BJ's Wholesale Club Holdings, Inc.

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. 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 seven and a half 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 three 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 and 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 offering and drove strong member engagement, especially during the holiday season. Notably, consumer electronics produced high single-digit comps in the quarter, led by video games, tablets, and audio. We're proud of this performance in light of the industry's soft performance. Toys led our seasonal sales with low double-digit comp growth in the quarter. As you know, we significantly improved our toy assortment last year, offering top brands at great value. And we further leaned into that strategy this year. In apparel, our fantastic children's assortment drove the growth, supported by the cold winter weather. We know there's still more to do in general merchandise, but I'm proud of the team's continued progress in differentiating ourselves and growing this important part of our business. Our four strategic priorities are critical to our long-term growth. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. Let me touch on our progress in each. Membership is the cornerstone of our business. We reported another record membership year with full-year membership fee income increasing by 8.5%, and our renewal rate remaining strong at 90%. Over the past couple of years, we enhanced our credit card program, invested in a gas discount for our Club Plus members, and most recently, added benefits for Plus members by giving them two free same-day deliveries every year. As a result, we are growing overall member counts and upgrading more members into our higher tiers. Higher tier membership penetration is now nearly 40%. We have much to be excited about in membership, but perhaps our greatest achievement in recent memory is the ability to consistently grow members in comp clubs. This has been years in the making. We enhanced our tools and strategies around member acquisition to open new avenues for growth. Our focus on post acquisition engagement and member retention has been critical to maximizing lifetime value, alleviating the pressure of replenishing churn. Our strength in membership is what gives us confidence in our ability to sustainably grow the business long term. We're focused on maintaining this strength in the future. Our thriving membership is also a direct reflection of the unbeatable shopping experience we aim to deliver at BJ's. Simply put, satisfied members are more likely to renew. That's why our merchandising strategy is deeply rooted in providing the best value for our members. A strong pricing position is fundamental to our value-driven model. Our advantage structure allows us to consistently offer up to 25% better pricing than our grocery competitors, and we are relentless in maintaining this edge. While pricing is crucial to delivering great member experiences, the value we provide extends beyond cost, encompassing a highly curated assortment and digital convenience. We're enhancing our assortment across the entire box. As I mentioned earlier, we're making significant strides in improving our general merchandise business and strengthening the treasure hunt at BJ's. Our category management process introduced a more rigorous member-centric mindset to our assortment planning strategy. We also continue to innovate our own brands, offering high-quality products at significant savings to help members stretch their budgets. Our own brands comprise 26% of our merchandise sales in fiscal 2024. and we remain on track to ultimately reach our goal of 30%. Finally, our fresh initiatives have sparked meaningful produce demand since the full rollout in the second quarter. We launched Fresh 2.0 based on a simple yet powerful observation. Members who rely on BJ's as their primary fresh destination are among our most loyal members. As a result, we believe that winning more members fresh produce shop would lead to greater trip frequency and larger overall baskets. Our fresh 2.0 journey started with gaining full control of our perishable supply chain several years ago. From there, we enhanced every aspect of our produce business, from logistics and team member training to in-club presentation and marketing. Our efforts have boosted our credibility in fresh, exhibited by our double-digit produce comps in each of the past three quarters. In fiscal 2024, our fresh business grew at a rate that was 10 percentage points greater than the rest of the market. While our performance in produce alone validates our work, we are especially encouraged by the positive ripple effects on overall member behavior. Early indications since launching Fresh 2.0 show that tenured members who are completely new to buying fresh produce at BJ's are making more trips and, on average, shopping across four more categories than they have in the past. said differently, our members who are new to fresh produce are beginning to trend toward the same strong behaviors as our most loyal members. It's still early, but we're pleased with the initial results and inspired to broaden our efforts beyond produce to bring even greater value to our members. We are also winning in digital conveniences. These have fueled double digit digitally enabled comp sales growth each year for the past four years. In the fourth quarter, digitally enabled comp sales grew by 26% year-over-year and 53% on a two-year stack. Today, our members have multiple ways to save time in addition to money with BJs, such as Bopick, curbside, pickup, and same-day delivery. Our mobile app supplements the shopping experience when members are in our clubs, allowing them to clip and use coupons digitally, identify the location of products they need, and skip the lines with Express Pay Checkout. We enhanced the app experience to foster member engagement in between trips as well, incorporating personalized messaging, product returns functionality, an AI-powered search engine to facilitate shopping list creation, and other touch points to prompt the next BJ's visit. Today, about 60% of members engage with us digitally in some shape or form. And while Bopick has historically been the largest contributor of our digital growth, member adoption rates for express pay and same day delivery have also been growing nicely to add more profitable growth to the business. As members increasingly embrace our digital conveniences and reward us with their spending and loyalty, we will continue investing to drive lifetime value. Finally, we are making meaningful progress on our real estate strategy, having opened seven new clubs and 12 gas stations in fiscal 2024. We opened our 250th club in Louisville, Kentucky at the end of the fourth quarter, marking entry into our 21st state. Since the end of our fiscal year, we have opened two additional clubs in Brooksville, Florida and Myrtle Beach, South Carolina. We expect to open our new club in Southern Pines, North Carolina this Friday, and clubs in Whippany, New Jersey and Staten Island, New York will follow in the coming weeks. While some of our plans 2024 openings slipped into the early days of fiscal 2025, our growth agenda remains robust, and we ended the year with the largest pipeline of approved new clubs in the company's history. Inclusive of our five new units in the first quarter, we expect to open 25 to 30 clubs across the next two fiscal years. The performance of our new clubs continues to be strong. with clubs opened since 2020 contributing to comp sales at a rate of over two times the chain. This performance continues to give us confidence in our growth plans and our strategy of bringing the value of a BJ Solso club to communities in our existing and adjacent geographies in order to serve new members who are tired of paying high grocery store prices. We recently announced our plans to build a fourth ambient distribution center. We've grown meaningfully over the years, both organically and with new club openings. Our new DC is strategically placed to drive efficiencies in our current footprint while supporting our continued expansion. Over the past two years, we've expanded into Tennessee, Alabama, and Kentucky. In 2026, we have plans to enter Texas in the Dallas-Fort Worth region. DFW is a high-growth market with favorable demographics. There's intense competition as well, but we're confident that our strong offering and value focus will resonate with the broader community. We are eager to serve the families in this exciting market soon. As we assess the health of the consumer today, members remain highly value conscious and especially discerning in any discretionary purchases, as we've seen all year. In these times, members are relying on BJ's as their one-stop shopping destination. as exhibited by the growth in spend and trips across all income levels in the fourth quarter. We expect these dynamics to continue into fiscal 2025, and our teams remain vigilant and ready to navigate the uncertainties that the year will certainly bring. We have an enduring business model that wins in both good times and in times of uncertainty. I'm confident that the advantages inherent in our business combined with our focus on our long-term priorities, continue to position us well for the future. Above all, I'm grateful for our team members who bring our purpose to life every day, taking care of the families who depend on us. I look forward to continuing this journey with you as we grow the company together. I'll now turn it over to Laura to provide more details on our results and outlook for fiscal year 2025.