Q1 2024 BJ's Wholesale Club Holdings Inc Earnings Call

Hello, everyone and welcome to the Bj's Wholesale Club Holdings, Inc. First quarter.

Candice: Fiscal 2024 earnings Conference call. My name is Candice and I will be coordinating your call today.

Speaker Change: The speakers remarks, there will be a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad I would now like to hand, the conference call over to your House Coffee Park. Please go ahead.

Operator: Good morning and welcome to BJ's first quarter fiscal 2024 earnings call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Warner, Executive Vice President of Strategy and Development.

Speaker Change: Good morning, and welcome to Bj's first quarter fiscal 2024 earnings call. Joining 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 may make forward looking.

Operator: Please remember that during this call, we may make forward-looking statements. Within the meaning of the federal securities laws, these statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call. Please see the risk 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'll refer to certain non-GAAP financial measures that we believe will provide useful information for investors.

Speaker Change: Statements.

Speaker Change: Within the meaning of the federal Securities laws. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call. Please see the risk factors section of our most recent Form 10-K and Form 10-Q filed with the SEC for a description of those risks.

Speaker Change: And uncertainties. Finally, please note that on today's call, we'll 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.

Speaker Change: And latest Investor presentation posted on our Investor Relations website for a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with that.

Operator: 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.

Robert W. Eddy: And now I'll turn the call over to Bob.

Robert W. Eddy: Good morning, everyone. Thanks for joining us today to discuss our first quarter results. The first quarter was marked by continued strong growth in membership fees and market share. We are also proud of the continued growth in comp sales. We expected the first quarter to be a tough lap, given last year's inflation dynamics, so we are particularly proud of our continued momentum, underpinned by strong traffic and unit growth. Our team continues to manage the day-to-day well, while staying laser-focused on executing our long-term strategic priorities. Comparable club sales, excluding gas sales, grew by 0.6% in the first quarter.

Robert W. Eddy: Good morning, everyone. Thanks for joining us today to discuss our first quarter results.

Robert W. Eddy: The first quarter was marked by continued strong growth in membership fees and market share.

Robert W. Eddy: We are also proud of the continued growth in comp sales.

Robert W. Eddy: We expected the first quarter to be a tough lap given last year's inflation dynamics. So we are particularly proud of our continued momentum underpinned by strong traffic and unit growth.

Robert W. Eddy: Our team continues to manage the day to day well.

Robert W. Eddy: While staying laser focused on executing our long term strategic priorities.

Robert W. Eddy: Comparable club sales, excluding gas sales grew by 6% in the first quarter.

Robert W. Eddy: Our compelling value proposition, both in the club and at our gas stations, drove strong traffic, contributing three percentage points in the quarter. Similar to our traffic trend in the fourth quarter of last year. Inflation was about flat, and we continued to grow unit volumes with our Perishables, Grocery, and Sundries division increasing comp units in the first quarter. Our members are rewarding us for our merchandising improvements and our amazing value. Consequently, we gained market share in both units and dollars for a quarter.

Robert W. Eddy: Our compelling value proposition both in the club and at our gas stations drove strong traffic contributing three percentage points in the quarter.

Robert W. Eddy: Similar to our traffic trend in the fourth quarter of last year.

Robert W. Eddy: Inflation was about flat and we continue to grow unit volumes with our perishables grocery and Sundries division increasing comp units in the first quarter.

Robert W. Eddy: Our members are rewarding us for our merchandising improvements and our amazing value. Consequently, we gained market share in both units and dollars in the quarter.

Robert W. Eddy: Top growth for our perishables growth grocery and sundries division was up over 1% in the first quarter. We experienced the strongest growth in perishables, particularly in unit volumes, led by our fresh produce and dairy category. Comp unit growth in Grocery and Sundries was equally impressive, especially when compared with declines in the broader marketplace. Our general merchandise business delivered a slightly negative comp in the first quarter as a handful of weather-sensitive categories weighed on the overall division.

Robert W. Eddy: Yeah.

Robert W. Eddy: Comp growth for our perishables growth grocery and Sundries division was up over 1% in the first quarter.

Robert W. Eddy: We experienced the strongest growth in perishables, particularly in unit volumes led by our fresh produce and dairy categories.

Robert W. Eddy: Comp unit growth in grocery and sundries was equally impressive, especially when compared with declines in the broader marketplace.

Robert W. Eddy: Our general merchandise business delivered a slightly negative comp in the first quarter is a handful of weather sensitive categories weighed on the overall division.

Robert W. Eddy: We saw about a 10-point variance in GM comp performance across markets that experienced better weather versus markets with cooler and wetter weather compared to the prior year. Consumers remain discerning in their purchasing, and we have also found that members are increasingly waiting to shop higher-ticket seasonal categories, such as patio sets and air conditioners, exactly when the weather turns, not in anticipation of it. When presented with great quality and value, members are spending.

We saw about a 10 point variance and GM comp performance across markets that experienced better weather versus markets with cooler and wetter weather compared to the prior year.

Robert W. Eddy: Consumers remain discerning in their purchasing and we have also found that members are increasingly waiting to shop higher ticket seasonal categories, such as patio sets and air conditioners exactly when the weather turns not in anticipation of it.

Robert W. Eddy: Okay.

Robert W. Eddy: When presented with great quality of value members are spending general merchandise is critical to our model and we continue to make outstanding progress on our transformation efforts.

Robert W. Eddy: General merchandise is critical to our model, and we continue to make outstanding progress on our transformation. We are intensely focused on delivering a new and exciting assortment that is presented and marketed in the right way, at the right time, and at the right price. Successful execution quarter after quarter is crucial to shifting member perception, and we believe we are delivering on this front. In fact, the categories that drove our general merchandise growth in last year's fourth quarter continue to showcase strength in the first quarter.

Robert W. Eddy: We are intensely focused on delivering a new and exciting assortment that is presented and marketed in the right way at the right time and at the right price.

Robert W. Eddy: Successful execution quarter after quarter is crucial to shifting member perception and we believe we are delivering on this front.

In fact, the categories that drove our general merchandise growth in last year's fourth quarter continued to showcase strength in the first quarter.

Robert W. Eddy: With consumer electronics and apparel both comping meaningfully positive, we're especially pleased with the performance of our home categories, which turned positive for the first time in a long time, with the segment comping nearly 7% in the first quarter. Home textiles led much of this growth.

Robert W. Eddy: With consumer electronics and apparel, both comping meaningfully positive.

Robert W. Eddy: We're especially pleased with the performance of our home categories, which turned positive for the first time in a long time.

Robert W. Eddy: With the segment Comping nearly 7% in the first quarter.

Robert W. Eddy: Home textiles led much of this growth.

Robert W. Eddy: Higher quality products, such as our bath towels and sheets, are resonating with our members. We've also elevated and enhanced the assortment in our kitchen and cleaning appliances. Leaning into trend-right items in higher growth categories designed to drive greater member demand. Members who engage in general merchandise exhibit trip and spend behaviors that highly correlate to membership renewal. Strengthening the treasure hunt and inspiring the general merchandise shop is a significant opportunity for the long-term growth of this company. I'm proud of the progress we're making and remain confident in our ability to realize the significant potential we see in this division.

Robert W. Eddy: Higher quality products, such as our Bath towels and sheets are resonating with our members.

Robert W. Eddy: We are also elevated and enhanced the assortment in our kitchen and cleaning appliances.

Robert W. Eddy: Leaning into trend right items and higher growth categories designed to drive greater member demand.

Robert W. Eddy: Members, who are engaged in general merchandize exhibit trip and spend behaviors that highly correlate to membership renewal.

Robert W. Eddy: Strengthening the treasure hunt and inspiring the general merchandise shop as a significant opportunity for the long term growth of this company.

Out of the progress, we're making and remain confident in our ability to realize the significant potential we see in this division.

Robert W. Eddy: Our four strategic priorities remain critical to our long-term success. These priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprints. We are making significant progress in each of these areas. Our membership momentum continues to build, demonstrating the power of our growing value proposition and our 90% renewal rate. Member counts increased both year-over-year and sequentially.

Robert W. Eddy: Our four strategic priorities remain critical to our long term success.

Robert W. Eddy: These priorities are improving member loyalty, giving our members an unbeatable shopping experience deliver.

Robert W. Eddy: Delivering value conveniently and growing our footprint, we are making significant progress in each of these areas.

Robert W. Eddy: Our membership momentum continues to build demonstrating the power of our growing value proposition and our 90% renewal rate.

Robert W. Eddy: Member counts increased both year over year and sequentially.

Robert W. Eddy: We are expanding membership in both new and existing markets, with our digital platforms powering nearly half of this growth. We're improving membership quality as well. Our highest tier member base consists of our 1 plus members who pay $110 a year and hold our co-brand credit card, which we believe is the best offering in retail today.

Robert W. Eddy: We are expanding membership in both new and existing markets with our digital platforms powering nearly half of this growth.

Robert W. Eddy: We're improving membership quality as well our highest tier member base consists of our one plus members who pay a $110 fee and hold our co brand credit card, which we believe is the best offering in retail today.

Robert W. Eddy: As you know, these are our most loyal and highest spending members, exhibiting the greatest lifetime value. This tier continues to grow double digits year over year, helping our higher tier membership penetration surpass 38% in the first quarter. As a testament to our ongoing success, in the first quarter, we reported membership fee income growth of 8.6% year over year.

Robert W. Eddy: As you know these are our most loyal and highest spending members exhibiting the greatest lifetime value.

Robert W. Eddy: <unk> continues to grow double digits year over year, helping our higher tier membership penetration surpassed 38% in the first quarter.

Robert W. Eddy: As a testament to our ongoing success in the first quarter, we reported membership fee income growth of eight 6% year over year.

Robert W. Eddy: We will remain focused on maintaining our strength in membership to drive long-term value 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. This is why we continually strive to improve the member experience through merchandising, digital, and in-club conveniences, and, of course, amazing value. We know our members choose where they do their weekly grocery shopping based on produce and meat.

Robert W. Eddy: We will remain focused on maintaining our strength in membership to drive long term value 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. This is why we continually strive to improve the member experience through merchandising digital and in club conveniences and of course amazing value.

Robert W. Eddy: We know our members choose where they do their weekly grocery shopping based on produce and meat members already love our assortment as well as the differentiated amenities such as our full service deli.

Robert W. Eddy: Members already love our assortment as well as the differentiated amenities, such as our full service deli. While we know they value the selection and quality of our meat, we knew we could do better in produce. Having full control over our perishable supply chain has been an enormous benefit, and we launched our FRESH 2.0 initiative last April, bringing even more freshness and excitement to our produce offering. FRESH 2.0 was built directly on insights and feedback from our members.

Robert W. Eddy: While we know the value of the selection and quality of our meat, we knew we could do better in produce.

Robert W. Eddy: <unk> full control over our perishable supply chain has been an enormous benefit and we launched our fresh <unk> initiative last April.

Robert W. Eddy: Even more freshness and excitement to our produce offering.

Robert W. Eddy: <unk> was built directly on insights and feedback from our members. We reassessed every step of our process from sourcing to packaging to marketing.

