Good morning, all, and thank you for joining us for the BJ Wholesale Club Holdings Inc. Fourth quarter Fiscal 2024 Earnings Conference Call. My name is Carly, and I'll be coordinating the call today. After the company's remarks, there'll be a question-and-answer session. In fairness to all participants today, we ask you to limit yourself to one question and return any additional questions to the queue. I'd like to hand over to your host, Cathy Park, VP of Investor Relations. The floor is yours.

Good morning, and welcome to BJ's fourth quarter fiscal 2024 earnings call. With me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that, we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factor sections of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our Investor Relations website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. With that, I'll turn the call over to Bob.

Good morning, everyone, and thank you for joining us. This morning, we are proud to report terrific results with fourth quarter comps and profits that were higher than anticipated. Fiscal 2024 was another milestone year for us, marked by record net sales, membership and adjusted earnings per share. We consistently drove robust traffic and market share gains both in our clubs and at our gas pumps. These results are a testament to our team's dedication to delivering exceptional value to our members, as well as outstanding execution of our strategic priorities. Membership is at an all-time high above 7.5 million members with another impressive renewal rate performance of 90%. Our merchandising initiatives and digital conveniences are driving greater member engagement. And our new club performance is proof of the power of our accelerating expansion strategy. Our investments in the business are bearing fruit and we are confident in our ability to grow long-term. In the fourth quarter, our comparable club sales, excluding gas sales grew by 4.6%. We are pleased with the continued strength in traffic, which contributed over 3 percentage points to our comp in the quarter. This was our 12th consecutive quarter of traffic growth. Growth in units also drove increased basket size. Our perishables, grocery and sundries division delivered over 4% comp growth in the fourth quarter, with perishables leading the way. Our strength in perishables has been a recurring theme all year as more members make us their weekly destination for quality essentials, such as produce, dairy and meat. Our general merchandise and services division comps grew by more than 5% in the fourth quarter, outpacing our consumables business for the first time since the pandemic. Our refined and expanded assortment in our gifting categories built on last year's success. This approach amplified our broader GM…

Thanks, Bob. Net sales in the quarter were $5.1 billion, increasing 5.4% year-over-year on a comparable 13 week basis. Merchandise comp sales, which exclude gas sales, increased by 4.6% year-over-year, led by traffic. We delivered strong traffic and comp unit growth all year, which we believe serve as a testament to members finding significant value in their BJ's membership. Total comparable club sales for the fourth quarter, including gas sales grew 4% year-over-year. Lower retail gas price per gallon was partially offset by our market share gains, with our comp gallons growing 3% year-over-year in the quarter. This compares to continued year-over-year volume declines across the broader industry in the U.S. Digitally enabled comp sales for the fourth quarter grew 26% year-over-year, contributing significantly to our overall growth. Over 90% of our digital sales are fulfilled by our clubs with services, like, BOPIC, Express Pay and same day delivery, which remain meaningful drivers of our digital growth. Over 60% of our members are now engaging with us through our app today, which we have grown steadily over the past several years. We will continue to leverage our digital conveniences to drive member loyalty in the future. Membership fee income, or MFI, grew 7.9% to approximately $117 million in the fourth quarter led by strong membership acquisition and retention across the chain. Our MFI in the quarter included minimal impact from our fee increase that went into effect January 1, 2025. Fourth quarter merchandise gross margins decreased by approximately 10 basis points year-over-year. Our members trust us to deliver outstanding value and we continue to manage our margins prudently to maintain that trust in a dynamic cost environment. While our category management process is yielding profitable growth across broader assortment, our continued strong, fresh produce performance and rising costs in products…

Thanks, Laura. We've transformed our business over the years, investing in the best talent to execute our strategic priorities and deliver increasing value and convenience to our members. Our membership is reaching new heights. We have a lot of exciting merchandising initiatives in motion to take our performance to the next level. Our digital business is contributing profoundly to our growth, as we help members maximize both cost and time savings. We're applying our new playbook to successfully open new clubs and profitably grow our footprint. We are at a pivotal point where our efforts across each priority are coming together to deliver tangible results, and we're excited. Our phenomenal progress validates our ongoing investments in the business. We know we're on the right path for the future, and we're focused on keeping the momentum going. Thanks again for joining us today and for your support of BJ Wholesale Club. We will now take your questions.

