Q2 2024 BJ's Wholesale Club Holdings Inc Earnings Call

August 22, 2024

Operator: Hello, everyone, and welcome to BJ's Wholesale Club Holdings, Inc, second quarter fiscal 2024 earnings conference call.

Kiki: hello everyone and welcome to b j's who se club holding in second quarter fiscal two thousand and twenty four andning's conference call my name is kiki and i will be calledord may your callt today

Kiki: My name is Kiki, and I will be coordinating your call today.

Kiki: After the speaker's remarks, there will be a question and answer session.

Kiki: after the speakerof remarks there will be a question and ans wersession if you like to ask a question please press stf followed by one on your tele phone y back if you change your mind please p a followed by two i now have the call over to your host katy park please go ahead

Kiki: If you'd like to ask a question, please press star followed by one on your telephone keypad.

Kiki: If you change your mind, please press star followed by two.

Kiki: I now pass the call over to your host, Katie Park.

Katie Park: Please go ahead.

Katy Park: good morning and welcome to be j's second quarter of fiscal two thousand and twenty-four earnings call with me today or bob eddyie chairman and chiefs executive officer laura fepolice chief financial officer and billworner executive vice president strategy and development

Katie Park: Good morning, and welcome to BJ's second quarter fiscal 2024 earnings call.

Katie Park: With me today are Bob Eddy, Chairman and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development.

Katie Park: Please remember that during this call, we may make forward-looking statements, within the meaning of the federal securities laws.

Speaker Change: please remember that during this call we may make forward-looking statements within the meaning ofthefederal securities laws

Katie Park: These statements are based on current expectations, and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call.

Speaker Change: these statements are based on current expectitations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call

Katie Park: 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.

Speaker Change: please see the riskfactor sections of our most recent form ten -k and form ten -q filed with the sec for a description of those risks and uncertainties

Katie Park: Finally, please note that on today's call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation, or as a substitute for the financial information presented in accordance with GAAP.

Speaker Change: finally please note that on today's call we will refer to certain non-gaap financial measures that we believe will provide useful information for investors the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with debap

Katie Park: Please refer to today's press release and latest investor presentation, posted on our investor relations website for a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP.

Speaker Change: please refer to today's press release and atest investor presentation posted on our investor relations website for a reconciliation of these non-gaap financial measures to the most comparable measures prepared in accordance with gaap and now i'll turn the call over to bob

Katie Park: And now I'll turn the call over to Bob.

Bob Eddy: Good morning.

Bob Eddy: Thank you for joining us today.

Bob: good morning thank you for joining us today

Bob: our second quarter results demonstrate the power of our business model and our unrelenting focus on delivering value especially at the time when members need it most

Bob Eddy: Our second quarter results demonstrate the power of our business model, and our unrelenting focus on delivering value. Especially at a time when members need it most. We drove quarterly comps and profits that were higher than anticipated, while making considerable investments in long-term initiatives that we believe will drive our business.

Bob: we drove quarterly comps and profits that were higher than anticipated while making considerable investments in long-term initiatives that we believe will drive our business

Bob Eddy: For the 10th consecutive quarter, we drove traffic gains in our business. We also grew market share inside our clubs and at the gas pumps.

Bob: for the tenth consecutive quarter we drove traffic gains in our business

Bob: we also grew market share inside our clubs at the gas pumps

Bob Eddy: Those short-term gains are great, but we're playing a long game, and we're also seeing striking progress in our long-term initiatives. Perhaps the greatest marker of long-term progress, is our 9% growth in membership fees. This was driven by the largest member count growth, in a quarter since the pandemic. We also saw great growth in premium tier memberships, and strong renewal rates.

Bob: those shortterm gains are great but we're playing a long game and we're also seeing striking progress in our long-term initiatives

Bob: perhaps the greatest marker of long-term progress is our nine percent growth in membership fees

Bob: this is driven by the largest member account growth in a quarter since the pandemic

Bob: we also saw great growth in premium your memberships and strong renewal rates

Bob Eddy: Our digital business continues to grow in incredible fashion, positioning us for the future.

Speaker Change: our digital business continues to grow an incredible fashion posisting us for the future

Bob Eddy: Further, our real estate pipeline is growing faster than it has in years.

Speaker Change: further our real estate pipeline is growing faster than it has in the years

Bob Eddy: These investments are heavy today, but in the years ahead, we will be thrilled that we made them.

Speaker Change: these investments are heavy today but in the years ahead we will be thrilled that we made them

Bob Eddy: Comparable club sales, excluding gas sales, grew by 2.4% in the second quarter. Our compelling value proposition led to accelerating traffic in the quarter, that contributed four percentage points to our comp. We believe our members are rewarding us, for our merchandising improvements and amazing value. As a result, we gained grocery market share, in both units and dollars in the quarter. We gained share at our gas stations, too, with 5% comp gallon growth in the second quarter.

Speaker Change: comparable club sales excluding gas sales grew by two point four percent in the second quarter

Speaker Change: our compelling value proposition led to accelerating traffic in the quarter that contributed four percentage points to our comp

Speaker Change: we believe our members of rewarding us for our merchandising improvements and amazing value

Speaker Change: as a result we gained grocery market share in both units and dollars in the quarter

Speaker Change: we gain shared at our gas station suit with five percent compp gallon growth in the second quarter

Bob Eddy: Our gas performance compares to the single-digit declines currently being reported by the broader industry. Our perishables, grocery, and sundries division delivered close to 3% comp growth in the second quarter, as more and more members rely on BJ's for their household essentials, and more often, too. Our perishables business continued to lead this growth, and we're pleased that our work to strengthen our perishables offering is delivering results. We saw broad-based growth across this division, anchored by fresh produce, dairy, and meat.

Speaker Change: our gas performance compares to the single-digit declines currently being reported by the broader industry

Operator: Hello everyone, and welcome to BJ's Wholesale Club Holdings Inc.

Operator: Hello everyone, and welcome to BJ's Wholesale Club Holdings Inc. 2nd quarter fiscal 2024 and its conference call.

Speaker Change: our perishablles grocery and sundryies division delivered close to three percent compp growth in the second quarter as more and more members rely on bj'sfor their household essentials and more often to

Operator: 2nd quarter fiscal 2024 and its conference call.

Operator: My name is Kiki, and I will be called maybe in your call today.

Operator: My name is Kiki, and I will be called maybe in your call today. After the speaker's remarks, there will be a question and answer session. If you like to ask a question, please press star, followed by one on your telephone keypad. If you change your mind, please press star, followed by two.

Operator: After the speaker's remarks, there will be a question and answer session. If you like to ask a question, please press star, followed by one on your telephone keypad.

Speaker Change: our parishabls business continue to lead this growth and work' pleased that our work to strengthen our parial s offering is delivering results we saw broad-based growth across this division anchored by fresh produce vary

Operator: If you change your mind, please press star, followed by two.

Operator: I now pass the call over to your host, Katie Park.

Operator: I now pass the call over to your host, Katie Park. Please, go ahead.

Bob Eddy: Our general merchandise business improved sequentially from the first quarter and delivered comp growth of over 1% in the second quarter. Our seasonal GM comps improved dramatically from the first quarter, increasing over 1,000 basis points sequentially. Better weather, coupled with great value, led to favorable seasonal appliance sales in the quarter.

Operator: Please, go ahead.

Katie Park: Good morning, and welcome to BJ's 2nd quarter fiscal 2024 earnings call.

Speaker Change: our general merchandise business improves sequentially from the first quarter and delivered comp growth of over one percent in the second quarter

Bob Eddy: With me today, our Bob Eddy, Chairman, and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development. Please remember that during this call, we may make forward-looking statements within the meeting of the federal securities laws. These statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call.

Speaker Change: our seasonal gm comps improved dramatically from the first quarter increasing over a thousand basis points sequentially

Speaker Change: better weather or coupled with great value led to favorable seasonal appliance sales in the quarter

Bob Eddy: It's worth noting that members remained discerning in their purchasing behavior, which was evident in big-ticket seasonal categories, such as patio sets and structures.

Speaker Change: it's worth noting that members remain discerning in their purchasing behavior which was evident in big ticket seasonal categories such as patiosets and structures

Bob Eddy: Nonetheless, our members are spending with us, recognizing the enhancements in the value and quality of our GM offering. Our assortment gets more and more exciting each quarter, and we are presenting it in the right way, at the right time, and at the right price.

Bob Eddy: Please see the risk factor sections of our most recent form 10K and form 10Q files with the SEC for a description of those risks and uncertainties. Finally, please note that on today's call, we will refer to certain non-gap 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 GAP. Please refer to today's press release, and ladies investor presentation posted on our investor relations website for a reconciliation of these non-gap financial measures to the most comparable measures prepared in accordance with GAP.

Speaker Change: nonetheless our members are spending with us recognizing the enhancements in the value and quality of ourgm offering

Speaker Change: our assortment gets more and more exciting each quarter and we are presenting it in the right way at the right time and at the right price

Bob Eddy: We believe our treasure hunt is gaining traction. Our apparel, consumer electronics, and home categories all performed well in the second quarter, with positive comps similar to those seen in the first quarter. Apparel is an area we are extremely proud of. Our work in this category continues to pay off, with high single-digit comp growth in the quarter, led by increases in both unit volumes and AUR. We believe the combination of an elevated assortment, compelling value, clean presentation, and powerful marketing is driving our success in the category.

Speaker Change: we believe our treasure hunt this gaining traction

Speaker Change: yeah

Speaker Change: our apparel consumer electronics and home categories all performed well in the second quarter with positive comps similar to those scene in the first quarter

Speaker Change: apparel as an area we are extremely proud of our work in this category continues to pay off with high single-digit comp growth in the quarter led by increases in both unit volumes and a

Bob Eddy: And now I'll turn the call over to Bob. Good morning. Thank you for joining us today. Our second quarter results demonstrate the power of our business model and our unrelenting focus on delivering value, especially at a time when members need it most. We drove quarterly comps and profits that were higher than anticipated while making considerable investments in long-term initiatives that we believe will drive our business. For the 10th consecutive quarter, we drove traffic gains in our business.

Speaker Change: we believe the combination of an elevative assortment compelling value clean presentation and powerful marketing is driving our success in the category

Katie Park: Good morning, and welcome to BJ's 2nd quarter fiscal 2024 earnings call.

Bob Eddy: With me today, our Bob Eddy, Chairman, and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development.

Bob Eddy: Please remember that during this call, we may make forward-looking statements within the meeting of the federal securities laws.

Bob Eddy: Our home business also delivered strong unit volumes, despite the choppy consumer environment.

Speaker Change: our home business also delivered strong unit volumes despplayite the choppy consumer environment

Bob Eddy: And in consumer electronics, we continue to win with televisions and audio categories, producing double-digit unit growth year-over-year.

Bob Eddy: These statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call.

Speaker Change: and in consumer electronics we continue to win with televisions and audio categories producing double-digit unit growth year-rooverpe-year

Bob Eddy: For BJs, our consumables offering is the driver of trips today.

Bob Eddy: Please see the risk factor sections of our most recent form 10K and form 10Q files with the SEC for a description of those risks and uncertainties.

Speaker Change: for bj's our consumables offering is the driver of trips today moving forward we see general merchandise also inspiring the shop driving incremental trips and expanding members baskets

Bob Eddy: Moving forward, we see general merchandise also inspiring the shop, driving incremental trips and expanding members' baskets. Naturally, as members' spend and trips grow, we expect this behavior to strengthen loyalty and membership renewals. This is why improving general merchandise is a significant opportunity for the long-term growth of this company.

Bob Eddy: Finally, please note that on today's call, we will refer to certain non-gap 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 GAP.

Bob Eddy: We also grew market share inside our clubs and at the gas pumps. Those short-term gains are great, but we're playing a long game, and we're also seeing striking progress in our long-term initiatives. Perhaps the greatest marker of long-term progress is our 9% growth in membership fees. This was driven by the largest member count growth in a quarter since the pandemic. We also saw a great growth in premium tier memberships and strong renewal rates.

Bob Eddy: Please refer to today's press release, and ladies investor presentation posted on our investor relations website for a reconciliation of these non-gap financial measures to the most comparable measures prepared in accordance with GAP.

Speaker Change: naturally as members spend and trips grow we expect this behavior to strengthen loyalty and membership renewals

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

Speaker Change: this is why improving gen merchandises a significant opportunity for the long-term growth of this company

Bob Eddy: Our general merchandise performance this quarter is a testament to the progress we continue to make in our GM transformation efforts. I'm confident that we have the right team in place to realize the significant potential we see in this division.

Bob Eddy: Good morning.

Speaker Change: our generour merchandise performance this quarter is a testam of the progress we continue to make in our gm transformation efforts

Bob Eddy: Thank you for joining us today.

Speaker Change: i'm confident that we have the right team in place to realize the significant potential we see in this division

Bob Eddy: Our second quarter results demonstrate the power of our business model and our unrelenting focus on delivering value, especially at a time when members need it most. We drove quarterly comps and profits that were higher than anticipated while making considerable investments in long-term initiatives that we believe will drive our business.

Bob Eddy: Our digital business continues to grow in incredible fashion, positioning us for the future. Further, our real estate pipeline is growing faster than it has in years. These investments are heavy today, but in the years ahead we will be thrilled that we made them. Comparable club sales, excluding gas sales, grew by 2.4% in the second quarter. Our compelling value proposition led to accelerating traffic in the quarter that contributed 4 percentage points to our comp.

Bob Eddy: Our four strategic priorities are critical to our long-term success. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. We are making meaningful strides in each of these areas.

Speaker Change: our vore strategic priorities are critical to our long-term success as a reminder of these priorities are improving memberof loyalty giving our members of an unbeatable shopping experience delivering value conveniently and growing our footprint

Bob Eddy: Our membership momentum is strong and growing. Our continued success in growing both the size and quality of the membership resulted in another robust membership fee income quarter with 9.1% year-over-year growth in the second quarter.

Speaker Change: we are making meaningful strides in each of these areas

Bob Eddy: For the 10th consecutive quarter, we drove traffic gains in our business. We also grew market share inside our clubs and at the gas pumps.

Speaker Change: our membership momentum is strong and growing our continued success in growing both the size and quality of the membership resulted in another robust membership fee income quarter with nine point one percent year-over-year growth in the second quarter

Bob Eddy: Those short-term gains are great, but we're playing a long game, and we're also seeing striking progress in our long-term initiatives.

Bob Eddy: We believe our members are rewarding us for our merchandising improvements and amazing value. As a result, we gained grocery market share in both units and dollars in the quarter. We gain share at our gas station to two with 5% comp gallon growth in the second quarter. Our gas performance compares to the single digit declines currently being reported by the broader industry. Our perishables, grocery and sundries division delivered close to 3% comp growth in the second quarter as more and more members rely on BJ's for their household essentials and more often too.

Bob Eddy: And finally, I'd like to thank all of you for joining us today.

Bob Eddy: Perhaps the greatest marker of long-term progress is our 9% growth in membership fees. This was driven by the largest member count growth in a quarter since the pandemic. We also saw a great growth in premium tier memberships and strong renewal rates.

Bob Eddy: Thank you so much for joining us.

Speaker Change: member accounts grew both on a year-over-year and sequential basis

Bob Eddy: We hope that you enjoyed the conversation.

Bob Eddy: And we hope that you'll join us again next year.

Speaker Change: even better our compp clubs contributed about two -thirds of that member growth that's promising to see that we are expanding our member base organically in our existing markets through both renewals and effective acquisition efforts

Bob Eddy: Member counts grew both on a year-over-year and sequential basis. Even better, our comp clubs contributed about two-thirds of that member growth.

Bob Eddy: It's promising to see that we are expanding our member base organically in our existing markets through both renewals and effective acquisition efforts.

Speaker Change: this combined with the benefit of new clubs growve the largest overall member growth in any quarter since the pandemic year in fiscal two thousand and twent

Bob Eddy: This is our next membership milestone of 7.5 million members in the back half of the year.

Speaker Change: we expect to reach our next membership milestone of sevenvent point five million members in the back half of the year

Bob Eddy: Our perishables business continue to lead this growth and we're pleased that our work to strengthen our perishables offering is delivering results. We saw broad-based growth across this division anchored by fresh produce dairy. Our general merchandise business improves sequentially from the first quarter and delivered comp growth of over 1% in the second quarter. Our seasonal GM comps improved dramatically from the first quarter increasing over a thousand basis points sequentially. Better weather coupled with great value led to favorable seasonal appliance sales in the quarter.

Bob Eddy: In the second quarter, we improved our higher-tier membership penetration to 39%, led by continued double-digit year-over-year growth in our highest 1-plus tier. 1-plus members pay the premium $110 fee and hold our co-brand credit card. These are our most loyal and highest-spending members, exhibiting the greatest lifetime value. Moreover, growth in our co-brand member base has translated to even greater growth in total credit card spend.

Speaker Change: in the second quarter we improved our higher -here membership penetration to thirty-nine percent led by continued double-digit year-over-year growth in our highest one -plus year

Speaker Change: one -plus members pay the premium one hundred and ten dollar fee and hold our co-brand credit card these are our most loyal and highest spending members exhibiting the greatest lifetime value

Speaker Change: moreover our growth in our co-brand member base has translated to even greater growth in total credit card spent this suggestedthat our members are having a great experience with the new program

Bob Eddy: This suggests that our members are having a great experience with the new program.

Bob Eddy: We will remain focused on maintaining our strength in membership to drive long-term value for both our members and shareholders.

Bob Eddy: It's worth noting that members remain discerning in their purchasing behavior which was evident in big ticket seasonal categories such as patio sets and structures. Nonetheless, our members are spending with us recognizing the enhancements in the value and quality of our GM offering. Our assortment gets more and more exciting each quarter and we are presenting it in the right way at the right time and at the right price. We believe our treasure hunt is gaining traction.

Speaker Change: we will remain focused on maintaining our strengthed membership to drive long-term value for both our members and shareholders

Bob Eddy: A great shopping experience leads to repeat trips, greater wallet share, and better loyalty. This is why we continually strive to enhance the member experience through improvements in our merchandising, digital, and in-club conveniences, all while we aim to deliver unbeatable value.

Speaker Change: a greatade shopping experience leads to repeat trips greater wallet share and better loyalty

Speaker Change: this is why we continually strive to enhance the member experience through improvements in our merchandising digital and inclub convenience to this

Bob Eddy: At this point on our last call, we delved into our fresh initiatives, including Fresh 2.0. Recall that our work was built on member insights, along with our desire to cement BJs as the weekly destination for our members' shopping needs. When we win our members' produce and meat shop, we win their first shop of the week, thereby increasing trips and spend, and resulting in more loyal members over time. Through our fresh initiatives, we worked hard over the past year to bring excitement and even more freshness to our produce offering.

Speaker Change: allwhile we aim to deliver unbeatable value

Bob Eddy: Our apparel consumer electronics and home categories all performed well in the second quarter with positive comp similar to those seen in the first quarter. Apparel is an area we are extremely proud of. Our work in this category continues to pay off with high single-digit comp growth in the quarter led by increases in both unit volumes and AUR. We believe the combination of an elevated assortment, compelling value, clean presentation and powerful marketing is driving our success in the category.

Speaker Change: at this point on our last call we delt into our fresh initiatives including fresh two point out

Speaker Change: recall that our work was built on member insights along with our desire to cement v js as a weekly destination for our members shopping needs

Speaker Change: when we win our members proproduce and meatshop we win their first shop of a week there by increasing trips and spend and resulting in more loyal numbers over time

Speaker Change: through our fh initiatives we work hard over the past year to bring excitement and even more freshness to our produces offering

Bob Eddy: With full control over our perishable distribution centers, we improved supply chain velocity where it mattered. We expanded vendor relationships to increase in-stocks and put new seasonally relevant produce on rotation. We implemented essential fresh training across our clubs. We upgraded our marketing and presentation. By the end of July, we completed the rollout of our standalone coolers stationed at our front entrances so that our members are captivated by our high-quality, low-priced seasonal produce as soon as they arrive in our clubs.

Bob Eddy: Our home business also delivered strong unit volumes despite the choppy consumer environment. And in consumer electronics, we continue to win with televisions and audio categories producing double digit unit growth year over year. For BJs, our consumables offering is the driver of trips today. Moving forward, we see general merchandise also inspiring the shop, driving incremental trips and expanding members baskets. Naturally, as members spend and trips grow, we expect this behavior to strengthen loyalty and membership renewals.

Speaker Change: with full control over our perishable distribution centers we improved supply chain velocity where it mattered

Speaker Change: we expanded vendor relationships to increase in stocks and put new seasonally relevant produce on rotation

Bob Eddy: Our digital business continues to grow in incredible fashion, positioning us for the future.