Robert W. Eddy: We reassessed every step of our process, from sourcing to packaging to marketing. We then implemented robust training, giving our team members the knowledge and tools to maintain maximum freshness and quality of our produce. We invested in speeding up the supply chain in areas such as Barry's, resulting in faster and fresher arrivals at our clubs and ultimately into members' homes. We strengthened existing vendor relationships and also forged new ones to improve stock levels and introduce newer, seasonally relevant products. We've already received great feedback on new offerings such as sumo mandarins and dragon fruit.

<unk> implemented robust training, giving our team members the knowledge and tools to maintain maximum freshness and quality of our produce.

Robert W. Eddy: We invested in speeding up the supply chain in areas, such as berries, resulting in faster and fresher arrivals at our clubs and ultimately into members' homes.

Robert W. Eddy: We strengthened existing vendor relationships and also forged new ones to improve in stocks and introduce newer seasonally relevant products we have.

Robert W. Eddy: <unk> already received great feedback on new offerings, such as sumo mandarins and Dragon fruit.

Robert W. Eddy: Our comprehensive FRESH 2.0 pilot, which ran through much of last year, drove incremental member engagement in the category and yielded 6% more produce trips than our control club. In light of this success, we are scaling the program chain-wide this year with compelling displays and signage in-club that help improve navigation and showcase our freshness, quality, and value. This month, we began installing coolers at the front of our club so that our members are drawn in by this high-quality, low-priced produce in the first moments of their visit.

Robert W. Eddy: Our comprehensive refresh II no pilot, which ran through much of last year drove incremental member engagement in the category and yielded 6% more protos strips that are control clubs.

Robert W. Eddy: In light of the success, we are scaling the program chain wide this year with compelling displays and signage in club.

That help improve navigation and showcase our freshness quality and value.

Robert W. Eddy: This month, we began installing coolers at the front of our clubs. So that our members are drawn in by this high quality low priced produce in the first moments of their visit.

Robert W. Eddy: We're amplifying this effort in our marketing with featured content and enticing promotions across all our channels. We believe the improvements we've made in our fresh offering over the last year have delivered significant value to our members, contributing to our perishables performance, and supporting our consistently strong traffic trends. In fact, our fresh produce category delivered eight points of comp unit growth in the first quarter, outperforming the market.

Robert W. Eddy: We're amplifying this effort in our marketing with featured content and enticing promotions across all our channels.

We believe the improvements we've made in our fresh offering in the last year have delivered significant value to our members contributing to our perishables performance and supporting our consistently strong traffic trends.

Robert W. Eddy: In fact, our fresh produce categories delivered eight points of comp unit growth in the first quarter outperforming the market.

Robert W. Eddy: As we advance our Fresh 2.0 rollout this year, we will continue to work to win the shop, aiming to further solidify BJ's as our members' best. We're innovating with our own brands, Wellesley Farms and Berkeley Jensen, to provide members with high-quality products at substantial value. Our own brand sales penetration continues to grow each quarter. Our summary categories lead the way in areas such as paper and trash. In the first quarter, we launched our own food storage bags.

Robert W. Eddy: As we advance our fresh <unk> rollout. This year, we will continue to work to win the shop aiming to further solidify bj's as our members destination.

Robert W. Eddy: We're innovating with our own brands Wellesley Farms' in Berkley Jensen to provide members with high quality products at substantial value.

Robert W. Eddy: Our own brand sales penetration continues to grow each quarter.

Robert W. Eddy: Our sundries categories lead the way in areas, such as paper and trash.

Robert W. Eddy: In the first quarter, we launched our own food storage bags. This offering is a strong illustration of our capabilities and approach to owned brands.

Robert W. Eddy: This offering is a strong illustration of our capabilities and approach to own brand. Our research suggests that our members were seeking greater value than the national brands offered. We underwent extensive benchmarking and analysis and identified a partner to help develop high-quality products that were comparable to the leading national brand while offering a value of more than 30%. Our members' response exceeded our expectations, improving the category sales trend with more than half of the sales coming from new members to the category.

Robert W. Eddy: Our research suggests that our members who are seeking greater value than the national brands offer.

Robert W. Eddy: We underwent extensive benchmarking and analysis and identified a partner to help develop high quality products that were comparable to the leading national brand, while offering a value of more than 30%.

Robert W. Eddy: Our members' response has exceeded our expectations improving the category sales trend with more than half of our sales coming from new members to the category.

Robert W. Eddy: Own Brand Sales make up over a quarter of our business, and we're confident in our goal of reaching 30% in the future. Finally, gas is a traffic driver for us and a meaningful way in which we deliver value to our members. We gained share once again in the first quarter, with comp gallons growing by approximately 6% year over year. This compares to the broader U.S. market, which was down mid-single digits in the same period.

Robert W. Eddy: Own brand sales makeup over a quarter of our business and we're confident in our goal of reaching 30% in the future.

Robert W. Eddy: Finally gas as a traffic driver for us in a meaningful way in which we deliver value to our members.

Robert W. Eddy: We gained share once again in the first quarter with comp gallons growing by approximately 6% year over year.

Robert W. Eddy: This compares to the broader U S market, which was down mid single digits in the same period.

Robert W. Eddy: Our philosophy on gas, like the rest of our business, is grounded in delivering value. This mindset allows us to proactively offer extra savings to our members through gas promotions and our Cobra and credit cards, which we believe deepens member loyalty. We work hard to save our members time and money. For members, taking advantage of our value proposition is easier than ever, as our digital conveniences allow them to shop at our clubs how they want. Our convenience initiatives include buy online, pick up in-club, curbside pickup, and same-day delivery. In-club shoppers can also leverage our digital coupon gallery and skip the lines with Express Pay Checkout.

Robert W. Eddy: Our philosophy on gas like the rest of our business is grounded in delivering value.

Robert W. Eddy: This mindset allows us to proactively offer extra savings to our members through gas promotions and our co brand credit card, which we believe deepens member loyalty.

Robert W. Eddy: We work hard to save our members time and money for members taking advantage of our value proposition is easier than ever as our digital conveniences allow them to shop, our clubs how they want.

Robert W. Eddy: Our convenience initiatives include buy online pickup in club curbside pickup and same day delivery.

Robert W. Eddy: In club shoppers can also leverage our digital coupon gallery, and skip the lines with express pay checkout.

Robert W. Eddy: Our digitally-enabled sales have posted double-digit growth in every quarter for the past two years, this is on top of meaningful growth through the pandemic. In fact, our digitally enabled comp sales in the first quarter were up 21% year over year. We're continuously refining and improving our user experience. In fact, this month, we are rolling out the ability to locate products through our app, making shopping in our 100,000 square foot clubs a whole lot easier. This is one of the numerous enhancements enabled by our autonomous inventory robots, which is also driving labor efficiencies in our digital order fulfillment process.

Robert W. Eddy: Our digitally enabled sales have posted double digit growth in every quarter in the past two years.

Robert W. Eddy: This is on top of meaningful growth through the pandemic in fact, our digitally enabled comp sales in the first quarter were up 21% year over year.

Robert W. Eddy: We're continuously refining and improving our user experience in fact this month, we are rolling out the ability to locate products through our app, making shopping in our 100000 square foot clubs a whole lot easier.

Robert W. Eddy: This is one of the numerous enhancements enabled by our autonomous inventory robots.

Robert W. Eddy: Which is also driving labor efficiencies and our digital order fulfillment process.

Robert W. Eddy: We will continue to lean into our digital capabilities to deliver even more value and convenience to our members in the future. Finally, we continue to make great progress on our real estate strategy. We opened our third club in the Nashville market in Goodlettsville earlier this year. We expect to open 11 more clubs in the back half of our fiscal year, including openings in new markets like Louisville, Knoxville, Southern Pines, and Myrtle Beach.

Robert W. Eddy: We will continue to lean into our digital capabilities to deliver even more value and convenience to our members in the future.

Robert W. Eddy: Finally, we continue to make great progress on our real estate strategy.

Robert W. Eddy: We opened our third club in the Nashville market in Goodlettsville earlier this year.

Robert W. Eddy: We expect to open 11 more clubs in the back half of our fiscal year, including openings in new markets like Louisville, Knoxville, Southern Pines, and Myrtle Beach.

Robert W. Eddy: While also expanding in our core markets with two openings in the New York metro market and four openings in Florida. In addition to our new unit expansion, we are investing in our existing footprint with upgraded signage, as well as remodels as part of Fresh 2.0. We continue to move at an accelerated pace with our real estate initiatives and in building our future pipeline, which remains at the highest levels in our company's history.

Robert W. Eddy: While also expanding in our core markets with two openings in the New York Metro market and four openings in Florida.

Robert W. Eddy: In addition to our new unit expansion, we are investing into our existing footprint with upgraded signage as well as remodels as part of fresh to point out.

Robert W. Eddy: We continue to move at an accelerated pace with our real estate initiatives and are building on our future pipeline, which remains at the highest levels in our company's history.

Robert W. Eddy: As we assess the health of the consumer, members remain selective and incredibly value-focused, which we believe bodes well for our business model. In a limited SKU environment, members rely on us to deliver a highly curated assortment that maximizes quality, value, and convenience. In doing so, we are driving great member engagement as exhibited by growth in trips, units, and market share in the first quarter, an achievement in today's challenging retail backdrop. We are driving greater trip frequency across all income levels that we track, high, mid, and low. Spend-per-shopper remains consistently strong with our mid- to higher-income members. But will our low-income members remain under pressure, particularly due to waning government aid?

Robert W. Eddy: As we assess the health of the consumer members remains selective and incredibly value focused which we believe bodes well for our business model.

Robert W. Eddy: And a limited SKU environment members rely on us to deliver a highly curated assortment that maximizes quality value and convenience.

Robert W. Eddy: In doing so we are driving great member engagement as exhibited by growth in trips units and market share in the first quarter an achievement in today's challenging retail backdrop.

Robert W. Eddy: We're driving greater trip frequency across all income levels that we track high mid and low <unk>.

Robert W. Eddy: Spend per shopper remains consistently strong with our mid to higher income members.

Robert W. Eddy: Well, our low income members remain under pressure, particularly due to waning government aid.

Robert W. Eddy: They continue to supplement their purchases with additional forms of tender, meaning they're spending more of their limited budget with us and not elsewhere. In fact, in the first quarter, overall sales from this member base started to grow again year over year after two consecutive quarters of decline. Looking ahead, we remain confident in our ability to grow the business, reinforced by healthy membership, traffic, and market share. These are key markers of the underlying strength of our company.

Robert W. Eddy: They continue to supplement their purchases with additional forms of tender, meaning they are spending more of their limited budget with us and not elsewhere.

Robert W. Eddy: In fact in the first quarter overall sales from this member base started to grow again year over year after two consecutive quarters of declines.

Robert W. Eddy: Looking ahead, we remain confident in our ability to grow the business reinforced by healthy membership traffic and market share.

Robert W. Eddy: These are key markers of the underlying strength of our company.

Robert W. Eddy: Furthermore, we believe our operating model, deep focus on our strategic priorities, and unwavering dedication to delivering value keep us well-positioned for long-term success. I'd like to close with my gratitude for our 34,000 team members. I'm impressed and inspired by their dedication to taking care of the families who depend on us every single day. To our team members listening in today, thank you for all of your hard work. I'll now turn it over to Laura to provide more details on our results and Outlook for the Year.

