BJ's Wholesale Club Holdings, Inc.

Hello and welcome to BJ's Wholesale Club Holdings Inc. First Quarter Physical 2025 Earnings Conference Call. After the company's remarks, there will be a question and answer session. In fairness to all participants today, we ask you to limit yourself to one question and return to the queue for additional questions. I will now pass the call over to your host, Kathy Park, VP of Investor Relations. Please go ahead.

Good morning and welcome to BJ's first quarter fiscal 2025 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 reported a strong start to the year with our first quarter top and bottom line results exceeding expectations. We grew net sales by nearly 5%, and we managed the business well, resulting in operating income and net income growth of 27% and 35%, respectively. Our team continues to execute on our long-term strategic priorities as we work hard to take care of the families who depend on us. Consumers are always looking for value, but it's paramount in challenging times like these. Due to this, BJ's remains a leading destination for our members to find what they need and want at a great value. The drivers of our business remain strong. Membership continues to grow nicely. Our continued improvements in merchandising and digital convenience are driving traffic, and we're gaining share in our clubs and gas stations. Finally, we are accelerating our club openings to serve more families. We are excited about our momentum. Our comparable club sales, excluding gas sales, grew by 3.9% in the first quarter and were led by traffic and units once again. Traffic grew for the 13th consecutive quarter, contributing about two and a half points to our comp in the quarter. Consumers across the country have digested meaningful inflation over the past few years, and the uncertain economic environment drove members to prioritize value in their purchases during the quarter. Members are consistently spending with us, especially in household essentials. Our perishables grocery and sundries division delivered more than 4% comp growth in the first quarter with unit volumes increasing across all three divisions. Perishables remains the strongest driver of our growth as more and more members make us their weekly destination for produce, dairy, and meat. We also saw terrific growth in our own brands during the quarter. Our general merchandise and services division comps decreased slightly in the first quarter. We delivered positive comps in apparel and toys, where the combination of an elevated assortment, low price points, and compelling value have kept our members engaged. We also grew comps in consumer electronics, led by computer equipment such as laptops, desktops, and monitors. Unfavorable weather and pressures on consumer sentiment impacted big-ticket, highly discretionary categories such as patio sets, gazebos, and outdoor sheds in the quarter. That said, we are maintaining our momentum on our transformation strategy, and it's clear that members are responding well to an improving treasure hunt. Tariffs have been top of mind for companies and consumers alike in recent months. BJ's is less impacted by imports than many of our competitors, but tariffs aren't new to us, and we have a great team to help us find our way in an incredibly dynamic environment that's been changing by the day. We have strong capabilities in areas like analytics and input cost tracking, tools we've used in past disruptions, and are applying with discipline today. I'm so proud of our teams across merchandising, supply chain, finance, and analytics who have remained agile in navigating these challenges. This includes sourcing from alternative countries of origin, reassessing orders, and collaborating with our vendors, all to drive the best outcomes for our members. We're always leaning into our model to deliver value, and while upward pressure on costs may drive prices higher, we are doing everything possible to minimize the impact to our members. Moreover, we will invest for the long term, as we should gain share in a market disrupted by rising prices. As we gain more clarity, our teams are ready to adapt and pivot, but our guiding principles will remain the same. Delivering great value is non-negotiable for BJs, and we will always make the right decisions for our members. Our first quarter results underscore the progress we are making on our four strategic priorities. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. Our business starts and ends with our members. We are strengthening membership quarter after quarter. We're growing total member counts in new and existing clubs and upgrading more members into our premium tiers. while keeping our renewal rate strong. Higher tier members spend more and are more likely to renew, driving greater lifetime value. Over the past couple of years, we enhanced our credit card program, invested in a gas discount for our Club Plus members, and in January, we added benefits for Plus members by giving them two free same-day deliveries every year. These investments in our value proposition are paying off. In the first quarter, higher-tier membership penetration grew by over 100 basis points sequentially from the fourth quarter, surpassing 40% for the first time in our history. Our momentum in membership is a direct reflection of the unbeatable shopping experience we provide at BJ's. Our merchandising strategies span our entire box and aim to deliver exceptional value to our members. That means having the right products at the right price presented in the right way. Great pricing is foundational to our model. Our advantage structure allows us to consistently offer up to 25% off grocery store prices, and we are committed to maintaining this edge. Beyond pricing, we deliver value through our highly curated assortment, which we have dramatically improved over the past few years. We