Q4 2023 BJ's Wholesale Club Holdings Inc Earnings Call

Good morning, everyone and welcome to the Bj's Wholesale Club Holdings, Inc. Sports coats out Twenty's 53 earnings Conference call. My name is true and I'll be coordinating your cool today. After the Speakers' remarks, there will be a question answer session, if you'd like to ask a question Jay.

Operator: Good morning everyone and welcome to BJ's Wholesale Club Holdings. Cool, that's it.

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At that time, Please press star followed by one on your telephone keypad and if you change your mind. Please press star followed by two I'll now pass the call over to your highest Cathy Park. Please go ahead.

Operator: Thanks, everyone. Thanks. I will now pass the call over to your host, Kathy Park.

Catherine Park: Good morning, and welcome to BJ's fourth quarter fiscal 2023 earnings call. On the 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 our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations as 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.

Catherine Park: Good morning, and welcome to Bj's fourth quarter of fiscal 2023 earnings call on the call with me today are Bob Eddy Chairman and Chief Executive Officer, Laura Police, Chief Financial Officer, and Bill Werner Executive Vice President strategy and development. Please remember that during this call we will make forward looking statements within the meaning.

Catherine Park: 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.

Catherine Park: 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.

Catherine Park: 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 the 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. Good morning, everyone.

Catherine Park: Reputation 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.

Robert W. Eddy: Good morning, everyone. Thanks for joining us today to discuss our fourth quarter and full year results for 2023.

Robert W. Eddy: Thanks for joining us today to discuss our fourth quarter and full year results for 2023. We ended the year with strong results, highlighted by robust growth in the fourth quarter. This growth in membership, traffic, units, and market share capped off another dynamic year. I'm proud of how our team managed through the changing landscape while maintaining our focus on long-term priorities and never losing focus on delivering value to our members. We finished the year with momentum, and I believe we are well positioned for long-term growth. Our comparable club sales, excluding gas sales, grew by half a point in the fourth quarter. This result was at the high end of our guidance range and landed us at 1.7% for the full year. Traffic, which has been positive all year, accelerated even further in the quarter, contributing about three percentage points to our overall growth.

Robert W. Eddy: We ended the year with strong results highlighted by robust growth in the fourth quarter.

Robert W. Eddy: This growth in membership traffic units and market share capped off another dynamic year on.

Robert W. Eddy: I'm proud of how our team managed through the changing landscape, while maintaining our focus on long term priorities and never losing losing focus on delivering value to our members.

Robert W. Eddy: We finished the year with momentum and I believe we are well positioned for long term growth.

Robert W. Eddy: Our comparable club sales excluding gas sales grew by half a point in the fourth quarter.

Robert W. Eddy: This result was at the high end of our guidance range and Linzess at one 7% for the full year.

Robert W. Eddy: Traffic, which has been positive all year accelerated even further in the quarter contributing about three percentage points to our comp.

Robert W. Eddy: Critically we also turned the corner on unit volumes in Q4 with positive comp units led by our consumables business.

Robert W. Eddy: Critically, we also turned the corner on unit volumes in Q4, with positive comp units led by our consumables business. As a result, we continue to gain market share in the quarter as we have all year. We believe our strong commitment to value is resonating with our members as they increasingly rely on BJ's for their shopping needs. Our Perishables, Grocery, and Sundries divisions delivered comp growth of nearly 1% in the fourth quarter. This was driven entirely by year-over-year volume growth, unlike the rest of the market, which continued to face unit decline. Household essentials such as fresh fruits and vegetables, milk, water, paper, and laundry were leading drivers of demand. Inflation continued to moderate during the quarter as it has all year, with fourth quarter inflation about flat year over. Many categories are still running slightly inflationary. Other perishable categories, such as eggs, underwent considerable swings in cost in fiscal 2023.

Robert W. Eddy: As a result, we continue to gain market share in the quarter as we have all year.

Robert W. Eddy: We believe our strong commitment to value is resonating with our members as they increasingly rely on bj's for their shopping needs.

Robert W. Eddy: Our perishables grocery and sundries divisions delivered comp growth of nearly 1% in the fourth quarter.

Robert W. Eddy: This was driven entirely by year over year volume growth. Unlike the rest of the market, which continued to face unit declines.

Robert W. Eddy: Household essentials, such as fresh fruits, and vegetables milk water paper, and laundry, where leading drivers of demand.

Robert W. Eddy: Inflation continued to moderate during the quarter as it has all year with fourth quarter inflation about flat year over year.

Robert W. Eddy: Many categories are still running slightly inflationary.

Robert W. Eddy: Other perishable categories, such as eggs underwent considerable swings in cost in fiscal 2023 with.

Robert W. Eddy: With average pricing in the fourth quarter declining double digits year over year, I should note that we generally see elasticity as prices decline, and comp egg units were up in the quarter. Amid the compounding impact of inflation over the past two years, we have relentlessly focused on delivering compelling pricing every day. In the fourth quarter, our pricing index against our grocery competitors improved against the same index a year ago. And for the full fiscal year, we improved by about 100 basis points. It's easy to see why our member base continues to grow. Consumers choose to shop at BJ's because we consistently save them money and time.

Robert W. Eddy: With average pricing in the fourth quarter declining double digits year over year.

Robert W. Eddy: I should note that we generally see elasticity as prices decline in comp units were up in the quarter.

Robert W. Eddy: Amid the compounding impact of inflation over the past two years, we have relentlessly focused on delivering compelling pricing everyday.

In the fourth quarter, our pricing index against our grocery competitors improved against the same index a year ago.

Robert W. Eddy: And for the full fiscal year, we improved by about 100 basis points.

Robert W. Eddy: It's easy to see why our member base continues to grow consumers choose to shop at Bj's, because we consistently save them money and time.

Robert W. Eddy: I'd like to take a moment and talk about our strengthening general merchandise business, which accelerated significantly during the fourth quarter and delivered close to a positive 2% comp.

Robert W. Eddy: I'd like to take a moment and talk about our strengthening general merchandise business, which accelerated significantly during the fourth quarter and delivered close to a positive 2% comp. This represents sequential acceleration of approximately 1,200 basis points over the third quarter and a 650 basis point acceleration when comparing the same two periods over a two-year period. Our entire commercial team, merchandising, marketing, operations, and supply chain, has been focused heavily on reigniting growth in these categories, and I love the progress we are seeing. Member demand was especially strong for us during our Black Friday event. Our performance was driven by an enhanced assortment focused on great brands at great value. We reinforce this with an improved approach to product presentation and competitive timing of offers.

Robert W. Eddy: This represents sequential acceleration of approximately 200 basis points over the third quarter and a 650 basis point acceleration when comparing the same two periods on a two year stack.

Robert W. Eddy: Our entire commercial team merchandising marketing ops and supply chain has been focused heavily on reigniting growth in these categories and I love the progress we are seeing.

Remember demand was especially strong for us during our black Friday events are.

Our performance was driven by an enhanced assortment focused on great brands at great value.

Robert W. Eddy: We reinforced this with an improved approach to product presentation.

On a competitive timing of offers.

Robert W. Eddy: As a result, we delivered a positive 9% comp and consumer electronics led by double digit unit growth in TV audio and video games.

Robert W. Eddy: As a result, we delivered a positive 9% comp in consumer electronics, led by double-digit unit growth in televisions, audio, and video games. We also produced another positive 5% comp in apparel, driven by an elevated cleaner assortment and stronger partnerships with brands such as Champion, Carter's, Levi's, and Skechers. In addition, Berkley Jensen Apparel Sales, our own brand, more than doubled year over year in Our holiday set this past season consisted of a vastly improved assortment and marketing. This created a much better shopping experience than I've seen in a very long time. We drove strong engagement through investments in quality and sharp price points designed to meet our members' needs, particularly in the current environment. Our toy category, for example, featured 90% new assortment anchored by popular brands, including Lego, Disney, Hot Wheels, and Barbie, generating sales that outpaced the market in the quarter.

Robert W. Eddy: We also produced another positive 5% comp in apparel, driven by an elevated cleaner assortment and stronger partnerships with brands such as champion Carters Levi's and Skechers.

Robert W. Eddy: In addition, Berkley Jensen apparel sales are own brand more than doubled year over year in the fourth quarter meaningfully supporting our apparel strength.

Robert W. Eddy: Our holiday set this past season consisted of vastly improved assortment and marketing.

Robert W. Eddy: We did a much better shopping experience that I've seen in a very long time.

We drove strong engagement through investments in quality and sharp price points designed to meet our members' needs, particularly in the current environment.

Robert W. Eddy: Our toy category for example featured 90% new assortment anchored by popular brands, including Lego Disney Hot wheels, and Barbie generating sales that outpaced the market in the quarter.

Robert W. Eddy: Our fourth quarter results demonstrate clear progress on our GM transformation and reinforce our confidence and sustainably growing this segment of our business over time.

Robert W. Eddy: Our fourth-quarter results demonstrate clear progress on our GM transformation and reinforce our confidence in sustainably growing this segment of our business over time. As we look ahead to the new year, we will continue the evolution with higher levels of quality and exceptional value. Rebuilding credibility in GM remains a crucial part of our long-term strategy, and we will continue to innovate to realize the significant potential we see in this space.

Robert W. Eddy: As we look ahead to the new year, we will continue the evolution with higher levels of quality and exceptional value.

Robert W. Eddy: Rebuilding credibility and GM remains a crucial part of our long term strategy and we will continue to innovate to realize the significant potential we see in this space.

Robert W. Eddy: Gas is a daily necessity for many of our members and it is another meaningful way in which we deliver great value.

Robert W. Eddy: Gas is a daily necessity for many of our members, and it is another meaningful way in which we deliver great value. We gained share once again in the fourth quarter as we grew comp gallons by nearly 3% year over year versus the overall market, which was down about 5%. For the full year, our comp gallons grew about 1%, as expected, a top double-digit comp gallon growth in each of the past two years. This compares to the broader industry, whose same-store volumes have decreased by double digits.

Robert W. Eddy: We gained share once again in the fourth quarter as we grew comp gallons by nearly 3% year over year versus the overall market, which was down about 5%.

For the full year, our comp gallons grew about 1% as expected a top double digit comp gallon growth in each of the past two years.

Robert W. Eddy: This compares to the broader industry, whose same store volumes have decreased by double digits.

Robert W. Eddy: This growth contributed to strong gas profits in the fourth quarter and for the year. We've reported adjusted earnings per share of $1.11 for the fourth quarter, at the high end of our expectations, and $3.96 for the full year due to our strong fundamentals. Our four strategic priorities remain cornerstones of our long-term growth. These priorities are improving customer loyalty, giving our members an unbeatable shopping experience. Delivering value conveniently and growing our footprint. We have a lot to be proud of in each of these areas.

Robert W. Eddy: This growth contributed to strong gas profits in the fourth quarter and for the year.

Robert W. Eddy: We reported adjusted earnings per share of $1 11 for the fourth quarter at the high end of our expectations.

And $3 96 for the full year due to our strong fundamentals.