Thank you very much. We now like to open the lines for Q&A. [Operator Instructions] Our first question comes from Edward Kelly of Wells Fargo. Edward, your line is now open.

Yeah. Hi. Good morning, everyone and nice quarter. I wanted to start on the comp and the outlook. I guess, first, maybe could you provide a little bit more color around the cadence of the comp throughout the fourth quarter? And then, I think more importantly, how you're looking at 2025, given the implied slowdown? I'm curious around what you're seeing so far in Q1, how you're thinking about the cadence of the year, and then how you factored in some of the variables that are out there, that are obviously uncertain.

Hi, Ed. Thanks for your question. If you look -- before I get going, thanks for everybody's attention and for your support of our company. We had a great fourth quarter, as you see in the results and I couldn't be more proud of the team for pulling together and putting those results out there for our members, most particularly, the comp cadence through the quarter was strong throughout November, December were very good months for us, and January was our strongest month. So really no concerning trends in the quarter and very, very strong traffic, as we noted in the release and in our prepared remarks, finishing out our 12th consecutive quarter of traffic growth. I'll let Laura talk a little bit about any context she wants to give on 2025 quarters. But I guess what I would say about the performance thus far in Q1 is, we've seen that traffic momentum continue in our business so far. It's obviously early, and we've seen a little bit of more sensitivity to discretionary purchasing. And I think that just oppose to the uncertainty out there that's coming from the news headlines. But we're very, very pleased with our membership trends, with the traffic coming out of that. And with the greater assortments being put on the shelves by our merchants and I'm sure at some point in the call here, we'll talk about our digital business, but that was screaming hot in Q4 as well, so we're very pleased overall.

Yeah. Hey, Ed. Maybe I'll color -- give you a little bit of color on the cadence and how we're thinking about the year. So I think the first half will be a little bit stronger than the second half, how we're looking at it right now. Like, Bob said, and we said in the prepared remarks, there's a bunch of variables out there. But the business right now is trending quite well from a traffic perspective and so, that's kind of how we're looking at it.

Thank you.

Thank you very much. Our next question comes from Robby Ohmes of Bank of America. Robby, your line is now open.

Hey, Bob. My first question, I know you -- there's not a lot, you're going to say about tariffs, but can you just sort of remind us how you managed it last time and why it could be similar or different this time. Can you just give us some context about how you're generally thinking about the tariff risk? And then, I have a follow-up.

Yeah. Good morning, Robby. Thanks for the question. Look, here's what I would say on tariffs. We all participate and live in a consumer led economy and tariffs will potentially useful in some regards are likely to raise prices for Americans. In fact, cost of key commodities are already moving up. Tariffs also risks some supply chain disruption as the market moves production around to mitigate tariff exposures. Here at BJ's, we believe our purpose is to take care of the families that depend on us. We take that honor and responsibility seriously. We work very hard every day to present the best values to our members. And so tariffs and the resulting rise in prices run counter to our purpose and may disrupt consumer spending and the greater economy in general. After all, consumers have tolerated a lot in the last few years. With that said, periods of rising prices and supply chain disruption have often been good for our company. When consumer wallets are stretched, most consumers search for value, they come to our channel and they come to BJ's. We also have lesser exposure to tariffs than many retailers out there. And to your -- the point of your question, we have robust muscle around dealing with inflation in our COGS base. It's one of the things our merchants do very, very well. So these structural benefits give us confidence that we can make our way through the uncertain times ahead, and we will focus on what we do best, and that's delivering outstanding value to our members every day.

