BJ's Wholesale Club Holdings, Inc.

Hello, everyone, and welcome to the BJ's Wholesale Club third quarter fiscal 2021 earnings conference. My name is Victoria, and I'll be coordinating call today. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'll now pass over to your host, Ange Stein, from BJ's Wholesale Club to begin. Ange, please go ahead.

Good morning, everyone. Thank you for joining BJ's Wholesale Club's third quarter fiscal 2021 earnings conference call. Bob Eddy, President and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development are on the call. 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 sections 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 an isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release posted on the Investors section of our website for 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, and thank you for joining us. We delivered another outstanding quarter with results surpassing our expectations by every measure. I'm proud of our team members' dedication and extremely thankful for all of their hard work, which continues to power our momentum. Our business accelerated during the third quarter and our results were balanced across a number of dimensions. We saw growth in all of our divisions, acceleration in traffic and ticket, and growth in digitally enabled sales and conventional sales. all underpinned by strong membership statistics in both new and tenured members. And we continue to transform the business as we go. Key to any transformation and any successful company is talent. We've continued to add world-class talent during the third quarter, appointing Rachel Vegas as chief merchandising officer. Rachel is a key member of my team responsible for the strategic leadership of merchandising and assortment planning and allocation. The talent and expertise she brings from her background at HEB and Target will allow us to take our team to the next level. We have welcomed Rachel with open arms. We have a lot to do together. Let me touch on our third quarter results at a high level. We delivered 5.7% positive comp, reflecting a two-year stacked comp sales growth of over 24%. Adjusted EBITDA of $228 million. adjusted EPS of 91 cents, and free cash flow of $99 million. I'd first like to remark on progress against our strategic priorities, which remain centered around growing and retaining members, delivering value with optimized assortment and services, improving convenience with digital, and strategically expanding our footprint. Let me speak to each one of these. Membership is at the heart of what we do, And over the past several quarters, we have grown the size and quality of our membership base significantly. In Q3, we grew our membership by 3% relative to the prior year and 15% compared to 2019. This growth was primarily driven by record renewals. We continue to believe that we are on track to deliver all-time high renewal rates in both first-year and tenured members for the year. In terms of membership quality, Higher tier penetration is now at 34%, representing a 400 basis point improvement relative to the prior year. This group consists of our most loyal members with the highest lifetime value. In addition, more than 75% of our members are now enrolled in Easy Renewal. Recall that many new members join on some sort of discounted membership proposition and graduate to full membership fees as a product of Easy Renewal. As we move people up into higher tier memberships and renew first years at full rates, we see a notable improvement in MFI per member as a result of the mixed shift. Our MFI dollar growth has surpassed member growth so far this year, and we expect it to do so for the fourth quarter. When you think about our flywheel spinning faster, you don't have to look much farther than membership to see it. It's incredible to look back to the time of our IPO when we had about 5 million members. We have well over six million today and growing. We expect membership fee income to be about 30% higher than it was then. Higher tier membership penetration is nearly 15 points higher and I could go on. We have truly transformed this business. The progress we are making in membership in terms of size, retention and quality has elevated the lifetime value of our members across the chain and is the best evidence that our flywheel continues to move ever faster. From an assortment perspective, we remain focused on curating the best assortment of products and services to meet our members' evolving demands. For a few years, we have been making incremental progress on our simplification efforts. More recently, product constraints and inflationary cost increases have allowed us the opportunity to make more revolutionary changes to many categories. This is most evident in many household goods categories in our sundries division. In October, we reduced SKUs in eight sundries categories by nearly 40%, significantly improving the clarity of our offering as well as operational efficiency. Our plan is to continue to drive these changes through strong partnerships with our suppliers and creative solutions to continue to enhance our assortment. Another area that showcases the progress we have made in our assortment is own brands. This strategy is essential in providing great value to our members, to our assortment simplification initiatives and our category profit improvements. We continue to make strong progress here, growing own brands penetration by nearly 200 basis points to 23% of merchandise sales. This increase was driven by better sales of grocery and sundries products during the quarter, partially owing to better in-stock rates on own brands items. We will continue to focus on further expanding our own brands portfolio over the long term, which we believe will strengthen member loyalty, increase value, and improve our margins. Let's turn to another key strategic pillar, our digital business. Our digital platforms continue to resonate with members and allow us to offer convenient access to tremendous value every day. Our digitally enabled sales grew by 44% this quarter and over 240% on a stacked basis driven by strong growth in our BOPEC and curbside offerings. More than 60% of BOPEC orders were delivered curbside this