Our four strategic priorities remain cornerstones of our long term growth.

Robert W. Eddy: These priorities are improving member loyalty.

Giving our members an unbeatable shopping experience.

Robert W. Eddy: Delivering value conveniently and growing our footprint.

Robert W. Eddy: We have a lot to be proud of and each of these areas.

Robert W. Eddy: Membership delivered another milestone year with us delivering impressive growth and a 90% renewal rate.

Robert W. Eddy: Membership delivered another milestone year, with us delivering impressive growth and a 90% renewal rate. Membership is arguably the most important product that we sell, and it's worth considering the profound growth our team has delivered since our IPO. From fiscal 2018, our member count has grown by about 35 percent, and we currently serve well over 7 million members.

Robert W. Eddy: Membership is arguably the most important product that we sell.

Robert W. Eddy: And it's worth considering the profile of growth our team has delivered since our IPO.

Robert W. Eddy: From fiscal 2018, our member count has grown by about 35%.

Robert W. Eddy: And we currently serve well over 7 million members.

Robert W. Eddy: While our strong value proposition has certainly contributed to our success, we've also gotten better at acquiring members over the years. We are expanding membership in both new and existing markets, with our digital platforms becoming a dominant source of that group. Our focus on lifetime value has paid dividends in the form of membership quality, too. Higher tier membership penetration is now 38%, having grown by over 13 points from fiscal 2018. 2023 was marked by the transition of our co-brand portfolio to Capital One, and we are already seeing the benefits of this change.

Robert W. Eddy: While our strong value prop has certainly contributed to our success. We've also gotten better at acquiring members over the years.

Robert W. Eddy: We are expanding membership in both new and existing markets.

Robert W. Eddy: With our digital platforms, becoming a dominant source of that growth.

Robert W. Eddy: Our focus on lifetime value has paid dividends in the form of membership quality to higher.

Robert W. Eddy: Higher tier membership penetration is now 38% having grown over 13 points from fiscal 2018.

Robert W. Eddy: 2023 was marked by the transition of our co brand portfolio to capital one and we are already seeing the benefits of this change.

Robert W. Eddy: With one of the best card value propositions in retail, we expect to deliver over $300 million in rewards back to our members in the program's first full year. This 35% increase in rewards has supported a double-digit percentage increase in $110 million in members in fiscal 2023, with a large majority of the growth happening in the highest tier credit cards. These members exhibit the highest spend and are our most loyal customers, contributing to our membership fee income growing by 6% in fiscal 2023. We believe that the growth this year... and the expected growth to come will result in long-term value creation for both our members and shareholders. A great shopping experience keeps our members coming back to shop with us, deepening their loyalty and driving higher renewal.

Robert W. Eddy: With one of the best card value propositions in retail, we expect to deliver over $300 million in rewards back to our members and the program's first full year.

Robert W. Eddy: This 35% increase in rewards has supported a double digit percentage increase and $110 members and fiscal 2023.

Robert W. Eddy: A large majority of the growth happening in the highest tier credit card.

Robert W. Eddy: These members exhibit the highest spend and are our most loyal customers contributing to our membership fee income growing by 6% in fiscal 2023.

We believe that the growth this year.

And the expected growth to come will result in long term value creation for both our members and shareholders.

Robert W. Eddy: A great shopping experience keeps our members coming back to shop with us deepening their loyalty and driving higher renewals. That's why we continually strive to improve the member experience through better merchandising digital and in club conveniences and of course amazing value.

Robert W. Eddy: That's why we continually strive to improve the member experience through better merchandising, digital and in-club conveniences, and, of course, amazing value. As you already know, the advantages inherent in our Warehouse Club model allow us to deliver more value to our members compared to other less efficient forms of retail. In a low SKU count environment, members rely on us for a highly curated, well-presented assortment that delivers the most value. Over the years, we have built and refined a comprehensive process that optimizes our assortment with relevant brands and products and stronger values, resulting in profitable growth. This continuous improvement process requires data-driven insights, strong relationships with our vendors, and discipline in execution. To put this into context, let's take a category like coffee, where high levels of inflation resulted in us breaking price cliffs across various articles last year. As costs moderated for the commodity, we took the opportunity to reevaluate our assortment. As a result of this process, we are rolling out a refined assortment that will reduce duplicative roast offerings.

Robert W. Eddy: As you already know the advantages inherent in our warehouse club model allow us to deliver more value to our members compared to other less efficient forms of retail.

Robert W. Eddy: In a low SKU count environment members rely on us for a highly curated well presented assortment that delivers the most value.

Robert W. Eddy: Over the years, we have built and refined a comprehensive process that optimizes, our assortment with relevant brands and products and stronger value, resulting in profitable growth.

Robert W. Eddy: This continuous improvement process requires data driven insights strong relationships with our vendors and discipline and execution.

Robert W. Eddy: To put this into context, let's take a category like coffee, where high levels of inflation have resulted in us breaking price cliffs across various articles last year.

Robert W. Eddy: As costs moderated for the commodity we took the opportunity to reevaluate our assortment.

Robert W. Eddy: As a result of this process, we are rolling out a refined assortment that will reduce duplicative roast offerings.

Robert W. Eddy: Expand and elevate our own brands and introduce relevant local offerings.

Robert W. Eddy: These changes helped our coffee unit performance exceed the market by over 100 basis points in the fourth quarter.

Robert W. Eddy: We believe our new assortment will allow us to recapture margin and move more units at better values to our members, especially relative to our grocery competitors.

Robert W. Eddy: Expand and Elevate Our Own Brands and Introduce Relevant Local Offices. These changes helped our coffee unit performance exceed the market by over 100 basis points in the fourth quarter. We believe our new assortment will allow us to recapture margin and move more units at better values for our members, especially relative to our grocery competitors. This is just one example of how we're constantly improving our assortment to offer unbeatable member experiences and drive traffic, market share, and long-term growth. We will continue to invest our time and resources to deliver the best value for our members. Our own brands, Wellesley Farms and Berkley Jensen, provide our members with high-quality products and deep savings.

Robert W. Eddy: This is just one example of how we're constantly improving our assortment to offer unbeatable member experiences and drive traffic market share and long term growth.

Robert W. Eddy: We will continue to invest our time and resources to deliver the best value for our members.

Robert W. Eddy: Our own brands Wellesley Farms' in Berkley Jensen provide our members with high quality products and deep savings I'm.

Robert W. Eddy: I am pleased to report another record year in fiscal 2023, as our own brand sales grew approximately three times faster than our broader business output.

Robert W. Eddy: Outpacing the market growth of owned brands.

Robert W. Eddy: This was led by our sundries categories and for the year, our paper category alone delivered about 750 basis points of growth in dollar share and 850 basis points of growth and unit penetration.

Robert W. Eddy: I'm pleased to report another record year in fiscal 2023, as our own brand sales grew approximately three times faster than our broader business, outpacing the market's growth for own brand. This was led by our Sundries categories, and for the year, our paper category alone delivered about 750 basis points of growth in dollar share and 850 basis points of growth in unit penetration.

Robert W. Eddy: Member penetration and repeat purchase rates have grown nicely as well signifying deeper loyalty to our brands.

Robert W. Eddy: On the heels of this success, we are leaning into additional categories. This year, including food storage snacking nuts, and coffee as I highlighted earlier.

Robert W. Eddy: Own brand sales now make up over a quarter of our business and we're confident in our goal of reaching 30% over time.

Robert W. Eddy: Our digital comp sales grew by 28% in the fourth quarter with digital comprising over 11% of our business.

Robert W. Eddy: Member penetration and repeat purchase rates have grown nicely as well, signifying deeper loyalty to our brand. On the heels of this success, we are leaning into additional categories this year, including food storage, snacking nuts, and coffee, as I highlighted earlier. Own brand sales now make up over a quarter of our business, and we're confident in our goal of reaching 30% over time. Our digital top sales grew by 28% in the fourth quarter, with digital comprising over 11% of our business.

Robert W. Eddy: Our digitally enabled sales have grown seven fold since fiscal 2018 with more members leveraging our convenience offerings over the past five years.

Robert W. Eddy: In fiscal 2023 members, who shopped with US digitally spent about 90% more than those who are solely shops us in club.

Robert W. Eddy: We believe we've only scratched the surface and our digital efforts and we will continue to augment our conveniences in areas such as same day delivery.

Robert W. Eddy: In app capabilities, and personalization to deliver even more value to our members.

Robert W. Eddy: Finally, we are growing our real estate portfolio profitably and at a faster pace than recent history, having opened six new clubs since the third quarter.

Robert W. Eddy: Our digitally-enabled sales have grown sevenfold since fiscal 2018, with more members leveraging our convenience offerings over the past five years. In fiscal 2023, members who shopped with us digitally spent about 90% more than those who solely shopped with us in club. We believe we've only scratched the surface in our digital efforts and will continue to enhance our conveniences in areas such as same-day delivery, in-app capabilities, and personalization to deliver even more value to our customers. Finally, we are growing our real estate portfolio profitably and at a faster pace than recent history Our chain currently stands at 244 clubs and 175 gas stations. This fiscal year, we expect to open about 12 new clubs. This includes our third Tennessee club, which opened in Goodlettsville a few weeks ago, along with two relocations and our exciting entry into our 21st state, Louisville, Kentucky.

Robert W. Eddy: Our chain currently stands at 244 clubs in 175 gas stations.

This fiscal year, we expect to open about 12, new clubs. This includes our third Tennessee club, which opened in Goodlettsville, a few weeks ago, along with two relocations and our exciting entry into our 20 <unk> state in Louisville, Kentucky.

We're.

Robert W. Eddy: Turning about 15, new gas stations as well as we opened gas in existing clubs without a gas offering in addition to new clubs.

Looking beyond this year.

Robert W. Eddy: We're also continuing to build our pipeline and currently have more units in the pipeline than anytime in the last 20 years.

Robert W. Eddy: Okay.

Robert W. Eddy: As we assess the state of the consumer over the past year, our members have been incredibly resilient.

Robert W. Eddy: We have as always remain committed to helping them stretch their dollars and this value seeking backdrop.

Robert W. Eddy: Our mid to higher income members, while Choosier and Theyre spending are still exhibiting strong shopping behavior with trips and spend continuing to grow.

Robert W. Eddy: Our lower income members shopped us with greater frequency in the fourth quarter, even as their wallets remained pressured.

Robert W. Eddy: Particularly by lapping government aid.

Robert W. Eddy: These members continued supplementing their purchases with other forms of tender.

Robert W. Eddy: We're planning about 15 new gas stations as well as opening gas in existing clubs without a gas offering in addition to new clubs, looking beyond this year. We're also continuing to build our pipeline and currently have more units in the pipeline than at any time in the last 20 years. As we assess the state of the consumer over the past year, our members have been incredibly resilient. We have, as always, remained committed to helping them stretch their dollars in this value-seeking backdrop. Our mid- to higher-income members, while choosier in their spending, are still exhibiting strong shopping behavior, with trips and spend continuing to grow. Our lower income numbers shocked us with greater frequency in the fourth quarter, even as their wallets remained pressured, particularly by lapping government aid.