Furthermore, we believe our operating model deep focus on our strategic priorities and unwavering dedication to delivering value keep us well positioned for long term success.

Robert W. Eddy: I'd like to close with my gratitude for our 34000 team members I am impressed and inspired by their dedication to taking care of their own families who depend on US every single day.

So our team members listening in today. Thank you for all of your hard work.

Robert W. Eddy: 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. I'd like to join Bob in thanking our team members across our club. Support Center and Distribution Centers, whose efforts contributed to another quarter of strong financial results. Let's dig into our results. Net sales in the quarter were approximately $4.8 billion, growing 4% over the prior year. Total comparable club sales in the first quarter, including gas sales, were up 1.6% year over year, led by gallon sold. Merchandise comp sales, which exclude gas sales, increased by 0.6% year-over-year and by 6.3% on a two-year stack.

Laura L. Felice: Thank you Bob I'd like to join Bob in thanking our team members across our clubs.

Laura L. Felice: <unk> Center and distribution centers, whose efforts contributed to another quarter of strong financial results.

Let's dig into our results.

Laura L. Felice: Net sales in the quarter were approximately $4 8 billion growing 4% over the prior year.

Laura L. Felice: Total comparable club sales in the first quarter, including gas sales were up one 6% year over year led by gallon sold.

Laura L. Felice: Merchandise comp sales, which exclude gas sales increased five 6% year over year and by six 3% on a two year stack.

Laura L. Felice: We are pleased to maintain traffic and unit growth in the quarter, which demonstrates our strong value proposition, which continues to resonate with our members. As Bob mentioned, inflation was about flat for the quarter, with April inflecting slightly positive following several months of slight deflation.

We are pleased to maintain traffic and unit growth in the quarter, which demonstrates our strong value prop, which continues to resonate with our members.

Speaker Change: As Bob mentioned inflation was about flat for the quarter with April inflicting slightly positive following several months of slight deflation.

Laura L. Felice: Our first quarter comp in our Grocery, Perishables, and Sundries division grew by more than 1% year over year. We drove market share gains once again in this quarter, 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 just under 5% for the first quarter, with general merchandise outperforming the rest of the divisions in this calculation.

Speaker Change: Our first quarter comp and our grocery perishables and Sundries division grew by more than 1% year over year.

Speaker Change: We drove market share gains once again in this quarter, which supports our belief in a growing and loyal member base that relies on bj's for its shopping needs.

Speaker Change: Our general merchandise and services division comp decreased by just under 5% for the first quarter with general merchandise outperforming the rest of the divisions in this calculation.

Laura L. Felice: Digitally enabled comp sales for the first quarter grew 21% year over year and 40% on a two-year stack. About 90% of our digital sales are fulfilled by our clubs with services like Buy Online, Pick Up in Store, and Same Day Delivery, which remain meaningful drivers of our digital growth. Members who leverage our digital conveniences save time during their shopping and become more loyal members. This is a major win-win, and we will continue implementing these mutually beneficial enhancements in the future.

Speaker Change: Digitally enabled comp sales for the first quarter grew 21% year over year and 40% on a two year stack.

Speaker Change: About 90% of our digital sales are fulfilled by our clubs with services like buy online pickup in club and same day delivery, which remains meaningful drivers of our digital growth.

Speaker Change: Members, who leverage our digital conveniences same time in their shopping and become more loyal members.

Speaker Change: This is a major win win and we will continue leaning into these mutually beneficial enhancements in the future.

Laura L. Felice: Membership Fee Income, or MFI, grew 8.6% to approximately $111.4 million in the first quarter, driven by broad-based strength in membership acquisition and retention across both new and existing clubs. In addition to our Goodlettsville Club opening in the first quarter, we also continued to add new members from the five clubs that mostly opened late in the fourth quarter. We are pleased with our momentum in growing membership size and quality. Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate decreased by approximately 50 basis points year over year.

Speaker Change: Membership fee income or MSI grew eight 6% to approximately $111 4 million in the first quarter driven by broad based strength in membership acquisition and retention across both new and existing clubs.

Speaker Change: In addition to our Goodlettsville club opening in the first quarter. We also continued to add new members from the five clubs that mostly opened late in the fourth quarter.

Speaker Change: We are pleased with our momentum and growing membership size and quality.

Speaker Change: Moving on to gross margins.

Excluding the gasoline business, our merchandise gross margin rate decreased by approximately 50 basis points year over year.

Laura L. Felice: As expected, we experienced some unfavorable lapping of our co-brand financial flows as we anniversary last year's launch, which led to the quarter year-over-year decline. However, our first quarter merchandise gross margin rate remains higher than historical levels. SG&A expenses for the quarter were approximately $721.8 million.

Speaker Change: As expected we experienced some unfavorable lapping of our co brand financial flows as we anniversary last year's launch, which led to the quarter year over year decline, our first quarter merchandise gross margin rate remains higher than historical levels.

Speaker Change: SG&A expenses for the quarter were approximately $721 8 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. As Bob mentioned earlier, we continue to gain share in our gas business, with comp gallons growing by approximately 6% year over year. From a profitability perspective, the broader industry faced margin headwinds in the quarter, resulting in profits that fell below our expectations. We reported first quarter adjusted EBITDA of $236.4 million, which, as a reminder, no longer includes pre-opening and non-cash rent expense add-backs. Our effective tax rate of 24.4% was primarily driven by a higher-than-expected tax windfall.

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

Speaker Change: As Bob mentioned earlier, we continue to gain share in our gas business with comp gallons growing by approximately 6% year over year.

Speaker Change: From a profitability perspective, the broader industry faced margin headwinds in the quarter, resulting in profits that fell below our expectations.

We reported first quarter adjusted EBITDA of $236 4 million.

Speaker Change: As a reminder, no longer includes preopening and non cash rent expense add backs.

Speaker Change: Our effective tax rate of 24, 4% was primarily driven by higher than expected tax windfall.

Laura L. Felice: All in, our first quarter adjusted earnings per share of 85 cents were flat year over year and in line with our expectations. Moving on to our balance sheet, we feel good about our inventory position. Our team is working hard, improving our ability to have the right amount of product in the right clubs at the right time. We ended the first quarter with inventory about flat year over year, despite seven new clubs and approximately 180 basis points of improvement in our in-stock levels over the same period.

Speaker Change: All in our first quarter adjusted earnings per share of <unk> 85.

Speaker Change: We're flat year over year and in line with our expectations.

Speaker Change: Moving onto our balance sheet, we feel good about our inventory position our team is working hard.

Speaker Change: Improving our ability to have the right amount of product in the right clubs at the right time.

We ended the first quarter with inventory about flat year over year, Despite seven new clubs and approximately 180 basis points of improvement in our in stock levels over the same period.

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 our 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. We ended the first quarter with 0.6 terms of net leverage, which aligns with our long-term target of under one term.

Our capital allocation strategy is consistent with the framework, we set forth a year ago at our Investor day.

Speaker Change: We continue to believe that the best use of our cash is applying it towards profitably growing our business.

Speaker Change: 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.

Speaker Change: We ended the first quarter with six turns of net leverage which aligns with our long term target of sub one term.

Laura L. Felice: Returning excess cash to shareholders remains an important part of our capital allocation strategy as well. We repurchased approximately 405,000 shares for $30.2 million, and as of the quarter end, we have approximately $159 million remaining under our current authorization.

Speaker Change: Returning excess cash to shareholders remains an important part of our capital allocation strategy as well.

Speaker Change: We repurchased approximately 405000 shares.

Speaker Change: $32 million and as of quarter end, we have approximately $159 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. Turning to our outlook for the year, our guidance for the fiscal year remains unchanged. We continue to expect our fiscal 2024 comp sales, excluding gas, to range from 1% to 2%, getting closer to our long-term algorithm towards the back half of the year. We are still assuming a slightly inflationary year and a strong consumable business led by traffic, units, and market share.

Speaker Change: We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value.

Speaker Change: Turning to our outlook for the year, our guidance for the fiscal year remains unchanged.

Speaker Change: We continue to expect our fiscal 2024 comp sales, excluding gas to range from 1% to 2% getting closer to our long term algorithm towards the back half of the year.

Speaker Change: We are still assuming a slightly inflationary year and a strong consumable business led by traffic units and market share.

Speaker Change: Despite external pressures beyond our control we are pleased with our continued progress in general merchandise.

Laura L. Felice: Despite external pressures beyond our control, we are pleased with our continued progress in general merchandise, and we are proud of our achievements in membership. As we consider all of the elements that drive membership fee income, including the aforementioned timing of new club openings last year and the cadence of openings this year, we believe the year-over-year MFI increase of 8.6% in the first quarter will be the highest growth rate of the year.

Speaker Change: We are proud of our achievements in membership as we consider all of the elements that drive membership fee income, including the aforementioned timing of new club openings last year and the cadence of openings this year.

Speaker Change: We believe the year over year MSI increase of eight 6% in the first quarter will be the highest growth rate of the year.

Laura L. Felice: We continue to 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. We are planning for continued SG&AD 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. A reminder that we are also lapping variable compensation tailwinds from fiscal 2023.

Speaker Change: We continue to expect to deliver our merchandise gross margin rate improvement of approximately 20 basis points for fiscal 2024, driven by strong cost management and continued growth in our owned brands.

Speaker Change: We are planning for continued SG&A deleverage in fiscal 2024, as we invest in our growth initiatives, particularly in unit growth as new club sales continue to ramp over a multiyear period.

Speaker Change: A reminder, that we are also lapping variable compensation tailwind from fiscal 2023.

Laura L. Felice: Our expectations for gas prices remain unchanged. We are planning for an effective tax rate of approximately 28% for the remaining three-quarters of the fiscal year. Putting all of this together, we continue to expect to deliver adjusted EPS in the $3.75 to $4.00 range. In the longer term, we remain confident of the underlying strength of our business and believe we are well positioned to deliver sustainable growth to maximize shareholder value. With that, I'll turn it back to Bob for his closing remarks.

Speaker Change: Our expectations for gas remain unchanged.

Speaker Change: We are planning for an effective tax rate of approximately 28% for the remaining three quarters of the fiscal year.

Speaker Change: Putting all of this together, we continue to expect to deliver adjusted EPS in the $3 75 to $4 range.

Speaker Change: Longer term, we remain confident of the underlying strength of our business and believe we are well positioned to deliver sustainable growth to maximize shareholder value.

Speaker Change: With that I'll turn it back to Bob for closing remarks.

Robert W. Eddy: Laura, we are celebrating the company's 40th anniversary this year. As I reflect on our history, we've taken a great business model and transformed it to be even better, particularly over the past five years. Our purpose is clear and simple: we take care of the families who depend on us.

Robert W. Eddy: Thanks, Laura.

Robert W. Eddy: Celebrating the company's 40th anniversary this year as I reflect on our history, we've taken a great business model and transformed it to be even better, particularly over the past five years.

Robert W. Eddy: Our purpose is clear and simple we take care of the families who depend on us.

Robert W. Eddy: This, combined with our strategic priorities, has built a strong foundation in the way we operate, leading to sustainable growth and value creation. We will grow the size and quality of our membership. We will offer an unbeatable member experience through our merchandising improvement. We will elevate our digital conveniences to save our members money and time. And we will profitably grow our footprint and strengthen our brand. Above all, we will always deliver compelling value to our members.