Thank you. And then my follow-up is just on the strength of digital. Is it -- what is primarily driving that? Is it expanded offerings online or is there -- is it just people using their app more when they're shopping the store? What -- how are you guys driving that strength?

Look, it's all of the above and more, right? We are -- we start out with just trying to save our members time, right? They're saving money just by shopping no matter what they do with us. But we love the idea of making the shop more convenient to our members. The club shop is can be kind of a pain in the butt (ph) sometimes, right? You're roaming around a big club, you're lifting up big, heavy things. You're putting those in your car. It's a big basket. And so anything we can do to make that shop more convenient or crews back to us. Those members that shop with us digitally spend more. They are reinvesting that time with us and putting more things in their basket. And so, the team continues to iterate on our digital business and adding capabilities. The basic services are the same with BOPIC and curbside pickup and same-day delivery and Express Pay and online coupons and that thing, those things that we've all talked about before. But the way in which we invest in those things continues to get better and better. So you think about our push into same day delivery as part of the membership changes that we made earlier this year and giving people to free same day deliveries, that's again, founded in convenience, right, trying to get people to save that time with their money. And is a simple principle where we can deliver it to your house or cheaper than you can go in a grocery store and buy it. And then you think about just changing the way our app and our website work, making sure that people can understand where a particular item is by looking at their app. They know which aisle and which bay in the stores. And we've fully rebuilt the search functionality in the app, so that it is intuitive. You can put in a term like Super Bowl, and it will come up with all sorts of Super Bowl snacks and televisions and anything you might need for your Super Bowl party. So the team has done incredible work to just get more and more relevant in this regard to our members and our members love it. They tell us all the time that we should continue to invest here, and we will do that in the future.

I think, Robby, the one thing I'd add on there is, 90% of our digital business is fulfilled through our clubs. And so, it's all coming out of our clubs through BOPIC and curbside and same-day and Express Pay which is really part of the structural advantage that we have not shipping it to homes and out of clubs. It’s really our members coming in to see us and using those conveniences every day.

Great. Thanks so much.

Thanks, Robby.

Thank you very much. Our next question comes from Peter Benedict with Baird. Peter, your line is now open.

Hi, guys. Good morning. Thanks for taking the question. One just follow-up on a previous question, then my real question. The follow-up would just be, are you able to frame for us, maybe remind us the exposure you guys have to China, but then also to Mexico given all what's going on there and around the food business, that would be just a follow-up. But then, my other question is really just around the new club performance. Obviously, you sound pleased with that. I don't know what else you could share in terms of performance metrics or anything that kind of gives you the confidence in accelerating this growth rate in new clubs over the next couple of years? Thank you.

Yeah. Sure. Good morning, Pete. Yeah. Good question on the nuclear performance. I will mostly kick that to Bill if he drives that for us. But let me talk about our exposure to China, in particular, it's a few percent of our business, right? Most of our business obviously is our grocery segment and then about 15%, 16% of our business is general merchandise. Only a couple of points of our business is imported directly from China, so that's markedly different than many other retailers of general merchandise products. And so overall, we believe we have lesser exposure than others who do what we do might have. Certainly, the exposure to Canada and Mexico is greater given the variety of products that they bring in and it does touch our grocery business for sure. We don't believe we're differentially affected negatively by any exposure in Canada or Mexico, at this point. And hopefully, we're able to figure out our way through those tariffs as well. We'll use that same muscle that I talked about in negotiating with our, our suppliers moving things around, doing all the things that we know how to do to buy things at the lowest cost so we can give that value to our members. Why don't we switch over to the new club performance. I'll let Bill talk about it. All I'll say is we're incredibly pleased with the size and the quality of our pipeline with the new clubs that have opened so far, and we're raring to go on the 25 to 30 that we expect to open in the next couple of years. So with that, let me hand it over to Bill.