Robert W. Eddy: And more so than in the third quarter, serving as another proof point of our growing wallet share.

Robert W. Eddy: These crucial underlying behaviors drive member loyalty and retention, which is what we're after longer term.

Robert W. Eddy: As we look ahead there is no doubt that this year will have its own set of challenges for us to navigate.

Robert W. Eddy: These include broad economic uncertainty geopolitical risk and ongoing disinflation.

Robert W. Eddy: However, we remain confident in our ability to continue driving our business forward.

Robert W. Eddy: Our operating model and intense focus on our long term growth priorities and dedication to delivering value keep us positioned to win no matter the macro.

Speaker Change: I'd like to close my remarks with my thanks to our team members, who moved mountains to take care of the families who depend on us.

Speaker Change: So any of our team members listening in today. Thank you for your dedication and your hard work.

Speaker Change: I remain excited about our future as we continue to grow our company together.

Robert W. Eddy: These members continued supplementing their purchases with other forms of tender, and more so than in the third quarter, serving as another proof point of our growing wallet share. These crucial underlying behaviors drive member loyalty and retention, which is what we're after longer term. As we look ahead, there's no doubt that this year will have its own set of challenges for us to navigate. These include broad economic uncertainty, geopolitical risk, and ongoing disinflation.

Speaker Change: I'll now turn it over to Laura to provide more details on our results and outlook for the year.

Laura L. Felice: Thank you Bob.

Laura L. Felice: I would like to join Bob in thanking our team members across our clubs clubs support center and distribution centers, whose efforts delivered another year of strong financial results amid a challenging operating environment.

Laura L. Felice: Let's now discuss the fourth quarter results.

Laura L. Felice: Net sales in the quarter were approximately $5 2 billion.

Laura L. Felice: Growing eight 7% over the prior year.

Robert W. Eddy: However, we remain confident in our ability to continue driving our business forward. Our operating model, intense focus on our long-term growth priorities, and dedication to delivering value keep us positioned to win no matter the macro. I'd like to close my remarks with my thanks to our team members who move mountains to take care of the families who depend on us. To any of our team members listening in today, thank you for your dedication and your hard work.

Laura L. Felice: Total comparable club sales in the fourth quarter, including gas sales decreased five 4% year over year as average retail gas prices fell below $3 a gallon.

Laura L. Felice: Merchandise comp sales, which exclude gas sales increased by 5% year over year and by over 9% on a two year stack.

Laura L. Felice: As Bob mentioned, we are pleased to see traffic accelerate.

Laura L. Felice: Can you disinflation pressured our overall basket, but we were excited to see units turned positive in the quarter.

Laura L. Felice: I remain excited about our future as we continue to grow our company together. I'll now turn it over to Laura to provide more details on our results and outlook for the year. Thank you, Bob.

Laura L. Felice: Our fourth quarter comp and our grocery perishables and Sundries division grew by nearly 1% year over year and 13% on a two year stack, we drove gains in market share. During every single quarter. This year, which supports our belief in a growing and loyal member base.

Laura L. Felice: I'd like to join Bob in thanking our team members across our clubs, club support center, and distribution centers, whose efforts delivered another year of strong financial results amid a challenging operating environment. Now, let's discuss the fourth quarter results. Net sales in the quarter were approximately $5.2 billion, growing 8.7% over the prior year. However, total comparable club sales in the fourth quarter, including gas sales, decreased by 0.4% year-over-year as average retail gas prices fell below $3 a gallon.

Laura L. Felice: That relies on bj's for its shopping needs.

Laura L. Felice: Our general merchandise and services division comp decreased by about 1% in the fourth quarter, but as Bob mentioned, our general merchandise comp was positive as our improvement efforts continue to gain traction, particularly around the holidays.

Laura L. Felice: Other components of our business on favorably impacted the overall divisional comp partially due to a strong year in our home improvement business, creating a tougher lap. This year. In addition to a ramping new co brand business.

Laura L. Felice: Merchandise comp sales, which exclude gas sales, increased by 0.5% year-over-year and by over 9% on a two-year stack. As Bob mentioned, we are pleased to see traffic accelerate. Continued deflation pressured our overall basket, but we were excited to see units turn positive in the quarter. Our fourth quarter comp in our Grocery, Perishables, and Sundries division grew by nearly 1% year-over-year and 13% on a two-year stack.

Laura L. Felice: Digitally enabled comp sales in the fourth quarter grew 28% year over year, reaching over 11% of our net merchandise sales in the quarter.

Laura L. Felice: About 90% of our digitally enabled sales are fulfilled by our clubs with services like buy online pick up in club as well as same day delivery, which remain the primary drivers of our digital growth.

Laura L. Felice: In fact, OPEC alone contributed to about half of our digital business today.

Laura L. Felice: We believe that digital convenience is a key advantage for us and we will continue to enhance member conveniences to expand our reach.

Laura L. Felice: We drove gains in market share during every single quarter this year, which supports our belief in a growing and loyal member base that relies on BJ's for its shopping needs. Our general merchandise and services division comp decreased by about 1% in the fourth quarter, but as Bob mentioned, our general merchandise comp was positive as our improvement efforts continued to gain traction, particularly around the holidays. Other components of our business unfavorably impacted the overall divisional comp, partially due to a strong year in our home improvement business creating a tougher lap this year, in addition to a ramping new co-brand business. Digitally enabled comp sales in the fourth quarter grew 28% year over year, reaching over 11% of our net merchandise sales in the quarter.

Laura L. Felice: Membership fee income or MSI grew six 5% to approximately $108 $4 million in the fourth quarter delivering another record year and overall member counts higher tier penetration and MSI.

Laura L. Felice: We're also pleased to have maintained our strength in retaining our members with another 90% and tenured renewal rate. This year on top of a growing new member base.

Laura L. Felice: Moving to our gross margins, excluding the gasoline business, our merchandise gross margin rate declined by approximately 40 basis points year over year.

Laura L. Felice: About 90% of our digitally enabled sales are fulfilled by our clubs, with services like Buy Online, Pick Up in Club, as well as Same Day Delivery, which remain the primary drivers of our digital growth. In fact, BOPIC alone contributes to about half of our digital business today. We believe that digital convenience is a key advantage for us, and we will continue to enhance member conveniences to expand our reach. Membership Fee Income, or MFI, grew 6.5% to approximately $108.4 million in the fourth quarter, delivering another record year in overall member counts, higher tier penetration, and MFI. We're also pleased to have maintained our strength in retaining our members with another 90% tenured renewal rate this year on top of a growing new member base. Moving to our gross margins, excluding the gasoline business, our merchandise gross margin rate declined by approximately 40 basis points year over year.

Laura L. Felice: We continued to invest across the business and similar to the past couple of quarters experienced some unfavorable lapping of co brand financial flows in the wake of our transition.

Laura L. Felice: On a full year basis merchandise gross margins grew year over year by approximately 50 basis points, our fiscal 2023 merchandise gross margin rate remains higher than each of the prior three years.

Laura L. Felice: SG&A expenses for the quarter were approximately $741 $1 million.

Laura L. Felice: The year over year increase was primarily attributable to our new unit growth and other investments to drive our strategic priorities.

Laura L. Felice: We drove a slight SG&A leverage as a percentage of net sales driven by lower variable compensation compared to prior year.

Laura L. Felice: We reported fourth quarter and full year, adjusted EBITDA of approximately $297 million and $1 $1 billion respectively.

Laura L. Felice: We continued to invest across the business and, similar to the past couple of quarters, experienced some unfavorable lapping of co-brand financial flows in the wake of our transition. On a full-year basis, merchandise gross margins grew year-over-year by approximately 50 basis points. Our fiscal 2023 merchandise gross margin rate remains higher than each of the prior three years. SG&A expenses for the quarter were approximately $741.1 million.

Laura L. Felice: These excluded approximately $5 5 million and $13 $9 million of fourth quarter and fiscal year 2023 restructuring costs respectively.

Laura L. Felice: <unk> to streamline our organizational structure to drive efficiencies at our clubs support center.

Laura L. Felice: After several years of significant growth, we have taken a step back to reassess what the appropriate org structure should be to facility our future growth.

Laura L. Felice: The year-over-year increase was primarily attributable to our new unit growth and other investments to drive our strategic priorities. We also had a slight SG&A leverage as a percentage of net sales driven by lower variable compensation compared to the prior year. We reported fourth quarter and full year adjusted EBITDA of approximately $290.7 million and $1.1 billion, respectively. These exclude approximately $5.5 million and $13.9 million of fourth quarter and fiscal year 2023 restructuring costs, respectively, incurred to streamline our organizational structure to drive efficiencies at our club support center.

Laura L. Felice: As part of this work, we are reorganizing certain functions and centralizing processes to reallocate more of our resources to executing our key strategic priorities.

Laura L. Felice: This will be a multiyear efficiency effort that we expect will ultimately yield up to $50 million in annual savings.

Laura L. Felice: Most of which would be reinvested in the business to fuel profitable growth.

Laura L. Felice: Returning to our adjusted EBITDA for a moment. Please note that we have amended our adjusted EBITDA definition in consultation with the SEC and are no longer adding back pre opening and non cash rent expense to the calculation.

Laura L. Felice: Specifically, our fourth quarter and full year fiscal 2023 adjusted EBITDA.

Laura L. Felice: After several years of significant growth, we have taken a step back to reassess what the appropriate organizational structure should be to facilitate our future growth. As part of this work, we are reorganizing certain functions and centralizing processes to reallocate more of our resources to executing our key strategic priorities. This will be a multi-year efficiency effort that we expect will ultimately yield up to $50 million in annual savings, most of which would be reinvested in the business to fuel profitable growth. Returning to our adjusted EBITDA for a moment, please note that we have amended our adjusted EBITDA definition in consultation with the SEC and are no longer adding back pre-opening and non-cash rent expense to the calculation. Specifically, our fourth quarter and full year fiscal 2023 adjusted EBITDA reported within this morning's press release are approximately $10 million and $28 million lower, respectively, than what we would have reported under our prior methodology.

Laura L. Felice: Ported within this morning's press release are approximately $10 million and $28 million lower respectively than what we would have reported under our prior methodology.

Laura L. Felice: All in our fourth quarter adjusted EPS was $1 11.

Laura L. Felice: Reflecting growth led by our strategic priorities and membership merchandising digital and new clubs as well as a 50 <unk> week benefit of approximately $13 $4 million and net income equating to approximately 10 cents of earnings per share.

Laura L. Felice: Okay.

Laura L. Felice: Moving to our balance sheet, we continue to feel good about our inventory position. We ended the fourth quarter with inventory up five 5% year over year, which was driven by strategic investments in our business, including supporting new clubs and in stock improvements and our consumable categories.

Laura L. Felice: Our capital allocation strategy is consistent with the framework, we set forth a year ago at our Investor Day, We continue to believe that the best use of our cash is applying it towards profitably growing the business.