Robert W. Eddy: This combined with our strategic priorities has built a strong foundation and the way we operate.

Robert W. Eddy: Turning to sustainable growth and value creation.

Robert W. Eddy: We will grow the size and quality of our membership we will offer unbeatable member experience through our merchandising improvements.

Robert W. Eddy: We will elevate our digital conveniences to save our members money and time.

Robert W. Eddy: We will profitably grow our footprint and strengthen our brand.

Robert W. Eddy: Above all we will always deliver compelling value to our members.

Robert W. Eddy: I'm proud of our entire team, and I'm excited for our future. 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.

Robert W. Eddy: I am proud of our entire team and I'm excited for our future.

Robert W. Eddy: 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.

Operator: Thank you. We will now start our Q&A session. If you'd like to ask a question, please press star followed by one on your telephone keypad, ensuring you are unmuted locally. If you'd like to withdraw your question, you can do so at any time by pressing star followed by two. In the fairness to all participants, please limit your questions to one question and one follow-up. The first question comes from the line of Peter Benedict of Baird. Your line is open; please go ahead.

Speaker Change: Thank you we will now start our Q&A session, if you'd like to register a question. Please press star followed by one on your telephone keypad, ensuring you are on mute locally.

Speaker Change: If you would like to withdraw your question you can do so at any time for questions.

Speaker Change: Yeah.

Speaker Change: In fairness to all participants please limit your questions to one question and one follow up.

Speaker Change: The first question comes from the line of Peter Benedict of Baird. Your line is open. Please go ahead.

Peter Sloan Benedict: Oh, hey, guys. Good morning.

Peter Sloan Benedict: Hi, guys. Good morning, Thanks for taking the question first just on the MFA growth, obviously very impressive there.

Speaker Change: Recognize it'll eight six is probably the fastest growth rate, but as we look out through the balance of the year.

Operator: Thanks for taking the question. First, just on the MFI growth, obviously very impressive there. Recognize that 8.6 is probably the fastest growth rate, but as we look out through the balance of the year, any reason why the dollar number would step down sequentially, or should we expect it to continue to grow a little bit? And curious kind of how the robust performance influences your willingness to consider a fee increase in some places this year? That's my first question.

Speaker Change: Any reason why the dollar number would step down sequentially.

Speaker Change: Or should we expect it to continue to grow a little bit.

And I'm curious kind of how the robust performance influences your willingness to consider a fee increase that's someplace. This year. That's my first question.

Robert W. Eddy: Thanks, Pete. Good morning.

Speaker Change: Okay.

Speaker Change: Morning.

Speaker Change: Took the first question to get to the fee increase.

Robert W. Eddy: I took the first question to get to the fee increase, huh? Look, I think we had a great quarter from a membership perspective. The team's doing pretty impressive things. Signing up new members and... Renewing members, getting them up through the premium to you.

Speaker Change: Okay.

Speaker Change: Look I think we had a great quarter from a membership perspective, the team is doing a pretty impressive things.

Speaker Change: Signing up new members.

Speaker Change: Okay.

Speaker Change: Renewing members getting them up through the premium tiers.

Robert W. Eddy: Our field folks have been doing a fantastic job of interacting with our members; we're engaging them nicely as well. So I think we've got a lot to be proud of there. As we said in the prepared remarks, 8.6 was pretty high, and we don't expect that to recur. Most of that increment over our previous trend was just the way the spacing of the clubs last year fell and how that falls into this year.

Speaker Change: Our field folks have been doing a fantastic job of interacting with our members.

Speaker Change: We're engaging them nicely as well so I think we've got a lot to be proud of there is as we said in the prepared remarks $8 six was was pretty high.

Speaker Change: We don't expect that to recur.

Speaker Change: Most most of that increment over our previous trend was just the way the spacing of the clubs last year fell and how.

Speaker Change: That falls into this year.

Robert W. Eddy: But with that said, we are slightly ahead of last year's trend, X that, and slightly ahead of our own plan. So we're pretty pleased with what we're doing and where we're going as a membership. As to the fee increase, we haven't really given a whole bunch of thought to it at this point. And so when there's news to share, we'll definitely share it.

Speaker Change: But with that said we are slightly out of.

Speaker Change: Last year's trend ex that.

Speaker Change: That's slightly ahead of our own plants. So we're pretty pleased with.

Speaker Change: With what we're doing and where.

Speaker Change: Where we're going from a membership.

Speaker Change: <unk> perspective.

Speaker Change: As to the fee increase we haven't.

Speaker Change: Really given a whole bunch of thought to it at this point and so when there is news to share we will definitely we'll definitely share it.

Peter Sloan Benedict: Gosh, fair enough. So my follow-up is kind of on inventory and merchandise margins. Inventory looked really clean.

Speaker Change: Gotcha fair enough. So my follow up is on kind of an inventory and merch margins inventory look really clean just.

Peter Sloan Benedict: I'm just curious, kind of your progress there, what maybe you've done to kind of get that in line. And what does that mean for kind of the retail margin path from here down 50 basis points in the first quarter? You're saying plus 20 for the year. Maybe just help us understand maybe the cadence in 2-2 and then versus the second half. Thank you.

Speaker Change: Just curious kind of your progress there what maybe you've done to kind of get that that in line.

Speaker Change: What does that mean for kind of the merch margin path from here down 50 basis points in the first quarter, Youre, saying plus 20% for the year, maybe just help us understand.

Speaker Change: Maybe the cadence in <unk> and that versus the second half. Thank you.

Robert W. Eddy: Yeah, look, we're pretty happy with where our inventories are at this point. You know, the team's been doing a lot of work. Frankly, we weren't happy with our inventory levels last year, particularly from an in-stock perspective. And so, you know, the team's done a bunch of work to raise our in-stocks, which are significantly higher today than they were a year ago today, and to find ways to offset those increases in inventory levels by reducing inventory that, frankly, we don't need, not inventory that's going to go bad, but just a more efficient way to present and move inventory around.

Speaker Change: Sure Yeah look we're pretty happy with where our inventories are at this point.

Speaker Change: <unk>.

Speaker Change: The team has been doing a bunch of work frankly.

Speaker Change: Frankly, werent happy with our inventory levels last year, particularly from an in stock perspective, and so it.

Speaker Change: The team has done a bunch of work to raise our in stocks.

Speaker Change: Which are significantly higher today than they were a year ago today.

Speaker Change: To find ways to offset those increases in inventory levels by reducing.

Speaker Change: Reducing inventory, but frankly, we don't need.

Speaker Change: Bought inventory, that's going to go bad, but just a more efficient way to present.

Speaker Change: And move inventory around.

Robert W. Eddy: So I think we've got continued upside there. We should be able to raise the end stocks even further and continue to rationalize the inventory base as well. Obviously, we've got new clubs coming in. We're pretty pleased with where we landed for the end of the quarter. And maybe I'll let Laura tackle the margin question.

Speaker Change: So I think we've got continued upside there we should be able to raise the in stocks even further.

Speaker Change: And continue to rationalize inventory base as well, obviously, we've got new clubs coming into the.

Speaker Change: The portfolio of that drives inventory up a little bit so.

Speaker Change: We're pretty pleased with where we landed for the end of the quarter.

Speaker Change: And maybe I'll, let <unk> talk about the.

Laura L. Felice: Yeah, hey, good morning. On merchandise margins, you know, as we expected when we guided for Q1, when we gave a little bit of color on it, largely what happened in Q1 was the transition of our co-brand portfolio last year and lapping that. So we continue to expect that that was a Q1 event only and will not drag margins down as we progress through the remainder of the year.

Speaker Change: The margin question.

Speaker Change: Yeah, Hey, good morning.

Speaker Change: On merch margins.

Speaker Change: It is.

Speaker Change: As we expected.

Speaker Change: When we guided for Q1, when we gave a little bit of color on it.

Speaker Change: Largely what happened in Q1 was.

Speaker Change: The transition of our co brand portfolio last year and lapping that.

Speaker Change: So we continue to expect that that was a Q1 event only.

Speaker Change: And we will not drag margins down as we progress through the remainder of the year.

Peter Sloan Benedict: Got it. Thanks so much, guys. Good luck. Thanks, Pete. The next question comes from the line of Kate McShane of Goldman Sachs. Your line is now open; please go ahead.

Speaker Change: Got it thanks, so much guys. Good luck.

Speaker Change: Thanks Pete.

Katharine Amanda McShane: The next question comes from the line of Kate McShane of Goldman Sachs. Your line is now open, please go ahead. Hi, good morning. Thanks for taking our question.

Speaker Change: The next question comes from the line of.

Speaker Change: Mccain of Goldman Sachs. Your line is now open. Please go ahead.

Speaker Change: Hi, good morning, Thanks for taking our question.

Speaker Change: Last quarter, we had asked you about the promotional environment and pricing and I think the answer at the time with maybe the environment was a little bit more promotional but how are you thinking about it now, especially in the context of pricing actions taken by a competitor and rollbacks from another I know you have your competitive price gap, but how are you thinking about that right now.

Robert W. Eddy: Hey, Kate, good morning. Thanks. Thanks for the question, certainly a relevant one. And, you know, I guess what I would say is that others are searching for value, and that's what we and the club channel provide every day of the week. So, you know, there's a lot of space between us and some of our competitors out there, so I'm not sure that... We spend a lot of time thinking about what's been in the news lately.

Speaker Change: Hey, good morning. Thanks, Thanks for the question certainly a relevant one.

Speaker Change: And I.

Speaker Change: I guess, what I would say is.

Speaker Change: Others are searching for value and that's what we in the club channel provide every every day of the week so.

Speaker Change: There's a lot of.

Speaker Change: Of space between Us and.

Speaker Change: Some of our competitors out there so I'm not sure that.

Speaker Change: We spend a lot of time thinking about.

Speaker Change: What's been in the news release, we spend a lot of time, obviously thinking about how we can provide better value.

Robert W. Eddy: We spend a lot of time, obviously, thinking about how we can provide better value to our members every single day, whether that's through pricing, whether it's through promotions, whether it's through the co-brand credit card, all sorts of different things rolling into. I think it's a pretty fantastic value proposition for our members, and so we'll just keep sticking to our knitting and making sure we're providing the right day-to-day shelf value and promotional values as we go.

Speaker Change: So our members every single day, whether that's through pricing, whether it's through promotions, whether it's through the co brand credit card.

Speaker Change: All sorts of different things rolling into.

Speaker Change: I think a pretty fantastic value proposition for our members and so we'll just keep sticking to our knitting and making sure were.

Speaker Change: Providing the right the right day to day shelf value and and promotional values as we go.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: Thank you for listening to Simeon Gutman's Live Question Time. Morgan Stanley, your line is now open, please go ahead.

Speaker Change: The next question comes from the line question.

Simeon Ari Gutman: Simeon Gutman.

Morgan Stanley. Your line is now open. Please go ahead.

Simeon Ari Gutman: Good morning, everyone. I want to follow up on the MFI, the spread of MFI growth versus club growth. I think it's been the highest in quite some time. So can you talk about why it was so good in the quarter and then why should it step down from here? And I guess, you know, you'll be opening more clubs throughout the year. So just thinking about the timing and why that was so strong.

Simeon Ari Gutman: Good morning, everyone.