Speaker Change: we implemented essential fresh training across our clubs

Bob Eddy: Further, our real estate pipeline is growing faster than it has in years. These investments are heavy today, but in the years ahead we will be thrilled that we made them.

Speaker Change: we upgraded our marketing and presentation

Speaker Change: by the end of july we completed the rollout of our stand-alone coolers stationed at our front entrces so that our members are captivated by our high-quality low-priced seasonal produce as soon as they arrive in our clubs

Bob Eddy: As we assess our second quarter results, it's clear that we are increasingly gaining our members' trust for their fresh groceries. In fact, our produce categories delivered low double-digit comp growth in the second quarter, almost entirely driven by unit volumes.

Bob Eddy: This is why improving general merchandise is a significant opportunity for the long-term growth of this company. Our general merchandise performance discord is a testament to the progress we continue to make in our GM transformation efforts. I'm confident that we have the right team in place to realize the significant potential we see in this division. Our four strategic priorities are critical to our long-term success. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently and growing our footprint.

Speaker Change: as we assess our second quarter results it's clear that we are increasingly gaining our members trust for their fresh groceries

Speaker Change: in fact our proestce categoriesized delivered low double-digit comp growth in the second quarter almost entirely driven by unit volumes

Bob Eddy: What's even more encouraging is that we drove over 90 basis points of year-over-year growth in produce transaction penetration as well.

Speaker Change: what's even more encouraging is that we drove over ninety basis points of year-over-year growth improduce transaction penetration as well

Bob Eddy: While still early, we are thrilled with how our members are responding to our efforts, and we're excited about what this could mean for member loyalty over the long term.

Speaker Change: while still early we are thrilled how members are responded to our efforts and we're excited about what this could mean for member of loyalty over the long term

Bob Eddy: The structural benefits of our club model allow us to regularly invest in value proposition. As such, our pricing position remains strong. In addition to our inherent advantages, we continue to execute on our Category Management Process, or CMP, across the business. CMP is a muscle that we've worked to build over the years, but our latest iteration is far more comprehensive in approach and, crucially, built on our members' feedback. As part of this process, we are fine-tuning our assortment to drive better member engagement and share of wallet while optimizing our costs.

Bob Eddy: We are making meaningful strides in each of these areas. Our membership momentum is strong and growing. Our continued success in growing both the size and quality of the membership resulted in another robust membership fee income quarter with 9.1% year over year growth in the second quarter. Remember counts for both on a year-over-year and sequential basis. Even better, our comp clubs contributed about two-thirds of that member growth. It's promising to see that we are expanding our member base organically in our existing markets through both renewals and effective acquisition efforts.

Speaker Change: the structural benefits of our clubb modelallow us to regularly invest in value proposition

Speaker Change: as such our pricing position remains strong in addition to our inherent advantages we continue to execute on our category management process or cmp across the business

Speaker Change: cp is a muscle that we've worked to build over the years but our latest siteruration is far more comprehensive in approach and crucially built on our members feedback

Speaker Change: as part of this process we are fine tuning our assortment to drive better remember engagement and share wal while optimizing our costs

Bob Eddy: This affords us the flexibility to deliver value to our members in a number of ways.

Speaker Change: this affororts us the flexibility to deliver value to our members in a number of ways

Bob Eddy: For example, while inflation has moderated this year, consumers are still digesting prices that are significantly higher than they were two years ago.

Bob Eddy: This, combined with the benefit of new clubs, grew up the largest overall member growth in any quarter since the pandemic year in fiscal 2020. We expect to reach our next membership milestone of 7.5 million members in the back half of the year. In the second quarter, we improved our higher tier membership penetration to 39 percent, led by continued double-digit year-over-year growth in our highest one-plus tier. One-plus members pay the premium $110 fee and hold our co-brand credit card.

Speaker Change: for example while inflation has moderated this year consumers are still digesting prices that are significantly higher than they were two years ago

Bob Eddy: In recent months, the cost of some key dairy and protein articles is climbing once again. These frequently purchased items, such as milk and eggs, are putting outsized pressure on members' baskets. We have invested considerably in order to help our members make their baskets work within the confines of their budgets.

Speaker Change: in recent months the cost of some key v improtein articles as climbing once again

Speaker Change: these frequently purchased items such as milk and ggs are putting outsized pressure on memberss baskets

Speaker Change: we have invested considerably in order to help our members make their baskets work within the confines with their budgets

Bob Eddy: Investing in value is part of our DNA and what our members expect from BJ's.

Speaker Change: investing in value as part of the rdna and what our members exspectrum b days

Bob Eddy: These investments may pressure our short-term results but will power our business in the future.

Bob Eddy: These are our most loyal and highest spending members, exhibiting the greatest lifetime value. Moreover, growth in our co-brand member base has translated to even greater growth in total credit card spend. This suggests that our members are having a great experience with the new program. We will remain focused on maintaining our strength and membership to drive long-term value for both our members and shareholders. A great shopping experience leads to repeat trips, greater wallet share, and better loyalty. This is why we continually strive to enhance the member experience through improvements in our merchandising, digital, and in-club conveniences, all while we aim to deliver unbeatable value.

Speaker Change: these investments made pressure our short-term results but will power our business in the future

Bob Eddy: Our accelerating traffic and units in the second quarter tell us we're making the right decisions to take care of the families who depend on us and deliver growth longer term.

Speaker Change: our accelerating traffic and units in the second quarter tell us we're making the right decisions to take care of the families who depend on us and deliver growth longer term

Bob Eddy: Our own brands, Wellesley Farms and Berkeley Jensen, continue to provide members with high-quality products at substantial value. Over 95% of our own brand's products earn ratings of 4 out of 5 stars or more, demonstrating the rigor in which our teams ensure that we have the best combination of assortment, quality, and price, which is consistently a significant value to the comparable national brand. We recently relaunched our Wellesley Farms Snack Nuts program and our cashews have earned 4.9 stars.

Speaker Change: our own brands wealthy farms berkeley joensen continue to provide members with high-quality products at substantial value

Speaker Change: over ninety-five percent of our own brands products earn ratings of four out of five stars or more demonstrating the rigor in which our teams ensure that we have the best combination of assortment quality and price which is consistently a significant value to the comparable national brand

Bob Eddy: Comparable club sales, excluding gas sales, grew by 2.4% in the second quarter. Our compelling value proposition led to accelerating traffic in the quarter that contributed 4 percentage points to our comp. We believe our members are rewarding us for our merchandising improvements and amazing value. As a result, we gained grocery market share in both units and dollars in the quarter.

Speaker Change: we recently relaunched our wellalthy farm snacknuts program and our cash ws have earned four point nine stars

Bob Eddy: Our new Berkeley Jensen food storage bags have also received glowing reviews, with top-selling products earning 4.8 stars.

Bob Eddy: At this point in our last call, we dealt into our fresh initiatives, including fresh 2.0. Recall that our work was built on member insights, along with our desire to cement BJ's as a weekly destination for our members shopping needs. When we went on members' produce and meet shop, we win their first shop of the week thereby increasing trips and spend and resulting in more loyal members over time. Through our fresh initiatives, we worked hard over the past year to bring excitement and even more freshness to our produce offering.

Speaker Change: our new berkeley jentson food storage bags have also received glow interviews with top selling products earnings four point eight stars

Bob Eddy: We're growing our own brand's sales penetration each quarter and remain confident in our goal of reaching 30% in the future.

Speaker Change: we're growing our own brands sales penetration each quarter and remain confident in our goal of reaching thirty percent in the future

Bob Eddy: We work hard to save our members time in addition to money. Our digital capabilities continue to deliver these savings to our members in a way that is convenient for them. Our convenience offerings include buy online pickup in-club, curbside pickup, and same-day delivery.

Speaker Change: we work hard to save our members i m in addition to money our digital capabilities continue to deliver these savings to our memers in a waythat is convenient for them

Speaker Change: our convenience offerings include by online pickup and club curbside pickup and sanddayay delivery

Bob Eddy: In-club shoppers can also leverage our digital coupon gallery and skip the lines with Express Pay Checkup.

Bob Eddy: With full control over our perishable distribution centers, we improved supply chain velocity where it mattered. We expanded vendor relationships to increase in stocks and put new seasonally relevant produce on rotation. We implemented essential fresh training across our clubs. We upgraded our marketing and presentation. By the end of July, we completed the rollout of our standalone coolers stationed at our front entrances so that our members are captivated by our high-quality low-priced seasonal produce as soon as they arrive in our clubs.

Speaker Change: in club shoppers can also leverage our digital coupon gallery and skiip the lines with expressed pay checkup

Bob Eddy: Our digital business was basically non-existent five years ago and we've grown by leaps and bounds since then, making up about 12% of our merchandise sales today. Our momentum continued in the second quarter with digitally enabled comp sales up 22% year-over-year. We believe our digital conveniences are only getting better from here. In the second quarter, we launched our product location capabilities on our app.

Speaker Change: our digital business was basically non-exist in five years a we vegwn by elleaps and bon since then making up about tlve percent of our merchandise sales today

Speaker Change: our momentum continued in the second quarter with igally enabled comp sales up twenty-two percent year-over-year

Speaker Change: we believe our digital convenienceces are only getting better from here

Speaker Change: in the second quarter we launched our product location capabilities on our app

Bob Eddy: We like a treasure hunt but can now spare our members the scavenger hunt. This is one of the various enhancements enabled by our autonomous inventory robots, which are also driving labor efficiencies in our digital order fulfillment process.

Bob Eddy: We gain share at our gas station to two with 5% comp gallon growth in the second quarter. Our gas performance compares to the single digit declines currently being reported by the broader industry.

Bob Eddy: As we assess, our second quarter results, it's clear that we are increasingly gaining our members' trust for their fresh groceries. In fact, our produce category has delivered low double-digit compost in the second quarter, almost entirely driven by unit volumes. What's even more encouraging is that we drove over 90 basis points of year-over-year growth in produce transaction penetration as well. While still early, we have thrilled with how our members are responding to our efforts and we're excited about what this could mean for member loyalty over the long-term.

Speaker Change: we like to treasure hunt but can now stspare our members the sccage or h

Speaker Change: this is one of the various enhancements enabled by our autonomous inventory robots which are also driving labor efficiencies in our digital order fulfillment process

Bob Eddy: Our perishables, grocery and sundries division delivered close to 3% comp growth in the second quarter as more and more members rely on BJ's for their household essentials and more often too. Our perishables business continue to lead this growth and we're pleased that our work to strengthen our perishables offering is delivering results. We saw broad-based growth across this division anchored by fresh produce dairy.

Bob Eddy: We will continue to lean into our digital capabilities to deliver even more value and convenience to our members.

Bob Eddy: Our general merchandise business improves sequentially from the first quarter and delivered comp growth of over 1% in the second quarter. Our seasonal GM comps improved dramatically from the first quarter increasing over a thousand basis points sequentially. Better weather coupled with great value led to favorable seasonal appliance sales in the quarter.

Speaker Change: we will continue to lean into our digital capabilities to deliver even more value and convenience to our members

Bob Eddy: Finally, our real estate strategy is progressing well and we remain on track to deliver on our new clubs opening in the back half of the fiscal year. We recently opened membership centers in Palm Coast, Florida, and Carmel, Indiana, at the start of a stretch that will see us open 11 new clubs in the next six months. Our new club program continues to drive success for our company and value to the communities we have the pleasure to serve.

Speaker Change: finally our real estate strategy is progressing well and we remain on track to deliver on our new clubs opening in the back half of the fiscal year

Bob Eddy: It's worth noting that members remain discerning in their purchasing behavior which was evident in big ticket seasonal categories such as patio sets and structures.

Speaker Change: we recently opened membership centers in tomcoast florida and carmel indiana at the start of a stretch that we'll see us open eleven new clubs in the next six months

Bob Eddy: Nonetheless, our members are spending with us recognizing the enhancements in the value and quality of our GM offering.

Bob Eddy: The structural benefits of our club model allow us to regularly invest in value properly. As such, our pricing position remains strong. In addition to our inherent advantages, we continue to execute on our category management process, or CMP, across the business. CMP is a muscle that we've worked to build over the years, but our latest iteration is far more comprehensive and approach, and crucially built on our members' feedback. As part of this process, we are fine-tuning our assortment to drive better member engagement and share it while optimizing our costs.

Speaker Change: our new club program continues to drive success for our company and value to the communities we have the pleasureto serve

Speaker Change: just one statistic to put a fine point on why we've been working on this so hard the new clubs that we have opened since our ipoo delivered comp sales growth of more than three times the chain average for the second quarter

Bob Eddy: Finally, we continue to grow our pipeline to enable even more accelerated growth of new clubs.

Bob Eddy: Our assortment gets more and more exciting each quarter and we are presenting it in the right way at the right time and at the right price.

Speaker Change: finally we continue to grow our pipeline to enable even more accelerated growth of new clubs

Bob Eddy: The health of the consumer remains top of mind for many.

Bob Eddy: From our vantage point, members remain value focused in their purchasing behavior, and they are seeking us out to attain that.

Speaker Change: the health of the consumer remains top of mind for many

Bob Eddy: This affords us the flexibility to deliver value to our members in a number of ways. For example, while inflation has moderated this year, consumers are still digesting prices that are significantly higher than they were two years ago. In recent months, the cost of some key dairy and protein articles is climbing once again. These frequently purchased items such as milk and eggs are putting outsized pressure on members' baskets. We have invested considerably in order to help our members make their baskets work within the confines of their budgets.

Speaker Change: from our brandage point members remain value-focused in their purchasing behavior and they are seeking us out to attain that

Bob Eddy: We believe we have a winning business model in any economic backdrop, but it is especially relevant in times when consumers prioritize value.

Speaker Change: we believe we have a winning business model any economic backdrop but it is especially relevant in times when consumers prioritizized value

Bob Eddy: Spend for shopper remains very healthy at higher income levels and continues to improve at the lower end, especially as we've moved past the tougher laps related to government aid in the second quarter. Critically, in the quarter, we drove greater trip frequency and overall spend growth across high, mid, and low income levels.

Speaker Change: spend for shopper remains very healthy at higher income levels and continues to improve at the lower end especially as we've moved past the tougher lapse related to government aid in the second quarter

Speaker Change: critically in the quarter we drove greater trip frequency and overall spend growth across high mid and low income levels

Bob Eddy: Investing in value is part of our DNA and what our members expect from BJs. These investments may pressure our short-term results, but will power our business in the future. Our accelerating traffic and units in the second quarter tell us we're making the right decisions to take care of the families who depend on us and deliver growth longer term. Our own brands, Wellesley Farms and Berkeley Jensen, continue to provide members with high-quality products at substantial value.

Bob Eddy: This continues to illustrate that our strong value profits resonating with our entire member base, regardless of their financial standing.

Speaker Change: this continues to illustrate that our strong value profits resonating with our entire member base regardless of their financial standing

Bob Eddy: We're pleased with how our members are engaging with us today, but we also recognize the building uncertainty and macroeconomic and geopolitical factors in the near term.

Speaker Change: we're pleased with how our members are engaging with us today but we also recognize the building uncertainty and macroeconomic and geopolitical factors in the near term

Bob Eddy: These dynamics and their impact on consumer demand are beyond our control, but we will remain focused on what we do best.

Bob Eddy: Over 95% of our own brands, products earn ratings of 4 out of 5 stars or more, demonstrating the rigor in which our teams ensure that we have the best combination of assortment, quality, and price, which is consistently a significant value to the comparable national brand. We recently relaunched our Wellesley Farms snack nuts program and our cashews have earned 4.9 stars. Our new Berkeley Jensen food storage bags have also received glowing reviews with pop-selling products earning 4.8 stars.

Speaker Change: these dynamics and their impact on consumer demand are beyond our control but we will remain focused on what we do best that's bring great value to our members

Bob Eddy: That's bringing great value to our members.

Bob Eddy: Looking past the near term, we are confident in our ability to grow the business, reinforced by strong membership, traffic, and unit volumes.

Speaker Change: looking past the near- term we are confident in our ability to grow the business reinforced by strong membership traffic and unit volumes

Bob Eddy: As I stated before, these are key markers of the underlying strength of our company.

Speaker Change: as i stated before these are key markers of the underlying strength of our comany

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

Speaker Change: furthermore we believe the operating model deep focus on our strategic priorities and unwaivering dedication to delivering value will keep us well positioned for long-term success

Bob Eddy: I'd like to close with my gratitude for our team members who go to great lengths daily to take care of the families who depend on us.

Bob Eddy: We're growing our own brands' sales penetration each quarter and remain confident in our goal of reaching 30% in the future. We work hard to save our members' time in addition to money. Our digital capabilities continue to deliver these savings to our members in a way that is convenient for them. Our convenience offerings include buy online pickup and club, curbside pickup, and same-day delivery. In-club shoppers can also leverage our digital coupon gallery and skip the lines with Express Pay Checkup.

Speaker Change: i'd like to close of my gratitude for our team members to go to great length dailyto take care of the families who depend on us as i do every quarter i'd like to say to all of our team members thank you again for all your hard work

Bob Eddy: As I do every quarter, I'd like to say to all of our team members, thank you again for all your hard work.

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

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

Laura Felice: Thanks, Bob.

Laura Felice: I'd like to echo Bob's gratitude for our amazing team members across our clubs, support center, and distribution centers whose dedication to our company and communities contributed to another strong quarter.

Laura: thanks bob i'd like to eboth bob's gratitude for our amazing team members across our clubs support center and distribution centers whoseis dedication to our company and communities contributed to another strong quarter

Bob Eddy: Our digital business was basically non-existent five years ago and we've grown by leaps and bounds since then, making up about 12% of our merchandise sales today. Our momentum continued in the second quarter with digitally enabled comp sales up 22% year over year. We believe our digital conveniences are only getting better from here.

Laura Felice: Let's now review our second quarter results. Net sales in the quarter were approximately $5.1 billion, growing 4.8% over the prior year. Total comparable club sales in the second quarter, including gas sales, grew 3.1% year-over-year, led by gallons sold. Merchandise comp sales, which exclude gas sales, increased by 2.4% year-over-year and by 3.5% on a two-year stack.

Laura: let's now review our second quarter results

Laura: net sales in the quarter were approximately five point one billion dollars growing four point eight percent over the prior year

Laura: total comparable club sales in the second quarter including gas sales grew three point one percent year-over-year led by gallon sold

Bob Eddy: In the second quarter we launched our product location capabilities on our app.

Bob Eddy: We believe our treasure hunt is gaining traction.

Bob Eddy: We like a treasure hunt but can now spare our members the scavenger hunt. This is one of the various enhancements enabled by our autonomous inventory robots which are also driving labor efficiencies in our digital order fulfillment process. We will continue to lean into our digital capabilities to deliver even more value and convenience to our members.

Laura: merchandise comp sales which exclude gas sales increased by two point four percent year-over-year and by three point five percent on a two -year stack

Laura Felice: We were pleased to deliver accelerating traffic and unit growth in the quarter.

Laura: we were pleased to deliver accelerating traffic and unit growth in the quarter

Laura Felice: Inflation was nearly flat for the quarter.

Laura: inflation was nearly flat for the quarter

Bob Eddy: Finally, our real estate strategy is progressing well and we remain on track to deliver on our new club's opening in the back half of the fiscal year. We recently opened membership centers in Palm Coast, Florida and Carmel, Indiana at the start of a stretch that will see us open 11 new clubs in the next six months. Our new club program continues to drive success for our company and value to the communities we have the pleasure to serve.

Laura Felice: Our second quarter comp in Grocery, Perishables, and Sundries division grew nearly 3% year-over-year, underpinned by growth in comp units, which outpaced the broader market.

Laura: our second quarter comp in grocery perishabls and sundry' division grew nearly three percent year-over-year underpinned by growth in comp units which outpaced the broader market

Laura Felice: Our General Merchandise and Services division comp increased slightly in the second quarter, with General Merchandise outperforming the rest of the divisions in this calculation. Digitally-enabled comp sales in the second quarter grew 22% year-over-year and 37% on a two-year stack.

Laura: our general merchandise and services division comp increased slightly in the second quarter with general merchandise outperforming the rest of the divisions in this calculation

Bob Eddy: Just one statistic to put a fine point on why we've been working on this so hard. The new clubs that we have opened since our IPO delivered comp sales growth of more than three times the chain average for the second quarter. Finally, we continue to grow our pipeline to enable even more accelerated growth of new clubs. The health of the consumer remains top of mind for many. From our vantage point, members remain value focused in their purchasing behavior, and they are seeking us out to attain that.

