BJ's Wholesale Club Holdings, Inc.

Good day, ladies and gentlemen, and welcome to BJ's Wholesale Club third quarter fiscal 2018 earnings conference call. My name is Christine, and I'll be your lead operator today. After the presentation, we will conduct a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press the pound sign. If at any time during the conference, you need to reach an operator, please press star followed by zero. Please note this conference is being recorded. I would now like to hand the conference over to Fatin Freeha, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. We appreciate you joining BJ's Wholesale Club's third quarter 2018 earnings conference call. Chris Baldwin, Chairman and CEO. Bob Eddy, Chief Financial and Administrative Officer, and Bill Werner, Senior Vice President, Strategic Planning and Investor Relations, are on the call. Chris and Bob will provide you with an overview of our results, followed by a Q&A session. Before we begin, 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 and in today's press release. Please see the risk factors section of our perspectives filed with the SEC on September 27, 2018 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 and the information posted on the investor section of our 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 Chris.

Good afternoon. Thank you for joining us and happy Thanksgiving. First of all, I want to welcome Fatin Freja, who joined BJ's as our Vice President of Investor Relations earlier this month. Many of you know Fatin, who was previously at UNFI. We are thrilled to have her on our team and look forward to working with her. In the third quarter, we successfully executed a secondary offering of approximately 32 million shares. This reduces the combined ownership of CBC and Leonard Green Partners to approximately 40%. As a result, we have started to add more independent directors to our board. To that end, I also want to welcome Judy Werthauser, Executive Vice President and Chief People Officer at Domino's Pizza to our board. Based on her experience at Domino's and at Target, Judy will be a valuable addition to our board. We're pleased with our third quarter performance. While we're in the early stages of our transformation, we continue to make progress and we exceeded our expectations for sales, earnings, and gross margin. In the third quarter, we saw sales growth of 4.3% and a merchandise comp sales of 1.9%, our fifth straight quarter of positive merchandise comps and an acceleration of our two-year stack. Adjusted EBITDA was at $149 million, which is up 5.3% over last year as an all-time high for our company in the third quarter. Our performance was particularly strong in our core northeastern markets. Our progress continues to be driven by disciplined investments in the capabilities necessary to unlock our true potential over time. We believe these investments are driving growth across our strategic priorities. First, I'd like to update you on acquiring and retaining our member base. Membership is the foundation of our company. In Q3, our membership and renewal rate trends continue to exceed our high expectations despite the fee increase instituted earlier in the year. We expect to report that year-end membership and renewal rates will be at historic highs. We're particularly pleased at the success we're having in reengaging lapsed members as we focused on reaching out to previous members and showcasing our transformation. We continue to focus on acquiring new members through digital channels, which are key to attracting younger members. Through Q3, we have more than doubled the number of members acquired digitally versus the same period a year ago. In addition, We're successfully moving members to our higher membership levels with nearly a quarter of our members now in premium tiers. In Q3, we also held an open house to showcase our transformation to non-members prior to the holiday season. The open house was an extension of our membership acquisition program and gave us the opportunity to talk to prospective and, most importantly, lapsed users. We used the event to showcase the value, merchandise, and services we offer, preview some of our holiday and Black Friday deals, and highlight the convenient new features we have launched and improved over the past several months. Services like our app, buy online pickup and club, digital coupons, and of course, same day delivery. Our second strategic priority is to deliver value to get members shopping. Our progress is based on delivering outstanding value to our members. We strive to give members a 10X return on their membership fee and continue to invest in pricing to deliver unbeatable value every single day. As you may recall, we have more than a million members who shop us more than 50 times a year. Our fresh business is key to delivering member value and driving frequency, and we are committed to maintaining extremely sharp pricing in this area. While Q3 saw a deflationary environment in many perishable categories, unit sales were up as we continued to focus on value and much improved execution by our field operations team. Our private label brands are crucial to delivering great products at outstanding value to members. We have a very strong pipeline of own brand products and in Q3 launched Wellesley Farm seafood items and fresh packaged soups in the