Simeon Ari Gutman: To follow up on the MSI.

Speaker Change: The spread.

Speaker Change: MSI growth versus club growth I think it's been the highest in quite some time.

Speaker Change: So can you talk about why it was so good in the quarter and then why should it step down from here.

Speaker Change: And I guess you will.

Speaker Change: The opening more clubs I guess throughout the year. So just thinking about the timing and why that was so strong.

Robert W. Eddy: Yeah, good morning, Simeon. Thanks for the question. It really has to do with the fact that we opened several clubs right around the end of the fiscal year. And so we didn't, we had signed up a bunch of members in those clubs and didn't recognize any membership fees, really until the first quarter here. And so there is that artificial bump.

Speaker Change: Yes, good morning, Simeon Thanks for the question.

Speaker Change: It really has to do with the fact that we opened.

Speaker Change: Several clubs right around the end of the fiscal year and so we didn't we had signed up a bunch of members in those clubs and didn't recognize any membership fees.

Speaker Change: Really until the first quarter here and so there is an artificial bump you're absolutely right that as we open more clubs in the end of this year, we've got a bunch in Q3.

Robert W. Eddy: You're absolutely right that as we open more clubs at the end of this year, we've got a bunch in Q3 and a lot in Q4. That should serve as an upward force on membership fees. But really, the Q1 number should be the highest.

Speaker Change: A lot in Q4 that should serve as a.

Speaker Change: As an upward for us on membership fees.

Speaker Change: <unk>.

Speaker Change: But really the Q1 numbers should be the highest so as I said earlier, we're very proud of what we're doing.

Robert W. Eddy: As I said earlier, we're very proud of what we're doing. We are definitely ahead of our plans. But as we sit here and look at the rest of the year, our plan doesn't start with an eight, we'll put it that way.

Speaker Change: We are definitely ahead of our plans.

Speaker Change: But as we sit here and look at the rest of the year.

Speaker Change: Our plan doesn't it doesn't start with an eight put it that way.

Speaker Change: <unk>.

Robert W. Eddy: And it's sort of slightly ahead of where we ended last year from a full-year MFI perspective. But with all that said, we're very pleased. Members continue to come in, and prospective members continue to come in. They're reacting to our communications and promotions for membership. And the team's doing a fantastic job engaging them when they do interact with us and selling them the appropriate membership for them. And, you know, turning them into good members over time. So we're very, very pleased with the progress we're making.

Speaker Change: And it's sort of slightly ahead of where we ended last year.

Speaker Change: First from a full year MSI perspective.

Speaker Change: But with all that said we are we're very pleased.

Speaker Change: <unk> continued to come in.

Speaker Change: Prospective members continue to come in and they are reacting to our our.

Speaker Change: <unk> and promotions for.

Speaker Change: Membership.

Speaker Change: The team is doing a fantastic job engaging them when they do.

Speaker Change: Direct with us.

Speaker Change: And selling them the appropriate membership for them.

Speaker Change: And.

Speaker Change: Turning them into good members over time, so we're very very pleased with the progress we're making there.

Simeon Ari Gutman: And can you share any insight if you take new members that have never been to BJ's before and look across the spend, what they're spending on across categories, and you compare it to an existing member, are you able to see the traction you're making in some of, I guess, the non-food items in that spend, or do they typically start with grocery food and then you get them into the other categories? [inaudible]

Speaker Change: And can you can you share any insight if you take new members that had never been to Bj's before and look across the spend what they're spending on across categories and you compare it to an existing member are you able to see the traction you're making in some of.

Speaker Change: I guess, the non food items in that spend or they typically start with the grocery food and then you get them into the other categories.

Robert W. Eddy: Look, I think there are two different shopping missions when you come to BJ's. One's a grocery trip, and one's a general merchandise trip. And we've talked a lot about the fact that we run a fantastic grocery business. That's, I think, indisputable. We are doing a great job meeting our members' needs for their day-to-day grocery purchases. And we have a tremendous opportunity to expand general merchandise. I think we've done it in – we've had great credibility in general merchandise in certain categories like consumer electronics for a long time.

Speaker Change: Look I think.

Speaker Change: I think there are two different trip missions, when you come to Bj's one's a grocery shop and one's a general merchandize stripping.

Speaker Change: Talk a lot about the fact that we run a fantastic grocery business.

Speaker Change: That's I think in dispute of what we are.

Speaker Change: Doing a great job meeting our members' needs for their day to day grocery purchases and we have a tremendous opportunity and expanding general merchandise I think we've done it in.

Speaker Change: We've had great credibility and general merchandize in certain categories like consumer electronics for a long time at our aim is really to expand that credibility into other categories. So we talked about the fantastic Q4 results in CE in apparel, but really our apparel all year long last year.

Robert W. Eddy: And our aim is really to expand that credibility into other categories. And we talked about the fantastic Q4 results in CE and apparel, really, apparel all year long last year. The momentum there has continued in those two categories. We talked about our home business coming alive for the first time in a long time. That's, you know, three out of the four big ones.

Speaker Change: The momentum there is continued in those two categories, we've talked about our home business coming alive for the first time in a long time that's.

Speaker Change: Three out of the.

Speaker Change: The four big ones, we've got to get the seasonal business going I think thats largely.

Robert W. Eddy: We've got to get the seasonal business going, and I think that's largely weather-related at this point. And we're finally getting some warm weather here in the Northeast, so we should have a good read on that very soon. With that said, we're pleased with the progress we're making in GM to sort of build on the success of the food business. As we look at member spending levels, as we talked about in the prepared remarks, they are increasing. And so it looks like, you know, we're going in the right direction as we continue to attract new members and bring them into the fold.

Speaker Change: Weather related at this point and.

Speaker Change: We're finally getting some warm weather here in the northeast. So we should we should have a good read on that.

Speaker Change: Very soon.

Speaker Change: Said.

Speaker Change: Pleased with the progress, we're making and GM to sort of.

Speaker Change: Build on the success of the food business as we look at member spending levels as we've talked about in the prepared remarks, they are increasing.

Speaker Change: And.

Speaker Change: So it looks like we're going in the right direction.

Speaker Change: As we as we continue to attract new members and bring them into the fold.

Speaker Change: Okay. Thank you very much.

Robert Frederick Ohmes: The next question comes from the line of Robbie Ohmes of Bank of America. Your line is now open, please go ahead.

Speaker Change: Our next question comes from the line of Rafi, Amit <unk> of Bank of America. Your line is now open. Please go ahead.

Robert Frederick Ohmes: Oh, hey, Bob. Hey, Laura.

Speaker Change: Oh, Hey, Bob Hey, Laura.

Speaker Change: I'll give my two questions upfront.

Speaker Change: Can you can you talk about the new market clubs.

Speaker Change: How those are doing versus your expectations and if there are differences between the more recently opened clubs some better than others.

Speaker Change: What the reason youre finding that is.

Speaker Change: And then the second question is just the.

Speaker Change: Coolers in front of clubs.

Speaker Change: Probably had missed that you're talking about that before can you just remind me what.

What youre doing there and what kind of driver of that is.

To comps.

Robert W. Eddy: I'll give you my two questions up front. Bob, can you talk about the new market clubs and how those are doing versus your expectations, and if there are differences between the more recently opened clubs, some better than others, what is the reason you're finding that is? And then the second question is just the coolers in front of clubs. I probably had missed that. You talked about that before. Can you just remind me what you're doing there and what kind of driver that is to cops?

Speaker Change: Yes sure.

Robert W. Eddy: Yeah, sure. But why don't we take them in reverse order?

Speaker Change: Why don't we take them in reverse order.

Coolers are a part of our fresh tufano effort, we've talked a lot about that on our prepared remarks today, we spent the.

Robert W. Eddy: The coolers are a part of our Fresh 2.0 effort. We talked a lot about that in our prepared remarks today. We spent most of last year testing in Florida how to make our produce assortment better and how to make members react to it better. And, you know, we learned a lot. We were, I think, good at produce but not great, and Fresh 2.0 really has put a light on ways to improve. And, you know, it was all across the board, as we talked about.

Speaker Change: Most of last year testing in Florida, how to make our protest assortment better.

How to make members reacts to it better.

Speaker Change: We learned a lot. We we were I think good that produced but not great and fresh to Plano really has put out.

Speaker Change: A light on ways to improve.

Speaker Change: It was all across the board as we as we talked about.

Robert W. Eddy: We have really changed our sourcing methodology a bit, we've changed our assortment, we've changed the way that product flows through our system to get it here faster. We've changed our marketing, we've changed signage in the clubs, and then we put these coolers in as sort of a signpost to get people thinking about it, and to get people to understand that they should be buying produce from us. We tend to put things in that cooler that are right from a timing perspective, they are priced right, they're fresh, they are at the right time of year, and it's been a big win.

Speaker Change: We have really changed our <unk>.

Speaker Change: Sourcing methodologies that we've changed our assortment we've changed the way that that product flows through our system to get at here faster.

Speaker Change: Okay.

Speaker Change: We've changed our marketing or change signage in the clubs and then we've put these coolers and really is sort of a signpost to get people thinking about it.

Speaker Change: Get people to understand that.

Speaker Change: They should be buying products from us we tend to put things in that cooler that are.

Speaker Change: No.

Speaker Change: No.

Speaker Change: Right from a timing perspective, they are priced right they are fresh.

Speaker Change: They're at the right time of year.

Speaker Change: And it's been a it's been a big win I wouldn't I wouldn't say, there's been a tremendous driver of comps, but it is certainly raising the.

Robert W. Eddy: I wouldn't say that it's been a tremendous driver of comps, but it is certainly raising the bar. The visibility of our produce to our members, and we've seen gains across the produce business as a result of not just the coolers, but the entire Fresh 2.0 effort. You know, we need to make sure that we're giving our members the freshest produce because they're buying it in bigger quantities than they would at a grocery store, so we need to give them more days of freshness. Give them it to them in the right pack sizes, and give it to them at the right price.

Speaker Change: The visibility of our produce to our members and we've seen gains across the produce business as a result of not just the coolers, but the entire fresh tufano effort.

Speaker Change: We need to make sure that we're giving our members the freshest produce because they are buying it in bigger quantities and they would at a grocery store so.

Speaker Change: We need to give them more days of freshness.

Speaker Change: Give it to them in the right pack sizes give it to them at the right price.

Robert W. Eddy: And Fresh 2.0 is really aimed at all of that, and the early returns are pretty favorable, so we've got a lot of room to run. We haven't rolled it out through the entire chain yet.

Speaker Change: And.

Speaker Change: Fresh coupon was really aimed at all of that in the early returns are pretty favorable. So we've got a lot of room to run we haven't rolled it out through the entire chain yet.

Robert W. Eddy: We need to keep pushing for it, but our members are telling us they like what they see, and they're certainly buying more produce in the clubs that have undergone this transformation. So we'll keep pushing that.

Speaker Change: We need to keep pushing on it.

Speaker Change: But our members are telling us they like what they see and they are certainly buying more produce.

Speaker Change: In the clubs that.

Speaker Change: Have undergone this transformation.

Speaker Change: So we'll keep pushing there.

Robert W. Eddy: From a real estate perspective, Bill and the team have been doing a great job getting more clubs into the pipeline. We said it was the biggest pipeline we've ever had, and that's true by a long shot.