Laura: digitally enabled comp sales in the second quarter grew twenty-two percent year-over-year and thirty-seven percent on a two -year stack

Laura Felice: Over 90% of our digital sales are fulfilled by our clubs, with services like Buy Online, Pick Up in Club, or Bow Pick, and Same Day Delivery, which remain meaningful drivers of our digital growth. In fact, Bow Pick alone comprises about half of our digital sales today. Our digital offering is intended to deliver value by maximizing convenience. Members who leverage our digital convenience save time with an easier shopping experience and thus become more loyal members.

Laura: over ninety percent of our digital sales are fulfilled by our clubs with services like bu online pickup in club or bopick and same day delivery which remain meaningful drivers of our digital growth

Bob Eddy: Our apparel consumer electronics and home categories all performed well in the second quarter with positive comp similar to those seen in the first quarter.

Bob Eddy: Apparel is an area we are extremely proud of. Our work in this category continues to pay off with high single-digit comp growth in the quarter led by increases in both unit volumes and AUR. We believe the combination of an elevated assortment, compelling value, clean presentation and powerful marketing is driving our success in the category.

Bob Eddy: Our home business also delivered strong unit volumes despite the choppy consumer environment.

Bob Eddy: We believe we have a winning business model on any economic backdrop, but it is especially relevant in times when consumers prioritize value. Spend for shopper remains very healthy at higher income levels and continues to improve at the lower end, especially as we've moved past the tougher laps related to government aid in the second quarter. Critically, in the quarter, we drove greater trip frequency and overall spend growth across high mid and low income levels. This continues to illustrate that our strong value prop is resonating with our entire member base, regardless of their financial standing.

Laura: in fact oppic alone comprises about half of our digital sales today

Laura: our digital offering is intended to deliver value by maximizing convenience

Bob Eddy: And in consumer electronics, we continue to win with televisions and audio categories producing double digit unit growth year over year.

Laura: members who leverage our digital convenience save time with an easier shopping experience and thus become more loyal members

Laura Felice: We will continue leaning into these mutually beneficial enhancements in the future.

Bob Eddy: For BJs, our consumables offering is the driver of trips today.

Laura Felice: Membership Fee Income, or MFI, grew 9.1% to approximately $113.1 million in the second quarter, driven by strong membership acquisition and retention across the chain. We are especially pleased with the performance of our comp clubs, whose growth in new member sign-ups and renewals drove upside to our planned MFI in the second quarter.

Laura: we will continue leaning into these mutually beneficial enhancements in the future

Bob Eddy: Moving forward, we see general merchandise also inspiring the shop, driving incremental trips and expanding members baskets. Naturally, as members spend and trips grow, we expect this behavior to strengthen loyalty and membership renewals. This is why improving general merchandise is a significant opportunity for the long-term growth of this company.

Laura: membership fee income or mi grew nine point one percent to approximately one hundred and thirteen point one million dollars in the second quarter driven by strong membership acquisition and retention across the chain

Bob Eddy: Our general merchandise performance discord is a testament to the progress we continue to make in our GM transformation efforts.

Bob Eddy: We're pleased with how our members are engaging with us today, but we also recognize the building uncertainty in macroeconomic and geopolitical factors in the near term. These dynamics and their impact on consumer demand are beyond our control, but we will remain focused on what we do best. That's bringing great value to our members. Looking past the near term, we are confident in our ability to grow the business reinforced by strong membership, traffic, and human volumes.

Bob Eddy: I'm confident that we have the right team in place to realize the significant potential we see in this division.

Laura: we are especially pleased with the performance of our compb clubs whose growth in new member signups and renewals drove upside to our planned mi in the second quarter

Bob Eddy: Our four strategic priorities are critical to our long-term success. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently and growing our footprint. We are making meaningful strides in each of these areas.

Laura Felice: Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate increased by approximately 10 basis points year-over-year, led by disciplined cost management and continued execution on our long-term initiatives, including that of our own brands.

Laura: moving on to gross margins

Laura: excluding the gasoline business our merchandise gross margin rate increased by approximately ten basis points year-over-year led by disciplined cost management and continued execution on our long-term initiatives including that of our own brands

Bob Eddy: As I stated before, these are key markers of the underlying strength of our company. Furthermore, we believe the operating model deep focus on our strategic priorities and unwavering dedication to delivering value will keep us well positioned for long term success.

Laura Felice: This was slightly lower than our planned rate for the quarter, as we work to invest in our business and in our members. We expect to continue to invest in the back half to continue to do the right thing for our members, which will be the right thing for us in the long term.

Laura: this was slightly lower than our planned rate for the quarter as we work to invest in our business and in our members

Bob Eddy: I'd like to close with my gratitude for our team members who go to great lengths daily to take care of the families who depend on us. As I do every quarter, I'd like to say to all of our team members, thank you again for all your hard work.

Laura: we expect to continue to invest in the back half to continue to do the right thing for our members which will be the right thing for us in the long term

Laura Felice: I'll now turn it over to Laura to provide more details on our results and outlook for the year. Thanks Bob. I'd like to echo Bob's gratitude for our amazing team members across our clubs, support center, and distribution centers whose dedication to our company and communities contributed to another strong quarter.

Laura Felice: SG&A expenses for the quarter were approximately $750.3 million, exhibiting expected de-leverage as a percentage of net sales. This was primarily attributable to our new unit growth and other investments to drive our strategic priorities.

Laura: sgna expenses for the quarter were approximately seven hundred and fifty point three million dollars exhibiting expected deleverage as a percentage of net sales

Laura: this was primarily attributable to our new unit growth and other investments to drive our strategic priorities

Laura Felice: As Bob mentioned earlier, we continue to gain share in our gas business, with comp gallons growing by approximately 5 percent year-over-year. Furthermore, stronger profitability contributed to overall gas profits that exceeded our expectations in the quarter.

Laura Felice: Let's now review our second quarter results. Net sales in the quarter were approximately $5.1 billion growing 4.8% over the prior year. Total comparable club sales in the second quarter, including gas sales, grew 3.1% year-over-year, led by gallon sold, merchandise comp sales, which exclude gas sales increased by 2.4% year-over-year and by 3.5% on a two-year stack. We were pleased to deliver accelerating traffic and unit growth in the quarter. Inflation was nearly flat for the quarter.

Laura: as bob mentioned earlier we continue to gain share in our gas business with comp gallons growing by approximately five percent year-over-year furthermore stronger profitability contributed to overall gas profits that exceed our expectations in the quarter

Laura Felice: Our second quarter adjusted EBITDA grew 4.9 percent year-over-year to $281.3 million.

Laura: our second quarter adjusted ebitda grew four point nine percent year-over-year to two hundred and eighty-one point three million dollars

Laura Felice: As a reminder, our calculation no longer includes pre-opening and non-cash rent expense ADVEX.

Speaker Change: as a reminder our calculation no longer includes preopening and noncash rent expense adbecx

Laura Felice: Attending to the first quarter, our second quarter effective tax rate of 24.1% was primarily driven by an unplanned tax windfall.

Speaker Change: a att to the first quarter our second quarter effected tax rate of twenty-four point one percent was primarily driven by an un-planned tax windfall

Laura Felice: Our second quarter comp in grocery, perishables, and sundries division grew nearly 3% year-over-year underpinned by growth in comp units which outpaced the broader market. Our general merchandise and services division comp increased slightly in the second quarter with general merchandise outperforming the rest of the divisions in this calculation. Digitally enabled comp sales in the second quarter grew 22% year-over-year and 37% on a two-year stack. Over 90% of our digital sales are fulfilled by our clubs with services like eye-on-line pickup and club, or BOPIC, and same-day delivery, which remain meaningful drivers of our digital growth.

Laura Felice: All in, our second quarter adjusted earnings per share of $1.09 increased by approximately 10.1% year-over-year, reflecting the growth in our top line and gross margins and robust membership trends.

Speaker Change: all in our second quarter adjusted earnings per share of one dollar and nine cents increased by approximately ten point one percent year-over-year reflecting the growth in our top line and gross margins and robust membership trends

Laura Felice: Moving on to our balance sheet, we ended the second quarter with absolute inventory levels about flat year-over-year, and down 2% year-over-year on a per-club basis. We are operating six more clubs in our chain today compared to a year ago. Our team continues to work to allocate the right amount of product to the right clubs at the right time. In the second quarter, we improved our in-stock levels by approximately 50 basis points over the same period last year.

Speaker Change: moving on to our balance sheet

Speaker Change: we ended the second quarter with absolute inventory levels about flat year-over-year

Speaker Change: and down two percent year-over-year on a per club basis

Speaker Change: we are operating six more clubs in our cha today compared to a year ago

Speaker Change: our team continues to work to allocate the right amount of product to the right clubs at the right time

Laura Felice: In fact, BOPIC alone comprises about half of our digital sales today. Our digital offering is intended to deliver value by maximizing convenience. Members who leverage our digital convenience save time with an easier shopping experience and thus become more loyal members. We will continue leaning into these mutually beneficial enhancements in the future. Membership fee income or MFI grew 9.1% to approximately $113.1 million in the second quarter, driven by strong membership acquisition and retention across the chain.

Speaker Change: in the second quarter we improved our in-stock levels by approximately fifty basis points over the same period last year

Laura Felice: Our capital allocation strategy is consistent with the framework we have set out in the past. 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.

Speaker Change: our capital allocation strategy is consistent with the framework we have set out in the past

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 realestate initiatives will continue to be funded by our cash flows and enabled by our strong balance sheet

Laura Felice: We ended the second quarter with half a turn of net leverage, which aligns with our long-term target of sub-one turn. Returning excess cash to shareholders remains an important part of our capital allocation strategy as well. In the second quarter, we repurchased nearly 452,000 shares for approximately $40.4 million. As of the second quarter end, we have approximately $119 million remaining under our current share repurchase program.

Bob Eddy: Remember counts for both on a year-over-year and sequential basis. Even better, our comp clubs contributed about two-thirds of that member growth.

Laura Felice: We are especially pleased with the performance of our Cobb clubs whose growth in new member signups and renewals drove upside to our planned MFI in the second quarter. Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate increased by approximately 10 basis points year-over-year, led by discipline cost management and continued execution on our long-term initiatives, including that of our own brands. This was slightly lower than our planned rate for the quarter as we work to invest in our business and in our members.

Speaker Change: we ended the second quarter with half a turn of net leverage which aligns with our long-term target of subone turn

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

Speaker Change: in the second quarter repurchased nearly four hundred and fifty two thousand shares for approximately forty point four million dollars

Speaker Change: as over the second quarter end we have approximately one hundred and nineteen million dollars remaining under our current share repurchase program

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

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

Laura Felice: We expect to continue to invest in the back half, to continue to do the right thing for our members, which will be the right thing for us in the long term. S-GNA expenses for the quarter were approximately $750.3 million, exhibiting expected de-leverage as a percentage of net sales. This 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 5% year-over-year.

Speaker Change: turning to our outlook for the year we continue to expect to deliver fiscal two thousand and twenty-four comp sales excluding gas between one percent to two percent growth

Speaker Change: within this range we expect to be towards the high end with q four performing better than q three

Speaker Change: we are proud of our achievements in membership which has performed better than our expectations thus far this year

Laura Felice: Furthermore, stronger profitability contributed to overall gas profits that exceeded our expectations in the quarter. Our second quarter adjusted EBITDA grew 4.9% year-over-year to $281.3 million. As a reminder, our calculation no longer includes pre-opening and non-cash rent expense advex. A tinnitus of the first quarter, our second quarter affected tax rate of 24.1% was primarily driven by an unplanned tax windfall.

Speaker Change: there are various elements that drive membership fee income including the timing of new club openings renewals and the cadence of promotions to name a few

Laura Felice: With these in mind, we still expect our fiscal 2024 MSI growth rate to track better than our long-term ALGO of mid-single digits, but moderate from the growth rates we delivered in the first half of the fiscal year.

Speaker Change: with these in mind we still expect our fiscal two thousand and twenty-four msi growth rate to track better than our long-term algo of mid-single digits

Speaker Change: but moderate from the growth rates we delivered in the first half of the fiscal year

Laura Felice: As Bob mentioned, our business model and strategies around CMP and our own brands have allowed us to invest in our value prop and help our members stretch their dollar.

Speaker Change: as bob mentioned our business model and strategies around cmp and our own brands have allowed us to invest in our value prop and help our members stretch their dollar

Laura Felice: We will remain consistent in this approach to deepen member loyalty over time.

Speaker Change: we will remain consistent in this approach to deep en member loyalty over time

Laura Felice: All in, our second quarter adjusted earnings per share of $1.99 increased by approximately 10.1% year-over-year, reflecting the growth in our top line and gross margins and robust membership trends. Moving on to our balance sheet, we ended the second quarter with absolute inventory levels about flat year-over-year and down 2% year-over-year on a per-club basis. We are operating six more clubs in our chain today compared to a year ago. Our team continues to work to allocate the right amount of product to the right clubs at the right time. In the second quarter, we improved our in-stock levels by approximately 50 basis points over the same period last year.

Laura Felice: Our perishables business is driving upside to our comp sales, especially as we advance our fresh initiatives. We expect that further strengthening our fresh business will boost trip frequency and share of wallet, positioning us for growth longer term.

Speaker Change: our perishhaals business is driving upside to our comp sales especially as we advance our fresh initiatives

Speaker Change: we expect that further strengthening our fresh business will boost trip frequency and share of wallet positioning us for growth longer term

Laura Felice: Greater than expected throughput in the near term has pressured our perishable supply chain in the form of additional DC labor and freight costs.

Speaker Change: greater than expected throughput in the near term has pressured our perishable supply chain in the form of additional dc labor and freight cost

Laura Felice: These are investments in our business that we are making today for long-term gains.

Speaker Change: these are investments in our business that we are making today for long-term gains

Laura Felice: As we do what's right for our members, we now expect our full year fiscal 2024 merchandise gross margin rate will be about flat year over year.

Speaker Change: as we do what's right for our members we now expect our full year of fiscal two thousand andtwentyfour merchandise gross margin rate will be about flat year-over-year

Laura Felice: We are planning for SG&AD leverage in the back half of fiscal 2024 as we continue to invest in our growth initiatives, particularly in unit growth and new club sales continue to ramp over a multi-year period.

Speaker Change: we are planning for sda leverage in the back half of fiscal two thousand and twenty-four as we continue to invest in our growth initiatives particularly in unit growth and new club sales continue to ramp over a multi-year period

Laura Felice: Our capital allocation strategy is consistent with the framework we have set out in the past. 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 second quarter with half a turn of net leverage, which aligns with our long-term target of sub-1 turn.

Laura Felice: A reminder that we are also lapping variable compensation tailwinds from fiscal 2023. As we prepare for 11 new club openings in the back half of the year, we also expect pre-opening expenses to ramp accordingly, amounting to approximately $30 million in aggregate across the third and fourth quarters.

Speaker Change: a reminder that we are also lapping variable compensation tailwinds from fiscal two thousand and twenty three

Speaker Change: as we prepare for eleven new club openings in the back half of the year we also expect preopening expenses to ramp accordinglyink amounting to approximately thirty million dollars in aggregate across the third and fourth quarters

Laura Felice: We are planning for an effective tax rate of approximately 28% in the back half of the fiscal year.

Speaker Change: we are planning for an effective tax rate of approximately twenty-eight percent in the back half of the fiscal year

Laura Felice: Returning excess cash to shareholders remains an important part of our capital allocation strategy as well. In the second quarter, we repurchased nearly 452,000 shares for approximately $40.4 million. As of the second quarter end, we have approximately $119 million remaining under our current share repurchase program. We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value.

Laura Felice: We are maintaining our guidance for fiscal 2024 adjusted EPS, which was in the $375 to $4 range with investments for the long-term potentially driving us towards the lower end of that range. Finally, recall that we are lapping a 53rd week in the fourth quarter of last year that contributed approximately 10 cents to our earnings per share.

Speaker Change: we are maintaining our guidance for fiscal two thousand and twenty-four adjusted eps

Speaker Change: which was in the three hundred and seventy five to four dollar range

Speaker Change: with investments with the long-term potentially driving us towards lower end of that range

Speaker Change: finally we're call that we are lapping a fifty-third week in the fourth quarter of last year that contributed approximately ten cents to our earnings per share

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

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

Laura Felice: Turning to our outlook for the year, we continue to expect to deliver fiscal 2024 comp sales, excluding gas, between 1% to 2% growth. Within this range, we expect to be towards the high end with Q4 performing better than Q3. We are proud of our achievements in membership, which has performed better than our expectations thus far this year. There are various elements that drive membership fee income, including the timing of new club openings, renewals, and the cadence of promotions to name a few.

Laura Felice: Bob, back over to you.

Speaker Change: pub back over to you

Bob Eddy: Thanks, Laura.

Bob Eddy: Over the past five years, we have transformed our business by building a top-notch team, taking calculated chances on key strategic opportunities, executing at the highest level, and playing the long game.

Pub: thanks flora over the past five years we have transformed our business by building a top nch team taking calculated chances on key strategic opportunities executing at the highest level and playing the long game

Bob Eddy: It's promising to see that we are expanding our member base organically in our existing markets through both renewals and effective acquisition efforts. This, combined with the benefit of new clubs, grew up the largest overall member growth in any quarter since the pandemic year in fiscal 2020. We expect to reach our next membership milestone of 7.5 million members in the back half of the year. In the second quarter, we improved our higher tier membership penetration to 39 percent, led by continued double-digit year-over-year growth in our highest one-plus tier.

Bob Eddy: Thank you all for joining us today.

Bob Eddy: While staying focused on what matters most, delivering value to our members.

Pub: whilestaying focused on what matters most delivering value to our members

Bob Eddy: One-plus members pay the premium $110 fee and hold our co-brand credit card. These are our most loyal and highest spending members, exhibiting the greatest lifetime value. Moreover, growth in our co-brand member base has translated to even greater growth in total credit card spend.

Bob Eddy: In doing so, we have demonstrated our ability to profitably grow our business and drive shareholder value since we re-entered the public market in 2018.

Pub: in doing so we have demonstrated our ability to profitably grow our business

Pub: and draw share holdder value since we reentered the public market in two thousand and eighteen

Laura Felice: With these in mind, we still expect our fiscal 2024 MFI growth rate to track better than our long-term algo of mid-single digits, but moderate from the growth rates we delivered in the first half of the fiscal year. As Bob mentioned, our business model and strategies around CMP and our own brands have allowed us to invest in our value prop and help our members stretch their dollar. We will remain consistent in this approach to deepen member loyalty over time.

Bob Eddy: We are a stronger company today, unified by our purpose of taking care of the families who depend on us.

Pub: we are a stronger company today unified by our purpose of taking care of the families are depend on us

Bob Eddy: And we are working to grow stronger.

Bob Eddy: The rate of change in our company is very high.

Pub: and we are working to grow stronger

Speaker Change: the rate of change in our company is very high you have a lot of irons in the fire

Bob Eddy: We have a lot of irons in the fire. These efforts significantly increase near-term complexity and may require more investments in the back half.

Speaker Change: these efforts significantly increased near-term complexity and may require more investments in the back half

Bob Eddy: This suggests that our members are having a great experience with the new program.

Bob Eddy: But we believe these efforts keep us poised for future success.

Speaker Change: but we believe these efforts keep us poised for future success

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

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

Speaker Change: we will grow the sizing quality of our membership we will offer an unbeatable member experience through our merchandising improvements we will provide more digital conveniences to save our members money and time

Bob Eddy: We will provide more digital conveniences to save our members money and time.

Bob Eddy: And we will profitably grow our footprint.

Laura Felice: Our perishable business is driving upside to our comp sales, especially as we advance our fresh initiatives. We expect that further strengthening our fresh business will boost trip frequency and share of wallet positioning us for growth longer term. Greater than expected throughput in the near term has pressured our perishable supply chain in the form of additional DC labor and freight cost. These are investments in our business that we are making today for long-term gains.

Bob Eddy: Above all, we will continue to deliver compelling value to our members.

Speaker Change: and we will profitly grow our footprint

Speaker Change: above all we will continue to deliver compelling value to our members

Bob Eddy: Thanks again for joining us today and for your support of BJ's Wholesale Club.

Speaker Change: thanks again for joining us today and for your support of bj alsoo cl we will now take your questions

Bob Eddy: We will now take your questions.

Operator: Thank you.

Operator: We will now start the Q&A session.

Operator: In fairness to all participants, please limit your question to one question and one follow-up.