Thanks, Bob. Hey, Peter. Yeah. Maybe I'll offer a couple of points on the new clubs. First of all, for the clubs that we've opened not only this past year, but the past couple of years, we're really happy with the performance as a whole. We're well above our plans, both on the top line and the bottom line and that goes for both the new markets that we've entered as well as the infill market. So across the board, yeah, we've seen really great results. And it's really driven by the confidence we have in our model. Bob touched on this a little bit, whether it's the digital conveniences or the value that we're bringing to the members. People want a wholesale club in their community. And we've seen that across the board, again, both in the new markets that we've entered into, as well as our existing markets. And it's a little bit -- as we think about the real estate game, and we've talked about this a little bit as we've been on the road, the models that we use to identify new markets are changing pretty rapidly as we gain share. And especially, when you look at areas where population is expanding as well, like, the convergence of those two things continue to open up more and more opportunities where we see attractive communities for us to bring the value of the BJ's Wholesale Club to those markets. And so, as we look down the road, we highlighted today, 25 to 30 new clubs over the next two years. We've talked about a little bit about to the investment that will come with that. The CapEx number that we've shown is a little bit higher than where it's been in the past, driven by both the…

Thanks, guys. Good luck.

Thanks, Peter.

Thank you very much. [Operator Instructions] Our next question comes from Mike Baker of D.A. Davidson. Mike, your line is now open.

Thanks, guys. I'll follow up on Peter's question, if I could, for Bill. Have you talked about and if not, could you point out how many clubs, do you think you can have over time. Is there any hindrance to this being a nationwide concept during 21 states now. Is there any reason why it can't work anywhere. What happens when you use the third player? And you said markets want clubs probably a Costco or a Sam's close there, every place where you're opening. But just wondering what the long-term could be? Thanks.

Mike, I referenced this on the last question a little bit. As we think about the market in total, right? Our current success in our -- across our existing portfolio ultimately drives our models. And as we continue to gain share, we look at our models and we see more and more opportunities for BJ's to be really successful in different markets. And so, as you think about that opportunity set, whether it's in our existing markets or as we look to adjacent markets and talk about entering a major new market like the Dallas-Fort Worth area, we see opportunities across the board and we've been really successful. And I think as a company, we've been pretty thoughtful in having measured growth, both in our existing footprint as well as we've expanded into adjacent markets. And I think that's what you can continue to expect from us. And so as we look at the long term, everything from the Bob and Laura and we've talked about today from our share growth to our fresh business to our digital business, which is really transforming how members in new markets think about the club business, it all points towards the ability to us to be really successful with our growth over the long term.

Yeah. Mike, I'll just add on to that. The share point is really important. It's not just us gaining share, but the whole club industry is gaining share and that's really because consumers are tired of paying high grocery store prices. And so, we are trying to be prudent with how we allocate capital and not get out over our skis despite the big CapEx number that we have in the budget for this year. We can try and grow even faster, but to do it all out of free cash flow is our goal. But we continue to see opportunities in almost every market that we look at going forward. So we’ll continue to do it in a reasonable and rational pace, but there’s nothing that we see today that would tell us to slow down.

Thank you.

Thank you very much.

Thanks, Mike.

Our next question comes from Oliver Chen of TD Cowen. Oliver, your line is now open.

Hi, Bob and Laura. As we think about the comp guidance, you had really nice general merchandise momentum. What's embedded in terms of the general merchandise as well as thoughts on fresh momentum and then overall pricing within the comp guidance. On the new store commentary is very helpful as well. I would love your thoughts on how new store productivity is trending with the latest vintages relative to present? And any strategies or learning as I know you have initiatives around optimizing the new store openings as well? Thank you.