Laura L. Felice: All in, our fourth-quarter adjusted EPS was $1.11, reflecting growth led by our strategic priorities in membership, merchandising, digital, and new clubs, as well as a 53rd week benefit of approximately $13.4 million in net income, equating to approximately $0.10 of earnings per share. Moving to our balance sheet, we continue to feel good about our inventory position. We ended the fourth quarter with inventory up 5.5% year-over-year, which was driven by strategic investments in our business, including supporting new clubs and in-stock improvements in our consumable category. Our capital allocation strategy is consistent with the framework we set forth a year ago at our Investor Day.

Laura L. Felice: As such investments to support membership merchandising digital and real estate initiatives will continue to be funded by our cash flows and enabled by our strong balance sheet.

Laura L. Felice: Our fiscal 2023 capital expenditures.

Laura L. Felice: <unk> of sale leasebacks or approximately $455 million as we continued to invest in these priorities.

Laura L. Felice: In recognition of the choppy rate environment. This year, we also opportunistically repriced, our debt agreements and proactively reduced our debt levels to minimize interest expense.

Laura L. Felice: We ended the fourth quarter with 0.6 turns of net leverage which remains consistent with our long term target of sub one term.

Laura L. Felice: We continue to believe that the best use of our cash is applying it towards profitably growing the business. As such, investments to support membership, merchandising, digital, and real estate initiatives will continue to be funded by our cash flows and enabled by our strong balance sheet. Our fiscal 2023 capital expenditures net of sale V-specs were approximately $455 million as we continued to invest in these priorities.

Laura L. Felice: We are returning excess cash to shareholders too.

Laura L. Felice: In fiscal 2023.

Laura L. Felice: Repurchased nearly 2 million shares.

Laura L. Felice: For approximately $130 million and we now have $189 million remaining under our current authorization.

Laura L. Felice: In recognition of the choppy rate environment this year, we also opportunistically repriced our debt agreements and proactively reduced our debt levels to minimize interest expense. We ended the fourth quarter with 0.6 turns of net leverage, which remains consistent with our long-term target of sub-one turns. We are returning excess cash to shareholders, too. In fiscal 2023, we repurchased nearly 2 million shares for approximately $130 million, and we now have $189 million remaining under our current authorization.

Laura L. Felice: We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value.

Let me now address our outlook for fiscal year 2024.

Laura L. Felice: While we are mindful that our business and the broader industry continue to navigate uncertainty.

Laura L. Felice: We believe our structural advantages and value prop will continue to translate to strength and membership traffic and market share this year.

Laura L. Felice: We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value. Now, let me address our outlook for fiscal year 2024. While we are mindful that our business and the broader industry continue to navigate uncertainty, we believe our structural advantages and value proposition will continue to translate to strength in membership, traffic, and market share this year. We expect our general merchandise improvements will drive incremental member engagement to a strong consumable base. Starting at the top of the P&L, we expect our fiscal 2024 comp sales, excluding gas, to range from 1% to 2%. We are currently planning for fiscal 2024 to be slightly inflationary overall, with slight deflation in Q1 as we lap high single-digit inflation from Q1 of last year and also proactively work to bring stronger value to our members.

Laura L. Felice: We expect our general merchandise improvements will drive incremental member engagement to a strong consumable base.

Laura L. Felice: Starting at the top of the P&L, we expect our fiscal 2024 comp sales, excluding gas to range from 1% to 2%.

Laura L. Felice: We are currently planning for fiscal 2024 to be slightly inflationary overall with slight deflation in Q1, as we lap high single digit inflation from Q1 of last year.

Laura L. Felice: And I'll also proactively work to bring stronger value to our members.

Laura L. Felice: We expect to return to inflation for the rest of the year and also expect the quarterly flow of comps to follow a similar trajectory getting closer to our long term algorithm towards the back half.

Laura L. Felice: We expect to return to inflation for the rest of the year and also expect the quarterly flow of comps to follow a similar trajectory, getting closer to our long-term algorithm towards the back half. We expect to deliver a merchandise gross margin rate improvement of approximately 20 basis points for fiscal 2024, driven by strong cost management and continued growth in our own brand penetration. From a cadence perspective, we expect the dynamics and timing of our co-brand credit card transition to continue into the first quarter with impacts easing as the program continues to ramp through the year. We are planning for continued SD&A fee leverage in fiscal 2024 as we invest in our growth initiatives, particularly in unit growth, as new club sales continue to ramp over a multi-year period.

Laura L. Felice: We expect to deliver merchandise gross margin rate improvement of approximately 20 basis points for fiscal 2024, driven by strong cost management and continued growth in our own brand penetration.

Laura L. Felice: From a cadence perspective, we expect the dynamics and timing of our co brand credit card transition to continue into the first quarter with impacts easing as the program continues to ramp through the year.

We are planning for continued SG&A deleverage in fiscal 2024 as we invest.

Laura L. Felice: And our growth initiatives, particularly in unit growth as new club sales continue to ramp over a multiyear period.

Laura L. Felice: Note that we are also lapping a previously mentioned variable compensation tailwind from fiscal 2023. Our strong value in gas has become even stronger with our new co-brand program, and we expect to continue to drive share gains with slight comp-gallon growth in fiscal 2024. Our gas business has also become structurally more profitable, and we are planning for a profit per gallon in the mid-teens range this year. We are planning for an effective tax rate of approximately 28% this year.

Laura L. Felice: Note that we are also lapping a previously mentioned variable compensation tailwind from fiscal 2023.

Laura L. Felice: Our strong value in gas has become even stronger with our new co brand program.

Laura L. Felice: We expect to continue to drive share gains with slight comp gallon growth in fiscal 2024.

Laura L. Felice: Our gas business has also become structurally more profitable and we are planning for a profit per gallon in the mid teens range. This year.

Laura L. Felice: We are planning for an effective tax rate of approximately 28% this year.

Robert W. Eddy: Putting all this together, we expect to deliver adjusted EPS in the $3.75 to $4.00 range. This year, we also expect capital expenditures of approximately $500 million, the majority of which will be put towards new clubs and gas stations. Longer term, we remain confident in the underlying strength of our business and believe we are well positioned to deliver sustainable growth to maximize shareholder value. With that, I will turn it back over to Bob for closing remarks. Thanks, Laura.

Laura L. Felice: Putting all this together, we expect to deliver adjusted EPS in.

Laura L. Felice: In the $3 75 to $4 range.

Laura L. Felice: This year, we also expect capital expenditures of approximately $500 million.

Laura L. Felice: Majority of which will be put towards new clubs and gas stations.

Laura L. Felice: Longer term reward remain confident in the underlying strength of our business and believe we are well positioned to deliver sustainable growth to maximize shareholder value.

Laura L. Felice: With that I will turn it back over to Bob for closing remarks.

Robert W. Eddy: Thanks, Laura we have considerably improved our business over the years and our team executed well this past year.

Robert W. Eddy: We've considerably improved our business over the years, and our team executed well this past year. We maintained our focus on the important drivers of long-term success, resulting in consistent growth in membership, traffic, and market share. Our strategic growth priorities continue to guide our future, with delivering the best value as our North Star. We will grow the size and quality of our membership. We will offer an unbeatable member experience through our merchandising improvement. We will grow our digital business and profitably expand our footprint.

Robert W. Eddy: We maintained our focus on the important drivers of long term success, resulting in consistent growth in membership traffic and market share.

Robert W. Eddy: Our strategic growth priorities continue to guide our future with delivering the best value as our North Star.

Robert W. Eddy: We will grow the size and quality of our membership.

Robert W. Eddy: We will offer an unbeatable member experience through our merchandising improvements.

Robert W. Eddy: We will grow our digital business and profitably expand our footprint.

Operator: Above all, we will continue delivering value to our members. I'm proud of our entire team, and I'm excited for the future of our business. Thanks again for joining us today and for your support of BJ's Wholesale Club. I'll now turn it back over to the operator to take your questions. Thank you.

Robert W. Eddy: Above all we will continue delivering value to our members.

Speaker Change: Proud of our entire team and I'm excited for the future of our business. Thanks.

Speaker Change: Thanks, again for joining us today and for your support of Bj's wholesale club.

Speaker Change: I'll now turn it back over to the operator to take your questions.

Speaker Change: Okay.

Speaker Change: Thank you we will now start the Q&A session in fairness to all participants please limit your questions to one question and one follow up.

Robert W. Eddy: One. Our first question today comes from Robbie Holmes from Bank of America. You know, great quarter and thanks for the outlook commentary. You know, Bob, Laura, maybe the traffic comps of almost 3% sound, you know, great. It does imply, you know, good ticket pressure still. Can you maybe give more color on sort of the expectations for a ticket versus traffic in your comp guidance you gave and a little more color on, you know, general merchandise versus the food side? And then and then I have a quick follow-up. Good morning, Robby.

Speaker Change: Our first question today comes from Robby <unk> from Bank of America. Your line is now open. Please go ahead.

Robby: Great great quarter, and thank you for the outlook commentary.

Robby: Bob lower maybe.

Robby: The traffic comps of almost 3% sounds great. It does imply.

Hey, good ticket pressure still can you maybe give more color on sort of the expectations for a ticket versus traffic in your in your comp guidance you gave.

Robby: And a little more color on general merchandise.

Speaker Change: Versus the food side, and then and then I have a quick follow up.

Speaker Change: Alright, good morning Ravi.

Robert W. Eddy: Look, I think we were pretty pleased with the complexion underneath the comp during the quarter, as we talked about. You know, 3% gains in traffic and turning the corner on units. Obviously, that means there's some pricing pressure, as you mentioned. You know, that's about, I don't know, 10 percentage points of disinflation year over year in the quarter.

Ravi: Look I think we were pretty pleased with the complexion underneath the comps during the quarter as we've talked about.

Ravi: 3% gains in traffic and.

Ravi: <unk> turned the corner on units.

Ravi: Obviously that means there's some.

Ravi: Pricing pressure as you mentioned.

Ravi: That's about I don't know 10 10.

Ravi: 10 percentage points.

Ravi: This inflation year over year in the quarter.

So.

Robert W. Eddy: So, you know, knowing that that's out there, we've spent more time making sure that our members are visiting us, engaging with us, putting things in their baskets, and... And we saw great performance from that perspective during the quarter, and certainly the acceleration in traffic was... I think probably the thing that we were most proud of during the quarter is that, really, Number one shows that engagement. From a long-term perspective, it's the biggest predictor of membership renewal, as we've told you a lot. And, you know, you brought up the split between food and general merchandise.

Ravi: Knowing that that's out there we've spent more time.

Ravi: Making sure that our members are visiting us engaging with us putting things in their basket.

Ravi: <unk>.

Ravi: And we saw great performance from that perspective during the quarter.

Ravi: And certainly the acceleration in traffic was.

Ravi: Probably the thing that we were most products during the quarter.

Ravi: Is it really.

Ravi: Number one shows that engagement.

Ravi: From a long term perspective, it's the biggest predictor membership renewal as we've told you a lot.