Speaker Change: thank you we were naskedced off a q sion in fan as to or participants please limit your question to one question and one follow up our first questions comes from the line of roby hommes from bankof america the line is now open please go head

Operator: Our first question comes from the line of Robbie Holmes from Bank of America.

Operator: The line is now open.

Operator: Please go ahead.

Maddie: Hi.

Laura Felice: As we do what's right for our members, we now expect our full year of fiscal 2024 merchandise growth margin rate will be about flat year over year. We are planning for SG&AD leverage in the back half of fiscal 2024. As we continue to invest in our growth initiatives, particularly in unit growth and new club sales can continue to ramp over a multi-year period. A reminder that we are also lapping variable compensation tailwinds from fiscal 2023.

Robby Hommes: i mris matie on for robby you thank you for taking our question our question is what are the general merchandise trends telling you on how you're positioned for holiday can you talk about any trends through the quarter and any color on how back to school is trending thank you

Maddie: This is Maddie on for Robbie.

Maddie: Thank you for taking our question.

Mataddie: i'm mataddie thanks thanks for a question

Speaker Change: i looked during the quarter we are pleased with our general merchandise business in getting back to positive comp growth is as we talked about another prepared remarks we saw continued great performance out of our consumer electronics business

Laura Felice: As we prepare for 11 new club openings in the back half of the year, we also expect pre-opening expenses to ramp accordingly, amounting to approximately $30 million in aggregate across the third and fourth quarters. We are planning for an effective tax rate of approximately 28% in the back half of the fiscal year. We are maintaining our guidance for fiscal 2024 adjusted EPS, which was in the $375 to $4 range, with investments for the long term potentially driving us towards the lower end of that range. Finally, recall that we are lapping a 53rd week in the fourth quarter of last year that contributed approximately 10 cents to our earnings per share.

Speaker Change: out of our apparel business and certainly continued progress in our home business seasonal had a much better trackrecord in the second quarter than it did in the first

Speaker Change: some of that obviously being the better weather year-over- year and so it was the great value that weve put forward as we look at our generuni chise es wewere very proud of the progress that we're making

Maddie: Our question is, what are the general merchandise trends telling you on how you're positioned for holiday?

Maddie: Can you talk about any trends through the quarter and any color on how back-to-school is trending?

Speaker Change: in providing the best assortment for our members the best value for our members each and every day as we get through third and fourth quarters certainly

Speaker Change: as we get into holiday gm becomes a big bigger portion of our business back to school back to college is not a huge business for us

Speaker Change: but certainly the holiday season is merchandise becomes a bigger penetration of our overall business at that point for obvious reasons

Speaker Change: we're very excited about the assortment that we're putting forward

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

Speaker Change: and bring in to our distribution centers and our clubs pretty shortly here and we're hoping for great results duringin the back half from a jgen merchandise perspective

Maddie: Thank you.

Bob Eddy: Bob, back over to you. Thanks, Laura. Over the past five years, we have transformed our business by building a top-notch team, taking calculated chances on key strategic opportunities, executing at the highest level and playing the long game. While staying focused on what matters most, delivering value to our members. In doing so, we have demonstrated our ability to properly grow our business and drive shareholder value since we re-entered the public market in 2018.

Speaker Change: thank you and maybe just one quick follow up are you giving yourself any room to invest in price and general merchandise

Bob Eddy: Hi, Maddie.

Speaker Change: look as you know many values what we do right so we are always investing in our business we're always investing in value always investing in our members

Bob Eddy: Thanks for your question.

Bob Eddy: We will remain focused on maintaining our strength and membership to drive long-term value for both our members and shareholders.

Speaker Change: and i think that's what what you're seeing really in the fantastic membership statistics that that we'have seen this past quarter

Speaker Change: the first quarter in the last couple of years as we as we grow the sizing quality of the membership are growing renewal rate meaningfully

Bob Eddy: We are a stronger company today, unified by our purpose of taking care of the families who depend on us, and we are working to grow stronger. The rate of change in our company is very high. We have a lot of irons in the fire. These efforts significantly increase near-term complexity and may require more investments in the back half.

Speaker Change: growing our premium peers it's all about

Speaker Change: value and certainly these days values even more paramount as folks digest all theinflation we've seen over the ast couple of years so we continue to invest every day we will continue to invest in the future across our business not just in john merchandise

Bob Eddy: But we believe these efforts keep us poised for future success. We will grow the size and quality of our membership. We will offer an unbeatable member experience through our merchandising improvements. We will provide more digital conveniences to save our members money and time, and we will possibly grow our footprint. Above all, we will continue to deliver compelling value to our members.

Speaker Change: thank you really appreciate it

Speaker Change: thanksexp

Peter Benednetit: next question is from peter benednetit from bird that long iss now open please go ahead

Peter Benednet: thanks god's good morning so

Bob Eddy: When we went on members' produce and meet shop, we win their first shop of the week thereby increasing trips and spend and resulting in more loyal members over time.

Peter Benednetit: i first question it's just just kind of around the profitability of view here you talked about the change in the merchandise margin outlook it sounds like

Bob Eddy: Through our fresh initiatives, we worked hard over the past year to bring excitement and even more freshness to our produce offering. With full control over our perishable distribution centers, we improved supply chain velocity where it mattered. We expanded vendor relationships to increase in stocks and put new seasonally relevant produce on rotation.

Bob Eddy: Thanks again for joining us today and for your support of BJ's Wholesale Club. We will now take your questions. Thank you.

Operator: We will now stop at Q&A session. In fairness to all participants, please limit your question to one question and one follow-up.

Speaker Change: there's some dc -related stuff there there's also some investment in perishable pricing

Speaker Change: i'm just curious it see at any of thats in particular latter and reaction to something you're seeing in the market something you're doing proactively just kind of curious maybe a comment on the competitive vironment that's my first question

Robbie Holmes: Our first question comes from the line of, Robbie Holmes from Bank of America. The line is now open. Please go ahead.

Bob Eddy: Look, during the quarter, we were pleased with our general merchandise business, in getting back to positive comp growth as we talked about in the prepared remarks.

Pe: morning pe thanks for the question

Maddie: Hi. This is Maddie on Farabi. Thank you for taking our question.

Speaker Change: look i think as it regards what we're seeing and doing for a merchandise margin perspective

Maddie: Our question is, what are the general merchandise trends telling you on how you're positioned for holiday? Can you talk about any trends through the quarter and any color on how back to school is trending? Thank you. Hi, Maddie. Thanks for your question. Look, during the quarter, we're pleased with our general merchandise business in getting back to positive comp growth as we talked about in the prepared remarks. We saw continued great performance out of our consumer electronics business, out of our apparel business, and certainly continued progress in our home business.

Bob Eddy: We saw continued great performance out of our consumer electronics business, out of our apparel business, and certainly continued progress in our home business.

Speaker Change: i think you can categorize it as playing the long game we are really trying to

Speaker Change: invest not just for particular quarter but for the long-term success of our franchise and building our membership and building

Speaker Change: our members you know positive feelings about our franchise so as you think about the dynamics in the second quarter and then in our forecast for the rest of the year i think you really have three things to to talk about one investments in price and promotion

Bob Eddy: Seasonal had a much better track record in the second quarter than it did in the first, some of that obviously being the better weather year over year, and some of it was the great value that we put forward.

Bob Eddy: We implemented essential fresh training across our clubs.

Bob Eddy: We upgraded our marketing and presentation.

Speaker Change: ah

Speaker Change: not as priseed anybody on this call that our members and consumers broadly have had to digest a lot of inflation over the last couple of years

Bob Eddy: By the end of July, we completed the rollout of our standalone coolers stationed at our front entrances so that our members are captivated by our high-quality low-priced seasonal produce as soon as they arrive in our clubs.

Maddie: Seasonal had a much better track record in the second quarter than it did in the first. Some of that obviously being the better weather year over year and some of it was the great value that we put forward. As we look at our general merchandise business, we're very proud of the progress that we're making in providing the best assortment for our members, the best value for our members each and every day.

Bob Eddy: As we assess, our second quarter results, it's clear that we are increasingly gaining our members' trust for their fresh groceries.

Speaker Change: they do remember what old price points are and they are we are seeing a consumer that well very resilient and very happy to be shopping in our buildings

Speaker Change: is is a little bit more sensitive to price and promotion than they have been in the past and so we are we are taking advantage of that and making sure that we have the right price gas making sure that we we help our members through

Maddie: As we get through third and fourth quarters, certainly as we get into holiday, GM becomes a bigger portion of our business back to school. Back to college is not a huge business for us, but certainly that the holiday season is. General merchandise becomes a bigger penetration of our overall business at that point for obvious reasons. We're very excited about the assortment that we're putting forward and bringing in to our distribution centers and our clubs pretty shortly here. We're hoping for great results during the back half from a general merchandise perspective.

Speaker Change: you know through their re shopping needaps number number two really is

Speaker Change: is the strength of our parisal business right we we've ked a lot about fresh two plan we've talkedaboutthe importance of

Speaker Change: riving our members into that weekly shop

Speaker Change: mode through categories like meat and produce we've seen tremendous schemes frankly higher than what we what we thought we would see in terms of perishable units

Speaker Change: and 's that's providing a bit of pressure as you know perishabls wh st incredibly important to

Maddie: Thank you, and maybe just one quick follow-up. Are you giving yourself any room? to invest in price in general merchandise? As you know, Maddie, value is what we do, right? So, we are always investing in our business, we're always investing in value, always investing in our members. And I think that's what you're seeing really in the fantastic membership statistics that we've seen this past quarter, the first quarter and in the last couple of years as we grow the sizing quality of the membership or growing renewal. We'll rate meaningfully growing our premium tiers, it's all about value. And certainly these days, value is even more paramount as folks digest all the inflation we've seen over the past couple of years.

Speaker Change: our members view of us and their're purchasing habits over the long term and their renewal habits over the long term

Speaker Change: it does't require a little bit of extra labor a little bit of extra handling in the distribution center and some extra freight verssus our plans and so we are investing proactively there

Speaker Change: to make sure that we see the results in the future that we want meaning that those extra trips across the box not just imperishabls and then they associated membership benefits from that

Speaker Change: and then then finally we are we are transforming our merchandising across the business at a fast pace

Bob Eddy: As we look at our general merchandise business, we're very proud of the progress that we're making in providing the best assortment for our members, the best value for our members each and every day.

Speaker Change: we we really are assorting for the long term trying to provide

Bob Eddy: As we get through third and fourth quarters, certainly as we get into holiday, GM becomes a bigger portion of our business.

Bob Eddy: Back-to-school, back-to-college is not a huge business for us, but certainly the holiday season is.

Speaker Change: our members with the greatest value in a sormer that we can and we are changing things all over the box and quite candidually that's providing some growing paints as we

Maddie: So we continue to invest every day, we will continue to invest in the future across our business, not just in general merchandise. Thank you, really appreciate it. Thanks, Maddie.

Bob Eddy: General merchandise becomes a bigger penetration of our overall business at that point for obvious reasons.

Speaker Change: as we go through their transitions we are actively doing this stuff because we think it benefits next year the year after the year after that even if it is a little bit of a burden this year

Peter Benedict: The next question is from Peter Benedict, from Bird. The line is not open, please go ahead. Thanks guys, good morning. So, my first question is just kind of around the profitability view here, you talked about the change in the merchandise margin outlook, it sounds like there's some DC related stuff there. There's also some investment in perishable pricing. I'm just curious if any of that's in particular the latter is in reaction to something you're seeing in the market, something you're doing proactively, just kind of curious maybe a comment around the competitive environment.

Speaker Change: well while saying that i think the teams doing a wonderful job picking items i think the teams doing a much better job managing inventory levels as laurer talked about in her comments being flat year-over-year and inventory being down on a

Maddie: We're very excited about the assortment that we're putting forward, and bringing in to our distribution centers and our clubs pretty shortly here, and we're hoping for great results during the back half from a general merchandise perspective.

Maddie: Thank you, and maybe just one quick follow-up.

Laurer: aper club basis in spite of everything going on like our in stock rates going up and building new stores i thought that was a fantastic result and so while we are seeing some growing pains

Maddie: Are you giving yourself any room to make any adjustments?

Bob Eddy: In fact, our produce category has delivered low double-digit compost in the second quarter, almost entirely driven by unit volumes.

Maddie: Okay.

Laurer: we are really managing the day to day pretty well and so as we look forward we'll continue to invest in our membership wewill continue to invest in parisfules because we know how important it is and we'll look to iron out the growing pains as we go

Bob Eddy: And what are you guys doing to invest in price and general merchandise?

Peter Benedict: That's my first question. Good morning, Pete. Thanks for the question. Look, I think as it regards what we're seeing and doing from a merchandise margin perspective, I think you can categorize it as playing the long game. We are really trying to invest not just for a particular quarter, but for the long term success of our franchise and building our membership and building our members of positive feelings about our franchise. So, as you think about the dynamics in the second quarter and then in our forecast for the rest of the year, I think you really have three things to talk about.

Speaker Change: grment that i'll make sense thank my fultse questionion me around kind of membership member growth in mi

Speaker Change: comp club member growth is driving two thirds of the

Speaker Change: the total member growth i think that that's what you guys said earlier what's what do you guys doing differently to create that because impretty surethat has not been the case historically so what have you really changed in terms of how you kind of go after members in existing markets

Speaker Change: and then related to that the mfi strength how does that impact if at all your willingness or to consider a thee increase at some point either later this year or at the two thousand and twenty five thank you

Peter Benedict: One, investments in price and promotion, not as priced anybody on this call that our members and consumers broadly have had to digest a lot of inflation over the last couple of years. They do remember what old price points are and we are seeing a consumer that, well, very resilient and very happy to be shopping on our buildings is a little bit more sensitive to price and promotion than they have been in the past.

Bob Eddy: Look, as you know, Maddie, value is what we do, right? So we are always investing in our business, we're always investing in value, we're always, investing in our members.

Speaker Change: yeah good conquestions

Speaker Change: so look we couldn't be proud of the results we had in in the second quarter they built on top of the fantastic results of the first quarter

Speaker Change: both quarters beating our expectations for our mffi performance

Peter Benedict: So, we are taking advantage of that and making sure that we have the right price gas making sure that we help our members through their shopping needs. Number two really is the strength of our perishable business. We have talked a lot about Fresh 2.0, we have talked about the importance of driving our members into that weekly shop mode through categories like meat and produce. We have seen tremendous gains, frankly, higher than what we thought we would see in terms of perishable units and that's providing a bit of pressure, as you know, perishables, well, incredibly important to our members view of us and their purchasing habits over the long term and their renewal habits over the long term.

Speaker Change: and really we saw great results across the mfi metrics that we care most about us as we talked about syink fantastic growth in total memberships

Bob Eddy: What's even more encouraging is that we drove over 90 basis points of year-over-year growth in produce transaction penetration as well.

Peter Benedict: It does require a little bit of extra labor, a little bit of extra handling in the distribution center and some extra freight versus our plans. And so, we are investing proactively there to make sure that we see the results in the future that we want, meaning that those extra trips across the box, not just in perishables, and then the associated membership benefits from them. And then finally, we are transforming our merchandising across the business at a fast pace.

Speaker Change: both from a renewal rate perspective and from a new member acquisition perspective if we're seeing mif i dollars per member grow remember we've talked about that the fee increase without a fee increase

Speaker Change: before i get to your fe creaseed question and then the team is doing a spectacular job driving members up into our premium tiars and into our copor andic credit card and so you know look i think the strengthen membership is a couple of things one we are running a better business today than we ever have

Speaker Change: we are providing more value than ever

Speaker Change: we are finding ways to convince our members of that we are showing it to them in ways that are evidence just just with their eyes you can look across our buildings and see better assortments and better value

Speaker Change: we are saving them time through our digital processes we're doing a lot of things really well

Speaker Change: the nine point one was a little bit ahead of our our expectations for thequarter laur there's a lot of stuff go in their timing accounting adjustments promotions things like that and so you know i think that will moderate in the back half a bit

Peter Benedict: We really are assorting for the long term, trying to provide our members with the greatest value and assortment that we can and we are changing things all over the box. And quite candidly, that's providing some growing pains as we go through their transitions. We are actively doing this stuff because we think it benefits next year or the year after the year after that, even if it is a little bit of a burden this year.

Speaker Change: that takes nothing away from the strength of what what we see in in our membership franchise

Speaker Change: um as as you think about

Speaker Change: thewhy i mean i think one of the great strategic unlocks ' weve pursued as a tee over the past several years as growing memberships and comp clubs

Speaker Change: and you know i've been around the company for a long time for for youdont

Peter Benedict: While saying that, I think the team is doing a wonderful job picking items. I think the team is doing a much better job managing inventory levels as Laura talked about in her comments, being flat year over year in inventory, being down on a per club basis, you know, in spite of everything going on. And like our in stock rates going up and building new stores, I thought that was a fantastic result.

Speaker Change: a ton old

Speaker Change: of my history with the company we really couldn't figure out how to grow membership and confs and the team is now unlocked that that you know that methodology that that allows us to grow comppl memberships in a pretty predictable where we are giving ourselves permission to experiment with new offer structures new

Peter Benedict: And so while we are seeing some growing pains, we are really managing the day to day pretty well. And so as we look forward, we'll continue to invest in our membership, we'll continue to invest in perishables because we know how important it is, and we'll look to iron out the growing pains as we go.

Speaker Change: new ways of balancing getting the right amount of people in versus the quality of those people in we're doing a great job understanding who are best target members are trying to figure a different ways to talk to them so it's a bunch of different things that's

Speaker Change: that's growing but it's all centered on providing the most value and the best assortment we can every day

Peter Benedict: Great, but that all makes sense. Thanks. My follow-up question will be around kind of membership and member growth and MFI, you know, comp club member growth is driving two-thirds of the total member growth. I think that's what you guys said earlier. What are you guys doing differently to create that? Because I'm pretty sure that has not been the case historically. So what have you really changed in terms of how you kind of go after members in existing markets?

Bob Eddy: While still early, we have thrilled with how our members are responding to our efforts and we're excited about what this could mean for member loyalty over the long-term.

Speaker Change: and you think about the prospect of a fee increase

Speaker Change: i think you need to step back and think about all that stuff that i just said first and fore most we have tremendous momentum in our membership statistics from an acquisition perspective from a renewal rate perspective

Bob Eddy: And I think that's what you're seeing really in the fantastic membership statistics that, we've seen this past quarter, the first quarter and then the last couple of years as we grow the size and quality of the membership, we're growing renewal rate meaningfully, growing our premium tiers.

Bob Eddy: It's all about value. And certainly these days, value is even more paramount as folks digest all the inflation, we've seen over the past couple of years.

Speaker Change: over the past several years we've really we really have had that fee crease without a fe increasase by leveraging folks up into the premium ti memberships our mfi remember is up well over five dollars were from where it was at the last fee increase

Peter Benedict: And then related to that, the MFI strength, how does that impact, if at all, your willingness or to consider a fee increase at some point, either later this year or into 2025? Thank you. Yeah, good questions. So look, you know, we couldn't be more proud of the results we had in the second quarter. They built on top of the fantastic results of the first quarter. You know, both quarters beating our expectations for our MFI performance.

Bob Eddy: So we continue to invest every day.

Bob Eddy: We will continue to invest in the future across our business, not just in general merchandise.

Speaker Change: we understand where where the industry has gone in the last couple of years and a couple of months even

Speaker Change: and we believe that we are providing considerably more value today

Speaker Change: then we were the time of our increase did you dont havetolook farther than n rogrand credit card that's given getting five percent back or five cents off gas for our rewards members

Speaker Change: those are those are new ads since the last being increase so you know were very comfortable where we are from our value offering for our membership momentum perspective with all that said our guide for the back app doesn't contemplate

Peter Benedict: And really, we saw great results across the MFI metrics that we care most about as we talked about seeing fantastic growth in total memberships, both from a renewal rate perspective and from a new member acquisition perspective. We're seeing, you know, MFI dollars per member grow. Remember, we've talked about that as the fee increase, without a fee increase, before I get to your fee increase question. And then the team is doing a spectacular job driving members up into our premium tiers and into our co-branded credit card.

Speaker Change: a fee increase and when we have we have news on that front 'will share it with everybody

Speaker Change: i fair enough thanks so that perspective

Maddie: Thank you, really appreciate it.

Speaker Change: i

micha baker: thank you the next question is from micha baker from the aid of a fund the line is now or benplease go ahead

Bob Eddy: Thanks, Maddie.

