BJ's Wholesale Club Holdings, Inc.

Hello, everyone, and welcome to BJ's Wholesale Club Holding Inc. Second Quarter Fiscal 2024 Annual Conference Call. My name is Kiki, and I will be coordinating your call today. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I now pass the call over to your host, Katie Park. Please go ahead.

Good morning and welcome to BJ's second 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 during this call, we may make forward-looking statements within the meaning of the federal securities laws. These statements are based on 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 factor 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 in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release and latest investor presentation 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. And now I'll turn the call over to Bob.

Good morning. Thank you for joining us today. Our second quarter results demonstrate the power of our business model and our unrelenting focus on delivering value. especially at a time when members need it most. We drove quarterly comps and profits that were higher than anticipated while making considerable investments in long-term initiatives that we believe will drive our business. For the 10th consecutive quarter, we drove traffic gains in our business. We also grew market share inside our clubs and at the gas pumps. Those short-term gains are great, but we're playing a long game, and we're also seeing striking progress in our long-term initiatives. Perhaps the greatest marker of long-term progress is our 9% growth in membership fees. This was driven by the largest member count growth in a quarter since the pandemic. We also saw a great growth in premium tier memberships and strong renewal rates. Our digital business continues to grow in incredible fashion, positioning us for the future. Further, our real estate pipeline is growing faster than it has in years. These investments are heavy today, but in the years ahead, we will be thrilled that we made them. Comparable club sales, excluding gas sales, grew by 2.4% in the second quarter. Our compelling value proposition led to accelerating traffic in the quarter that contributed four percentage points to our comp. We believe our members are rewarding us for our merchandising improvements and amazing value. As a result, we gained grocery market share in both units and dollars in the quarter. We gained share at our gas stations, too, with 5% comp gallon growth in the second quarter. Our gas performance compares to the single-digit declines currently being reported by the broader industry. Our perishables, grocery, and sundries division delivered close to 3% comp growth in the second quarter as more and more members rely on BJ's for their household essentials. and more often, too. Our perishables business continued to lead this growth, and we're pleased that our work to strengthen our perishables offering is delivering results. We saw broad-based growth across this division, anchored by fresh produce, dairy, and meat. Our general merchandise business improved sequentially from the first quarter and delivered comp growth of over 1% in the second quarter. Our seasonal GM comps improved dramatically from the first quarter, increasing over 1,000 basis points sequentially. Better weather coupled with great value led to favorable seasonal appliance sales in the quarter. It's worth noting that members remained discerning in their purchasing behavior, which was evident in big-ticket seasonal categories such as patio sets and structures. Nonetheless, our members are spending with us. recognizing the enhancements in the value and quality of our gm offering our assortment gets more and more exciting each quarter and we are presenting it in the right way at the right time and at the right price we believe our treasure hunt is gaining traction our apparel consumer electronics and home categories all performed well in the second quarter with positive comps similar to those seen in the first quarter apparel is an area we are extremely proud of Our work in this category continues to pay off with high single-digit comp growth in the quarter, led by increases in both unit volumes and AUR. We believe the combination of an elevated assortment, compelling value, clean presentation, and powerful marketing is driving our success in the category. Our home business also delivered strong unit volumes, despite the choppy consumer environment. And in consumer electronics, we continue to win with televisions and audio categories, producing double-digit unit growth year over year. For BJ's, our consumables offering is the driver of trips today. Moving forward, we see general merchandise also inspiring the shop, driving incremental trips and expanding members' baskets. Naturally, as members spend and trips grow, we expect this behavior to strengthen loyalty and membership renewals. This is why improving general merchandise is a significant opportunity for the long-term growth of this company. Our general merchandise performance this quarter is a testament to the progress we continue to make in our GM transformation efforts. I'm confident that we have the right team in place to realize the significant potential we see in this division. Our four strategic priorities are critical to our long-term success. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. We are making meaningful strides in each of these areas. Our membership momentum is strong and growing. Our continued success in growing both the size and quality of the membership resulted in another robust membership fee income quarter with 9.1% year over year growth in the second quarter. Member counts grew both on a year over year and sequential basis. Even better, our comp clubs contributed about two-thirds of that member growth. It's promising to see that we are expanding our member base organically in our existing markets through both renewals and effective acquisition efforts. This, combined with the benefit of new clubs, drove the largest overall member growth in any quarter since the pandemic year in fiscal 2020. We expect to reach our next membership milestone of 7.5 million members in the back half of the year. In the second quarter, we improved our higher-tier membership penetration to 39%, led by continued double-digit year-over-year growth in our highest One Plus tier. One Plus members pay the premium $110 fee and hold our co-brand credit card. These are our most loyal and highest-spending members, exhibiting the greatest lifetime value. Moreover, growth in our co-brand member base has translated to even greater growth in total credit card spend. This suggests that our members are having a great experience with the new program. We will remain focused on maintaining our strength and membership to drive long-term value for both our members and shareholders. A great shopping experience leads to repeat trips, greater wallet share, and better loyalty. This is why we continually strive to enhance the member experience through improvements in our merchandising, digital, and in-club conveniences. all while we aim to deliver unbeatable value. At this point on our last call, we delved into our fresh initiatives, including Fresh 2.0. Recall that our work was built on member insights, along with our desire to cement BJ's as the weekly destination for our members' shopping needs. When