Ravi: You brought up the split between food and general merchandise it really reflected the progress that we've made during the quarter in our general merchandise business as we've talked about.

Robert W. Eddy: It really reflected the progress that we made during the quarter in our general merchandise business. As we talked about, you know, GM comps led the entire business, and that's a new thing for us. Hopefully, that continues.

Ravi: GM comps.

Ravi: <unk> led the entire business and that's that's a new thing for US hopefully that continues we're certainly.

Robert W. Eddy: We're certainly expecting GM to have a good year in this new year as we look to really, You know, grow that segment of our business over time. It's an incredibly important part of our strategy. You know, nobody that I know really loves to shop for groceries, even when they come to us and save 25 percent.

Ravi: Expecting it to Jim to have a good year in this in this new year as we look to really.

Ravi: Grow that segment of our business over time.

Ravi: Incredibly important part of our strategy.

Ravi: Nobody that I know really loves to shop for groceries, and even when they come to us and say if 25%.

Robert W. Eddy: But they do love to buy electronics and apparel and home goods and things, particularly the quality that we're seeing now at the values that we're putting forth as well. So we're pretty happy with the complexion of the business during the quarter, and it made us feel like we had a lot of momentum going into the next year. That's really helpful.

Ravi: But they do love too.

Ravi: Electronics, and apparel and home goods and things, particularly quality that we're seeing now at the values that we're putting forth as well so.

Ravi: We're pretty happy with what the complexion of the business during the quarter and it made us feel like we have a lot of momentum going into the next year.

Speaker Change: That's really helpful and just a quick follow up I think I saw you guys and in also Sam's club doing some membership discounting in the fourth quarter I'm not sure a lot of thats going on anymore, but just curious how if you have any.

Robert W. Eddy: And just a quick follow up. I think I saw you guys and also Sam's Club doing some membership discounting in the fourth quarter. I'm not sure a lot of that's going on anymore, but just curious, you know, how, if you have any, any thoughts on how you think, you know, members gotten on discount will behave? Will you hold them as similar as other members?

Speaker Change: Any thoughts on how you think member.

Speaker Change: Remember Scott non discount will they behave will you hold them as similar as other members you know any thoughts on how that will work for you guys.

Robert W. Eddy: You know, any thoughts on how that will work for you guys? It's a good question. You know, membership underlies the entire business. We had a strong year from a membership perspective, and two-four was better than the full year. All the metrics that we care about, our ability to attract new members, our ability to attract the right members in terms of their quality. Our long-term renewal rate, as we talked about, is still at 90%.

Speaker Change: Yes, it's a good question membership underlies the entire business, we had a strong year from a membership perspective.

Speaker Change: Q4 was better than the full year on all of the metrics that we care about our ability to attract.

Speaker Change: Members, our ability to attract the right members in terms of their quality.

Speaker Change: Our long term renewal rate as we talked about it still at 90%.

Speaker Change: Our higher tier members are at 38% in the co brand has really helped us lever up that portfolio into the.

Robert W. Eddy: Our higher-tier members are at 38%, and the co-brand has really helped us lever up that portfolio into the highest levels of our tiers. So, lots to be proud of there. You know, we're very judicious from a discounting perspective.

Speaker Change: The highest levels of our tiers, so lots to be proud of there.

Speaker Change: We're very judicious from a discounting perspective. It is it is something that we that we do it is something our competitors do.

Speaker Change: As as we've talked about to avail yourself of a discount we ask you to participate in our easy renewal program. So discounting as an important way to to catch somebody's attention and get them in the first year.

Robert W. Eddy: It is something that we do. It is something our competitors do, too. As we've talked about, to avail yourself of a discount, we ask you to participate in our Easy Renewal Program. So, discounting is an important way to catch somebody's attention and get them in for the first year.

It's up to us to properly engage you during that first year and then and then you renew it full freight through our easy renewal program.

Robert W. Eddy: It's up to us to properly engage you during that first year, and then you renew it at full freight through our Easy Renewal Program in the second year. So, again, very proud of our membership progress. It is, again, part of why we feel bullish about the business. And, you know, built upon several years of growth in members. This is not just a COVID phenomenon.

Speaker Change: And the second year so.

Speaker Change: I'm very proud of our membership progress.

Speaker Change: Again, it's part of why we feel bullish about the business.

Speaker Change: Built upon several years now of growth in members. This is not just the COVID-19 phenomenon. This is something we've been able to stack membership gains on membership gains for a few years now.

Speaker Change: We don't see any reason why that would slow down.

Robert W. Eddy: This is something we've been able to stack membership gains on membership gains for a few years now, and we don't see any reason why that would slow down. That's great. Thank you. Thanks, Robbie. Our next question today comes from Simeon Gutman.

Speaker Change: That's great. Thank you.

Speaker Change: Thanks Robert.

Speaker Change: Okay.

Speaker Change: Our next question today comes from Simon Gutman from Morgan Stanley. Your line is now open. Please go ahead.

Speaker Change: Yeah.

Simeon Ari Gutman: Hey, good morning, everyone.

Simeon Ari Gutman: Hey, Bob I wanted to ask you first the topline environment has been constrained and we've seen that across retail.

Simeon Ari Gutman: Hey, good morning, everyone. Hey, Bob, I wanted to ask you first. The top line environment has been constrained, and we've seen that across retail. You're talking a lot about investments and thinking about where the business could be in a couple years from now. Is there any degree to which you're holding back to manage, you know, short-term profitability, or some of these changes you're making some cost savings designed so that you don't have to hold back over the interim? Yeah, good morning, Simeon.

Simeon Ari Gutman: Talking a lot about investments.

Simeon Ari Gutman: Thinking about where the business could be in a couple of years from now is there any degree to which you are holding back to manage short term profitability or some of these changes you're making some of the cost saves designs. So that you don't have to hold back over the interim.

Speaker Change: Yes, good morning Simeon.

Speaker Change: It's a really good question.

Speaker Change: We talk a lot about it.

Speaker Change: We're investing for the long term.

Speaker Change: So very very few conversations around here about investment for a quarter or for a year, it's where are we going to be in two years three years five years.

Robert W. Eddy: It's a really good question. We talk a lot about it here, investing for the long term, and so there are very, very few conversations around here about investment for a quarter or for a year. It's where are we going to be in two years, three years, five years? And that's really important.

Speaker Change: And that's really the point of the membership business, we want to create.

Speaker Change: Franchise for the next five or 10 years so.

Speaker Change: Certainly we have opportunities for in period investments we tend to.

Speaker Change: Make those as they come but the more important ones to us or the other long term loans and those tend to fall in the membership arena.

Robert W. Eddy: And I think that's the point of the membership business. We want to create a franchise for the next five or 10 years. So, certainly, we have opportunities for in-period investments. You know, make those as they come, but the more important ones to us are the other long-term ones, and those tend to fall in the membership arena. So, we are really proud of what we've been able to do. It's certainly one of the things that have really transformed the business over time. And in a quarter like this past one, where we had a great bottom-line number, you've heard us talk about spending into the beat a little bit as well. Every time we know we have a good quarter going, we amp up the investment a little bit, not necessarily for this particular quarter, but for the next year, the next two years, the next five years. And that won't change.

Speaker Change: So we are really proud of what we've been able to do it's certainly one of the things that has really transformed the business over time and in a quarter like this past one.

Speaker Change: We had a great bottom line number you've heard us talk about spending into the beat a little bit as well every time, we know we have a good quarter going.

Speaker Change: We amp up the investment a little bit not necessarily for this particular quarter, but for the next year. The next two years. The next five years and that won't change.

Speaker Change: Probably the Best example of that is the co brand credit card.

Speaker Change: There was a more lucrative deal than our prior.

Speaker Change: Our prior deal with our prior.

Speaker Change: But we took all of those.

Speaker Change: Additional moneys and invested them back into the.

Speaker Change: The value proposition for our members and we talked about in the prepared remarks.

Speaker Change: 35% more rewards in the first year than in.

Speaker Change: In last year, that's an incredibly powerful thing for for our members, whether it's 5% back on what they what they buy our 15 back on every gallon of gas that <unk>.

Robert W. Eddy: So, you know, probably the best example of that is... The Co-Brand Credit Card. It certainly was a more lucrative deal than our prior deal with our prior bank. We took all of those.

Speaker Change: <unk> pump.

Speaker Change: That really drives people's behavior.

Speaker Change: Our lucrative fashion over the long term, it's not particularly accretive.

Robert W. Eddy: Additional monies and invested them back into the value proposition for our members. And we, you know, we talked about in the prepared remarks 35% more rewards in the first year than in the last year. That's an incredibly powerful thing for our members, whether it's 5% back on what they buy or 15 cents back on every gallon of gas that they pump. That really drives people's behavior in a lucrative fashion over the long term. It's not particularly accretive in the first year, as we've seen here in this first year of that new program.

Speaker Change: In the first year as we've as we've seen here in this in this first year of that new program, but.

Speaker Change: It allows the program to grow so that it will be really a juggernaut in two or three years or five years. So.

Speaker Change: We will continue to invest in the business for the long term that's really that's really our job is to create that long term value for our shareholders.

Speaker Change: Okay.

Speaker Change: Thanks, and then one follow up on general merchandise, how well do you know the customer who is buying it meaning is it the most loyal as a new member and then the breadth across the different categories and general merchandise.

Any anything thats observable between mature center or an existing market versus new markets.

Simeon Ari Gutman: But it allows the program to grow so that it will be really a juggernaut in two or three or five years. So we will continue to invest in the business for the long term. That's really, that's really our job is to create that long-term value for our shareholders. Thanks. And then, on general merchandise, how well do you know the customer who's buying it? Meaning, is he the most loyal?

Speaker Change: Jim was it was a great story during the quarter as we talked about.

Speaker Change: The business almost a positive two comp.

Huge acceleration off of the third quarter. This was the first quarter, where you could really see.

Speaker Change: The new and better assortment across many categories and Jim as you know, we started to renovate and apparel last year and saw some great results.

Robert W. Eddy: Is it a new member? And then the breadth across the different categories in general merchandise and anything that's observable between a mature center or an existing market versus a new market. You know, GM was a great story during the quarter, as we talked about, so it led the business to almost a positive two comp and a huge acceleration off of the third quarter. And this was the first quarter where you could really see the new and better assortment across many categories in GM. As you know, we started to renovate in apparel last year and saw some great results. A lot of the Q4 categories were long lead time categories. The first time I really saw that benefit was in the fourth quarter.

Speaker Change: A lot of the Q4 categories were long lead time categories.

Speaker Change: For the first time to really see that benefit was in the fourth quarter. The great news is that really resonated with our members. We took huge important categories like consumer electronics, and just knock them out of the park.

Speaker Change: Apparel continues to do well we had.

Speaker Change: <unk>.

Speaker Change: Great great business in other categories as well.

Speaker Change: You brought up the point of.

Speaker Change: Of member engagement.

Speaker Change: We're not just looking at the sales for these things are the margin for these things we're looking at how many members are participating what's the growth in those members what do they look like and they are members from across our portfolio.

