Q1 2025 BJ's Wholesale Club Holdings Inc Earnings Call

Operator: Hello, and welcome to BJ's Wholesale Club Holdings, Inc. first quarter fiscal 2025 earnings conference call. After the company's remarks, there will be a question and answer session.

Hello, and welcome to Bj's Wholesale Club Holdings, Inc. First quarter basically called 10 to 25 earnings conference call. After the company's remarks, there will be a question and answer session in fairness to all participants today.

Operator: In fairness to all participants today, we ask you to limit yourself to one question and return to the queue for additional questions.

Speaker Change: We ask you to limit yourself to one question and a return to the queue for additional questions I will now pass the call over to your host Cathy Park.

Catherine Park: I will now pass the call over to your host, Kathy Park, VP of Investor Relations. Please go ahead.

Cathy Park: P of Investor Relations. Please go ahead.

Catherine Park: Good morning and welcome to BJ's first quarter fiscal 2025 earnings call. With me today are Bob Eddy, Chairman and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factor sections of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our Investor Relations website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations.

Speaker Change: Good morning, and welcome to Bj's first quarter fiscal 2025 earnings call with me today are Bob Eddy Chairman and Chief Executive Officer, Laura Police, Chief Financial Officer, and Bill Werner Executive Vice President strategy and development. Please.

Cathy Park: Remember that we may make forward looking statements on this call that are based on our current expectations forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factors sections of our most recent SEC filings for a description of these risks and uncertainties. Please.

Cathy Park: Please also refer to todays press release and latest Investor presentation posted on our Investor Relations website for our cautionary statement regarding forward looking statements and non-GAAP reconciliations with that I'll turn the call over to Bob.

Robert Eddy: With that, I'll turn the call over to Bob. Good morning, everyone. Thank you for joining us. This morning we reported a strong start to the year with our first quarter top and bottom line results exceeding expectations. We grew net sales by nearly 5% and we managed the business well, resulting in operating income and net income growth of 27% and 35% respectively. Our team continues to execute on our long-term strategic priorities as we work hard to take care of the families who depend on us. Consumers are always looking for value, but it's paramount in challenging times like these.

Bob: Good morning, everyone. Thank you for joining us.

Speaker Change: This morning, we reported a strong start to the year with our first quarter top and bottom line results exceeding expectations.

Speaker Change: We grew net sales by nearly 5% and we manage the business well, resulting in operating income and net income growth of 27% and 35% respectively.

Speaker Change: Our team continues to execute on our long term strategic priorities as we work hard to take care of the families who depend on us.

Speaker Change: Consumers are always looking for value, but it's paramount in challenging times like these.

Robert Eddy: Due to this, BJ's remains a leading destination for our members to find what they need and want at a great value. The drivers of our business remain strong. Membership continues to grow nicely, our continued improvements in merchandising and digital convenience are driving traffic, and we're gaining share in our clubs and gas stations. Finally, we are accelerating our club openings to serve more families. We are excited about our momentum. Our comparable club sales, excluding gas sales, grew by 3.9% in the first quarter and were led by traffic and units once again. Traffic grew for the 13th consecutive quarter, contributing about two and a half points to our comp in the quarter.

Speaker Change: Due to this bj's remains a leading destination for our members to find what they need and want at a great value.

Speaker Change: The drivers of our business remains strong membership continues to grow nicely.

Speaker Change: Our continued improvements in merchandising and digital convenience are driving traffic and we're gaining share in our clubs and gas stations.

Speaker Change: Finally, we are accelerating our club openings to serve more families.

Speaker Change: We are excited about our momentum.

Speaker Change: Our comparable club sales excluding gas sales grew by three 9% in the first quarter and were led by traffic and units once again.

Speaker Change: <unk> grew for the 13th consecutive quarter contributing about two and a half points to our comp in the quarter.

Speaker Change: Yeah.

Robert Eddy: Consumers across the country have digested meaningful inflation over the past few years and the uncertain economic environment drove members to prioritize value in their purchases during the quarter. Members are consistently spending with us, especially in Household Essentials. Our perishables, grocery, and sundries division delivered more than 4% comp growth in the first quarter, with unit volumes increasing across all three divisions. Perishables remains the strongest driver of our growth as more and more members make us their weekly destination for produce, dairy and meat. We also saw terrific growth in our own brands during the quarter. Our general merchandise and services division comps decreased slightly in the first quarter.

Speaker Change: Consumers across the country have digested meaningful inflation over the past few years and the uncertain economic environment drove members to prioritize value and their purchases during the quarter.

Speaker Change: Members are consistently spending with us, especially in household essentials.

Speaker Change: Our perishables grocery and Sundries division delivered more than 4% comp growth in the first quarter with unit volumes increasing across all three divisions.

Speaker Change: Perishables remains the strongest driver of our growth as more and more members make us their weekly destination for produce dairy and meat.