Peter Benedict: And so, you know, look, I think the strength and membership is a couple of things. One, we are running a better business today than we ever have. We are providing more value than ever. We are finding ways to convince our members of that. We are showing it to them in ways that are evident just with their eyes. You can look across our buildings and see better assortments and better value. We are saving them time through our digital processes.

micha baker: okay thanks maybea couple of fall some things we've talked about but

Speaker Change: the preopening cost of thirty milliondollars thirty illiondoars in the backhalf i mean that that's almost two ex last year

Speaker Change: was that always the plan or have clubs has been delay the timing at least of the reopening on the pen

Speaker Change: is that different than you originally thought i guess tried to get out

Speaker Change: is that a reason why you know you might be at the lower end or in the back ap or anything along that relative to the original plants

Peter Benedict: We're doing a lot of things really well. The 9.1 was a little bit ahead of our expectations for the quarter. As Laura said, there's a lot of stuff that goes in there, timing, accounting adjustments, promotions, things like that. And so, you know, I think that will moderate in the back half a bit. That takes nothing away from the strength of what we see in our membership franchise. As you think about the why, I mean, I think one of the great strategic unlocks, we've pursued as a team over the past several years is growing memberships and comp clubs.

Operator: The next question is from Peter Benedict from BERT, the line is now open, please go ahead.

Operator: Oh, hey, thanks, guys, good morning.

Speaker Change: andm like thanks for the question i thinkit's a good one we arethrilledwith our progress in our estate perspective as well and we are a little bit ahead of our original plans for the in terms of the number of boxes that

Peter Benedict: So my first question is just kind of around the profitability view here.

Peter Benedict: You talked about the change in the merchandise margin outlook.

Speaker Change: that will open us as we said and i'll they'll talk for a minute year we've got eleven in the next six months

Peter Benedict: It sounds like there's some DC related stuff there.

Peter Benedict: There's also some investment in perishable pricing.

Peter Benedict: I'm just curious if any of that, particularly the latter, is in reaction to something you're, seeing in the market, something you're doing proactively.

Peter Benedict: And, you know, I've been around the company for a long time for a ton of my history with the company. We really couldn't figure out how to grow membership and comp clubs. And the team is now unlocked that methodology that allows us to grow comp club memberships in a pretty predictable way. We are giving ourselves permission to experiment with new offer structures, new ways of balancing, getting the right amount of people in versus the quality of those people in.

Speaker Change: we had built a few less than that into our original plan for the year and so it does provide some pressure in the back half again these are great investments for a future and so even though it pressures the back half in this year it will it will bode well for the future so

Peter Benedict: Just kind of curious, maybe a comment around the competitive environment, that's my first, question.

Bob Eddy: All right, good morning, Pete.

Speaker Change: you're on the right point there though what also a real estate perspective

Bob Eddy: Thanks for the question.

Speaker Change: i think as as i look out eleven clubs in the nextsix months is probably one of the most aggressive expansion plans that we've had in in the company's history

Bob Eddy: Look, I think as it regards to what we're seeing and doing from a merchandise margin, perspective, I think you can categorize it as playing the long game.

Speaker Change: and we're really ou of all the work ofthe teams done as they have mike versus lapinglast yearwe had five pluubsin the back half of last year 'will do elevenin thebackhalf thisyear says you think about sequentially year-over-year the preopen expense

Peter Benedict: We're doing a great job understanding who our best target members are and trying to figure out different ways to talk to them. So it's a bunch of different things that's growing, but it's all centered on providing the most value and the best assortment we can every day. As you're thinking about the prospect of a fee increase, I think you need to step back and think about all that stuff that I just said first and foremost.

Speaker Change: that's why that's flowing in in that way but it was onlyalways the plan was always as we communicated back cap weighted for for this year

Bob Eddy: As part of this process, we are fine-tuning our assortment to drive better member engagement and share it while optimizing our costs.

Speaker Change: okay makes sense f another fall up to a previous point now you talked about the growing pains in changing the assortment

Speaker Change: more color on exactly what that means is that you know mark down as you change things out is out labor associated with those those changes and then typically what's the timing of when that pays off does that pay off this holiday season does that pay off you know next year how to think about that a little more

Bob Eddy: This affords us the flexibility to deliver value to our members in a number of ways.

Peter Benedict: We have tremendous momentum in our membership statistics from an acquisition perspective, from a renewal rate perspective. Over the past several years, we really have had that fee increase without a fee increase by leveraging folks up into the premium tier memberships. Our MFI member is up well over $5. $5.00 dollars from where it was at the last fee increase. We understand where the industry has gone in the last couple of years and a couple of months even, and we believe that we are providing considerably more value today than we were at the time of our last fee increase.

Bob Eddy: For example, while inflation has moderated this year, consumers are still digesting prices that are significantly higher than they were two years ago.

Speaker Change: yes sure

Speaker Change: look it's a little bit of all the above you know we're doing it because our members are asking us for better assortments our cmp process urking it is yielding

Bob Eddy: In recent months, the cost of some key dairy and protein articles is climbing once again. These frequently purchased items such as milk and eggs are putting outsized pressure on members' baskets. We have invested considerably in order to help our members make their baskets work within the confines of their budgets.

Speaker Change: really relevant timely new assortments across the box and in many categories those categories going through the cmp process are compuming better than than those that haven't they're having better margin results

Bob Eddy: Investing in value is part of our DNA and what our members expect from BJs.

Bob Eddy: These investments may pressure our short-term results, but will power our business in the future.

Peter Benedict: You don't have to look farther than our co-brand credit card getting 5% back or 5% off gas for our rewards members. Those are new ads since the last fee increase. So, you know, we're very comfortable where we are from our value offering from our membership momentum perspective. With all that said, our guide for the back app doesn't contemplate a fee increase, and when we have news on that front, we'll share it with everybody. All right. Fair enough. Thanks for the perspective. You're welcome.

Speaker Change: as well and so we're very happy and and proud of what the cmp process is putting forward

Bob Eddy: Our accelerating traffic and units in the second quarter tell us we're making the right decisions to take care of the families who depend on us and deliver growth longer term.

Speaker Change: but it is requiring a little bit more labor in areas like in several of our boxes we have reset our entire snacking assortment in the middle of the club

Bob Eddy: Our own brands, Wellesley Farms and Berkeley Jensen, continue to provide members with high-quality products at substantial value. Over 95% of our own brands, products earn ratings of 4 out of 5 stars or more, demonstrating the rigor in which our teams ensure that we have the best combination of assortment, quality, and price, which is consistently a significant value to the comparable national brand. We recently relaunched our Wellesley Farms snack nuts program and our cashews have earned 4.9 stars. Our new Berkeley Jensen food storage bags have also received glowing reviews with pop-selling products earning 4.8 stars.

Speaker Change: we've consolidated the snacking from a number of different runs and put it put it up front rightnear the registers right in prime time where we can take advantage of people's passth through the club

Bob Eddy: We're growing our own brands' sales penetration each quarter and remain confident in our goal of reaching 30% in the future.

Bob Eddy: We work hard to save our members' time in addition to money. Our digital capabilities continue to deliver these savings to our members in a way that is convenient for them. Our convenience offerings include buy online pickup and club, curbside pickup, and same-day delivery.

Speaker Change: and really show off that great assortment that we have that's an expensive endeavor to move stuff around the clubs

Bob Eddy: In-club shoppers can also leverage our digital coupon gallery and skip the lines with Express Pay Checkup.

Bob Eddy: Our digital business was basically non-existent five years ago and we've grown by leaps and bounds since then, making up about 12% of our merchandise sales today. Our momentum continued in the second quarter with digitally enabled comp sales up 22% year over year. We believe our digital conveniences are only getting better from here. In the second quarter we launched our product location capabilities on our app.

Speaker Change: as as one example

Bob Eddy: We will continue to lean into our digital capabilities to deliver even more value and convenience to our members.

Michael Baker: Thank you. The next question is from Michael Baker from DA David's Fund. The line is not open, please go ahead. Okay. Thanks.

Speaker Change: and certainly as we swap out old stuff for new stuff we are incurring markdowns to get to get rid of the old stuff we probably have a little bit more of those than we anticipated

Michael Baker: Maybe a couple of fall-ups on some things we've talked about, but the pre-opening cost of $30 million dollars in the back app, I mean, that's almost 2X from last year, was that always the plan or have clubs been delayed or the timing at least of the pre-opening on the P&L? Is that different than you originally thought? I guess what I'm trying to get at is that a reason why you might be at the lower end or in the back app?

Speaker Change: and we are working a streamline our process of hooking the new skses to the oldones and bring in the new ones when the oldle and sell down in their natural course

Speaker Change: again all these things we believe our great investments for the future as i said all the stuff that goes through cp is performing better

Speaker Change: and so we anticipate these these investments paying off next year the back half i think we'll see some burden associated with it but we wouldn't be doing it if we didn't see the fantastic results that we are seeaying from these categories that go through the process

Michael Baker: Or anything along that relative to the original plans? Hey, Mike. Thanks for the question. I think it's a good one. You know, we are thrilled with our progress from our real estate perspective as well. And we are a little bit ahead of our original plans for the end terms of the number of boxes that that will open. As we said, and I'll let Bill talk for a minute here. We've got 11 in the next six months.

Michael Baker: We had built a few less than that into our original plan for the year, and so it does provide some pressure in the back half. Again, these are great investments for the future, and so even though it pressures the back half in this year, it will both well for the future. So you're on the right point there. Bill, what else from a real estate perspective? I think, Bob, as I look out, 11 clubs in the next six months is probably one of the most aggressive kind of expansion plans that we've had in the company's history.

Speaker Change: yeah awesome makes sense appreciate the time

Bob Eddy: Our new club program continues to drive success for our company and value to the communities we have the pleasure to serve.

Speaker Change: thank you the nice questionushing is from church brom fromom gdon hasusket the line is now or then please skilt ahead

Ryan Buller: hey guys this is a ryan buller on foratruck here i just one of the ask about the general merchandise categories a little bit it sounds like you know it's improving and as you see these categories of youknow within general mar that have been weaker or stronger start to turn around rebound

Bob Eddy: Finally, we continue to grow our pipeline to enable even more accelerated growth of new clubs.

Speaker Change: just kind of want to know what's really driving that improvement is it the macro or replace cycle starting to turn or may be innovation just any coloron that would be great thank you

Bob Eddy: The health of the consumer remains top of mind for many.

Michael Baker: And we're really proud of all the work the team's done as we think about Mike versus laughing last year. We had five clubs in the back half of last year. We'll do 11 in the back half this year. So as you think about sequentially year over year, the reopen expense, that's why that's flowing in that way. But the plan was always as we communicated back half waited for this year.

Speaker Change: thereare thanks for for your question

Speaker Change: as we said we're very proud of our gmteam and the results that they're putting up we've turned around this giant category in our business that

Michael Baker: Okay, make sense.

Speaker Change: it's incibly important to the treasure hunt and the emotional aspect of shopping by investing in our team and investing in our members by showing them even better assortments quarter -over quarter year-over-year this is a long-term build

Michael Baker: Another follow-up to a previous point. You talked about the growing pains in changing the assortment. More color on exactly what that means is that, you know, markdowns as you change things out. Is that labor associated with those changes? And then typically what's the timing of when that pays off? Does that pay off this holiday season? Does that pay off next year? How do you think about that a little more? Yeah, sure.

Speaker Change: for our company took us quite a bit of time to get to where we were

Speaker Change: a couple of quarters ago at are hopefully our lowest general merchandise penetration in our history and we are now building back towards an even higher genour merchise penetrationwe know it's important to our memories

Speaker Change: we know that the treasure hun is

Michael Baker: Look, it's a little bit of all the above. You know, we're doing it because our members are asking us for better assortments. Our CMP process working. It is yielding really relevant, timely, new assortments across the box in many categories. Those categories going through the CMP process are comping better than those that haven't. They're having better margin results. As well. And so we're very happy and proud of what the CMP process is putting forward.

Speaker Change: as important they want to be surprised and delighted as they do their grocery shop and

Bob Eddy: From our vantage point, members remain value focused in their purchasing behavior, and they are seeking us out to attain that.

Bob Eddy: We believe we have a winning business model on any economic backdrop, but it is especially relevant in times when consumers prioritize value.

Speaker Change: when they see that greatater apparalleitem or that the cool thing from one of our home categories are certainly

Speaker Change: sure one of our best categories consumer electronics they want to be able to put that in their basket and know our job is to move it from an opportunistic business to one that generates trips by itself

Bob Eddy: Critically, in the quarter, we drove greater trip frequency and overall spend growth across high mid and low income levels.

Bob Eddy: This continues to illustrate that our strong value prop is resonating with our entire member base, regardless of their financial standing.

Speaker Change: and we certainly had that in some categories like ce we've run that business very effectively over the years we've always had great merchants there

Bob Eddy: We're pleased with how our members are engaging with us today, but we also recognize the building uncertainty in macroeconomic and geopolitical factors in the near term.

Bob Eddy: These dynamics and their impact on consumer demand are beyond our control, but we will remain focused on what we do best.

Speaker Change: and

Bob Eddy: That's bringing great value to our members.

Michael Baker: But it is requiring a little bit more labor in areas like in several of our boxes. We have reset our entire snacking assortment in the middle of the club. We've consolidated the snacking from a number of different runs and put it up front right near the registers right in prime time where we can take advantage of people's path through the club. And really show off that great assortment that we have. That's an expensive endeavor to move stuff around the clubs as one example.

Speaker Change: and great market share and we are really trying to run that playbook across

Speaker Change: across the business and it starts with getting the right new products and in our buildings we didn't

Bob Eddy: Looking past the near term, we are confident in our ability to grow the business reinforced by strong membership, traffic, and human volumes. As I stated before, these are key markers of the underlying strength of our company.

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

Speaker Change: in the past have the right brands the right products are value prop with somewhat off the way we displayed things was an optimal we are making great strides in all of those things it starts with having the right town here in the building in our club supports on here massachusetts

Bob Eddy: I'd like to close with my gratitude for our team members who go to great lengths daily to take care of the families who depend on us.

Bob Eddy: As I do every quarter, I'd like to say to all of our team members, thank you again for all your hard work.

Speaker Change: allthose folks do the hardwork pickin the items and makekingit sure they get into the

Speaker Change: into the clubs in the right way

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

Michael Baker: And certainly as we swap out old stuff for new stuff, we are incurring markdowns to get to get rid of the old stuff. We probably have a little bit more of those than we anticipated. And we are working the streamline our process of, you know, hooking the new skews to the old ones and bringing in the new ones when the old ones fell down in their natural course. Again, all these things are, we believe are great investments for the future.

Speaker Change: takes a lot of investment in the field to present those things the right way you think about something like furniture our patiossets we've completely renovated the way that we assort those

Laura Felice: Thanks Bob.

Speaker Change: presented ing them and much more thanyet style life flifestyle things fill members what it might look like in their home

Speaker Change: we've done a lot and yet we still have a lot to go we need to repeatedly do these things quarter after quarter year after year to reintroduce these categories to our members to build credibility with our members and keep building the fly wheel from a gener merchandise perspective

Michael Baker: As I said, all the stuff that goes through CMP is performing better. And so we anticipate these investments paying off next year. The back half, I think we'll see some burden associated with it. But we wouldn't be doing it if we didn't see the fantastic results that we are seeing from these categories to go through the process.

Michael Baker: Yeah, awesome. Makes sense. Appreciate the time.

Michael Baker: Thanks Mike.

Speaker Change: great noknow thank you and then just as a quick follow-up on big ticket

Ryan Bulger: Thank you.

Speaker Change: just a little bit more color are you seeing any difference and big to get spend in trend between your membership teers or youknowany metr look gu in terms of house income on you spoke to customer health low but earlier but just any coloron the big tickeget out ofthat would be great thankyou

Ryan Bulger: The next question is from church from from Gordon Hascott.

Speaker Change: you ll look i think you think about the consumer out there they are certainly resilient and yet value focused at the same time as we talked about in the prepared remarks we're seeing great purchasing behaviors across the economic cohorts that we track

Ryan Bulger: The line is not open. Please go ahead.

Ryan Bulger: Hey guys, this is Ryan Bulger on for Chuck here. I just wanted to ask about the general merchandise categories a little bit. It sounds like, you know, it's improving. And as you see these categories of within general merchandise that have been weaker or stronger start to turn around and rebound. I just kind of wanted to know what's really driving that improvement. Is it the macro or replacement cycle starting to turn or maybe innovation, just any color on that would be great.

Speaker Change: there's undoubtedly more pressure on the folks at the on the bottom of the economic spectrum versus those folks at the top but they're all exhibiting as we see a great purchasing behaviors

Speaker Change: but they are they are a value focus they are looking for that that right item at the right price when they see it they will absolutely put it in their basket and they don't they are a little bit more chouy

Ryan Bulger: Thank you. Thanks Ryan for your question. Look, as I said, we're very proud of our GM team and the results that they're putting up. We've we've turned around, you know, this giant category in our business that is incredibly important to the treasure hunt and the emotional aspect of shopping. By investing in our team and investing in our members by showing them even better assortments quarter over quarter year over year. This is a long term build for our company took us quite a bit of time to get to where we were.

Laura Felice: We were pleased to deliver accelerating traffic and unit growth in the quarter.

Laura Felice: Inflation was nearly flat for the quarter.

Speaker Change: in places where we have that assortment we have that credibility we have those right price points and the bring tickets like consumer electronics they're absolutely purchasing

Laura Felice: Our second quarter comp in grocery, perishables, and sundries division grew nearly 3% year-over-year underpinned by growth in comp units which outpaced the broader market.

Speaker Change: and where it's not perfect on one of those dimensions there're a little bit more savy they're waiting for a markdown they're waiting for promotion

Speaker Change: and we saw some of that in our patioassets and structures this year those are those are abnormally big tickets couple of thousand dollars for a structure or shed and in this in this day and age you've got to have it you've got to have it right for for folks to do it

Laura Felice: Our general merchandise and services division comp increased slightly in the second quarter with general merchandise outperforming the rest of the divisions in this calculation. Digitally enabled comp sales in the second quarter grew 22% year-over-year and 37% on a two-year stack. Over 90% of our digital sales are fulfilled by our clubs with services like eye-on-line pickup and club, or BOPIC, and same-day delivery, which remain meaningful drivers of our digital growth. In fact, BOPIC alone comprises about half of our digital sales today.

Ryan Bulger: A couple of quarters ago at our hopefully our lowest general merchandise penetration in our history and we are now building back towards uneven higher general merchandise penetration. We know it's important to our members. We know that the treasure hunt is important. They want to, you know, be surprised and delighted as they do their grocery shop. And when they see that great apparel item or the cool thing from, you know, one of our home categories are certainly one of our best categories, consumer electronics.

Speaker Change: so we'll continue to work to provide the best assortment the best best value to our members regardless of what's going on in the economy

Laura Felice: Our digital offering is intended to deliver value by maximizing convenience. Members who leverage our digital convenience save time with an easier shopping experience and thus become more loyal members.

Laura Felice: We will continue leaning into these mutually beneficial enhancements in the future.

Laura Felice: Membership fee income or MFI grew 9.1% to approximately $113.1 million in the second quarter, driven by strong membership acquisition and retention across the chain. We are especially pleased with the performance of our Cobb clubs whose growth in new member signups and renewals drove upside to our planned MFI in the second quarter.

Laura Felice: Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate increased by approximately 10 basis points year-over-year, led by discipline cost management and continued execution on our long-term initiatives, including that of our own brands.

cme cotman: thank you the next' question is from cme cotman from morgan stanley the line is now open please go ahead

Laura Felice: This was slightly lower than our planned rate for the quarter as we work to invest in our business and in our members. We expect to continue to invest in the back half, to continue to do the right thing for our members, which will be the right thing for us in the long term.

Ryan Bulger: They want to be able to put that in their basket. And you know, our job is to move it from an opportunistic business to one that generates trips by itself. And we certainly have that in some some categories like CE. We've run that business very effectively over the years. We've always had great merchants there and great market share. And we are really trying to run that playbook across across the business and it starts with getting the right new products in in our buildings.

Laura Felice: S-GNA expenses for the quarter were approximately $750.3 million, exhibiting expected de-leverage as a percentage of net sales. This was primarily attributable to our new unit growth and other investments to drive our strategic priorities.

Speaker Change: thanks good morning i wanted to ask a little bit about the backhalf change so the business has been managed really well and especially this past quarter i want i'm curious how much of the back half change investments that you talked about

Laura Felice: As Bob mentioned earlier, we continue to gain share in our gas business with comp gallons growing by approximately 5% year-over-year. Furthermore, stronger profitability contributed to overall gas profits that exceeded our expectations in the quarter.