we win our members' produce and meat shop, we win their first shop of the week, thereby increasing trips and spend, and resulting in more loyal members over time. Through our fresh initiatives, we worked hard over the past year to bring excitement and even more freshness to our produce offering. With full control over our perishable distribution centers, we improved supply chain velocity where it mattered. We expanded vendor relationships to increase in-stocks and put new seasonally relevant produce on rotation. We implemented essential fresh training across our clubs. We upgraded our marketing and presentations. By the end of July, we completed the rollout of our standalone coolers stationed at our front entrances so that our members are captivated by our high-quality, low-priced seasonal produce as soon as they arrive in our clubs. As we assess our second quarter results, it's clear that we are increasingly gaining our members' trust for their fresh groceries. In fact, our produce categories delivered low double-digit comp growth in the second quarter, almost entirely driven by unit volumes. What's even more encouraging is that we drove over 90 basis points of year over year growth in produce transaction penetration as well. While still early, we are thrilled with how our members are responding to our efforts and we're excited about what this could mean for member loyalty over the long term. The structural benefits of our club model allow us to regularly invest in value proposition. As such, our pricing position remains strong. In addition to our inherent advantages, we continue to execute on our category management process, or CMP, across the business. CMP is a muscle that we've worked to build over the years, but our latest iteration is far more comprehensive in approach and crucially built on our members' feedback. As part of this process, we are fine-tuning our assortment to drive better member engagement and share of wallet while optimizing our costs. This affords us the flexibility to deliver value to our members in a number of ways. For example, while inflation has moderated this year, consumers are still digesting prices that are significantly higher than they were two years ago. In recent months, the cost of some key dairy and protein articles is climbing once again. These frequently purchased items such as milk and eggs are putting outsized pressure on members' baskets. We have invested considerably in order to help our members make their baskets work within the confines of their budgets. Investing in value is part of our DNA, and what our members expect from BJs. These investments may pressure our short-term results, but will power our business in the future. Our accelerating traffic and units in the second quarter tell us we're making the right decisions to take care of the families who depend on us and deliver growth longer term. Our own brands, Wellesley Farms and Berkley Jensen, continue to provide members with high-quality products at substantial value. Over 95% of our own brand's products earn ratings of four out of five stars or more, demonstrating the rigor in which our teams ensure that we have the best combination of assortment, quality, and price, which is consistently a significant value to the comparable national brand. We recently relaunched our Wellesley Farm Snack Nuts program, and our cashews have earned 4.9 stars. Our new Berkley Jensen food storage bags have also received glowing reviews, with top-selling products earning 4.8 stars. We're growing our own brands sales penetration each quarter and remain confident in our goal of reaching 30% in the future. We work hard to save our members time. In addition to money, our digital capabilities continue to deliver these savings to our members in a way that is convenient for them. Our convenience offerings include buy online pickup and club curbside pickup and same day delivery in club shoppers, can also leverage our digital coupon gallery and skip the lines with Express Pay Checkup. Our digital business was basically non-existent five years ago, and we've grown by leaps and bounds since then, making up about 12% of our merchandise sales today. Our momentum continued in the second quarter with digitally enabled comp sales up 22% year over year. We believe our digital conveniences are only getting better from here. In the second quarter, we launched our product location capabilities on our app. We like a treasure hunt, but can now spare our members the scavenger hunt. This is one of the various enhancements enabled by our autonomous inventory robots, which are also driving labor efficiencies in our digital order fulfillment process. We will continue to lean into our digital capabilities to deliver even more value and convenience to our members. Finally, our real estate strategy is progressing well, and we remain on track to deliver on our new clubs opening in the back half of the fiscal year. We recently opened membership centers in Palm Coast, Florida and Carmel, Indiana at the start of a stretch that will see us open 11 new clubs in the next six months. Our new club program continues to drive success for our company and value to the communities we have the pleasure to serve. Just one statistic to put a fine point on why we've been working on this so hard. The new clubs that we have opened since our IPO delivered comp sales growth of more than three times the chain average for the second quarter. Finally, we continue to grow our pipeline to enable even more accelerated growth of new clubs. The health of the consumer remains top of mind for many. From our vantage point, members remain value focused in their purchasing behavior and they are seeking us out to attain that. We believe we have a winning business model in any economic backdrop, but it is especially relevant in times when consumers prioritize value. Spend per shopper remains very healthy at higher income levels and continues to improve at the lower end, especially as we've moved past the tougher lapse related to government aid in the second quarter. Critically, in the quarter, we drove greater trip frequency and overall spend growth across high-, mid-, and low-income levels. This continues to illustrate that our strong value prop is resonating with our entire member base, regardless of their financial standing. We're pleased with how our members are engaging with us today. but we also recognize the building uncertainty in macroeconomic and geopolitical factors in the near term. These dynamics and their impact on consumer demand are beyond our control, but we will remain focused on what we do best. That's bringing great value to our members. Looking past the near term, we are confident in our ability to grow the business reinforced by strong membership, traffic, and unit volumes. As I stated before, these are key markers of the underlying strength of our company. Furthermore, we believe the operating model, deep focus on our strategic priorities, and unwavering dedication to delivering value will keep us well positioned for long-term success. I'd like to close with my gratitude for our team members who go to great lengths daily to take care of the families who depend on us. As I do every quarter, I'd like to say to all of our team members, thank you again for all your hard work. I'll now turn it over to Laura to provide more details on our results and outlook for the year.