Speaker Change: We also saw a terrific growth in our own brands during the quarter.

Speaker Change: Our general merchandise and services division comps decreased slightly in the first quarter.

Robert Eddy: We delivered positive comps in apparel and toys, where the combination of an elevated assortment, low price points, and compelling value have kept our members engaged. We also grew comps and consumer electronics. led by computer equipment such as laptops, desktops, and monitors. Unfavorable weather and pressures on consumer sentiment impacted big-ticket, highly discretionary categories such as patio sets, gazebos, and outdoor sheds in the quarter. That said, we are maintaining our momentum on our transformation strategy, and it's clear that members are responding well to an improving treasure hunt. Ferris have been top of mind for companies and consumers alike in recent months.

Speaker Change: We delivered positive comps in apparel and toys, where the combination of an elevated assortment low price points and compelling value have kept our members engaged.

Speaker Change: We also grew comps in consumer electronics.

Speaker Change: Led by computer equipment, such as laptops desktops and monitors.

Speaker Change: Unfavorable weather and pressures on consumer sentiment impacted big ticket highly discretionary categories, such as patio sets because evo is an outdoor sheds and the quarter.

Speaker Change: That said, we are maintaining our momentum on our transformation strategy and it's clear that members are responding well to an improving treasure hunt.

Speaker Change: Yeah.

Speaker Change: Tariffs have been top of mind for companies and consumers alike. In recent months Bj's is less impacted by imports that many of our competitors, but tariffs aren't new to us and we have a great team to help us find our way in an incredibly dynamic environment, that's been changing by the day.

Robert Eddy: BJ's is less impacted by imports than many of our competitors, but tariffs aren't new to us, and we have a great team to help us find our way in an incredibly dynamic environment that's been changing by the day. We have strong capabilities in areas like analytics and input cost tracking, tools we've used in past disruptions, and are applying with discipline today. I'm so proud of our teams across merchandising, supply chain, finance, and analytics who have remained agile in navigating these challenges. This includes sourcing from alternative countries of origin, reassessing orders, and collaborating with our vendors, all to drive the best outcomes for our members.

Speaker Change: We have strong capabilities in areas like analytics and input cost tracking tools, we've used in past disruptions and are applying with discipline today.

Speaker Change: I am so proud of our teams across merchandising supply chain finance and analytics, who have remained agile and navigating these challenges.

Speaker Change: This includes sourcing from alternative countries of origin, reassessing orders and collaborating with our vendors all to drive the best outcomes for our members.

Robert Eddy: We're always leaning into our model to deliver value, and while upward pressure on costs may drive prices higher, We are doing everything possible to minimize the impact to our members. Moreover, we will invest for the long term as we should gain share in a market disrupted by rising prices. As we gain more clarity, our teams are ready to adapt and pivot, but our guiding principles will remain the same. Delivering great value is non-negotiable for BJ's, and we will always make the right decisions for our members. Our first quarter results underscore the progress we are making on our four strategic priorities.

Speaker Change: We're always leaning into our model to deliver value and while upward pressure on costs may drive prices higher.

Speaker Change: We are doing everything possible to minimize the impact to our members. Moreover, we will invest for the long term as we should gain share in a market disrupted by rising prices as.

Speaker Change: As we gain more clarity our teams are ready to adapt and pivot, but our guiding principles will remain the same delivering great value is non negotiable for bj's and we will always make the right decisions for our members.

Speaker Change: Our first quarter results underscore the progress we are making on our four strategic priorities.

Robert Eddy: As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. Our business starts and ends with our members. We are strengthening membership quarter after quarter. We're growing total member counts in new and existing clubs and upgrading more members into our premium tiers while keeping our renewal rates strong. Higher tier members spend more and are more likely to renew, driving greater lifetime value. Over the past couple of years, we enhanced our credit card program, invested in a gas discount for our Club Plus members, and in January, we added benefits for Plus members by giving them two free same-day deliveries every year.

Speaker Change: 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: Our business starts and ends with our members we are strengthening membership quarter after quarter, we're growing total member counts and new and existing clubs and upgrading more members into our premium tiers, while keeping our renewal rates strong.

Speaker Change: Higher tier members spend more and are more likely to renew driving greater lifetime value.

Speaker Change: For the past couple of years, we enhanced our credit card program invested in the gas discount for our club plus members.

Speaker Change: And in January we added benefits for plus members by giving them to free same day deliveries every year.

Robert Eddy: These investments in our value proposition are paying off. In the first quarter, higher-tier membership penetration grew by over 100 basis points sequentially from the fourth quarter, surpassing 40% for the first time in our history. Our momentum and membership is a direct reflection of the unbeatable shopping experience we provide at BJ's. Our merchandising strategies span our entire box and aim to deliver exceptional value to our members. That means having the right products at the right price presented in the right way. Great pricing is foundational to our model. Our advantage structure allows us to consistently offer up to 25% off grocery store prices, and we are committed to maintaining this.