Laura Felice: Our second quarter adjusted EBITDA grew 4.9% year-over-year to $281.3 million. As a reminder, our calculation no longer includes pre-opening and non-cash rent expense advex.

Laura Felice: A tinnitus of the first quarter, our second quarter affected tax rate of 24.1% was primarily driven by an unplanned tax windfall.

Speaker Change: is responding to the environment that's changing versus and i don't mean this word badly but under investment to mean things that could have been preempted so if you can sort those two out if it's just responding to environment versus investments that you know could have been made earlier in cycle

Laura Felice: Our team continues to work to allocate the right amount of product to the right clubs at the right time. In the second quarter, we improved our in-stock levels by approximately 50 basis points over the same period last year.

Ryan Bulger: We didn't in the past have the right brands, the right products, our value prop was somewhat off the way we displayed things was an optimal. We are making great strides in all of those things. It starts with having the right talent here in the building in our club supports center here in Massachusetts. Those folks do the hard work of picking the items and making sure they get into the into the clubs in the right way.

Laura Felice: Our capital allocation strategy is consistent with the framework we have set out in the past. 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.

Laura Felice: We ended the second quarter with half a turn of net leverage, which aligns with our long-term target of sub-1 turn.

Speaker Change: high seeming how you doing

Speaker Change: so look i think there's a little bit of a little bit of both were as i said we're trying to

Speaker Change: build our company for the long term build our franchise in our marketshare for the long ter were playinga little bit of officese here which sometimes

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

Ryan Bulger: Takes a lot of investment in the field to present those things the right way. I think about something like furniture or patio sets. We've completely renovated the way that we assort those presenting them in much more vignette style lifestyle things to fill the members what it might look like in their home. We've done a lot and yet we still have a lot to go. We need to repeatedly do these things quarter after quarter year after year. To reintroduce these categories to our members to build credibility with our members and keep building the flywheel from a general merchandise perspective. Great. Yeah. No, thank you.

Speaker Change: requires investment and we're playing a little bit of defense to knowing that every every retailer out there is seeing very similar things to what we're seeing with very savy price sensitive customers

Speaker Change: and so when you think about what we think about providing everyday value we won't we won't compromise from an investment perspective we invest all all all day long all months in a quarter ong

Speaker Change: all you're ong and we we will continue to do that even if it pressures the back half most of the change in the pressure that we're that we're seeing is

Ryan Bulger: And then just as a quick follow up on big ticket, just a little bit more color there. Are you seeing any difference on and big ticket spend in trends between your membership tiers or any metrics you look at in terms of household income? I know you spoke to customer health a little bit earlier, but just any color on the big ticket side of that would be great. Thank you. Yeah, look, I think as you think about the consumer out there, they are certainly resilient and yet value focused at the same time.

Speaker Change: from choices that we are making that we believe have long-term benefits we wouldn't be proactively growing our perishhabl business at the pace that we're growing at if we didn't think that would yield overall trips and renewal rate in the future

Speaker Change: we wouldn't be changing our assortment as fast as we are if we didn't see the payoff in the results after we change

Laura Felice: We are proud of our achievements in membership, which has performed better than our expectations thus far this year. There are various elements that drive membership fee income, including the timing of new club openings, renewals, and the cadence of promotions to name a few. With these in mind, we still expect our fiscal 2024 MFI growth rate to track better than our long-term algo of mid-single digits, but moderate from the growth rates we delivered in the first half of the fiscal year.

Ryan Bulger: As we talked about in the preparatory remarks, we're seeing great purchasing behaviors across the economic cohorts that we track. There's undoubtedly more pressure on the folks at the bottom of the economic spectrum versus those folks at the top, but they're all exhibiting as we see a great purchasing behaviors. But they are value focused. They are looking for that right item at the right price. When they see it, they will absolutely put it in their basket and when they don't, they are a little bit more choosy.

Speaker Change: we could do those things in a more careful slow methodical basis and potentially lessonthan the burden in the back half but we want to position ourselves in the future for the greatest success that we cant

Laura Felice: As Bob mentioned, our business model and strategies around CMP and our own brands have allowed us to invest in our value prop and help our members stretch their dollar.

Speaker Change: and so we really are trying to be mindful of

Speaker Change: going as fast as we can and investing as much as we can because we are very confident

Speaker Change: in our future we don't have to look past the membership statistics and know why work we're confident but we understand that it requires continual investment and really offensive mindset to do it

Ryan Bulger: In places where we have that assortment, we have that credibility, we have those right price points and our big tickets like consumer electronics, they're absolutely purchasing. And where it's not perfect on one of those dimensions, they're a little bit more savvy. They're waiting for a mark down. They're waiting for a promotion. And we saw some of that in our patio sets and structures this year. Those are abnormally big tickets, a couple thousand dollars for a structure or a shed.

Speaker Change: and does it change i think some of it you said the benefit should be felt already in the next fiscal year

Speaker Change: does it change your posture in how you approach investment i was looking at you're even margins higher than it was precovid to gross is the same so it looks like you know the higher sales base covering expenses which doesn't seem

Ryan Bulger: And in this day and age, you've got to have it right for folks to do it. So we'll continue to work to provide the best assortment and the best value to our members. You know, regardless of what's going on in the economy. Thank you.

Laura Felice: We will remain consistent in this approach to deepen member loyalty over time.

Speaker Change: that bad but that do you do the margin of the business lower down to to allow for some of these investments or do you try to keep the margin of the business where it is while you invest

Speaker Change: i think you've got pluses of minus is running through through margin right you have

Speaker Change: things like our retail media network that are new to us in in the last couple of years that are good guysance from a margin perspective and we take those dollars and we reinvest them back in our membership

Simeon Gottman: The next question is from Simeon Gottman from Morgan Stanley. The line is now open. Please go ahead. Thanks. Good morning. I wanted to ask a little bit about the back half change. So the business has been managed really well. And especially this past quarter, I want to, I'm curious how much of this the back half change investments that you talked about is responding to the environment that's changing versus it is. And I don't mean this word badly, but under investment, mean things that could have been preempted. So if you can sort those two out, if it's just responding to environment versus investments that could have been made earlier in cycle.

Speaker Change: you see our ability through cmp to raise our core margin rates and we usually take that and reinvest that somewhere like we did in our credit card program

Bob Eddy: We are really trying to invest not just for a particular quarter, but for the long term, success of our franchise and building our membership and building our members' positive feelings about our franchise.

Speaker Change: or you know we are trying to

Speaker Change: build a strong long term franchise not really to win in anyone particular quarter so

Speaker Change: like i think we're makingany eventsments we think that that we can that will matter and some of them will pay off in the shortterm some will ayoff in the long term and if they don' will change course

Speaker Change: sharon ok thanks good luck

Simeon Gottman: Hi, Simeon. How you doing? So look, I think there's a little bit of a little bit of both where, as I said, we're trying to build our company for the long term build our franchise and our market share for the long term. We're playing a little bit of offense here, which sometimes requires investment. And we're playing a little bit of defense too, knowing that every retailer out there is seeing very similar things to what we're seeing with very savvy, price sensitive customers.

Sharon: thanks for me

Sharon: thank you the next questions is from mart cardin from u b s the line is now open please go ahead

Mart Cardin: good morning thanks so much taking the questions gu to start another question relates tothe margin just in a twenty basis point reduction in your merge margin outlook is that all being driven by price investments

Speaker Change: or is there much a mix element involved tihere and is there any element of it would not sort be lear like that but you feel the need to increase discounting for new memberships thank you

Simeon Gottman: And so when you think about when we think about providing everyday value, we won't compromise from an investment perspective. If we invest all day long, all month long, all quarter long, all year long, and we will continue to do that, even if it pressures the back half. Most of the change in the pressure that we're seeing is... You know, from choices that we are making, that we believe have long-term benefits. We wouldn't be proactively growing our perishables business at the pace that we're growing at if we didn't think that would yield overall trips and renewal rate in the future.

Bob Eddy: So as you think about the dynamics in the second quarter and then in our forecast for, the rest of the year, I think you really have three things to talk about.

Bob Eddy: One, investments in price and promotion.

Bob Eddy: Not a surprise to anybody on this call that our members and consumers broadly have had, to digest a lot of inflation over the last couple of years.

Bob Eddy: They do remember what old price points are, and we are seeing a consumer that while very, resilient and very happy to be shopping in our buildings, is a little bit more sensitive to price and promotion than they have been in the past.

Bob Eddy: So we are taking advantage of that and making sure that we have the right price gaps, making, sure that we help our members through their shopping needs.

Microer: hi microer morning

Bob Eddy: Number two, really, is the strength of our perishable business.

Bob Eddy: We have talked a lot about Fresh 2.0.

Bob Eddy: We have talked about the importance of driving our members into that weekly shop mode through, categories like meat and produce.

Speaker Change: listen i don't know thati have a un to build on the margin point i think we've we fit that quite heavily other than to say that there is some some mix involved as we build perishabl as a for instance that has a little bit of a lower ring on an average basis

Bob Eddy: We have seen tremendous gains, frankly, higher than what we thought we would see in terms, of perishable units, and that is providing a bit of pressure. As you know, perishables, while incredibly important to our members' view of us and their, purchasing habits over the long term and their renewal habits over the long term, it does require a little bit of extra labor, a little bit of extra handling in the distribution center, and some extra freight versus our plans, and so we are investing proactively there to make sure that we see the results in the future that we want, meaning that those extra trips across the box, not just in perishables, and then the associated membership benefits from that.

Bob Eddy: And then finally, we are transforming our merchandising across the business at a fast, pace.

Speaker Change: then pack of paper towels are an item and general merchandise so that can provide some margin rate pressure just by the math of it but but really it is those things that we've been talking about the proactive investments we're making in every day value and

Bob Eddy: We really are assorting for the long term, trying to provide our members with the greatest, value and assortment that we can, and we are changing things all over the box, and quite candidly, that is providing some growing pains as we go through those transitions. We are actively doing this stuff because we think it benefits next year, the year after, the year after that, even if it is a little bit of a burden this year.

Bob Eddy: While saying that, I think the team is doing a wonderful job picking items. I think the team is doing a much better job managing inventory levels, as Laura talked, about in her comments, being flat year over year in inventory, being down on a per club basis in spite of everything going on, like our in-stock rates going up and building new stores.

Laura Felice: Greater than expected throughput in the near term has pressured our perishable supply chain in the form of additional DC labor and freight cost.

Simeon Gottman: We wouldn't be changing our assortment as fast as we are if we didn't see the payoff in the results after we change. We could do those things in a more careful, slow, methodical basis and potentially less in the burden in the back half, but we want to position ourselves in the future for the greatest success that we can. And so we really are trying to be mindful of going as fast as we can and investing as much as we can because we are very confident, you know, in our future.

Bob Eddy: I think that was a fantastic result, and so while we are seeing some growing pains, we are really managing the day-to-day pretty well, and so as we look forward, we'll continue to invest in our membership, we'll continue to invest in perishables because we know how important it is, and we'll look to iron out the growing pains as we go.

Speaker Change: you know i m growing our franchise for the future

Speaker Change: as you think about membership fee income and and attracting new members the tremendous success that we've seen so far is built on a discounted membership fee model as as you know

Laura Felice: These are investments in our business that we are making today for long-term gains.

Peter Benedict: Great.

Peter Benedict: That all makes sense.

Speaker Change: years ago we transition transition to go away from a free trial model to a paid membership model most of our members come in on some sort of a deal in the first year contingent upon participating in our easy renewal program where they pay the full membership fee in the second year

Laura Felice: As we do what's right for our members, we now expect our full year of fiscal 2024 merchandise growth margin rate will be about flat year over year.

Simeon Gottman: We don't have to look past the membership statistics and know why we're confident, but we understand that it requires continual investment and a really offensive mindset to do it. And does it change? I think some of it you said the benefits should be felt already in the next fiscal year. Does it change your posture in how you approach investment? I was looking at, you know, your even margins higher than it was pre-COVID or gross is the same.

Peter Benedict: Thanks.

Peter Benedict: My follow-up question, Bob, would be around kind of membership,

Peter Benedict: member growth, and MFI.

Peter Benedict: You know, comp club member growth is driving two-thirds of the total member growth.

Peter Benedict: I think that's what you guys said earlier.

Peter Benedict: What are you guys doing differently to create that?

Peter Benedict: Because I'm pretty sure that has not been the case historically.

Laura Felice: We are planning for SG&AD leverage in the back half of fiscal 2024. As we continue to invest in our growth initiatives, particularly in unit growth and new club sales can continue to ramp over a multi-year period.

Peter Benedict: So what have you really changed in terms of how you kind of go after members in existing, markets?

Speaker Change: that's pretty consistent with what goes on in the club world and with the description

Speaker Change: models up all across the economy

Speaker Change: we are continuing that it's been very successful

Laura Felice: We are planning for an effective tax rate of approximately 28% in the back half of the fiscal year.

Speaker Change: and our teamshas been greatedat innovating

Laura Felice: We are maintaining our guidance for fiscal 2024 adjusted EPS, which was in the $375 to $4 range, with investments for the long term potentially driving us towards the lower end of that range. Finally, recall that we are lapping a 53rd week in the fourth quarter of last year that contributed approximately 10 cents to our earnings per share.

Speaker Change: around you know the offers presented but that with that structure and it is is really about finding the right perspective members and finding an offer that works for those perspective members and so

Peter Benedict: And then related to that, the MFI strength, how does that impact, if at all, your willingness or to consider a fee increase at some point either later this year or into 2025?

Peter Benedict: Thank you.

Bob Eddy: Yeah, good questions.

Bob Eddy: So look, you know, we couldn't be more proud of the results, we had in the second quarter. They built on top of the fantastic results of the first quarter, you know, both quarters beating our expectations for our MFI performance.

Simeon Gottman: So it looks like, you know, the higher sales base covering expenses, which doesn't seem that bad. But do you do that the margin of the business lower downs to allow for some of these investments or do you try to keep the margin of the business where it is while you invest? I think you've got pluses of minuses running through margin, right? You have things like a retail media network that are new to us in the last couple of years that are good guys from a margin perspective and we take those dollars and we reinvest them back in our membership.

Speaker Change: i think we'll continue to

Speaker Change: to use that discounted mfi model we will continue to push people through the higher tiers

Speaker Change: we will continue renew folks full freedom in the second year that's been a great underlying strength for us over the past several years and idon't see a reason why we sto

Bob Eddy: And really, we saw great results across the MFI metrics that we care most about, as we talked about seeing fantastic growth in total memberships, both from a renewal rate perspective and from a new member acquisition perspective. We're seeing, you know, MFI dollars per member grow.

Bob Eddy: Remember, we've talked about that as the fee increase without a fee increase.

Bob Eddy: Before I get to your fee increase question.

Bob Eddy: And then the team is doing a spectacular job driving members up into our premium tiers and into our co-branded credit card.

Bob Eddy: And so, you know, look, I think the strength in membership is a couple of things. One, we are running a better business today than we ever have.

Bob Eddy: We are providing more value than ever.

Bob Eddy: We are finding ways to convince our members of that.

Bob Eddy: We are showing it to them in ways that, are evident just with their eyes.

Speaker Change: great thank you and then as the follow up one of your largest conventional grossceryour competitorsanoun a shutting down a number of stores in your fod print when you guys see major grocerers cloed stoors within your trade areas you typically see a material uptick and membership sign up the those market

Bob Eddy: You can look across our buildings and see better assortments and better value.

Bob Eddy: We are saving them time through our digital processes.

Bob Eddy: We're doing a lot of things really well. The 9.1 was a little bit ahead of our expectations for the quarter.

Bob Eddy: As Laura said, there's a lot of stuff that goes in there, timing, accounting adjustments, promotions, things like that.

Bob Eddy: And so, you know, I think that will moderate in the back half a bit.

Bob Eddy: That takes nothing away from the strength of what we see in our membership franchise. As you think about the why, I mean, I think one of the great strategic unlocks we've pursued as a team over the past several years is growing memberships in comp clubs.

Bob Eddy: And, you know, I've been around the company for a long time for, you know, a ton of my history with the company.

Bob Eddy: We really couldn't figure out how to grow membership in comp clubs. And the team has now unlocked that methodology that allows us to grow comp club memberships in a pretty predictable way.

Simeon Gottman: You see our ability through CNP to raise our core margin rates and we usually take that and reinvest that somewhere like we did in our credit card program. We're trying to build a strong long-term franchise not really to win in any one particular quarter. So look, I think we're making the investments we think that we can that will matter and some of them will pay off in the short-term and some will pay off in the long-term. And if they don't, we'll change, of course.

Bob Eddy: We are giving ourselves permission to experiment with new offer structures, new ways of balancing, getting the right amount of people in versus the quality of those people in.

Bob Eddy: We're doing a great job understanding who our best target members are and trying to figure out different ways to talk to them.

Bob Eddy: So it's a bunch of different things that's growing, but it's all centered on providing the most value and the best assortment we can every day.

Bob Eddy: As you think about the prospect of a fee increase, you know, I think you need to step back and, think about all that stuff that I just said, first and foremost.

Bob Eddy: We have tremendous momentum in our membership statistics from an acquisition perspective, from a renewal rate perspective.

Bob Eddy: You know, over the past several years, we've really, we really have had that fee increase, without a fee increase by leveraging folks up into the premium tier memberships.

Bob Eddy: You know, our MFI per member is up well over $5, you know, from where it was at the last fee increase.

Bob Eddy: We understand where the industry has gone in the last couple of years and a couple of months even. And we believe that we are providing considerably more value today than we were at the time of our last fee increase.

Speaker Change: these customers tend to graditate towards other conventional grocers just given q account of act differences just what would pically see in that fr

Bob Eddy: You don't have to look farther than our co-brand credit card, getting 5% back or 5 cents off gas for our rewards members.

Bob Eddy: Those are new ads since the last fee increase.

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

Bob Eddy: So, you know, we're very comfortable with where we are from our value offering, from our membership momentum perspective.

Bob Eddy: With all that said, our guide for the back half doesn't contemplate a fee increase.

Bob Eddy: And when we have news on that front, we'll share it with everybody.

Peter Benedict: All right.

Peter Benedict: Fair enough.

Peter Benedict: Thanks for the perspective.

Peter Benedict: Thank you.

Bob Eddy: Bob, back over to you.

Speaker Change: you look look i think we have tremendous benefits

Speaker Change: to our model versus conventional grocer and the biggest one is obviously value we've try and be twenty five percent better price than conventional groers

Simeon Gottman: Sharon, okay. Thanks. Good luck. Thanks, Amit.

Speaker Change: and in some places it's even it's even higher than that i would suspect

Bob Eddy: Thanks, Laura.

Mark Cudden: Thank you. The next question is from Mark Cudden from UBS. The line is now open. Please go ahead. Good morning. Thanks so much for taking the question guys. To start, another question relates to the margin. Just on that 20 basis point reduction in your merge margin outlook. Is that all being driven by price investments or is there much of a mixed element involved here? And is there any element of it wouldn't have so I do realize that, but do you feel the need to increase this counting for new memberships? Thank you. Hi, Mark. Good morning.

Speaker Change: that club gaining share and bj's gaining share waysgh on conventional grocers and

Bob Eddy: While staying focused on what matters most, delivering value to our members.

Speaker Change: and i expect that when folks close their buildings their customers if they're not already a member of ours in in our markets they would look to us to fill some of the gap and so we look at it as an opportunity

Speaker Change: we will be playing offense to try and

Speaker Change: to try and get get an additional share from from those customers and we'll play to our strengths we try and our members time for digital and money through the value that we offer every day and it's it's

Mark Cudden: Listen, I don't know that I have a ton to build on the margin point. I think we've we've hit that quite heavily. Other than to say there is some some mix involved as we build perishables as a, for instance, that has a little bit of a lower ring on an average basis. Then, you know, a pack of paper towels or an item in general merge nice so that can provide some margin rate pressure just by the math of it.

Speaker Change: usually a pretty compelling case when we face a conventional grocer

Operator: The next question is from Michael Baker from DA Debit Fund.

Operator: The line is now open.

Operator: Please go ahead.

Speaker Change: from that perspective and so we are 're pleased to have this opportunity to gain more of our members walalls that also shock convental gcer we're pleased out the opportunity tointroduce ourselves to to folks that don't know us that may come over during those transitions

Michael Baker: Okay.

Michael Baker: Thanks.

Michael Baker: Maybe a couple of follow-ups on some things we've talked about.

Michael Baker: But the pre-opening cost of $30 million in the back half, I mean, that's almost 2x from last year.

Michael Baker: Was that always the plan or have clubs been delayed or the timing, at least, of the pre-opening on the P&L?