Speaker Change: From a real estate perspective, bill and the team have been doing a great job.

Speaker Change: Getting more clubs into the pipeline, we said, it's the biggest pipeline we've ever had.

Speaker Change: Yeah.

Speaker Change: That's true by a long shot and we've got a fantastic slate for this year.

Robert W. Eddy: We've got a fantastic slate for this year, back end weighted, as I said earlier. And a good slate for next year as well. I guess I would tell you all of our new clubs, really since we started opening new clubs again several years ago, have done well. And they've met or exceeded their underwriting.

Speaker Change: Back end weighted as I said earlier.

Speaker Change: Good slate for next year as well.

Speaker Change: I guess I would tell you all of our new clubs really since we started opening new clubs again several years ago have done well.

Speaker Change: They've met or exceeded their their underwriting.

Robert W. Eddy: You know, we are learning how to interact with new members in these new clubs, learning how to tell our story in new markets, learning how to really run a new club in an efficient and effective fashion. But the returns across the portfolio have been great. You know, that's why we've got our foot hard on the gas pedal at this point. Do you want to add anything, Bill?

Speaker Change: We are.

Speaker Change: Learning how to interact with new members in these new clubs learning how to tell our story in new markets.

Speaker Change: Learning how to really run our new club in an efficient and effective fashion.

Speaker Change: But the returns across the portfolio have been have been great.

Speaker Change: Sure.

Speaker Change: That's why we've got our foot on the gas pedal at this point.

Speaker Change: You want to add anything.

William C. Werner: No, I would just add, Robby, that last year was a big year for us with entry into the Nashville market, and entry into our 20th state in Alabama and Madison. And we've seen a really good response to our membership in those markets. And as we look forward to this year, it's continued expansion. We'll continue our growth in Tennessee, moving into the Knoxville market with the new club in Maryville that we just announced. And then also great expansion throughout our core, a lot of growth down in Florida. We talked about a couple of clubs in our key New York metro market, including our first club on Staten Island.

Robbie: No I would just add Robbie that last year was a big.

Speaker Change: Big year for us with entry into the Nashville market entry into our 20th stayed in Alabama in Madison.

Speaker Change: And we've seen really good response to our membership in.

Speaker Change: In those markets and as we look forward to this year.

Speaker Change: It's continued expansion we will continue our growth in Tennessee.

Speaker Change: Moving into the Knoxville market with a new club in Maryville, though we just announced.

Speaker Change: And then also great expansion throughout our core a lot of growth down in Florida, we.

Speaker Change: We talked about a couple of clubs in our.

Speaker Change: Our key New York Metro market, including our first club on Staten Island.

William C. Werner: So as we look out, Bob mentioned our pipeline. We talked about it being the most robust in the company's history at Q4. We've grown it by the pipeline, but by a bunch of units here in Q1. So it's now even deeper, and we continue to see great results, and we're going to continue to lean in.

Robert W. Eddy: So as we look out Bob mentioned, our pipeline, we talked about it being the most robust in the company's history at Q4.

Speaker Change: We've grown it by the pipeline, but by a bunch of units during Q1.

Speaker Change: So its now even deeper and we.

Speaker Change: We continue to see great results and we're going to continue to lean in.

Robert W. Eddy: That sounds great. Thank you. Oh, yeah. Sorry, Laura.

Speaker Change: Great. Thank you.

Laura L. Felice: That's okay. I was just going to jump on to the cooler comments. And just a reminder, all of that work that we're doing on Fresh 2.0, including the coolers and the comments Bob already made, started with our acquisition of Burris. And so this is something we've been working on for a while. And so we're just starting to see it all kind of coming to the market and really showing our members what that supply chain and acquisition did for the company.

Speaker Change: Hi, Laura.

Speaker Change: I was just going to <unk>.

Speaker Change: Answer that.

Speaker Change: Cool.

Speaker Change: Comments and just a reminder, all of that work that we're doing on refresh as you point out.

Speaker Change: <unk> the coolers in the comments I've already made.

Speaker Change: Started with our acquisition of Rs.

Speaker Change: So this is something we've been working on for a while.

Speaker Change: And so we're just starting to see.

Speaker Change: It all kind of coming to the market and really.

Speaker Change: Showing our members what that supply chain.

Speaker Change: And acquiring that did for the company.

Laura L. Felice: Sounds great. Thank you.

Speaker Change: Sounds great. Thank you.

Charles P. Grom: The next question comes from the line of Chuck Grome of Golden Haskett. Your line is now open; please go ahead.

Speaker Change: Our next question comes from the line of Chuck Grom Gordon.

Speaker Change: Thank you.

Speaker Change: Your line is now open. Please go ahead.

Charles P. Grom: Hey, thanks a lot. Good morning.

Speaker Change: Hey, Thanks, a lot good morning.

Speaker Change: Bob can you talk a little bit more about general merchandise.

Robert W. Eddy: Bob, can you talk a little bit more about general merchandise? You sound really good about CE apparel, but there's obviously other parts of the business that need to pick up the slack a little bit, and I noticed that the overall category, including services, was down 5%, so I guess what's going on in services that's weighing on the category? Thanks. Look, Chuck, good morning.

Speaker Change: Really good on CE apparel.

Speaker Change: There's obviously other parts of the business that need to pick up.

Speaker Change: The slack a little bit and I noticed that the overall category, including services was down 5%. So I guess, what's going on in services, that's weighing on the category. Thanks.

Robert W. Eddy: You've got a few things in there. You've got sort of core GM, you've got services, and you've got what we call ancillary or other. That's where the co-brand accounting flies through. So that's sort of the biggest drag to make the vision negative services slightly negative. We're still pleased with the way the business is working. There's some timing going on through there.

Chuck Grom: Look Chuck good morning, you've got a few things in there you've got sort of core Jim you've got services and you've got.

Chuck Grom: What we call ancillary or other.

Speaker Change: That's where the co brand accounting flies through so thats sort of the biggest.

Speaker Change: Drag to make the division negative.

Speaker Change: Services was slightly negative we're still pleased with the way the business is working there are some timing going on through there.

Speaker Change: We would expect services to be fine in Q2.

Robert W. Eddy: We would expect services to be fine in Q2, and GM was only very slightly negative. 4 p.m. As we talked about, really strong results in CE and apparel, continuing that trend, the home business doing really well, members reacting to a new assortment there. That's been really the key in a lot of these categories, right? Making sure we've talked about this, making sure we have the right stuff on the shelves, making sure it's on trend, making sure it's at the right quality, making sure the value is correct.

Speaker Change: And GM was was very slightly negative.

Jim: Sure Jim.

Speaker Change: As we talked about really strong results in CE in apparel, continuing that trend the home business doing really well members reacting to our new assortment there that's been really the key.

Speaker Change: And in a lot of these categories are making sure and we've talked about is making sure. We have the right stuff on the shelves, making sure it's on trend and making sure it's at the right quality.

Speaker Change: Making sure the value is correct.

Robert W. Eddy: And making sure it's simple, quite honestly, and part of the magic here in apparel is reducing the number of brands and colorways in a particular SKU so that the member can easily shop for it and understand what we're doing.

Speaker Change: And making sure it's simple quite honestly in part of the.

Speaker Change: The magic here in apparel.

Speaker Change: Reducing the number of brands, reducing the number of.

Speaker Change: Color ways.

Speaker Change: Particular skew some of the member can easily shop at and understand.

Speaker Change: What we're doing.

Robert W. Eddy: So, we were delighted to see the home business come alive. That was one that we thought was going to be harder to fix, and we are by no means done, but certainly, the stuff that we have done in that category so far has resonated with our members. And, you know, seasonality, this quarter is very highly weighted. You know, as we get into this summer seasonal time of year, it becomes such a big part of our business that, you know, the cruddy weather in the Northeast really had a pretty ugly impact on that category, and because it's so big in the overall calculation for CoreGM.

Speaker Change: So we were delighted to see the home business come alive.

Speaker Change: That was.

Speaker Change: One that we thought was.

Speaker Change: Are you going to be harder to fix and we are by no means done, but certainly the stuff that we have.

Speaker Change: Done in that in that category, so far have resonated with our members.

Speaker Change: And seasonal this quarter is very highly weighted.

Speaker Change: As we get into the summer seasonal.

Speaker Change: The time of the year it becomes such a big part of our business that.

Speaker Change: You know that credit weather in the northeast really had.

Speaker Change: It had a pretty ugly impact on that category.

Speaker Change: Because it's so big on the overall calculation for our core GM.

Robert W. Eddy: But, as I talked about in the prepared remarks, in their Southeast clubs, or actually all of those clubs with warmer weather, we saw a 10-point differential positive. You know, comps from north to south. So, you know, we're pretty confident that as the weather starts to turn here, that stuff will turn on, and we'll get back to positive comps in GM in the second quarter. Okay, that's great to hear.

Speaker Change: Uh huh.

But as I talked about in the prepared remarks.

Southeast clubs are actually all of those clubs with warmer weather we.

We saw a 10 point differential positive.

Speaker Change: Comps.

Speaker Change: <unk> north to south so.

Speaker Change: We're pretty confident that as the weather starts to turn here that.

Speaker Change: That stuff will will turn on.

Speaker Change: And.

Speaker Change: We'll get back to positive comps and GM.

Speaker Change: In the second quarter.

Speaker Change: Okay, that's good to hear.

Charles P. Grom: And then, Laura, just on Corcoran's Margins Pound.

Charles P. Grom: on the core gross margins, bound 50. It sounds like that was all Capital One related. So as we look ahead to 2Q and the balance of the year, can you talk about the drivers of the upside on the gross margin line and if you could tie in your CMP work, skew rationalization, and other efforts that help you get there? Thanks. Yeah. Hey, good morning.

Speaker Change: And then Laura just on the core gross margins down 50, it sounds like that was all the capital one related so as we look ahead to <unk> through the balance of the year can you talk about the drivers of the upside on the gross margin line and if you could tie in your <unk>.

Speaker Change: CMP work SKU rationalization and other efforts that help you get there. Thanks.

Laura L. Felice: Yeah, hey, good morning, Chuck. Look, I think you got part of the answer there. So two things. I would say, right, we think 20 bits for the full year is still a good number. How does that come? That comes from the work we started doing and talked about at year end with CMP. So that's really looking across categories at the assortment and making sure we have the right value, and the right assortment on the shelves to deliver that to our members. So a little bit from that.

Speaker Change: Yeah, Hey, good morning, Chuck.

Speaker Change: Okay. Thank you got part of the answer there so.

Speaker Change: Two things.

Speaker Change: Say right we think.

Speaker Change: 20 bps for the full year is still a good number.

Speaker Change: How does that come that comes from the work, we started doing and talked about at year end.

With CMP, so thats really looking at.

Speaker Change: Across categories.

Speaker Change: Assortment and making sure we have the right value the right assortment on the shelves.

Speaker Change: To deliver that to our members so a little bit from that.

Laura L. Felice: And then we continue to work on our own brand efforts. And so we're really happy with the progress we've made there. You know, longer term, we continue to think that 30% penetration is in sight, and so some of that gross margin expansion will come from the work we continue on that. In the prepared remarks, we talked a little bit about storage bags, trash, and paper that continues to do really well for us. And that's what gives us... Excitement about the remainder of the year and as we continue to progress on those.