Sure. Good morning, Oliver. Listen, the comp was very strong in Q4. As we've talked about, we had traffic and unit growth for the year, and lots of good participation in our fresh business and then GM really shined in the fourth quarter on top of a good Q4 last year. And so, I feel like across our business, we're seeing progress and momentum from a merchandising perspective, putting the right stuff on the shelves, making sure that our pricing is where it's supposed to be, communicating those things effectively to our members through great storytelling, great visual merchandising, great promotional efforts. And I don't see any of that changing. Certainly, the outside world could change on us a little bit. I don't think that means really anything bad for our grocery business. It could soften consumer demand for discretionary items and maybe hold back our general merchandise growth a bit -- but even there, we're not slowing down on the efforts to continue to modernize and brighten our general merchandise assortment. As you know, that's the emotional part of the shop, that's the treasure hunt part of the shop. People love to wander around and see things. And for years, we didn't give that opportunity to our members as well as we could have. And the team is doing a wonderful job today, putting things out on the floor that it's fun to look at. It's fun to shop. It's great stuff to put in your basket when you're there on your grocery shop. And we're trending towards becoming a general merchandise destination again. We saw that certainly in toys and gifting this year in Q4. So I'd love to see that continue. We certainly have the effort and the expertise to allow to continue and we'll just continue…

Yeah. Oliver, I'll just add on to that, and Bob mentioned it. I touched on earlier the team and the culture. And I feel like that we've gotten really, really good about how we open the building. And there continue to be opportunities in terms of how we optimize it. So as a team, we talk about how do we drive the club to its material run rate as soon as possible. And this is where, again, team and the culture as we think about the lifetime value and the things that drive that for new members, especially in new markets, something like digital, we spend an inordinate amount of time in the new markets, trying to get people engaged in the app, engage in Express Pay, engage in digital coupons, engage in curbside to drive those behaviors that we know will drive value over the long term. And even something like our partners at Cap One have been tremendous in helping us think about how to drive credit card adoption in new clubs, as we know that drives long-term lifetime value. So again, there are a ton of opportunities that the team are working on, but we're proud of what we've done, but more to go do.

Yeah. And we can see it in every new club getting a little bit better. I mean the one that we opened we could go in Myrtle Beach, I think, was the best new club opening. I've ever seen if Ryan and the team or anybody from the team are listening, congratulations to you guys. It really it looks special. And I noticed that 10 feet inside the door, there was just something a little extra about it. And that's this idea where we know we're not done. We know we can get better. We know we want to present a wonderful experience to our members, and we just keep grinding on it and getting better and better.

Congrats on the innovation, best regards.

Thanks, Oliver.

Thank you very much. Our next question comes from Chuck Grom of Gordon Haskett. Chuck, your line is now open.

Hey. Thanks very much. Good quarter. Bob, can you talk about the success of Fresh 2.0 and the maturation of that effort? And maybe talk about the basket size before and after stay in the state of Florida, where I believe you first rolled it out. And then, Laura, just on the -- you talked about the comp basing throughout the year. Is there anything on the earnings side that we should be mindful of as we build out our models? Thank you.

Yeah. Good question, Chuck. Why don't we just take them in order here. Look, Fresh 2.0 was -- has been really sort of an unmitigated success so far. Based on a simple idea that our best members interact with our produce category. And if we can get more people into that category, we might get more of those best members. And importantly and probably not surprisingly, those best numbers visit us more often, they put more things in their basket, they renew at markedly higher rates, the interactive categories all over the building, not just our fresh categories. So the idea behind Fresh 2.0 is really to take a good business and make it great. We feel like we ran a good produce business, but we could all spot opportunities as we walked around and the product selection and the execution, the way we promote it, the way we communicate, the way we display things making sure that we get things as fresh as possible to the clubs. And it's been a long time in the making, right? It was part of the reason why we decided to buy our fractional supply chain from our former partner who was wonderful to us. But we knew we wanted to do it a little bit differently and tilted more towards freshness. We spent forever resourcing tons of produce products. We spent forever training our team across the building, not just in the back of the club, but across the building in what a great produce experience looks like and what it takes to get there. And again, we're not done. We continue to try and improve that offering, introducing new SKUs, making sure they're the right SKUs, making sure that the right pack size, making sure we have the right price on…

Yeah. Hey, Chuck. Look, I think we called out the two biggest things for consideration. So just as a reminder, from a tax rate perspective, I would plan for the lowest rate in the first quarter, which would be consistent with kind of how the tax rate trends on a historical basis across the quarters. And then the second thing, in Q3, we are lapping the net legal settlements. So about $0.10 of earnings in there from last year that we should think about from a cadence perspective.