past quarter. As we've said in the past, digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. Allowing our members to save on their purchases in a more convenient format is what we are after in our digital efforts. We intend to win in digital, And in the last few days, there have been a couple of notable areas of progress toward that end. First, in October, we successfully launched a product we'll call Express Pay across the chain. With Express Pay, members are able to shop the club and pay for their purchases entirely on their mobile device, allowing them to skip the lines, a huge convenience. Prior to launch, we tested this service in a number of clubs, and member feedback and engagement was very positive. Our second bit of news revolves around our same day delivery product. I'm thrilled to announce that we just signed a partnership agreement with DoorDash to augment our existing partnership with Instacart. We expect the DoorDash marketplace to be live in January and Dashers to be making their first deliveries of orders made through bjs.com in Q1. This will be the first step towards a new model where our team members will pick all bjs.com orders and a stable of transportation partners make the deliveries. This vision should drive better experience and value to the member and better economics for us. Our members' experience will be better as our team members pick with greater quality and care, driving better order accuracy. More competition also lowers prices on marketplaces. Further, by having more than one partner, we can dynamically route deliveries based on a number of variables such as service levels, speed, member ratings, cost, and so on. Finally, as we will combine picking of same-day delivery orders with BOPEC and curbside orders, we will gain efficiencies in picking economics. We are thrilled to partner with Tony and his team at DoorDash to grow both of our great companies. Our efforts to expand our footprint also continue to progress. We expect to open five new clubs this year. Our Seabrook, New Hampshire club opened in June. We will enter the Pittsburgh market in December and open in January in Port Charlotte, Florida, Lansing, Michigan, and on Long Island. Our second club in Pittsburgh was scheduled to open in January as well. It has slipped by a few weeks due to construction supply chain challenges and will open in the early days of next year. This club that will be a few days late will join as many as 10 more new clubs on tap for 2022. In addition, we expect to open seven gas stations this year, followed by a dozen or more gas stations in 2022, which means about three quarters of our clubs will have gas stations by the end of 2022. We're excited about our expansion and our confidence is underpinned by the strong performance we are seeing in our new clubs. As you can see, we are making strong progress against all of our strategic priorities, despite what continues to be a challenging backdrop that features heady inflation, a dynamic labor market, and inventory constraints. Let me provide an update on how our team has managed through them to continue to drive our growth and success over the long term. Let's start with inflation. We continue to experience meaningful inflation, and its impact was felt across almost all categories. While we passed on price increases in many areas, we invested to maintain our price gaps against our competitors in the places we found value to do so. For example, meat and produce, as well as super key value items like beverages, which are on most of our members' shopping lists. Ultimately, we sell value to our members, and we will continue to invest in order to maintain that proposition. As we've said before, historically, Inflationary pressures have widened our price gaps relative to grocery, leading to market share gains and top line growth. We certainly saw that playing out during this quarter. Moving to the dynamic labor environment, we've shared that we made the largest increases in starting hourly wages in our history at the beginning of the third quarter. We've made great progress since making these moves and our teams are in great shape. We will continue to invest in our team so that we can recruit and retain talent across our footprint. Finally, as you know, there are widespread challenges in the global supply chain, including port delays, truck, container, labor, and packaging shortages, to name a few. We expect supply chain and sourcing challenges to continue for the foreseeable future, and we have activated various remediation plans to mitigate the impact. We're looking for alternate suppliers while also leveraging own brands to drive further penetration. We're partnering with new transportation providers and bringing in products early as vendor lead times have gotten longer. we will continue to work hard to mitigate the effects of this incredibly challenging environment. Overall, we are incredibly proud of our results. Our year-to-date performance has exceeded our internal plans across all metrics. While there continues to be a tremendous amount of uncertainty in the near term, our ability to retain members and market share has been strong, and we continue to execute at the highest levels. Looking ahead to the first quarter, Our team is focused on engaging our members to continue to drive strong renewals and ensuring we remain in stock for products our members demand during the holiday season. We believe that we are well positioned to exceed our members' expectations and remain a convenient one-stop shop for holiday needs. Laura will talk a bit more about our expectations for the fourth quarter. You will note that we are considerably more bullish about our prospects than we were earlier in the year. As a final proof point to that notion, I'd like to highlight that our board has authorized a new $500 million share repurchase program. We have many ways to grow our business, and that will always be our first use of capital. But the fact that we are a different and better company than we were just a couple of years ago should also allow us opportunities to use our considerable cash flow to reward our shareholders. Let me turn the call over to Laura to give a bit more color on our results and view of the future. Laura?