marketplace. For the quarter, own brand penetration was 20%. We also deliver outstanding value to members by offering great assortment. We started our assortment transformation by focusing on general merchandise. This category is key to creating the treasure hunt that drives trips and engages members in our clubs. Our recent results show the effect of this work as GM comps were up 5% in the quarter. Our apparel business continues to benefit from our investment in assortment capabilities. We're now able to offer the latest trends in seasonal apparel at unbeatable prices. In Q3, apparel grew by double digits as we delivered great value with brands like Levi's, Champion, Izod, and Jones New York. Earlier this year, we invested in improved TV signals to our clubs, allowing us to better display high-def 4K TVs. As a result, we saw strong TV growth in the quarter, and clubs with the improved signal saw double-digit comp increases. This bodes well for our Black Friday performance in TVs as well as other electronics categories. We're accelerating our assortment work in categories outside of general merchandise for the first time. Earlier this year, we relaunched our health and beauty category with a more focused assortment and much enhanced marketing. The results have been strong, driving business increases in members, shopping, and in sales with 6% fewer items. Lee and his team have also updated our baby section, moving from two national brands to one in diapers. Overall, we reduced diapers, wipes, and training pants assortment by approximately 30%. We used the freed-up space to create a convenient, one-stop location of items including toys, baby food, car seats, and formula. We're in the early stages of this change, but this is a key category for many of our newest members who are just starting families and will be rolling out our improved assortment chain-wide in 2019. Our third strategic priority is our attempt to make it more convenient to shop at BJ's Wholesale Club. A key element of our transformation is building a true omnichannel offering that lets our members shop how and when they want, whether it's in-club, online, or via a mobile app. We've taken an agile approach that allows us to quickly develop and launch new features. Over the past year, we've launched an app, digital coupons, buy online pickup and club, same day grocery delivery, and most recently, next day tire installation. Let me make a few comments on each. A little over a year ago, we launched our mobile app. We continue to enhance the app, and downloads grew by 20% in the quarter. Members have already clipped tens of millions of digital coupons, and we continue to add features that will help unlock the value of a BJ's membership by making shopping even more convenient. In Q3, we launched a reorder feature, which lets members place orders from the app based on their purchase history, and we also added same-day delivery from the app. Our tire business shows how our investments in this area deliver both value and convenience to our members. We know that members can save $100 to $150 when they purchase tires from us, and we work to make this process even more convenient for our members. This quarter, we launched next day tire installation, which allows members to order tires and schedule next day installation online. Following this launch, digitally enabled tire sales more than doubled for the quarter. This is an excellent example of how we can use our online platform to deliver value to our members, improve convenience, and drive sales and traffic to our physical locations. Our investments are also allowing us to deliver personalized offers that help drive trips and get members to shop new categories. These offers delivered through both digital and traditional means have a higher response rate than non-personalized offers. This effort is still just beginning, but we see significant opportunity in personalization and plan to further scale it moving forward. Finally, we plan to expand our strategic footprint. We've reinvented the BJ's club opening model using a data-driven approach that has yielded much better new club performance. As a reminder, the clubs open using this approach in Kearney, New Jersey and Somerville, South Carolina outperform the clubs open before we use this approach. In Q3, we opened in Roanoke, Virginia, which is our 216th club and 136th gas station. We exceeded our initial membership goals for this club. and we're on track to open at least four clubs in 2019, with our next new club in Clearwater, Florida set to open in the spring. I'm also pleased to announce our plans to add two new clubs and gas stations in eastern Michigan. This represents a new market for us, and we're thrilled to be part of Michigan's future. At BJ's, we proudly serve hardworking, middle-class families and see eastern Michigan as a great fit for our company. We expect the clubs and gas stations in Madison Heights and Taylor, Michigan to open late in 2019 and are actively looking for additional growth opportunities in the region. Overall, we're pleased with our Q3 results. We continue to make progress on our transformation and have significant opportunities ahead of us. We have strong plans in place for the holiday and look forward to building on our momentum. With that, I'll turn the call over to Bob who will review our results and outlook for the year in more detail.