Speaker Change: And then we continue to work on our own brand efforts and so we're really happy with the progress we've made there.

Speaker Change: Longer term, we continue to think that 30% penetration is in sight.

Speaker Change: And so some of that gross margin expansion will come from the work. We continue on that in the prepared remarks, we talked a little bit about storage bags trash.

Paper that continues to do really well for us.

Speaker Change: And that's what gives us.

Speaker Change: Excitement about the remainder of the year and as we continue progress on those efforts.

Speaker Change: Hum.

Speaker Change: Great. Thank you.

Gregory Scott Melich: The next question comes from the line of Greg Malish of Evercore ISI. Your line is now open; please go ahead.

The next question comes from the line of Greg <unk>.

Speaker Change: Evercore ISI. Your line is now open. Please go ahead.

Gregory Scott Melich: All right, thanks. It sounds like gas profits came down in the quarter. Is that alleviated, or could you update us on where we are on penny profit?

Speaker Change: Hi, Thanks.

Speaker Change: It sounds like gas profits came down in the quarter.

Speaker Change: Hi.

Speaker Change: That alleviated or could you update us on where we are a penny profit.

Robert W. Eddy: Yeah, good morning, Greg. Certainly, it was a tougher quarter from a profitability perspective in gas despite pretty significant gallon growth and market share growth. We're, you know, very proud of our members continuing to react to our great value every day in that segment of our business, being up six on top of a big number last quarter, sorry, last year. At the same time, we've been growing market share for a couple of years. They're now growing by leaps and bounds.

Greg: Yes, good morning, Greg certainly it was a tougher quarter from a profitability perspective in gas.

Greg: Despite pretty significant gallon growth and market share growth.

Greg: We're very proud of our members continuing to react to our great value every day and that segment of our business being up six on top of a big number last quarter, sorry last year at the same time.

Robert W. Eddy: So we'll take that all day long as, you know, we typically sell out of gas every day. And so, in a rising cost environment, like we saw in Q1, we are constantly putting more and more expensive gas in the ground versus our certain normal everyday competitors who sell far less volume than we do. So it compresses margins in rising cost environments.

Greg: We've been growing market share for a couple of years that are now in leaps and bounds.

Greg: We'll take that all day long.

As you know we.

Greg: We typically sell out of gas every day and so in a rising cost environment like we saw in Q1, we.

Greg: We are constantly putting more and more expensive gas in the ground versus our sort of normal everyday competitors yourself far less volume than we do.

Greg: So it compresses margin and rising cost environment. So that's exactly what we saw in the first quarter as oil and gasoline costs rose pretty precipitously, given what's going on in the world.

Robert W. Eddy: That's exactly what we saw in the first quarter as oil and gasoline costs rose pretty precipitously, given what's going on in the world. You know, that has gotten a bit better here in Q2. And so Q1 was below our plan by a couple million dollars, a few million dollars. And so Q2 so far is better.

Greg: That has gone a bit better here in Q2, so far and so.

Greg: Q1 was below our plan.

Call. It a couple of million dollars a few million dollars.

Greg: No.

Greg: Q2, so far is better gas is impossible to predict we don't try and do it quarter by quarter, we can tell you.

Robert W. Eddy: Gas is impossible to predict. We don't try and do it quarter by quarter. We can tell you with reasonable certainty about a year. And as we sit here today, our plan for the year is still a good one. We have not changed it.

Greg: Reasonable certainty.

Greg: A year.

Greg: As we sit here today, our plan for the year is still a good one we have not changed we're still confident we can continue to grow the business.

Robert W. Eddy: We're still confident we can continue to grow the business. We're still confident we can continue to grow the interaction of our gas business with our core business and get folks from the pumps into our clubs. And we're still confident that it's a profitable part of our business, and we'll drive. You know, we'll drive our bottom line.

Greg: Still confident we can continue to grow the interaction of our gas business with our core business and get folks from the pumps into our clubs.

Greg: And we're still confident that it's a profitable part of our business and will drive.

Greg: We'll drive our bottom line as well.

Robert W. Eddy: That's great, Bob. I guess my follow-up would be back on margins. I think, Laura, you said the gross merchandise margin from the credit card changeover was mostly, but not all, down because of that. Could you help unpack the rest of the credit card changeover and how that's impacting the top line? Margin SG&A.

Speaker Change: That's great I guess my follow up would be back on on margins I think Laura you said the merch margin from the credit card changeover was mostly but not all down because of that could you help unpack the rest of the credit card changeover and how thats impacting the top line.

Speaker Change: Margin SG&A.

Laura L. Felice: Yeah, good morning. So, you're right. The depression of the Q1 March margin rate was largely driven by the lapping of the co-brand. There is a component of it that is dragging down comp in the first quarter slightly. As I said before, that dissipates as we go into the remainder of the year. So, you know, as we look at Q2, Q3 and Q4, we expect that there won't be any disruption from the lapping of the co-brand, and it will be really core business March margins.

Speaker Change: Yeah.

Speaker Change: So.

Speaker Change: Youre right.

Speaker Change: What the.

Speaker Change: Depression.

Speaker Change #100: Q1 March margin rate was was largely driven by <unk>.

Speaker Change #100: Wrapping of co brand.

Speaker Change #100: There is a component of it that is dragging down comp in the first quarter slightly.

Speaker Change #100: As I said before that anticipate as we go into the remainder of the year. So.

Speaker Change #100: As we look at Q2, Q3 and Q4, we expect.

Speaker Change #100: That there won't be any disruption from the lapping of co brand and it will be really core business mark to margins.

Laura L. Felice: Again, like I already talked about, we expect that this will grow over the course of the year by about 20 bips, largely from our CMP efforts and own brand penetration and all the great work that our merchants are doing, thinking about value and assortment that we offer to our members every day.

Speaker Change #100: Again like I like I already talked about we expect that those will grow over the course of the year.

Speaker Change #100: 90 bps.

Largely from our CMP efforts.

Speaker Change #100: And owned brand penetration in all of the great work that our merchants are doing thinking.

Speaker Change #100: Thinking about value and assortment that we offer to our members every day.

Laura L. Felice: And just as a reminder, last year that switch was, the impact this year, I think was roughly a third of what it was last year, at least on the top line. I have that in my notes somewhere, but

Speaker Change #100: And just as a reminder, last year that switch was the impact. This year I think is roughly a third of what it was last year at least on the top line.

Speaker Change #100: I have that in my notes somewhere but.

Speaker Change #100: I want to make sure I got it right.

Speaker Change #100: Great.

Gregory Scott Melich: So, the transition was last year, first quarter. I don't know that we've quantified the number, but again, we'll kind of lap it, and it's a non-event for the remainder of the year. All right.

Speaker Change #100: So the transition was last year first quarter.

Speaker Change #101: I don't know that that we've quantified the number but.

Speaker Change #101: Again, we'll kind of lap it and its a non event for the remainder of the year.

Gregory Scott Melich: All right, that's great. Thanks and good luck.

Absent an outcomes alright, that's great thanks, and good luck.

Speaker Change #101: Okay.

Speaker Change #101: Okay.

Michael Allen Baker: The next question comes from the line of Mike Baker of CA Davidson. Your line is now open, please go ahead. Hi Mike, your line is open; please check that you're not on mute.

Speaker Change #102: The next question comes from the line of Mike Michael D. A Davidson. Your line is now open. Please go ahead.

Speaker Change #103: Hi, Mike Your line is open please check your mute.

Michael Allen Baker: My bad. Can you, I'll ask the sort of monthly cadence question. Can you talk about your trends throughout the quarter as the weather gets better here in the northeast? Does that business lose that business when it wasn't, you know, when the weather was bad, or does that business come back? And then follow up. I'll ask up front.

Speaker Change #104: My bad.

Can you all ask the monthly cadence question can you talk about your trends throughout the quarter as the weather gets better here in the northeast does that business.

Speaker Change #104: Do you lose that business when it wasn't you know what the weather was bad or does that business come back and then a follow up I'll ask upfront.

Michael Allen Baker: The dumb math suggests comps get better as we go through the year because comparisons are easier. And you talked about some things like that co-branded credit card pressure going away. Is that a correct assumption that comps should get better throughout the year?

Speaker Change #105: Dumb math, just comps get better as we go through the year because the comparisons are easier and you talked about some things like that co branded credit card.

Speaker Change #106: Yes, youre going away is that a correct assumption that comps should get better throughout the year. Thanks.

Robert W. Eddy: Good morning, Mike. You're pretty correct, comps will get better throughout the year. The way we planned it, part of it was the program rolling away, part of it was easier laps, part of its progress, frankly, as building a better business through things like Fresh 2.0 and general merchandise and signing up more members.

Speaker Change #107: Good morning, Mike.

Mike: You are.

Speaker Change #109: Youre pretty correct comps will get better throughout the year.

Speaker Change #110: That's the way we plan to part of it is the co brand rolling away part of it is easier laps part of its progress frankly, as we build a better <unk>.

Speaker Change #110: There are things like fresh viewpoint on general merchandise.

Robert W. Eddy: So, you know, as we talked about, As we've talked about, you know, we should get towards our long-term goals. At the end of the year, we knew this quarter would be a dogfight lapsing 10 points of inflation, and that's certainly true. Our 0.6 comp was a bit better than our plan, so we were happy with that. And I would imagine we see some progress from here as the year plays out. I forget the, oh, monthly cadence. I mean, there weren't any huge differences.

Speaker Change #110: Signing up more and more members so.

Speaker Change #110: As we've talked about.

Speaker Change #110: As we've talked about.

Speaker Change #110: We should get.

Speaker Change #110: Our long term algo.

Speaker Change #110: At the end of the year were.

Speaker Change #110: Sure we knew what we knew this quarter would be a it will be a dog fight lapping 10 points of inflation and that's certainly certainly true.

Speaker Change #110: <unk> six comp was a bit better than our plan. So we were happy with that.

Speaker Change #111: Uh huh.

Speaker Change #111: And I would imagine we see some progress from here as the year plays out.

Speaker Change #111: Forget the monthly cadence.

Speaker Change #111: No.

Robert W. Eddy: I will tell you, March was lower than February and April. I think that's no surprise given what we've all heard from everybody else who's reported. You know, ours was definitely in that same same place.

Speaker Change #111: They weren't huge differences I will tell you.

Speaker Change #111: March was lower than February and April I think that's no surprise given.

Speaker Change #111: We've all heard from everybody else has reported.

Speaker Change #112: Uh huh.

Ours was definitely in that same same place.

Robert W. Eddy: As we look at the GM business, you know, I don't want to belabor it. We do think it's weather-sensitive categories that have. I've driven it down. It's still very early in the summer seasonal year. So I don't think we've really lost any sales. I just think people are waiting for it. They wait until, you know, it's not 50 and raining. And there's no need to buy a patio set when it's when it's raining outside.

Speaker Change #112: As we look at the GM business.

Speaker Change #112: I don't want to belabor. It we do think it's weather sensitive categories.

Speaker Change #112: Driven it down.

Speaker Change #112: It's still very early in the summer seasonal year. So I don't think we've really lost any sales.

Speaker Change #112: I just think people waited.

Speaker Change #112: And until it's not 50% or anything.

