parts of the value equation for our members, so we’ll continue to make investments in our digital properties and I believe that our members will reward us for doing that as well.

Appreciate it. Good luck with holiday.

Thanks Brandon.

This concludes today’s Q&A session, and thus does conclude today’s call. We thank you very much for your attendance and you may now disconnect your lines.