Okay. Great. Thank you.

Yeah.

Thank you very much. Our next question comes from Rupesh Parikh of Oppenheimer. Rupesh, your line is now open.

Good morning, and thanks for taking my question. Congrats on a really nice quarter. I just want to, I guess, just go back to the merchandise margins. Just want to get a sense of what your expectations are for the year and then any key puts and takes you highlight for us to think about? Thank you.

Yeah. Good morning, Rupesh. I think we had a good year and a good Q4 from a merchandise margin perspective. Certainly, showed up a touch short of our expectation, that was really due to taking care of our members in the face of some rising commodities. And like, you've heard say before, we will always invest in price. We will always do the right thing for our member. We knew we had the quarter in hand in doing that. But even if we didn't, we would always take that opportunity to take key commodities and keep the prices where they need to be for our membership. So we didn't really see anything in the fourth quarter that would be concerning. The crystal ball is a little unclear at the moment. We certainly have a ton of effort around raising our merchandise margins through better sourcing and co-brand and own brands, and efficiencies in our supply chain, a bunch of different irons in the fire to allow us to not only make a little bit more money on each sale, but continue to invest across the business, continue to invest in price. We've talked a little bit so far about the effect of tariffs, that's clouding sort of the near-term view of what merchandise margins might look like, in terms of just the cost that will increase because of that and then anticipated consumer response. But I think we will -- we have that muscle as we've talked about. We will do our damndest to mitigate any cost increases and continue to provide outstanding value to our members every day. And over the long-term, we’re very bullish on our business and our ability to drive margin, but also to drive the right value for our members.

Great. Thank you. I’ll pass it on.

Thank you.

Thank you very much. Our next question comes from Simeon Gutman of Morgan Stanley. Simeon, your line is now open.

Hey. Good morning, team and great job on the results. My question, it's a little follow-up on the real estate. So if you take the next few years of openings, Bill mentioned some infill versus new market, can you give us a sense of what that 25 to 30 looks like for infill versus new markets. And related, you said there will be some deleverage because of store opening costs this year. It might be because also of ownership. Can you tell us, is there a point at which you get enough new stores that are ramping that the comp contribution is great enough such that you lever those expenses even as this new expansion rolls out?

Yeah. Good morning, Simeon. Let me hand it over to Bill.

Yeah. Sure Simeon. I mean, I think as we think about the long-term leverage, we think we'll hit that pace once we level out a consistent cadence of new store openings over a couple of year period, right? So we're still in a period where we're ramping the growth. And as we're doing that, we will still have a touch of deleverage as we do that. Once we get a point to where we're at a steady state of openings, so whether that's 10 or 12 a year for three or four years in a row, that's the point where we feel like we'll have essentially a consistent basin, and then we should start to see some of that leverage come to life. In terms of the comp contribution, we've shared on the previous calls that we continue to see the new clubs comp at a rate that's 2 to 3x the chain rate. And we certainly saw that in Q4. And so, in terms of the new club starting to contribute to the bottom line comp, we're starting to see that. It's in there a little bit. But as we now ramp and increase the club base as we look forward out into the out years and how that contributes to the long-term algorithm that we presented at Investor Day last year, we think that, that will continue to become a bigger piece of it.

Thank you.

Thank you very much. This is the time we have left for questions. I'd now like to turn it back to Bob Eddy for any closing remarks.

Thanks, Carly, and thanks, everybody for your attention and your support of our company. As you heard today, we're very pleased with our fourth quarter results. We've got a lot of irons in the fire going forward for the long-term, and we will do what's prudent for our members in the short-term. So thank you so much for your attention, and we will talk to you in the first quarter.

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.