Robert W. Eddy: The great news is that it really resonated with our members. We took huge, important categories like consumer electronics and just knocked them out of the park. Apparel continued to do well.

Speaker Change: It doesn't it doesn't.

Speaker Change: Surprise me to see that right. If you put a fantastic brand or the fantastic value in front of somebody.

Robert W. Eddy: We had... You know, we had great, great business in other categories as well. And, you know, you brought up the point of member engagement. We're not just looking at the sales for these things or the margin for these things. We're looking at how many members are participating. What's the growth in those members? What do they look like?

Speaker Change: There are 10 years as a member.

Speaker Change: Doesn't really matter.

Speaker Change: It's really about that.

Speaker Change: That great quality items at a great value. So we're very pleased with what we saw.

Speaker Change: It's one it's what inning in the long game, we need to continue to do this over and over and over to rebuild our credibility and general merchandise with our members.

Speaker Change: But for the first time in a long time.

Speaker Change: Just just hearing from from friends and neighbors and colleagues that are summer was much much better than in the past.

Robert W. Eddy: And they are members from across our portfolio. You know, it doesn't surprise me to see that, right? If you put a fantastic brand or fantastic value in front of somebody, their tenure as a member doesn't really matter. It's really about that, you know, that great quality item at a great value. So we were very pleased with what we saw. It's, it's just one inning in a long game.

Speaker Change: Really good first step for our team.

I couldnt be more proud of what they did during the quarter.

Speaker Change: Thanks, Good luck.

Speaker Change: Thanks Amy.

Speaker Change: Our next question today comes from Michael Baker from D. A Davidson your line is it not as my wife and please go ahead.

Michael Allen Baker: Okay, Hey, Thanks, I wanted to ask Bill about.

Michael Allen Baker: Real estate can you update us on how youre doing in some of the newer markets.

Michael Allen Baker: And trade with another new state in Kentucky.

Robert W. Eddy: You know, we need to continue to do this over and over and over to rebuild credibility in general merchandise with our members. But for the first time in a long time, Just hearing from friends and neighbors and colleagues that our summer was much, much better than in the past was a really good first step for our team, and I couldn't be more proud of what they did during the course of the summer. Thanks. Good luck! Thank you. Questions?

Michael Allen Baker: Overall, what youre seeing from new markets and why that gives you continued confidence to continue to grow the footprint.

William C. Werner: Hey, Mike Thanks for the question.

Mike: We feel we feel.

Speaker Change: Great about the real estate program.

Speaker Change: As we've talked about in our release, we did a clubs last year.

Mike: We opened up.

Mike: Nine.

Mike: Just last month and as we look forward to this year.

Mike: We see continued growth on the horizon and as Bob said in the prepared remarks, as we step back.

Michael Allen Baker: from Michael Baker. I like it. Okay. Hey, thanks. I wanted to ask Bill about real estate.

Mike: And look across the club growth plus where we now have in the pipeline with.

Michael Allen Baker: Can you update us on how you're doing in some of the newer markets and intrigued with another new state in Kentucky? Just overall, www.larryweaver.com, Copyright 2018 IFA Productions. All rights reserved.

With the pipeline is strong it's been at any point in my tenure at the company.

Mike: We feel really good about what's ahead.

Mike: In terms of the recent club performance I think this past year, we've seen what we've seen over the last couple of years is that the clubs are.

Mike: Outperforming on the sell side and we see really great member acquisition member engagement. So.

William C. Werner: Hey, Mike, thanks for the question. You know, we feel great about the real estate program. We, you know, as we talked about the release, we did eight clubs last year, we opened up a ninth. Just last month, and as we look forward to this year, we see continued growth on the horizon. And as Bob said in his prior remarks, as we step back and look across the club growth, plus what we now have in the pipeline, the stronger it's been at any point in my tenure at the company, we feel really good about what's ahead. You know, in terms of recent club performance, I think, you know, this past year, what we've seen over the last couple of years is that the clubs are, you know, outperforming on the sales And we see really great member acquisition and member engagement. So, you know, we continue to, you know, work hard. Bob reminds me every day to go a little bit faster in real estate.

Mike: We continue to work hard Bob.

Mike: Reminds me every day to go a little bit faster on real estate and we've done a great job in and adding to the pipeline this year. So.

Mike: Yes, I think I think more and more club growth ahead, and it's an important reflection.

Mike: It wasn't too long ago that we stopped opening because we really didn't know how to do it well we weren't doing it profitably we didn't have enough members when we open the clubs and now the <unk>.

Mike: Recent results are just spectacular over the last couple of years.

Speaker Change: As Bill said.

Speaker Change: I am pushing pretty hard to go even faster than.

Speaker Change: Then where we are today.

Speaker Change: I'm proud of where we are going from no club growth to about 10, a year that's no.

Speaker Change: No terrible performance there its fantastic, but this is really clubs time right you think about the the shopping environment Thats out there where value is paramount theres no better value than the club business and so we need to be as aggressive as possible and bringing what we offer to.

Speaker Change: New markets and really extending our reach in existing markets as well.

Speaker Change: Yes, it makes sense, if I could ask one I guess follow up but admittedly unrelated.

Robert W. Eddy: And we've done a great job of adding to the pipeline this year. So, you know, I think there is more club growth ahead. And it's an important reflection, Mike, it wasn't too long ago that we stopped opening. We really didn't know how to do it well, we weren't doing it profitably, and we didn't have enough members when we opened the club. And now, the recent results are just spectacular over the last couple of years. And as Bill said, you know, I'm pushing pretty hard to go even faster. I'm proud of where we are going from no club growth to about 10 a year. No terrible performances there. It's fantastic!

Speaker Change: You talked about the strength in general merchandise, particularly over the holidays that opens the door, maybe wondering if youre willing to make any comments on <unk>.

Speaker Change: Monthly trend during the fourth quarter, and then into early first quarter, where it sounds like there's a little bit of disinflation.

Speaker Change: Does that mean, maybe a negative comp in the first quarter or should all quarters, perhaps comp positively.

Look.

Speaker Change: We.

Speaker Change: We had a fantastic November we were very proud of.

Speaker Change: As we talked about the new GM assortment and all of the offers that we put out there.

Robert W. Eddy: But this is really clubs time, right? You think about the shopping environment that's out there, where value is paramount. There's no better value than the club business, and so we need to be as aggressive as possible in bringing what we offer to new markets and really extending our reach in existing markets as well. Yeah, that makes sense. If I could ask one, I guess, follow-up question, but admittedly unrelated. You talked about the strength in general merchandise, particularly over the holidays. That opens the door, maybe, to wondering if you're willing to make any comments on the monthly trends during the fourth quarter and then into early the first quarter, where it sounds like there's a little bit of disinflation. Does that mean maybe a negative comp in the first quarter, or should all quarters perhaps be positive? Look, you know, we had a fantastic November. We were very proud of it. As we talked about the new GM assortment, all the offers that we put out there, it was really a great 360-degree program that our team put together and executed very, very well. That resonated early in the quarter, although December was slightly less than November.

Speaker Change: It was really a great 360 degree program.

Speaker Change: But our team put together and executed very very well.

That resonated early in the quarter.

Speaker Change: Timber was slightly less in November January came back a little bit so.

Speaker Change: <unk>.

Speaker Change: There were slight differences from month to month, but all through the quarter. We saw we saw really good performance.

I'll refrain from getting into the first quarter all that much other than to say.

Speaker Change: And Laura can build on this however, she'd like.

Laura L. Felice: Like the first quarter given the.

Laura L. Felice: Pretty significant pricing.

Laura L. Felice: <unk> year over year first quarter should look a lot like the like the fourth quarter of last year and then the comps should build as we go.

Laura L. Felice: As the comp lap gets a little bit easier.

Laura L. Felice: From a disinflation perspective, and we also expect.

Laura L. Felice: Some some easing pressure on the low end consumer as we go through the year as well so.

Laura L. Felice: By the end of the year and we made sure to put this in the prepared remarks by the end of the year, we feel like we should be.

Laura L. Felice: Our near or long term comp algorithm.

Speaker Change: Yeah, Okay I appreciate the color. Thank you.

Speaker Change: Thanks, Mike.

Speaker Change: Our next question comes from Oliver Chen from TD Cowen. Your line is now Adrianne. Please go ahead.

Oliver Chen: Hi, Bob and nor do we think about what the head with that merchandise margin opportunity, what's underlying the cost management opportunity and also what you see with with their own brands, helping the merchandize margins in this quarter on the merchandize margins that headwind would just love some detail on it.

Michael Allen Baker: January came back a little bit. So, you know, there were slight differences from month to month, but all through the quarter, we saw really good performance. I'll refrain from getting into the first quarter all that much, other than to say... And Laura can build on this however she'd like. I feel like the first quarter, given the pretty significant pricing gap year over year, the first quarter should look a lot like the fourth quarter of last year, and then the comp should build as we go as that comp lap gets a little bit easier from a disinflation perspective. And we also expect some some easing of pressure on the low end consumer as we go through the year as well. So by the end of the year, we made sure to put this in the prepared remarks. By the end of the year, we feel like we should be at or near our long-term comp algorithm. Yeah, okay. I appreciate the call. The question comes, Channel. Your line is now open.

Oliver Chen: That relates to anything going forward.

Speaker Change: So up is on your <unk>.

Speaker Change: Your articulation on reorganization of functions and centralization decentralization I was curious about why why this was the right time for that.

Speaker Change: It will it will help your business in terms of customer Centricity et cetera. Thank you.

Speaker Change: Yes, Thanks Oliver.

Speaker Change: Maybe I'll take a shot and more and bill can fill in.

Speaker Change: Spend time thinking about gross margins.

Speaker Change: You really kind of three things to think about that impact in Q4 and that will impact next year in a few years.

Speaker Change: In front of US first is our ability.

Speaker Change: <unk> to field the right Assortments.

Oliver Chen: Hi Bob and Laura. As we think about what's ahead with the merchandise margin opportunity, what's underlying the cost management opportunity and also what you see with own brands helping the merchandise margin? And this quarter, on the merchandise margins, that headwind, which is left in detail, and that relates to anything going forward, a follow-up is on your articulation on reorganization of functions and centralization. I was curious about why this was the right time for that and how it will help your business in terms of Customer Centres for the etc.

Speaker Change: And the margin profile of that that that that provides.

Speaker Change: For those that have been following the story for a while we have we have this muscle built we used to call. It CPI now.

Speaker Change: Probably a more wholesome.

Speaker Change: Assortment driven.

Speaker Change: Process, we call CMP category.

Speaker Change: Management.

Speaker Change: Process and and Thats.

Speaker Change: Along the lines of what we talked about in the prepared remarks around coffee and making sure that we take these categories that might have cost opportunity margin opportunity.

Robert W. Eddy: Thank you. Yeah, thanks, Oliver. Maybe I'll take a shot, and Laura and Bill can fill in.

Speaker Change: Uh huh.

Speaker Change: And making sure that we carry the right assortment.

Speaker Change: And the rate.