Michael Baker: Is that different than you originally thought?

Michael Baker: I guess what I'm trying to get at is, is that a reason why, you know, you might be at the lower end or in the back half or anything along that relative to the original plan?

Bob Eddy: Hey, Mike.

Bob Eddy: Thanks for the question.

Bob Eddy: I think it's a good one.

Bob Eddy: You know, we are thrilled with our progress from a real estate perspective as well.

Bob Eddy: And we are a little bit ahead of our original plans for the year in terms of the number of boxes that will open.

Bob Eddy: As we said, and I'll let Bill talk for a minute here, we've got 11 in the next six months.

Mark Cudden: But really, it is those things that we've been talking about. The proactive investments we're making in every day and growing our franchise for the future. As you think about membership fee income and attracting new members, the tremendous success that we've seen so far, you know, is built on a discounted membership fee model. As you know, years ago, we transitioned away from a free trial model to a paid membership model. Most of our members come in on some sort of a deal in the first year, contingent upon participating in our easy renewal program where they pay the full membership fee in the second year.

Bob Eddy: We had built a few less than that into our original plan for the year.

Bob Eddy: In doing so, we have demonstrated our ability to properly grow our business and drive shareholder value since we re-entered the public market in 2018.

Speaker Change: great thank so much of your look at

Speaker Change: thanksmark

Speaker Change: thank you that's the end of q any for today's conference i will now handle to bob at the chairman and chief exe good officer for the closing remarks

Bob Eddy: We are a stronger company today, unified by our purpose of taking care of the families who depend on us, and we are working to grow stronger.

Mark Cudden: That's pretty consistent with what goes on in the club world and with the models all across the economy. We are continuing that. It's been very successful, and our team's been great at innovating around the offers presented with that structure, and it is really about finding the right perspective members and finding an offer that works for those perspective members. And so I think we'll continue to use that discounted MFI model. We will continue to push people up through the higher tiers. We will continue to renew folks at full freight in the second year.

Bob Eddy: And so it does provide some pressure in the back half.

Bob Eddy: Again, these are great investments for the future.

Bob Eddy: And so even though it pressures the back half in this year, it will bode well for the future.

Bob Eddy: So you're on the right point there.

Bob Eddy: Bill, what else from a real estate perspective?

Bob: thanks very much appreciate everybody's attention this morning thank you for your questions for your support of our company and that we wish you the best as we go through the back half enjoy the rest of summer we will talk to atthe end of the third quarter thanksso much

Bill Werner: I think, Bob, as I look out, 11 clubs in the next six months is probably one of the most aggressive kind of expansion plans that we've had in the company's history.

Bill Werner: And we're really proud of all the work the team's done.

Bill Werner: As we think about Mike versus last year, we had five clubs in the back half of last year.

Bill Werner: We'll do 11 in the back half this year.

Bob Eddy: The rate of change in our company is very high.

Bill Werner: So as you think about sequentially, year over year, the pre-open expense, that's why that's flowing in that way.

Bill Werner: But the plan was always, as we communicated, back half weighted for this year.

Michael Baker: Okay, makes sense.

Michael Baker: Another follow-up to a previous point.

Michael Baker: You talked about the growing pains in changing the assortment.

Michael Baker: More color on exactly what that means.

Michael Baker: Is that, you know, markdowns as you change things out?

Michael Baker: Is that labor associated with those changes?

Michael Baker: And then, typically, what's the timing of when that pays off?

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

Bob Eddy: We have a lot of irons in the fire. These efforts significantly increase near-term complexity and may require more investments in the back half.

Michael Baker: Does that pay off this holiday season?

Michael Baker: Does that pay off, you know, next year?

Michael Baker: How to think about that a little more.

Bob Eddy: Yeah, sure.

Operator: Thanks for watching.

Speaker Change: this concludes today's offference call you may now disconnect

Bob Eddy: Look, it's a little bit of all of the above.

Operator: We hope you enjoyed this video.

Bob Eddy: You know, we're doing it because our members are asking us for better assortments.

Operator: We'll see you next time.

Bob Eddy: Our CMP process is working. It is yielding really relevant, timely, new assortments across the box in many categories. Those categories going through the CMP process are comping better than those that haven't.

Operator: Bye-bye.

Bob Eddy: And certainly, as we swap out old stuff for new stuff, we are incurring markdowns to get rid of the old stuff. We probably have a little bit more of those than we anticipated, and we are working to streamline our process of hooking the new SKUs to the old ones and bringing in the new ones when the old ones sell down in their natural course.

Bob Eddy: Again, all these things, we believe, are great investments for the future.

Bob Eddy: As I said, all the stuff that goes through CMP is performing better.

Bob Eddy: And so we anticipate these investments paying off next year.

Bob Eddy: The back half, I think we'll see some burden associated with it, but we wouldn't be doing it if we didn't see the fantastic results that we are seeing from these categories that go through the process.

Bob Eddy: But we believe these efforts keep us poised for future success.

Bob Eddy: Yeah.

Michael Baker: Awesome.

Michael Baker: Makes sense.

Michael Baker: Appreciate the time.

Michael Baker: Thanks, Mike.

Michael Baker: Thank you.

Operator: The next question is from Chuck Brum from Gordon Hathcote.

Operator: The line is now open.

Operator: Please go ahead.

Chuck Brum: Hey, guys.

Chuck Brum: This is Ryan Bolger on for Chuck here.

Chuck Brum: I just wanted to ask about the general merchandise categories a little bit.

Chuck Brum: It sounds like it's improving.

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

Chuck Brum: And as you see these categories within general merchandise that have been weaker or stronger start to turn around and rebound, I just kind of wanted to know what's really driving that improvement.

Chuck Brum: Is it the macro or replacement cycles starting to turn or maybe it's innovation?

Chuck Brum: Just any color on that one.

Chuck Brum: That would be great.

Chuck Brum: Thank you.

Bob Eddy: Sure.

Bob Eddy: Thanks, Ryan, for your question.

Bob Eddy: Look, as I said, we're very proud of our GM team and the results that they're putting up.

Bob Eddy: We've turned around this giant category in our business that is incredibly important to the treasure hunt and the emotional aspect of shopping by investing in our team and investing in our members by showing them even better assortments quarter over quarter, year over year.

Bob Eddy: This is a long term build for our company.

Bob Eddy: It took us quite a bit of time to get to where we were a couple of quarters ago at hopefully our lowest general merchandise penetration in our history. And we are now building back towards an even higher general merchandise penetration.

Bob Eddy: We've done a lot and yet we still have a lot to go. We need to repeatedly do these things quarter after quarter, year after year to reintroduce these categories to our members, to build credibility with our members, and keep building the flywheel from a general merchandise perspective.

Chuck Brum: Great.

Chuck Brum: Yeah, no, thank you.

Chuck Brum: And then just as a quick follow-up on Big Ticket, just a little bit more color there.

Chuck Brum: Are you seeing any difference in Big Ticket spend and trends between your membership tiers or any metrics you look at in terms of household income?

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

Chuck Brum: I know you spoke to customer health a little bit earlier, but just any color on the Big Ticket side of that would be great.

Chuck Brum: Thank you.

Bob Eddy: Yeah, look, I think as you think about the consumer out there, they are certainly resilient and yet value-focused at the same time.

Bob Eddy: As we talked about in the prepared remarks, we're seeing great purchasing behaviors across the economic cohorts that we track.

Bob Eddy: And we saw some of that in our patio sets and structures this year.

Bob Eddy: Those are abnormally big tickets, a couple thousand dollars for a structure or shed.

Bob Eddy: And in this day and age, you've got to have it right for folks to do it.

Bob Eddy: So we'll continue to work to provide the best assortment and the best value to our members, regardless of what's going on in the economy.

Chuck Brum: Thank you.

Operator: The next question is from Simeon Gottman from Morgan Stanley.

Operator: The line is now open.

Simeon Gottman: Please go ahead.

Simeon Gottman: So if you could sort those two out, if it's just responding to environment versus investments that could have been made earlier in the cycle.

Bob Eddy: Hi, Simeon.

Bob Eddy: How are you doing?

Bob Eddy: So look, I think there's a little bit of both.

Mark Cudden: That's been a great underlying strength for us over the past several years, and I don't see a reason why we stop. Great, thank you.

Bob Eddy: As I said, we're trying to build our company for the long term, build our franchise and our market share for the long term. We're playing a little bit of offense here, which sometimes requires investment.

Bob Eddy: And we're playing a little bit of defense, too, knowing that every retailer out there is seeing very similar things to what we're seeing with very savvy, price-sensitive customers.

Bob Eddy: And so when we think about providing everyday value, we won't compromise from an investment perspective.

Bob Eddy: We invest all day long, all month long, all quarter long, all year long, and we will continue to do that, even if it pressures the back half.

Bob Eddy: Most of the change and the pressure that we're seeing is a result of investment, you know, from choices that we are making that we believe have long-term benefits.

Bob Eddy: We wouldn't be proactively growing our perishables business at the pace that we're growing at if we didn't think that would yield overall trips and renewal rate in the future.

Bob Eddy: We wouldn't be changing our assortment as fast as we are if we didn't see the payoff in the results after we change.

Bob Eddy: We could do those things in a more careful, slow, methodical basis and potentially, lessen the burden in the back half, but we want to position ourselves in the future for the greatest success that we can.

Bob Eddy: And so we really are trying to be mindful of going as fast as we can and investing as much as we can because we are very confident in our future.

Bob Eddy: We don't have to look past the membership statistics to know why we're confident, but we understand that it requires continual investment and a really offensive mindset to do it.

Mark Cudden: And then as a follow-up, one of your largest conventional grocery competitors announced is shutting down a number of stores in your footprint. When you guys see major grocers close stores within your trade areas, you typically see a material uptick and membership sign up in those markets. Those customers tend to gravitate towards other conventional grocers just given SKU account impact differences. Just what would you typically see on that front? Yeah, look, I think we have tremendous benefits to our model versus conventional grocer, and the biggest one is obviously value.

Simeon Gottman: And does it change, I think some of it you said the benefits should be felt already in the next fiscal year, does it change your posture in how you approach investment?

Simeon Gottman: I was looking at your EBIT margins higher than it was pre-COVID, your gross is the same.

Simeon Gottman: So it looks like it's the higher sales base covering expenses, which doesn't seem that bad, but does the margin of the business lower down to allow for some of these investments or do you try to keep the margin of the business where it is while you invest?

Bob Eddy: I think you've got pluses and minuses running through margin, right?

Bob Eddy: You have things like our retail media network that are new to us in the last couple of years that are good guys from a margin perspective and we take those dollars and we reinvest them back in our membership.

Bob Eddy: You see our ability through CMP to raise our core margin rates and we usually take that and reinvest that somewhere like we did in our credit card program.

Bob Eddy: We are trying to build a strong long-term franchise, not really to win in any one particular quarter. So I think we're making the investments we think that we can that will matter and some of them will pay off in the short term and some will pay off in the long term. And if they don't, we'll change course.

Bob Eddy: Fair enough.

Simeon Gottman: Okay.

Simeon Gottman: Thanks.

Simeon Gottman: Good luck.

Simeon Gottman: Thanks, Samir.

Simeon Gottman: Thank you.

Operator: The next question is from Mark Cotton from UBS.

Operator: The line is now open.

Mark Cotton: Please go ahead.

Mark Cotton: Good morning.

Mark Cotton: Thanks so much for taking the questions, guys.

Mark Cotton: To start, another question, related to the margin, just on that 20 basis point reduction in your merged margin outlook, is that all being driven by price investments or is there much of a mixed element involved here and is there any element of, it wouldn't necessarily be like that, but do you feel the need to increase discounting for new memberships?

Mark Cotton: Thank you.

Bob Eddy: Hi, Mark.

Bob Eddy: Good morning.

Bob Eddy: Listen, I don't know that I have a ton to build on the margin point.

Bob Eddy: I think, we've hit that quite heavily.

Bob Eddy: Other than to say that there is some mix involved as we build perishables, for instance, that has a little bit of a lower ring on an average basis than a pack of paper towels or an item in general merchandise.

Bob Eddy: So that can provide some margin rate pressure just by the math of it.

Bob Eddy: But really, it is those things that we've been talking about, the proactive investments we're making in everyday value and growing our franchise for the future.

Bob Eddy: As you think about membership fee income and attracting new members, the tremendous success, that we've seen so far is built on a discounted membership fee model. As you know, years ago, we transitioned away from a free trial model to a paid membership model. Most of our members come in on some sort of a deal in the first year contingent upon participating in our Easy Renewal program where they pay the full membership fee in the second year.

Bob Eddy: That's pretty consistent with what goes on in the club world.

Bob Eddy: And then with subscription,

Bob Eddy: We are continuing that.

Bob Eddy: It's been very successful.

Bob Eddy: And our team's been great at innovating around, you know, the offers presented with that structure.

Bob Eddy: And it is really about finding the right prospective members and finding an offer that works for those prospective members.

Bob Eddy: And so I think we'll continue to use that discounted MFI model.

Bob Eddy: We will continue to push people up through the higher tiers.

Mark Cudden: We try and be 25% better priced than conventional grocers, and in some places it's even higher than that. I would suspect that club gaining share and BJs gaining share weighs on conventional grocers, and I expect that when folks close their buildings, their customers, if they're not already, a member of ours in our markets, they would look to us to fill some of the gap. And so we look at it as an opportunity.

Bob Eddy: We will continue to renew folks at full freight in the second year.

Bob Eddy: That's been a great underlying strength for us over the past several years.

Bob Eddy: And I don't see a reason why we stop.

Mark Cotton: Great.

Mark Cotton: Thank you.

Mark Cotton: And then as a follow-up, one of your largest conventional grocery competitors announced is shutting down a number of stores near footprint.

Mark Cotton: When you guys see major grocers close stores within your trade areas, do you typically see a material uptick in membership signups in those markets?

Bob Eddy: And so we're pleased to have this opportunity to gain more of our members' wallets that also shop conventional grocery.

Bob Eddy: And we're pleased to have the opportunity to introduce ourselves to folks that don't know us that may come over during those transitions.

Mark Cotton: Great.

Mark Cotton: Thanks so much.

Mark Cotton: Good luck, guys.

Mark Cotton: Thanks, Mark.

Mark Cotton: Thank you.

Operator: That's the end of Q&A for today's conference.

Bob Eddy: I will now hand over to Bob Eddy, Chairman and Chief Executive Officer, for the closing remarks.

Bob Eddy: Thanks very much.

Bob Eddy: I appreciate everybody's attention this morning.

Bob Eddy: Thank you for your questions, for your support of our company.

Bob Eddy: And we wish you the best as we go through the back half.

Bob Eddy: Enjoy the rest of the summer.

Bob Eddy: We will talk to you at the end of the third quarter.

Bob Eddy: Thanks so much.

Mark Cudden: We will be playing offense to try and get an additional share from those customers, and we'll play to our strengths. We try and save our members time through digital and money through the value that we offer every day, and it's usually a pretty compelling case when we face a conventional grocer from that perspective. And so we're pleased to have this opportunity to gain more of our members' wallets that also shop conventional grocer, and we're pleased to have the opportunity to introduce ourselves to folks that don't know us, that may come over during those transitions. Great. Thanks so much. Good luck, guys. Thanks, Mark. Thank you.

Bob Eddy: We will provide more digital conveniences to save our members money and time, and we will possibly grow our footprint.

Bob Eddy: Above all, we will continue to deliver compelling value to our members.

Operator: That's the end of Q&E for today's conference.

Bob Eddy: I will now hand over to Bob Eddie, Chairman, and Chief Executive Officer for the closing remarks. Thanks very much. Appreciate everybody's attention this morning. Thank you for your questions, for your support of our company, and we wish you the best as we go through the back half. Enjoy the rest of the summer. We will talk to you at the end of the third quarter. Thanks so much.

Bob Eddy: Thanks again for joining us today and for your support of BJ's Wholesale Club.

Operator: We will now take your questions.

Operator: Thank you.

Operator: We will now stop at Q&A session.

Operator: In fairness to all participants, please limit your question to one question and one follow-up.

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

Robbie Holmes: Our first question comes from the line of, Robbie Holmes from Bank of America.

Operator: Thanks.

Operator: The line is now open.

Maddie: Please go ahead.

Maddie: Hi.

Maddie: This is Maddie on Farabi.

Maddie: Thank you for taking our question.

Maddie: Our question is, what are the general merchandise trends telling you on how you're positioned for holiday?

Maddie: Can you talk about any trends through the quarter and any color on how back to school is trending?

Maddie: Thank you.

Bob Eddy: Hi, Maddie.

Bob Eddy: Thanks for your question.

Bob Eddy: Look, during the quarter, we're pleased with our general merchandise business in getting back to positive comp growth as we talked about in the prepared remarks.

Bob Eddy: We saw continued great performance out of our consumer electronics business, out of our apparel business, and certainly continued progress in our home business.

Bob Eddy: Seasonal had a much better track record in the second quarter than it did in the first. Some of that obviously being the better weather year over year and some of it was the great value that we put forward.

Bob Eddy: As we get through third and fourth quarters, certainly as we get into holiday, GM becomes a bigger portion of our business back to school.

Bob Eddy: Back to college is not a huge business for us, but certainly that the holiday season is.

Bob Eddy: General merchandise becomes a bigger penetration of our overall business at that point for obvious reasons.

Bob Eddy: We're very excited about the assortment that we're putting forward and bringing in to our distribution centers and our clubs pretty shortly here.

Bob Eddy: We're hoping for great results during the back half from a general merchandise perspective.

Maddie: Thank you, and maybe just one quick follow-up.

Maddie: Are you giving yourself any room?

Bob Eddy: to invest in price in general merchandise?

Bob Eddy: As you know, Maddie, value is what we do, right? So, we are always investing in our business, we're always investing in value, always investing in our members.

Bob Eddy: And I think that's what you're seeing really in the fantastic membership statistics that we've seen this past quarter, the first quarter and in the last couple of years as we grow the sizing quality of the membership or growing renewal.

Bob Eddy: We'll rate meaningfully growing our premium tiers, it's all about value. And certainly these days, value is even more paramount as folks digest all the inflation we've seen over the past couple of years.

Bob Eddy: So we continue to invest every day, we will continue to invest in the future across our business, not just in general merchandise.

Maddie: Thank you, really appreciate it.

Maddie: Thanks, Maddie.

Peter Benedict: The next question is from Peter Benedict, from Bird.

Operator: The line is not open, please go ahead.

Peter Benedict: Thanks guys, good morning.

Peter Benedict: So, my first question is just kind of around the profitability view here, you talked about the change in the merchandise margin outlook, it sounds like there's some DC related stuff there.

Peter Benedict: There's also some investment in perishable pricing.

Peter Benedict: I'm just curious if any of that's in particular the latter is in reaction to something you're seeing in the market, something you're doing proactively, just kind of curious maybe a comment around the competitive environment.

Laura Felice: That's my first question.

Laura Felice: Good morning, Pete.

Laura Felice: Thanks for the question.

Laura Felice: Look, I think as it regards what we're seeing and doing from a merchandise margin perspective, I think you can categorize it as playing the long game. We are really trying to invest not just for a particular quarter, but for the long term success of our franchise and building our membership and building our members of positive feelings about our franchise.

Laura Felice: So, as you think about the dynamics in the second quarter and then in our forecast for the rest of the year, I think you really have three things to talk about.

Laura Felice: One, investments in price and promotion, not as priced anybody on this call that our members and consumers broadly have had to digest a lot of inflation over the last couple of years.

Laura Felice: They do remember what old price points are and we are seeing a consumer that, well, very resilient and very happy to be shopping on our buildings is a little bit more sensitive to price and promotion than they have been in the past.

Laura Felice: So, we are taking advantage of that and making sure that we have the right price gas making sure that we help our members through their shopping needs.

Laura Felice: Number two really is the strength of our perishable business.

Laura Felice: We have talked a lot about Fresh 2.0, we have talked about the importance of driving our members into that weekly shop mode through categories like meat and produce.

Laura Felice: We have seen tremendous gains, frankly, higher than what we thought we would see in terms of perishable units and that's providing a bit of pressure, as you know, perishables, well, incredibly important to our members view of us and their purchasing habits over the long term and their renewal habits over the long term. It does require a little bit of extra labor, a little bit of extra handling in the distribution center and some extra freight versus our plans.

Laura Felice: And so, we are investing proactively there to make sure that we see the results in the future that we want, meaning that those extra trips across the box, not just in perishables, and then the associated membership benefits from them.

Laura Felice: And then finally, we are transforming our merchandising across the business at a fast pace.