renovated our general merchandise business to regain credibility in our treasure hunt. We launched Fresh 2.0 to win our members' shop and grow trip frequency. We continuously elevate our own brands to deepen loyalty. The result is great member engagement and market share, as evidenced by our growth in traffic, comp sales, and, of course, in membership. I'd like to provide a little more color around our current work in Fresh. As you know, we launched our Fresh 2.0 initiative in produce last year based on the insight that perishables, especially produce, dictate our members' first weekly shop. We knew that if we won in produce, we would win trip frequency and wallet share. Since launching in the second quarter of last year, the program has driven quarterly produce comps of high single digit to low double digits. We're not only introducing new members into our produce category, but they are regularly reengaging in produce as well. The success we've seen in produce has given us confidence to extend Fresh 2.0 to meat and seafood, which we piloted in Florida late last year, and launched chain-wide this month. Similar to our early work in fresh produce, our meat and seafood initiatives are built on comprehensive market studies and competitive assessment. Our research determined that our biggest opportunity was in our assortment and presentation. First, we optimized our assortment to better reflect localized member preferences, adding items that members wanted and removing less relevant ones. Second, we added signage and dividers in our coolers for cleaner presentation and easier navigation reminiscent of our efforts in produce. We also reflowed our merchandise to reflect how our members shop meat. For example, we created a single destination for pre-seasoned and marinated proteins, making these ready to cook products easier to find. While these products comprise a small percentage of our protein sales today, the example illustrates how we're leveraging our understanding of shopper behavior to rethink all aspects of our business. As part of these efforts, we've also armed our field team members with better tools and reporting to track performance and reduce salvage. Our members love the improvements in Fresh, and we will continue to invest to drive trips, baskets, and member loyalty. Speaking of what members love, let's talk about our digital conveniences. Today, our members have multiple ways to save their time in addition to 25% lower grocery store prices through Bopick, Express Pay, curbside pickup, and same-day delivery. These have helped fuel double-digit growth in digitally-enabled comp sales each year for the past four years. In the first quarter, digitally-enabled comp sales grew by 35% year-over-year and 56% on a two-year stack. We're using technology to achieve greater labor efficiencies and accommodate the continued growth of our digital business. Consider our journey with digital order fulfillment. Today, OPIC, curbside, and same-day delivery comprise the majority of our digitally enabled sales, and our team members are picking these orders in our clubs. Over the past 18 months, with the product location data provided by our autonomous inventory robots and the help of AI, We developed and rolled out tools that optimized order batches and pick routes. This has enabled us to reduce the time required to pick an item by over 45%. As more members adopt our digital conveniences and reward us with their spending and loyalty, we will continue investing to drive operational efficiencies and member lifetime value. Finally, we're making meaningful progress on our real estate strategy. We hit the ground running in the first quarter, opening five new clubs, including our very first club on Staten Island, as well as four gas stations. Our new clubs are performing well against our expectations, and our future growth pipeline is strong. We remain on track to open 25 to 30 new clubs over the next two years. As we continue to demonstrate the success of our new club playbook, we've also asked ourselves how we can bring the same level of premium experience to the existing chains. In the past several years, we've updated our clubs with the latest sign packages and invested to support our key growth initiatives, including digital and fresh 2.0. We're also looking to identify relocation opportunities to better position our fleet for tomorrow. As part of this strategy, we expect to open a relocated club in the coming months in Mechanicsburg, Pennsylvania. We'll have more relocations planned over the next several years, including in Rotterdam, New York next year. Stepping back and assessing the current state of the consumer, broader uncertainty in the marketplace continues to drive consumers toward value, and our members are relying on BJS to provide it. Spending behavior remained solid across our membership in the first quarter as we drove healthy year-over-year growth in spend and trips across our high-, mid-, and low-income cohorts. Even in these uncertain times, some things remain constant, and here's what you can expect from us. You can expect us to stay committed to delivering the value our members rely on every time they shop with us. You can also expect us to remain focused on our long-term growth priorities. Our business model is built to win in both good times and times when consumers feel pressured. This especially holds true today as the investments we're making in the business are driving results. This year is turning out to be more dynamic than we all thought, and I'd like to thank our team members who continue to rise to the occasion and work tirelessly to take care of the families who depend on us. I'm confident in our ability to execute through the near term together and more convinced than ever that we're set up for long-term sustainable growth. I'll now turn it over to Laura to provide more details on our results and outlook.