Robert W. Eddy: If you spend time thinking about gross margin... You really have three things to think about that impacted Q4 and that will impact next year and in a few years in front of us. First is our ability to field the right assortment. And, you know, the margin profile that that provides. We... For those that have been following the story for a while, we have this muscle built we used to call it CPI, now it's probably a more wholesome assortment driven process we call CMP category. Management process.

Speaker Change: The right investments in our in our value proposition and balance out the margin.

Speaker Change: That's a particularly strong effort at this point the merchandising team.

Speaker Change: And our analytics team have done fantastic work.

Speaker Change: That will benefit us in the next year on brands you mentioned.

Speaker Change: <unk> continuing growth effort for us now over 25% of our business with with 30 in our sites.

Speaker Change: Obviously that comes at a tremendous value to our members.

Speaker Change: With with savings for them.

Robert W. Eddy: And that's, you know, along the lines of what we talked about in the prepared remarks around coffee, making sure that we take these categories that might have cost opportunity, and margin opportunity, and making sure that we carry the right assortment and make the right investments in our value proposition and balance out the margins. That's a particularly strong effort at this point; the merchandising team and our analytics team have done fantastic work that will benefit us in the next year. Own Brands, you mentioned, that's been a continuing growth effort for us, now over 25% of our business with 30 in our site. Obviously, that comes at tremendous value to our members, with savings for them. It comes with loyalty for us and arguably better margins somewhere near 1000 basis points, better margins when you compare a typical own-brand item again to a typical national brand equivalent.

Speaker Change: It comes with loyalty for us and arguably better margins of somewhere near 1000 basis points better margins. When you compare to typical olin brands item against.

Speaker Change: <unk> National brand equivalent so as we continue to grow that that should provide opportunity for.

Speaker Change: Our margin rate growth.

Speaker Change: The third thing is co brands.

Speaker Change: We saw some pressure in the last year.

Speaker Change: On margin rate and frankly on comps the way that the accounting works.

Speaker Change: <unk>.

Speaker Change: From the first year of the co brand program that will continue until the until the last so the first part of this year. This new year, we expect to be pressured a little bit from a margin rate perspective.

Speaker Change: And that's continuing investment in the business right as I talked about earlier, we take all of the we decided to take all of the flows from the from the deal and put it into the value prop.

Speaker Change: That's what grew us from from zero to 1 million and a half cardholders and Thats, what we expect to grow us too.

Robert W. Eddy: So as we continue to grow that, that should provide opportunity for Margin Rate Growth. And then the third thing is co-branding, right? We We saw some pressure in the last year on margin rates and, frankly, on comps, the way that the accounting works. From the first year of the co-brand program, that will continue until the end of the first part of this year, this new year, we expect to be pressured a little bit from a margin rate perspective. And you know, that's continuing investment in the business, right? As I talked about earlier, we decided to take all the flows from the deal and put them into the value prop.

Speaker Change: Two and a half or 3 million cardholders in the future. So.

Speaker Change: <unk>.

That's really what we think we do think of the margin rate will grow for the next year as we as we as.

Speaker Change: As we've talked about.

Speaker Change: And it really should be CMP and owned brands.

Speaker Change: Offset by.

Speaker Change: Some co brand pressure in the beginning of the year.

Speaker Change: Anything else floor on their own.

Speaker Change: No the only thing I'd pile on.

Speaker Change: Related to the co brand card is.

Speaker Change: Despite that margin pressure that Bob just talked about.

Speaker Change: As we step back and look at the program we are incredibly proud of.

Speaker Change: What we accomplished this year during the transition the new members, we brought into the card product.

Speaker Change: And the long term prospects for the program.

Robert W. Eddy: That's what grew us from zero to a million and a half cardholders, and that's what we expect to grow to two and a half or three million cardholders in the future.

Speaker Change: Capital one is our partner.

Speaker Change: Yes.

Speaker Change: We didn't make the decision to move based on economics, we've made it based on member service and our ability to grow the program and if you talk to our members who can talk to our general managers out in the field.

Robert W. Eddy: You know, that's really what we think. We do think the margin rate will grow for the next year, as we talked about, and it really should be CMPs and own brands offset by some co-brand pressure in the beginning of the year. Anything else for on their own?

Speaker Change: We are very confident that our members are having a much better.

Robert W. Eddy: No, I said the only thing I'd pile on related to COBRA and CARD is, despite that margin pressure that Bob just talked about, as we step back and look at the program, we are incredibly proud of what we accomplished this year during the transition, the new members we've brought into the CARD product, and the long-term prospects for the program with Capital One as our partner. Yeah, but we didn't make the decision to move based on economics. We made it based on member service and our ability to grow the program. If you talk to our members, if you talk to our general managers out in the field, we are very confident that our members are having a much better service experience with Capital One, a much better overall experience with the value proposition, and that will yield benefits going forward.

Speaker Change: Service experience with capital on a much better overall experience with the value prop and that will yield benefits going forward.

Speaker Change: Follow up on the reorganization that we put forward I think the best way to.

Speaker Change: Think about this is we've just.

Speaker Change: Finished five years of tremendous growth going through Covid and post COVID-19.

Speaker Change: We didn't say no to a lot of investments in those years and so is the right time for me and for our team to really.

Look at the next five years and make sure that we were putting our bets in the right places.

Speaker Change: A lot of that was was in our clubs support center here at our headquarters start trying to make sure that after years of adding head count that we.

Robert W. Eddy: Your follow-up on the reorganization that we put forward. I think the best way to think about this is, you know, we've just finished five years of tremendous growth going through COVID and post-COVID, and, you know, we didn't say no to a lot of investments in those years, and so it was the right time for me and for our team to really look at the next five years and make sure that we were And a lot of that was in our club support center here, our headquarters, trying to make sure that after years of adding headcount, we have it in the right places for the future. And so that yielded this effort that added a bunch of jobs and changed a bunch of jobs. And unfortunately, we've removed some jobs, but we are really confident in the long-term success of our business. If you can't tell, I just say that for effect.

Speaker Change: We have it in the right places for the go forward.

Speaker Change: So that yielded this effort that <unk> added a bunch of jobs changed a bunch of jobs and unfortunately remove some jobs.

But we are really confident in the long term of our business.

Speaker Change: Can't tell I'll, just say that for for effect and we just wanted to make sure that our our underlying administrative structure serves all of the different investments and initiatives that we have going forward.

Speaker Change: Okay.

Thanks, Bob.

Speaker Change: Baird.

Baird: Thank you. Thank you.

Baird: Our next question comes from Edward Kelly from Wells Fargo. Your line is now open. Please go ahead.

Edward Joseph Kelly: Hi, everyone. Good morning.

Edward Joseph Kelly: Good morning, I wanted to ask about that.

Edward Joseph Kelly: I wanted to ask about SG&A as we think about Q4.

Edward Joseph Kelly: If you could quantify or maybe help frame the incentive comp benefit I guess in Q4, and then I guess as we go.

Edward Joseph Kelly: Move through 'twenty four.

Edward Joseph Kelly: Should we be thinking about more normalized operating expense growth I guess, how do you think about the comp.

Robert W. Eddy: We just wanted to make sure that our underlying administrative structure serves all the different investments and initiatives that we have going forward. Thanks, Bob and Laura. Best regards, Thank you. Thank you. This is Kelly from Wells Fargo, your live news reporter. Hi everyone. Good morning.

Edward Joseph Kelly: Beat it to leverage I guess.

Edward Joseph Kelly: And as it pertains to that Capex over the last couple of years have risen pretty good DNA was up quite a bit in Q4.

Edward Joseph Kelly: Curious as to how we should be thinking about D&A growth.

Edward Joseph Kelly: Over over 24 as well related to this.

Kelly: I wanted to ask you about SG&A as we think about, you know, Q4. If you could quantify or... frame the incentive comp benefit, I guess, in Q4. And then, I guess, as we, you know, move through 24, should we think about more normalized, you know, operating expense growth? I guess, you know, how do you think about, you know, the comp needed to leverage, I guess? And as it pertains to that, you know, CapEx over the last..., https://www.youtube.com or the link in the description below, over 24 hours, you know, as well related. Look, I think, why don't we start in reverse?

Edward Joseph Kelly:

Speaker Change: Look I think why don't we start in reverse Capex. This past year was I think the highest capex budget in our history in the new year will be even higher and that is really reflecting our confidence in our ability to grow our chain.

Speaker Change: Through additional stores so.

Speaker Change: You look at about.

Speaker Change: About half of $1 billion of Capex in the new year about 80% of that maybe 75% of that is in our real estate portfolio as we.

Speaker Change: As we try and extend our reach.

Get into.

Speaker Change: Markets that are growing quite quickly.

Speaker Change: I think that's a great story, that's not something we take lately, it's a lot of money, but we have tremendous confidence in our ability to spend that money effectively for the long term.

Robert W. Eddy: CapEx this past year was, I think, the highest CapEx. The budget in our history will be even higher, and that is really reflecting our confidence in our ability to grow our chain via other allied companies to strengthen their business. The Bulletproof Executive 2013, Thank you all for joining us today, and I hope that we can get into markets that are growing quite quickly. I think that's a great story idea.

Speaker Change: And certainly we'd youre absolutely right. We did we did face a sorry.

Speaker Change: Favorability.

Speaker Change: And incentive comps.

Speaker Change: This year.

Speaker Change: That turns into a headwind for next year.

Speaker Change: And maybe I'll, let Laura talk about SG&A in general.

Speaker Change: Yeah.

Laura L. Felice: Thanks, Bob the thing I'd add add on.

Laura L. Felice: Capex being our largest plan.

Laura L. Felice: Youre right in that I think the thing I would say to think about is that $500 million is largely.

Robert W. Eddy: That's not something we take lightly. It's a lot of money, but we have tremendous confidence in our ability to spend that money effectively for the long term.

Laura L. Felice: New clubs and gas stations and there is.

Laura L. Felice: And certainly, you're absolutely right. We did face a sort of favorability in incentive comps this year, which turned into a headwind for next year, and maybe I'll let Laura talk about SG&A in general. Yeah, thanks, Bob.

Laura L. Felice: A little bit of build that is two years out right. So as we think about our new club openings.

Laura L. Felice: For this year Bill talked about we've already opened one in Goodlettsville and.

Laura L. Felice: The thing I'd add, Ed, on CapEx being our largest plan. You're right about that. I think the thing I'd say to think about is that $500 million is largely new clubs and gas stations, and there is a little bit of build that is two years out, right? So as we think about our new club openings for this year, Bill talked about how we've already opened one in Goodlettsville, and the remainder of our new clubs this year are back-weighted in Q3 and Q4, and the CapEx plan contemplates the start of new club builds for the following year. So a little bit of that is in this year's plan, but you should expect us to continue on that same trajectory going forward. I think we're really proud of the work we've made on our real estate portfolio, and I think those are great investments of our dollars. You asked about the comp to leverage the business, and I haven't changed. It's roughly, you know, two to 3%.