Laura Felice: We really are assorting for the long term, trying to provide our members with the greatest value and assortment that we can and we are changing things all over the box.

Laura Felice: And quite candidly, that's providing some growing pains as we go through their transitions.

Laura Felice: We are actively doing this stuff because we think it benefits next year or the year after the year after that, even if it is a little bit of a burden this year. While saying that, I think the team is doing a wonderful job picking items.

Laura Felice: I think the team is doing a much better job managing inventory levels as Laura talked about in her comments, being flat year over year in inventory, being down on a per club basis, you know, in spite of everything going on.

Laura Felice: And like our in stock rates going up and building new stores, I thought that was a fantastic result.

Laura Felice: And so while we are seeing some growing pains, we are really managing the day to day pretty well.

Laura Felice: And so as we look forward, we'll continue to invest in our membership, we'll continue to invest in perishables because we know how important it is, and we'll look to iron out the growing pains as we go.

Laura Felice: Great, but that all makes sense.

Laura Felice: Thanks.

Michael Baker: My follow-up question will be around kind of membership and member growth and MFI, you know, comp club member growth is driving two-thirds of the total member growth.

Michael Baker: I think that's what you guys said earlier.

Michael Baker: What are you guys doing differently to create that?

Michael Baker: Because I'm pretty sure that has not been the case historically.

Michael Baker: So what have you really changed in terms of how you kind of go after members in existing markets?

Michael Baker: And then related to that, the MFI strength, how does that impact, if at all, your willingness or to consider a fee increase at some point, either later this year or into 2025?

Michael Baker: Thank you.

Bob Eddy: Yeah, good questions.

Bob Eddy: So look, you know, we couldn't be more proud of the results we had in the second quarter. They built on top of the fantastic results of the first quarter.

Bob Eddy: You know, both quarters beating our expectations for our MFI performance. And really, we saw great results across the MFI metrics that we care most about as we talked about seeing fantastic growth in total memberships, both from a renewal rate perspective and from a new member acquisition perspective.

Bob Eddy: We're seeing, you know, MFI dollars per member grow.

Bob Eddy: Remember, we've talked about that as the fee increase, without a fee increase, before I get to your fee increase question.

Bob Eddy: And then the team is doing a spectacular job driving members up into our premium tiers and into our co-branded credit card.

Bob Eddy: And so, you know, look, I think the strength and membership is a couple of things.

Bob Eddy: One, we are running a better business today than we ever have.

Bob Eddy: We are providing more value than ever.

Bob Eddy: We are finding ways to convince our members of that.

Bob Eddy: We are showing it to them in ways that are evident just with their eyes.

Bob Eddy: You can look across our buildings and see better assortments and better value.

Bob Eddy: We are saving them time through our digital processes.

Bob Eddy: We're doing a lot of things really well. The 9.1 was a little bit ahead of our expectations for the quarter.

Bob Eddy: As Laura said, there's a lot of stuff that goes in there, timing, accounting adjustments, promotions, things like that.

Bob Eddy: And so, you know, I think that will moderate in the back half a bit.

Bob Eddy: That takes nothing away from the strength of what we see in our membership franchise. As you think about the why, I mean, I think one of the great strategic unlocks, we've pursued as a team over the past several years is growing memberships and comp clubs.

Bob Eddy: And, you know, I've been around the company for a long time for a ton of my history with the company.

Bob Eddy: We really couldn't figure out how to grow membership and comp clubs. And the team is now unlocked that methodology that allows us to grow comp club memberships in a pretty predictable way.

Bob Eddy: We are giving ourselves permission to experiment with new offer structures, new ways of balancing, getting the right amount of people in versus the quality of those people in.

Bob Eddy: We're doing a great job understanding who our best target members are and trying to figure out different ways to talk to them.

Bob Eddy: So it's a bunch of different things that's growing, but it's all centered on providing the most value and the best assortment we can every day.

Bob Eddy: As you're thinking about the prospect of a fee increase, I think you need to step back and think about all that stuff that I just said first and foremost.

Bob Eddy: We have tremendous momentum in our membership statistics from an acquisition perspective, from a renewal rate perspective. Over the past several years, we really have had that fee increase without a fee increase by leveraging folks up into the premium tier memberships.

Bob Eddy: Our MFI member is up well over $5. $5.00 dollars from where it was at the last fee increase. We understand where the industry has gone in the last couple of years and a couple of months even, and we believe that we are providing considerably more value today than we were at the time of our last fee increase.

Bob Eddy: You don't have to look farther than our co-brand credit card getting 5% back or 5% off gas for our rewards members.

Bob Eddy: Those are new ads since the last fee increase.

Bob Eddy: So, you know, we're very comfortable where we are from our value offering from our membership momentum perspective.

Bob Eddy: With all that said, our guide for the back app doesn't contemplate a fee increase, and when we have news on that front, we'll share it with everybody.

Bob Eddy: All right.

Bob Eddy: Fair enough.

Bob Eddy: Thanks for the perspective.

Michael Baker: You're welcome.

Michael Baker: Thank you.

Michael Baker: The next question is from Michael Baker from DA David's Fund.

Operator: The line is not open, please go ahead.

Michael Baker: Okay.

Michael Baker: Thanks.

Michael Baker: Is that different than you originally thought?

Michael Baker: I guess what I'm trying to get at is that a reason why you might be at the lower end or in the back app?

Michael Baker: Or anything along that relative to the original plans?

Bob Eddy: Hey, Mike.

Bob Eddy: Thanks for the question.

Bob Eddy: I think it's a good one.

Bob Eddy: You know, we are thrilled with our progress from our real estate perspective as well.

Bob Eddy: And we are a little bit ahead of our original plans for the end terms of the number of boxes that that will open.

Bill Werner: As we said, and I'll let Bill talk for a minute here.

Bill Werner: We've got 11 in the next six months. We had built a few less than that into our original plan for the year, and so it does provide some pressure in the back half.

Bill Werner: Again, these are great investments for the future, and so even though it pressures the back half in this year, it will both well for the future.

Bill Werner: So you're on the right point there.

Bill Werner: Bill, what else from a real estate perspective?

Bill Werner: I think, Bob, as I look out, 11 clubs in the next six months is probably one of the most aggressive kind of expansion plans that we've had in the company's history.

Bill Werner: And we're really proud of all the work the team's done as we think about Mike versus laughing last year.

Bill Werner: We had five clubs in the back half of last year.

Bill Werner: We'll do 11 in the back half this year.

Bill Werner: So as you think about sequentially year over year, the reopen expense, that's why that's flowing in that way.

Bill Werner: But the plan was always as we communicated back half waited for this year.

Michael Baker: Okay, make sense.

Michael Baker: Another follow-up to a previous point.

Michael Baker: You talked about the growing pains in changing the assortment.

Michael Baker: More color on exactly what that means is that, you know, markdowns as you change things out.

Michael Baker: Is that labor associated with those changes?

Michael Baker: And then typically what's the timing of when that pays off?

Michael Baker: Does that pay off this holiday season?

Michael Baker: Does that pay off next year?

Michael Baker: How do you think about that a little more?

Bill Werner: Yeah, sure.

Bill Werner: Look, it's a little bit of all the above.

Bill Werner: You know, we're doing it because our members are asking us for better assortments.

Bill Werner: Our CMP process working.

Bill Werner: It is yielding really relevant, timely, new assortments across the box in many categories.

Bill Werner: Those categories going through the CMP process are comping better than those that haven't. They're having better margin results.

Bill Werner: As well.

Bill Werner: And so we're very happy and proud of what the CMP process is putting forward.

Bill Werner: But it is requiring a little bit more labor in areas like in several of our boxes.

Bill Werner: We have reset our entire snacking assortment in the middle of the club. We've consolidated the snacking from a number of different runs and put it up front right near the registers right in prime time where we can take advantage of people's path through the club. And really show off that great assortment that we have.

Bill Werner: That's an expensive endeavor to move stuff around the clubs as one example.

Bill Werner: And certainly as we swap out old stuff for new stuff, we are incurring markdowns to get to get rid of the old stuff. We probably have a little bit more of those than we anticipated.

Bill Werner: And we are working the streamline our process of, you know, hooking the new skews to the old ones and bringing in the new ones when the old ones fell down in their natural course.

Bill Werner: Again, all these things are, we believe are great investments for the future.

Bill Werner: As I said, all the stuff that goes through CMP is performing better.

Bill Werner: And so we anticipate these investments paying off next year.

Bill Werner: The back half, I think we'll see some burden associated with it.

Bill Werner: But we wouldn't be doing it if we didn't see the fantastic results that we are seeing from these categories to go through the process.

Bill Werner: Yeah, awesome.

Bill Werner: Makes sense.

Michael Baker: Appreciate the time.

Michael Baker: Thanks Mike.

Operator: Thank you.

Ryan Bulger: The next question is from church from from Gordon Hascott.

Operator: The line is not open.

Ryan Bulger: Please go ahead.

Ryan Bulger: Hey guys, this is Ryan Bulger on for Chuck here.

Ryan Bulger: I just wanted to ask about the general merchandise categories a little bit.

Ryan Bulger: It sounds like, you know, it's improving. And as you see these categories of within general merchandise that have been weaker or stronger start to turn around and rebound.

Ryan Bulger: I just kind of wanted to know what's really driving that improvement.

Ryan Bulger: Is it the macro or replacement cycle starting to turn or maybe innovation, just any color on that would be great.

Bob Eddy: Thank you.

Bob Eddy: Thanks Ryan for your question.

Bob Eddy: Look, as I said, we're very proud of our GM team and the results that they're putting up.

Bob Eddy: We've we've turned around, you know, this giant category in our business that is incredibly important to the treasure hunt and the emotional aspect of shopping.

Bob Eddy: By investing in our team and investing in our members by showing them even better assortments quarter over quarter year over year.

Bob Eddy: This is a long term build for our company took us quite a bit of time to get to where we were.

Bob Eddy: A couple of quarters ago at our hopefully our lowest general merchandise penetration in our history and we are now building back towards uneven higher general merchandise penetration.

Bob Eddy: We know it's important to our members.

Bob Eddy: We know that the treasure hunt is important.

Bob Eddy: They want to, you know, be surprised and delighted as they do their grocery shop.

Bob Eddy: And when they see that great apparel item or the cool thing from, you know, one of our home categories are certainly one of our best categories, consumer electronics. They want to be able to put that in their basket.

Bob Eddy: And you know, our job is to move it from an opportunistic business to one that generates trips by itself.

Bob Eddy: And we certainly have that in some some categories like CE.

Bob Eddy: We've run that business very effectively over the years.

Bob Eddy: We've always had great merchants there and great market share.

Bob Eddy: And we are really trying to run that playbook across across the business and it starts with getting the right new products in in our buildings. We didn't in the past have the right brands, the right products, our value prop was somewhat off the way we displayed things was an optimal.

Bob Eddy: We are making great strides in all of those things.

Bob Eddy: It starts with having the right talent here in the building in our club supports center here in Massachusetts.

Bob Eddy: Those folks do the hard work of picking the items and making sure they get into the into the clubs in the right way.

Bob Eddy: Takes a lot of investment in the field to present those things the right way.

Bob Eddy: I think about something like furniture or patio sets. We've completely renovated the way that we assort those presenting them in much more vignette style lifestyle things to fill the members what it might look like in their home.

Bob Eddy: We've done a lot and yet we still have a lot to go. We need to repeatedly do these things quarter after quarter year after year. To reintroduce these categories to our members to build credibility with our members and keep building the flywheel from a general merchandise perspective.

Ryan Bulger: Great.

Ryan Bulger: Yeah.

Ryan Bulger: No, thank you.

Ryan Bulger: And then just as a quick follow up on big ticket, just a little bit more color there.

Ryan Bulger: Are you seeing any difference on and big ticket spend in trends between your membership tiers or any metrics you look at in terms of household income?

Ryan Bulger: I know you spoke to customer health a little bit earlier, but just any color on the big ticket side of that would be great.

Ryan Bulger: Thank you.

Bob Eddy: Yeah, look, I think as you think about the consumer out there, they are certainly resilient and yet value focused at the same time.

Bob Eddy: As we talked about in the preparatory remarks, we're seeing great purchasing behaviors across the economic cohorts that we track.

Bob Eddy: There's undoubtedly more pressure on the folks at the bottom of the economic spectrum versus those folks at the top, but they're all exhibiting as we see a great purchasing behaviors.

Bob Eddy: But they are value focused. They are looking for that right item at the right price.

Bob Eddy: When they see it, they will absolutely put it in their basket and when they don't, they are a little bit more choosy.

Bob Eddy: In places where we have that assortment, we have that credibility, we have those right price points and our big tickets like consumer electronics, they're absolutely purchasing.

Bob Eddy: And where it's not perfect on one of those dimensions, they're a little bit more savvy.

Bob Eddy: They're waiting for a mark down.

Bob Eddy: They're waiting for a promotion.

Bob Eddy: And we saw some of that in our patio sets and structures this year.

Bob Eddy: Those are abnormally big tickets, a couple thousand dollars for a structure or a shed.

Bob Eddy: And in this day and age, you've got to have it right for folks to do it.

Bob Eddy: So we'll continue to work to provide the best assortment and the best value to our members.

Bob Eddy: You know, regardless of what's going on in the economy.

Simeon Gottman: Thank you.

Operator: The next question is from Simeon Gottman from Morgan Stanley.

Simeon Gottman: The line is now open.

Simeon Gottman: Please go ahead.

Simeon Gottman: Thanks.

Simeon Gottman: Good morning.

Simeon Gottman: I wanted to ask a little bit about the back half change.

Simeon Gottman: So the business has been managed really well.

Simeon Gottman: And especially this past quarter, I want to, I'm curious how much of this the back half change investments that you talked about is responding to the environment that's changing versus it is.

Simeon Gottman: And I don't mean this word badly, but under investment, mean things that could have been preempted.

Simeon Gottman: So if you can sort those two out, if it's just responding to environment versus investments that could have been made earlier in cycle.

Bob Eddy: Hi, Simeon.

Bob Eddy: How you doing?

Bob Eddy: So look, I think there's a little bit of a little bit of both where, as I said, we're trying to build our company for the long term build our franchise and our market share for the long term. We're playing a little bit of offense here, which sometimes requires investment.

Bob Eddy: And we're playing a little bit of defense too, knowing that every retailer out there is seeing very similar things to what we're seeing with very savvy, price sensitive customers.

Bob Eddy: And so when you think about when we think about providing everyday value, we won't compromise from an investment perspective.

Bob Eddy: If we invest all day long, all month long, all quarter long, all year long, and we will continue to do that, even if it pressures the back half.

Bob Eddy: Most of the change in the pressure that we're seeing is... You know, from choices that we are making, that we believe have long-term benefits.

Bob Eddy: We wouldn't be proactively growing our perishables business at the pace that we're growing at if we didn't think that would yield overall trips and renewal rate in the future.

Bob Eddy: We wouldn't be changing our assortment as fast as we are if we didn't see the payoff in the results after we change.

Bob Eddy: We could do those things in a more careful, slow, methodical basis and potentially less in the burden in the back half, but we want to position ourselves in the future for the greatest success that we can.

Bob Eddy: And so we really are trying to be mindful of going as fast as we can and investing as much as we can because we are very confident, you know, in our future.

Bob Eddy: We don't have to look past the membership statistics and know why we're confident, but we understand that it requires continual investment and a really offensive mindset to do it.

Simeon Gottman: And does it change?

Simeon Gottman: I think some of it you said the benefits should be felt already in the next fiscal year.

Simeon Gottman: Does it change your posture in how you approach investment?

Simeon Gottman: I was looking at, you know, your even margins higher than it was pre-COVID or gross is the same.

Simeon Gottman: So it looks like, you know, the higher sales base covering expenses, which doesn't seem that bad.

Simeon Gottman: But do you do that the margin of the business lower downs to allow for some of these investments or do you try to keep the margin of the business where it is while you invest?

Simeon Gottman: I think you've got pluses of minuses running through margin, right?

Simeon Gottman: You have things like a retail media network that are new to us in the last couple of years that are good guys from a margin perspective and we take those dollars and we reinvest them back in our membership.

Simeon Gottman: You see our ability through CNP to raise our core margin rates and we usually take that and reinvest that somewhere like we did in our credit card program.

Simeon Gottman: We're trying to build a strong long-term franchise not really to win in any one particular quarter. So look, I think we're making the investments we think that we can that will matter and some of them will pay off in the short-term and some will pay off in the long-term. And if they don't, we'll change, of course.

Simeon Gottman: Sharon, okay.

Simeon Gottman: Thanks.

Simeon Gottman: Good luck.

Simeon Gottman: Thanks, Amit.

Mark Cudden: Thank you.

Operator: The next question is from Mark Cudden from UBS.

Mark Cudden: The line is now open.

Mark Cudden: Please go ahead.

Mark Cudden: Good morning.

Mark Cudden: Thanks so much for taking the question guys.

Mark Cudden: To start, another question relates to the margin.

Mark Cudden: Just on that 20 basis point reduction in your merge margin outlook.

Laura Felice: Is that all being driven by price investments or is there much of a mixed element involved here?

Laura Felice: And is there any element of it wouldn't have so I do realize that, but do you feel the need to increase this counting for new memberships?

Laura Felice: Thank you.

Laura Felice: Hi, Mark.

Laura Felice: Good morning.

Laura Felice: Listen, I don't know that I have a ton to build on the margin point.

Laura Felice: I think we've we've hit that quite heavily.

Laura Felice: Other than to say there is some some mix involved as we build perishables as a, for instance, that has a little bit of a lower ring on an average basis.

Laura Felice: Then, you know, a pack of paper towels or an item in general merge nice so that can provide some margin rate pressure just by the math of it.

Laura Felice: But really, it is those things that we've been talking about.

Laura Felice: The proactive investments we're making in every day and growing our franchise for the future.

Laura Felice: As you think about membership fee income and attracting new members, the tremendous success that we've seen so far, you know, is built on a discounted membership fee model. As you know, years ago, we transitioned away from a free trial model to a paid membership model. Most of our members come in on some sort of a deal in the first year, contingent upon participating in our easy renewal program where they pay the full membership fee in the second year.

Laura Felice: That's pretty consistent with what goes on in the club world and with the models all across the economy.

Laura Felice: We are continuing that.

Laura Felice: It's been very successful, and our team's been great at innovating around the offers presented with that structure, and it is really about finding the right perspective members and finding an offer that works for those perspective members.

Laura Felice: And so I think we'll continue to use that discounted MFI model.

Laura Felice: We will continue to push people up through the higher tiers.

Laura Felice: We will continue to renew folks at full freight in the second year. That's been a great underlying strength for us over the past several years, and I don't see a reason why we stop.

Mark Cudden: Great, thank you.

Mark Cudden: Those customers tend to gravitate towards other conventional grocers just given SKU account impact differences.

Mark Cudden: Just what would you typically see on that front?

Bob Eddy: Yeah, look, I think we have tremendous benefits to our model versus conventional grocer, and the biggest one is obviously value. We try and be 25% better priced than conventional grocers, and in some places it's even higher than that.

Bob Eddy: I would suspect that club gaining share and BJs gaining share weighs on conventional grocers, and I expect that when folks close their buildings, their customers, if they're not already, a member of ours in our markets, they would look to us to fill some of the gap.

Bob Eddy: And so we look at it as an opportunity.

Bob Eddy: We will be playing offense to try and get an additional share from those customers, and we'll play to our strengths.

Bob Eddy: We try and save our members time through digital and money through the value that we offer every day, and it's usually a pretty compelling case when we face a conventional grocer from that perspective.

Bob Eddy: And so we're pleased to have this opportunity to gain more of our members' wallets that also shop conventional grocer, and we're pleased to have the opportunity to introduce ourselves to folks that don't know us, that may come over during those transitions.

Mark Cudden: Great.

Mark Cudden: Thanks so much.

Mark Cudden: Good luck, guys.

Bob Eddy: Thanks, Mark.

Operator: Thank you.

Bob Eddy: That's the end of Q&E for today's conference.

Bob Eddy: I will now hand over to Bob Eddie, Chairman, and Chief Executive Officer for the closing remarks.

Bob Eddy: Thanks very much.

Bob Eddy: Appreciate everybody's attention this morning.

Bob Eddy: Thank you for your questions, for your support of our company, and we wish you the best as we go through the back half.

Bob Eddy: Enjoy the rest of the summer.

Bob Eddy: We will talk to you at the end of the third quarter.

Operator: Thanks so much.

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

Thanks.

Q2 2024 BJ's Wholesale Club Holdings Inc Earnings Call

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