Speaker Change #112: I need to buy a patio set when it's when it's raining outside so.

Robert W. Eddy: So, I do expect we'll see business pick up in the second quarter and, you know, this week's been nice in Boston, so hopefully, May will end on a strong note.

Speaker Change #112: I do expect we'll see that business pick up in the second quarter.

Speaker Change #112: Yeah.

Speaker Change #112: This week. This week has been nice in Boston, So hopefully hopefully may occur.

Speaker Change #112: Ended on a strong note.

Michael Allen Baker: I appreciate that. Thank you.

Yes.

Speaker Change #113: Thank you.

Mike: All right Mike Thanks.

Edward Joseph Kelly: The next question comes from the line of Edward Kelly of Wells Fargo. Your line is now open, please go ahead.

Speaker Change #114: The next question comes from the line of Kelly of Wells Fargo. Your line is now open. Please go ahead.

Edward Joseph Kelly: Yeah, hi, morning guys. I wanted to start with just a bit of clarification around membership fee growth this year. Bob, I think you mentioned that you expected maybe be a little bit about last year when everything is sort of set in number. Is that the exit rate that you're talking about? Is that a full year? I'm just, I'm just trying to get a better gauge of the like the step down. From Q1 there,

Mike: Yeah.

Speaker Change #115: Yes, hi, good morning, guys.

Kelly: I wanted to start.

Kelly: Yes first the clarification.

Kelly: Around around membership fee growth this year, Bob I think you mentioned that.

Kelly: You expected, maybe a little bit above.

Last year, when all is said and done but it is that the exit rate that youre talking about at that full year I'm just I'm, just trying to get a better gauge of like the step down.

From Q1 there.

Robert W. Eddy: Yeah, good morning. Thanks for the question. I was giving you a commentary on the full-year rate. So, you know, we were six and change for the full year last year. We are slightly north of that in our current version of the plan, but below the Q1 number.

Speaker Change #117: Yeah, Good morning, guys.

Speaker Change #118: Thanks for the question I was giving you.

Speaker Change #118: That's a commentary on our full year rate so.

Speaker Change #119: We were <unk>.

Speaker Change #119: Six and change for the full year last year.

Speaker Change #119: We are slightly north of that.

Speaker Change #119: Our current version of the plan.

Speaker Change #119: But below below the Q1 number.

Speaker Change #119: Yeah.

Robert W. Eddy: Got it. Okay.

Speaker Change #120: Got it Okay and then second question for you around income cohorts.

Speaker Change #121: I think I heard you say on the call that the that your lower income cohort.

Speaker Change #121: Was positive better than its been kind of in a while.

Speaker Change #122: That's not something I think we're hearing sort of elsewhere.

Speaker Change #123: Can you just talk a bit more about what you're seeing from that customer of that lapping snap are you seeing excellent share gains just curious as to what youre seeing there. Thank you.

Speaker Change #124: Yeah look I think we're seeing share gain there.

Speaker Change #124: We've talked about a couple of things over time.

Speaker Change #124: Those folks are.

Speaker Change #124: We've been very sensitive to.

Speaker Change #124: The direction of the.

Speaker Change #124: Government benefits when they got more they're spending would go up when they.

Speaker Change #124: Unless theyre spending would go down.

Edward Joseph Kelly: And then a second question for you around income cohorts. I think I heard you say on the call that your lower income cohort was positive, better than it's been, you know, kind of for a while. That's not something I think we're hearing sort of elsewhere.

That's largely not been the case with us in the last year or so.

Robert W. Eddy: Can you just talk a bit more about what you're seeing from that customer, is that laughing at SNAP, or are you seeing an incremental share game? Just curious as to what you're seeing there. Thank you. Yeah, look, I think we're seeing a share game there.

Speaker Change #124: They have been spending more of their non government benefit wallet with us.

Robert W. Eddy: You know, we've talked about a couple of things over time. Those folks have always been very sensitive to the direction of government benefits. When they got more, their spending would go up when they, Unless their spending would go down. That's largely not been the case with us in the last year or so. They have been spending more of their non-government benefit wallet with us, which we've frankly never seen before last year.

Speaker Change #124: Which frankly never seen before with last year. So.

Robert W. Eddy: So that tells me we've convinced them we are a destination for them. We can provide them with the right value, and they need that value more than anybody else. So we're particularly pleased after a couple of quarters of total spending in that cohort going down, that that spending has turned back around to be slightly positive. I don't think it's a huge source of growth, given the number of dollars in their wallets, just to be fair about it.

Speaker Change #124: That tells me we've convinced them that.

We are a destination for them, we can provide them the right value.

Speaker Change #124: And.

Speaker Change #124: They need the value more than anybody else.

Speaker Change #124: So we're particularly pleased after a couple of quarters of total spending in that cohort going down that.

Speaker Change #124: That spending has turned back around to be slightly positive.

Charles Edward Cerankosky: But we're very pleased that they continue to come to see us. Their trips are holding in there nicely. We're putting the right stuff in their baskets, and hopefully, they'll continue to do that. We're very pleased with their behavior.

Speaker Change #124: It's a huge source of growth given the number of <unk> in their wallet.

Speaker Change #124: Just to be fair about it but.

Speaker Change #124: We're very pleased that they continue to come to see us their trips are holding in there nicely.

Speaker Change #124: They put it in the right stuff in their basket.

Speaker Change #124: And hopefully they continue to do that we're very pleased with their behavior. So far.

Speaker Change #125: Okay. Thank you.

Speaker Change #125: Sure.

Speaker Change #125: Okay.

Charles Edward Cerankosky: The next question comes from the line of Chuck Cheranovsky of North Coast Research. Your line is now open; please go ahead.

Speaker Change #126: The next question comes from the line of Chuck Cerankosky Northcoast Research. Your line is now open. Please go ahead.

Charles Edward Cerankosky: Good morning everyone. Bob and Laura, if you go back to the gross margin line again, you talked about units improvement. Does that reflect an increased number of clubs, as well as an average lower retail per item purchased?

Speaker Change #127: Good morning, everyone.

Speaker Change #128: Laura if you go back to the.

Speaker Change #129: Gross margin line again, you talked about units improvement does that reflect.

Speaker Change #129: An increased number of clubs as well as.

Speaker Change #129: Average lower retail per item purchased.

Laura L. Felice: Hi Chuck. When we talk about units, it's comp units, right? So, units in our comp base. Therefore, new clubs would be excluded.

Chuck: Hi, Chuck when we when we talk about units its comp units right. So.

Speaker Change #131: Units in our in our comp base on new close would would be excluded.

Speaker Change #131: It's really a good measure of.

Robert W. Eddy: It's really a good measure of what our, what our member base is thinking about. They're certainly looking for value at this point. They're coming to see us.

Speaker Change #131: What are what our member basis is thinking about there certainly.

Speaker Change #131: Looking for value at this point.

Speaker Change #131: And.

Robert W. Eddy: So I think it's a good mark of share of wallet, how much we're picking up there. We certainly have a tough lap from an inflation perspective, and so if that gain in share continues and the inflation lap wanes, I would expect comps to grow from here. So we're pleased with the unit behavior, and frankly, the traffic. You know, look at the momentum we have in the business.

Speaker Change #131: They're coming to see us so I think it's a good mark of share of wallet.

Speaker Change #131: How much were picking up there.

Speaker Change #131: Certainly.

Tough tough lap from inflation perspective, and so if that.

Speaker Change #131: Gain in share continues and the inflation lap wanes.

Speaker Change #131: I would expect.

Speaker Change #131: Comps to grow from here. So we're pleased with the with the.

Speaker Change #131: Unit behavior, and frankly, the traffic I mean, we'll be running three points of traffic quarter on quarter as is a fantastic.

Speaker Change #131: <unk>.

Speaker Change #131:

Speaker Change #131: Look at the momentum we have in the business.

Charles Edward Cerankosky: And when you're talking about owned brands, business, can you quantify the pickup in that, what impact that had on the... [inaudible] sales comps simply because the merchandise is priced lower?

Speaker Change #131: And when you're talking about owned brands business.

Speaker Change #131: <unk>.

Speaker Change #132: Can you quantify what is the pickup in that what impact that had on the.

Speaker Change #132: Comps.

Speaker Change #133: Sales comps simply because the merchandize is priced lower.

Robert W. Eddy: Yeah, look, it's usually a drag on comps. Certainly, there are cases where members are getting into a new category for the first time.

Speaker Change #134: Yes look it's usually a drag on comps.

Speaker Change #135: Certainly there are cases, where members are getting into a new category for the first time, we talked about that on our prepared remarks with our.

Robert W. Eddy: We talked about that in the prepared remarks with our food storage bags. But a lot of the own-brand increase is just switching from brands given that they tend to be 30% cheaper. So just remember, you know, that calculus, right? 30% cheaper than the brand, and there are about 1000 basis points more accretive to us from a margin perspective. So, you know, for every percentage point of growth, tends to be a little bit of a comp headwind, but it tends to give us 10 bits of margin rate growth as well.

Speaker Change #135: Our food storage bags.

Speaker Change #135: But a lot of.

Speaker Change #135: Lot of the owned brand increases just switching from brands given they tend to be 30% cheaper.

Speaker Change #135: So just remember.

Speaker Change #135: Sure.

Speaker Change #135: That.

Speaker Change #135: Calculus, right, 30% cheaper than the brand and there are about 1000 basis points more accretive to us from a margin perspective so.

Speaker Change #135: For every every percentage point of growth tends to be a little bit.

Speaker Change #135: Bit of a comp headwind, but it tends to give us 10 bps of.

Speaker Change #135: Margin rate growth as well so.

Robert W. Eddy: You know, you're not going to see the own brand business really in the comp, all that. You're going to see it in margin, you're going to see it in repeat shopping, renewal rate, member satisfaction, that kind of thing.

Speaker Change #136: Uh huh.

Speaker Change #136: Youre not going to see the owned brand business really on the comp all that much.

Speaker Change #136: You're going to see it in margin youre going to see it in.

Speaker Change #136: Repeat shopping renewal rate member satisfaction that kind of thing.

Charles Edward Cerankosky: Thank you. Good luck for the rest of the year.

Speaker Change #137: Thank you good luck for the rest of the year.

Chuck: Thanks Chuck.

Operator: This now concludes our Q&A session, so I'd like to hand the conference back over to Bob Eddy, Chairman and CEO, for closing remarks.

Speaker Change #138: This now conclude dusty.

Speaker Change #139: Q&A session I would like to hand, the conference back over to Bob Etsy, Chairman and CEO for closing remarks.

Robert W. Eddy: Great, thank you. Thanks for your time this morning, everybody. We are very proud of the results we reported to you this morning, and we've got tremendous confidence in our business going forward. So, I wish you all a great summer, and we will talk to you at the end of the second quarter. Thanks so much.

Robert W. Eddy: Great. Thank you. Thanks. Thanks for your time. This morning, everybody. We are very proud of the results. We reported to you. This morning, and we've got tremendous confidence in our business going forward. So.

Robert W. Eddy: I wish you all a.

Robert W. Eddy: Summer and we will will talk to you at the end of the second quarter. Thanks, So much.

Operator: This concludes today's conference. You may now disconnect your lines.

Speaker Change #140: This concludes today's conference you may now disconnect your line.

Speaker Change #140: [music].