Laura L. Felice: The remainder of our new clubs. This year are back weighted in Q3, and Q4 and the Capex plan contemplates.

Laura L. Felice: The start of New club builds for the following year, so a little bit of that is in this year's plan, but you should expect.

Laura L. Felice: To continue on that same trajectory going forward I think we're really proud of the work we've made on our real estate portfolio.

Laura L. Felice: And then I think those are great investments of our dollars.

Laura L. Felice: You asked about the comp.

Laura L. Felice: The leverage of the business.

Laura L. Felice: And that hasn't changed.

Laura L. Felice: It's roughly.

Laura L. Felice: 2% to 3%.

Laura L. Felice:

Laura L. Felice: So we will continue down that path I think the thing you're seeing on SG&A, which I talked about in the prepared remarks is there still is a little bit of deleverage.

Laura L. Felice: As we continue to build out our real estate portfolio. So there is some ramp time, which we've talked about historically.

Laura L. Felice: <unk>.

Laura L. Felice: Expenses ramp differ.

Laura L. Felice: So we will continue down that path. I think the thing you're seeing on SG&A, which I talked about in the prepared remarks, is there still is a little bit of de-leverage as we continue to build out our real estate portfolio. So there is some ramp time, which we've talked about historically as expenses ramp differently than the top line. So think about kind of year three to four when a club hits maturity.

<unk> differently than the top line.

Laura L. Felice: So think about kind of year three to four warehouse club hits maturity. So we're in our third year. This will be our third year of 10 club growth. So it's just kind of layering in and then I think over time, we see SG&A kind of hitting.

Laura L. Felice: Level playing field.

Laura L. Felice: From a leverage perspective.

Speaker Change: Got it and could you just remind us.

Speaker Change: How are you thinking about membership fee increase.

Laura L. Felice: So we're in our third year; this will be our third year of 10 club growth. So it's, it's just kind of layering on, and I think over time, we see SG&A kind of hitting a level playing field from a leverage perspective.

Speaker Change: Loss of fee.

Obviously, you are providing really good value generating good growth in membership.

Kelly: And could you just remind us, how are you thinking about membership fee increase philosophy? Obviously, you're providing really good value, generating good growth and membership. Are you at the point where you just would not want to disrupt that?

Speaker Change: Are you at the point, where you just would not want to disrupt that or if you see competition do that you may be interested in following.

Speaker Change: Just curious on updated thoughts there.

Speaker Change: Yes, it's a good.

Speaker Change: And recurring question.

Robert W. Eddy: Or if, you know, you see competition doing that, you know, you may be interested in following? I'm just curious about updated talks there. Yeah, I think it's a good idea... I'm a little leery of disrupting that.

Speaker Change: My view on that Hasnt changed we've had such tremendous momentum in the business I'm, a little leery to disrupt that.

Robert W. Eddy: We will certainly be mindful of what goes on out in the industry, but as we sit here and consider the best way to grow our chain and grow the number of members and the quality of those members, we take that MFI question, you know, into that calculus a little bit. I do think that, you know, the math around it is fairly compelling from a perspective of the dollars that it would yield. If I were you, I would... I would be considering that as an investment pool for us to play with, not so much that it would fall to the bottom line. So I don't think it would really impact our EBITDA and our EPS all that much because we would look to reinvest that to further grow our chain. So, you know, we'll see how the year plays out, how the future plays out, but there are no plans today, and nothing's embedded in our guidance for the future. Thank you, www.larryweaver.com. Thank you for joining us. Have a great day... how, Hi Kate. How are you?

Speaker Change: We will certainly be mindful of what goes on out in the industry.

Speaker Change: But as we sit here.

Speaker Change: And consider the best way to grow our chain.

Speaker Change: And grow the number of members and the quality of those members.

Speaker Change: Take that MSI question.

Speaker Change: Into that.

Speaker Change: To that calculus, a little bit.

Speaker Change: I do think that.

The math around this is fairly compelling.

Speaker Change:

Speaker Change: From a perspective of the dollars that it would yield.

Speaker Change: If I were if I were you I would.

Speaker Change: It would be considering that as an investment pool for us to play with not so much that it would fall to the bottom line. So.

Speaker Change: I don't think it would really.

Speaker Change: Initially impacts our EBITDA and EPS all that all that much because we would look to reinvest that to.

Speaker Change: Further further grow our chain so we'll see how the year plays out.

Speaker Change: The future plays out, but there are no plans today and nothing is embedded in our guidance from a fee increase perspective.

Speaker Change: Alright, thank you.

Speaker Change: Thanks, Ed.

Speaker Change: Our next question comes from Kate Mcshane from Goldman Sachs. Your line is now open. Please go ahead.

Katharine Amanda McShane: Hi, good morning, Thanks for taking our question.

Katharine Amanda McShane: We noticed that there wasn't much discussion or talk around promotions during the fourth quarter and just wondered if you could maybe talk to that.

Katharine Amanda McShane: You saw with regards to the promotional environment in Q4, and how youre thinking about it for 2024.

Speaker Change: Yes, Hi, how are you.

Speaker Change: Sure.

Robert W. Eddy: Look, I think the promotional environment is fairly normal, right? It was certainly a little bit more promotional than prior quarters. I think as we look at it, it sort of feels like a pre-COVID promotional environment at this point, maybe slightly less so. But you know, the brands, as you know, most of our promotion is funded by our supplier partners. They're certainly more interested in driving units.

Speaker Change: Look I think the promotional environment as fairly normal right. It was certainly a little bit more promotional than the prior.

Speaker Change: Prior quarters, I think as we look at it.

Speaker Change: It sort of feels like pre COVID-19 promotional environment at this point may be slightly less than that.

Speaker Change:

Speaker Change: But the brands as you know most of our promotion is funded by our supplier partners.

Speaker Change: Certainly more interested in driving units.

Robert W. Eddy: Today, more than two years ago, they are investing in places they think that they can grow, and we're certainly willing and able to help them do that as well. So we did see a slight increase in promotion in the quarter and the full year last year. Probably the biggest and most impactful area for us was in general merchandise, trying to make sure that we tell that story of improved quality, The Bulletproof Executive 2013. As we as we renovate that. You know, our Black Friday promotions, and our Thanksgiving promotions were incredibly powerful, as I talked about earlier. And we'll look to do a little bit more of those, I think, as we look back on the past couple of years. When we do the promotion schedule correctly and invest behind some weight, we get disproportionate results. We won't look to raise our overall level of promotions; we'll probably look to reallocate from one period to another. But our team has done a fantastic job using promotions in a smart way to encourage driving. Follow me on http://TheBusinessProfessor.com www.larryweaver.com.

Speaker Change: Today than they were two years ago, they are investing behind.

Speaker Change: Places I think that they can grow and we are certainly.

Speaker Change: Willing and able to help them do that as well.

Speaker Change: So we did see a slight increase in promotion.

Speaker Change: <unk>.

Speaker Change: In the quarter and the full year last year.

Speaker Change: Probably the biggest and most impactful area for us.

Speaker Change: And general merchandize trying to make sure that we tell that story of improves quality improves experience improved value.

Speaker Change: In general merchandise.

Speaker Change: As we.

Speaker Change: As we renovate that business.

Speaker Change: Our black Friday promotions, our Thanksgiving promotions were.

Speaker Change: We're incredibly powerful is that as I talked to earlier.

Speaker Change: We will look to do a little bit more of those I think as we.

Speaker Change: As we look back on the past couple of years when we when we do the promos scheduled correctly.

Speaker Change: And invest behind some weight, we get disproportionate results and so we will look to raise our overall level of promotions will probably look to reallocate from one period to another but.

Speaker Change: Our team has done a fantastic job of using promotions and a <unk>.

Speaker Change: Smart way to to drive the business.

Speaker Change: Thank you.

Speaker Change: A follow up question I know theres been a lot discussed already on your thoughts around gross margin and SG&A, but if you could talk specifically to the EPS range given today, how do you think about the drivers of the lower end of the range versus the higher end of the range.

Robert W. Eddy: Um, look, I think there are a couple of big things. One is obviously the sales trend, right? If we see inflation or deflation, and that would certainly impact the bottom line. And the other part is the gas business. You know that that has a tendency to be pretty volatile. It's certainly structurally more profitable today than it ever has been. Embedded in the guidance is some normalization from last year's results, which were sort of high double digit cents per gallon towards, you know, 15, 16 cents per gallon. That could be better or worse than that assumption, too. Those are the two big ones that I would make. I would play around with it.

Speaker Change: Look I think there's a couple of big things one is obviously the sales trend right. If we see.

Speaker Change: We could see more or less inflation or deflation and that would certainly impacts.

Speaker Change: The bottom line and the other part of it is the gas business you know that that is that.

Speaker Change: It has a tendency to be pretty volatile.

Speaker Change: Certainly.

Speaker Change: Actually more profitable today than it ever has been.

Speaker Change: Bedded in the guidance is some normalization in that from.

Speaker Change: From last year's results, which were.

Speaker Change: Sort of high double digit cents per gallon.

Speaker Change: Towards $15 16 per gallon.

Speaker Change: That could be better or worse than.

Speaker Change: Assumption there to those are the two big ones that I would I would.

Speaker Change: Play around but we're pretty comfortable in the comp guidance that we've got out there we're pretty comfortable with the margin rate guidance, we've got out there.

Robert W. Eddy: We're pretty comfortable with the comp guidance that we've got out there. We're pretty comfortable with the margin rate guidance we've got out there. I mean, I think we've got multiple levers to hit the EPS guidance. But, you know, every year is a little different at the end of the year from the beginning of the year.

Speaker Change: I mean, I think we've got multiple levers to hit the EPS guidance.

Speaker Change: Every every year is a little different at the end of the year from the beginning of the year. So.

Robert W. Eddy: So we tend to, as we talked about, invest for the long term and manage for the short term. Thanks. That concludes the Q&A portion of today's call. I will now turn the session back over to Bob Eddy for any final comments. Great, thank you. Look, we had a great fourth quarter, a great fiscal year, and that concludes a great five-year period for us as well. We're very bullish on our future at BJ's Wholesale Club, and we have a lot of irons in the fire to make those dreams come true.

Speaker Change: We we tend to to as we've talked about and invest for the long term and manage the short term.

Speaker Change: Thank you.

Speaker Change: Great. Thanks, Keith.

Speaker Change: That concludes the Q&A portion of today's call I will now turn the session back over to Bob Eddy for any final comments.

Robert W. Eddy: Great. Thank you.

Robert W. Eddy: If you look we had a great great fourth quarter, a great fiscal year and that concludes a great five year period for us as well, where we're very bullish on our future Bj's wholesale club and we have.

Robert W. Eddy: A lot of irons in the fire to make those dreams come true. So we appreciate your time and effort and attending the call today and we will talk to you at the end of the first quarter. Thanks, so much.

Robert W. Eddy: So we appreciate your time and effort in attending the call today, and we will talk to you at the end of the first quarter. Thanks so much. That brings us to the end. You may now disconnect your line.

Speaker Change: That brings us to the end you may now disconnect your lines.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.