BJ's Wholesale Club Holdings, Inc.

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the BJA's Wholesale Club First Quarter Fiscal 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Fatma Prihat, Vice President, Investor Relations. You may begin your conference.

Thank you. Good morning, everyone. We appreciate you joining BJ's Wholesale Club's first quarter fiscal 2019 earnings conference call. Chris Baldwin, Chairman and CEO, Bob Eddy, Chief Financial 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 Form 10-K filed with the FCC on March 25, 2009, 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 supplemental document posted on the Investors 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 morning. Thank you for joining us. Ahead of discussing our results for the quarter, I'd like to share that Robert Steele, who has served on our board since 2016, has been appointed to serve as our lead independent director. His extensive experience and knowledge of our industry and our business will be invaluable. This appointment enhances our corporate governance, and we all look forward to working with Rob in his expanded role. Let's turn to our results. Our first quarter results reflect a solid start to the year as we continued our transformation of our company. We're pleased with our performance in sales, earnings, and cash flows. For the quarter, we saw merchandise comp sales of 1.9%, representing a 3.9% two-year stacked comp. Sales were affected by the timing shift of government assistance benefits, which we discussed last quarter. Without this shift, our comp sales would have been above the high end of our full-year guidance range, which is 1.5% to 2.5%. Adjusted EBITDA was $124 million, up 2% over last year, which exceeded our internal expectations. We continue to drive strong cash flows and expect to reach our goal of leverage below three times EBITDA in Q2, well ahead of our accelerated schedule. My comments today will be focused on the work we are doing to transform our company for the long term. Our investments are focused on building capabilities across our strategic priorities, which are acquiring and retaining members, delivering value to get them shopping, making it more convenient to shop at BJ's, and, of course, expanding our strategic footprint. First, I'll give you an update on acquiring and retaining members. Our membership level remains as historic highs, and we delivered record membership fee income in the quarter. We continue to see increases in both new members and renewals. In addition, we experienced double-digit growth in members enrolling in our higher-tier memberships. Our co-bearing credit card is a powerful tool for delivering value and engaging our members. As a group, our credit card holders are among our most loyal members with the highest lifetime value. Since we launched the program in 2014, enrollment in our credit card plan has quintupled, and we continue to find new and innovative ways to improve this program. As I mentioned on previous calls, last year we invested in technology that enables credit card sign-ups through our in-lane POS system. Early results of this investment are encouraging, with new credit card enrollment up more than 20% over the same period last year, and we expect strong growth to continue during 2019. Our second priority is to deliver value to get our members shopping. We started our assortment transformation in our general merchandise business several years ago. Our GM performance shows that members respond well to new categories, products, and brands, obviously at unbeatable prices. For the first quarter, our GM comp sales were up 9%, a continuation of our strong third and fourth quarter performance. We saw growth during the quarter in a number of general merchandise categories, including consumer electronics, toys, and home, which includes products such as gift cards, books, and kitchen items. Our investment in assortment capabilities is driving continued growth in our apparel business. we're able to change our inventory more often, ensuring that we can deliver relevant styles and seasonal items at the right time at great prices. Since we started our apparel transformation, we've seen growth in categories like children's licensed apparel and women's athleisure. In the first quarter, we've continued to see these trends while also seeing strong performance in men's active wear from brands such as Reebok and Champion. Given our consumer target, men's workwear has also been a growth driver for us. TV sales were also very strong in the quarter, driven by our assortment and the investments we made to improve the quality of signals in our clubs to better showcase high-definition TVs. Growth has been particularly strong in premium TVs, which we define as those larger than 60 inches. Our grocery and perishables business are key to delivering value to our members. In Q1, our perishables business, which includes frozen foods, was impacted by the government assistant benefits shift I mentioned earlier. At the same time, our focus on value and in-club execution deliver growth in key areas of our fresh business during the quarter, including olive produce, rotisserie chicken, bakery, and full-service deli. We're also quite pleased with our performance during the Easter season. As we've mentioned before, our simplified baby assortment is delivering increased productivity with significantly less space. We are taking a deliberate approach to applying our assortment learnings. We see opportunity throughout our clubs to simplify our assortment with an emphasis on the most productive items and to enhance the member experience through improved displays and graphics. In terms of member experience, we've worked with Starbucks to improve presentation in our coffee category. We plan to expand a current test of in-club signage and displays that pair coffee with complementary items. We'll start to apply our assortment learnings across a range of grocery categories beginning in Q2. As in other areas of the club, we expect a simplified assortment and great value to resonate with our members over time. Our members continue to appreciate the value provided by our own brands, and our penetration remains strong, driven by Wellesley Farms produce, meat, and seafood. In Q2, we're offering a selection of summer seasonal items, and we're expanding our housewares collection, which will strengthen our own brand's presence within general merchandise. As I have foreshadowed, We see a significant opportunity to improve our services business at BJ's as we deliver new products and value to our members. Our optical business, which we started to relaunch late in the fourth quarter, is gaining momentum with our members and we're able to deliver improved value in a stronger selection. Importantly, in Q1, we launched an improved contact lens offering, which offers very competitive value compared to online and club store competitors, and we are pleased with early performance. We're just beginning to transform our services offering and look forward to strengthening our portfolio in ways that deliver additional value to members over time. Our next strategic priority is making it more convenient to shop at BJ's. We continue to invest in our digital properties, adding new capabilities and improving features rolled out over the last year. In Q1, we launched a new feature on BJs.com, making it more convenient for members to reorder items they have previously purchased. In addition, we are now showcasing our fresh items on BJs.com, making it easier for members to see the breadth of our offering. Sales driven by convenience features like buy online pickup and club and same day delivery, while small relative to the rest of our business, continue to grow rapidly. Items that account for more than three quarters of our sales are now available for same day delivery at club store prices. We've also started to streamline the buy online, pick up in club feature by enabling members to check in for pick up in our app, eliminating the need to wait in line. Importantly, a significant number of Bopix shoppers buy additional items once they're in the club. We also started to update an improved convenience feature that allows people to scan and pay for in club purchases within our app. This new test builds on our earlier pilot program and plays on the unique advantage of the club store environment, where every item is directly scannable with a UPC code. In club stores, shoppers do not need to weigh articles and print and scan their own labels for items such as fresh produce. While our current test is still quite small, this is a potentially transformational change for us. We'll continue to learn from the ongoing tests as we work to provide a more convenient, seamless shopping experience for our members. Finally, we plan to expand our strategic footprint. Our club in Clearwater, Florida is off to a strong start. We're pleased with membership acquisition, which has exceeded our goals. In the first quarter, we also broke ground on two clubs in eastern Michigan and are on track to open both clubs in Q4. We're actively looking at additional locations in this market. I want to make a comment on our gas business. BJ's gas stations are key to delivering value to our members. In Q1, our comp gas gallons showed significant growth as we continue to take share from our competitors. Our credit card and gas business are excellent examples of how various elements of our value proposition work together to drive growth. Our credit card offers members additional savings on gas, driving both credit card sign-ups and gas sales. We've also found that off-site gas stations are important tools for driving member acquisition and keeping BJ's top of mind for our members. We're on track to open 8 to 10 gas stations in fiscal year 2019 and expect to have gas stations in about two-thirds of our clubs by the end of this year. Overall, we're pleased with our performance in Q1, and most importantly, we're optimistic about the opportunities ahead of us. The investments we've made are resonating with members and driving growth. Going forward, we'll continue to drive growth by focusing on our strategic priorities and investing in the company for the long term. With that, I'll turn the call over to Bob, who will review our results and outlook for the year in more detail. Bob?