Speaker Change: These investments in our value proposition are paying off in the first quarter higher tier membership penetration grew by over 100 basis points sequentially from the fourth quarter.

Speaker Change: Surpassing 40% for the first time in our history.

Speaker Change: Our momentum in membership is a direct reflection of the unbeatable shopping experience, we provide our P. J S. Our merchandising strategy has spanned our entire box and aim to deliver exceptional value to our members.

Speaker Change: That means having the right products at the right price presented in the right way.

Speaker Change: Great pricing is foundational to our model our advantaged structure allows us to consistently offer up to 25% off grocery store prices and we are committed to maintaining this edge.

Robert Eddy: Beyond pricing, we deliver value through our highly curated assortment, which we have dramatically improved over the past few years. We renovated our general merchandise business to regain credibility in our treasure hunt. We launched Fresh 2.0 to win our members shop and grow trip frequency. We continuously elevate our own brands to deepen loyalty. The result is great member engagement and market share, as evidenced by our growth in traffic, comp sales, and, of course, in membership.

Speaker Change: Beyond pricing, we deliver value through our highly curated assortment, which we have dramatically improved over the past few years.

Speaker Change: We renovated our general merchandise business to regain credibility in our treasure Hunt.

Speaker Change: We launched <unk> 2.12, when our members shop and grow trip frequency.

Speaker Change: We continuously elevate our own brands to deepen loyalty.

Speaker Change: The result is great member engagement and market share as evidenced by our growth in traffic comp sales and of course in membership.

Robert Eddy: I'd like to provide a little more color around our current work in fresh. As you know, we launched our Fresh 2.0 initiative in produce last year based on the insight that perishables, especially produce, dictate our members' first weekly shop. We knew that if we won in produce, we would win trip frequency and wallet share. Since launching in the second quarter of last year, the program has driven quarterly produce comps of high single digit to low double digit. We're not only introducing new members into our produce category, but they are regularly reengaging in produce as well.

Speaker Change: I'd like to provide a little more color around our current work in fresh.

Speaker Change: As you know, we launched our fresh to Plano initiative and produce last year based on the insight that perishables, especially produce dictate our members' first weekly shop.

Speaker Change: We knew that if we won in produce we would win trip frequency and wallet share.

Speaker Change: Since launching in the second quarter of last year. The program has driven quarterly produce comps of high single digit to low double digits.

Speaker Change: We're not only introducing new members into our Protos category, but they are regularly re engaging and produce as well.

Robert Eddy: The success we've seen in produce has given us confidence to extend Fresh 2.0 to meat and seafood, which we piloted in Florida late last year and launched chain-wide this month. Similar to our early work in fresh produce, our meat and seafood initiatives are built on comprehensive market studies and competitive assessment. Our research determined that our biggest opportunity was in our assortment and presentation. First, we optimized our assortment to better reflect localized member preferences, adding items that members wanted and removing less relevant. Second, we added signage and dividers in our coolers for cleaner presentation and easier navigation, reminiscent of our efforts in produce.

Speaker Change: The success, we've seen in Proteus has given us confidence to extend fresh to point out to meat and seafood, which we piloted in Florida late last year and launched chain wide. This month.

Speaker Change: Similar to our early work in fresh produce or meat and seafood initiatives are built on comprehensive market studies and competitive assessment.

Speaker Change: Our research determined that our biggest opportunity was in our assortment and presentation.

Speaker Change: First we optimized our assortment to better reflect the localized member preferences, adding items that members wanted and removing less relevant ones.

Speaker Change: Second we added signage and divide errors in our coolers for cleaner presentation and easier navigation reminiscent of our efforts in produce.

Robert Eddy: We also reflowed our merchandise to reflect how our members shop meat. For example, we created a single destination for pre-seasoned and marinated proteins, making these ready-to-cook products easier to find. While these products comprise a small percentage of our protein sales today, the example illustrates how we're leveraging our understanding of shopper behavior to rethink all aspects of our business. As part of these efforts, we've also armed our field team members with better tools and reporting to track performance and reduce salvage. Our members love the improvements in FRESH, and we will continue to invest to drive trips, baskets, and member loyalty.

Speaker Change: We also re flowed our merchandize to reflect how our members shop meet for example, we created a single destination for pre seasoned and marinated proteins, making these ready to cook products easier to find.

Speaker Change: While these products comprise a small percentage of our protein sales today. The example illustrates how we're leveraging our understanding of shopper behavior to rethink all aspects of our business.

Speaker Change: As part of these efforts we've also armed our field team members with better tools and reporting to track performance and reduced salvage.

Speaker Change: Our members love the improvements in fresh and we will continue to invest to drive trips and baskets and member loyalty.

Robert Eddy: Speaking of what members love, let's talk about our digital conveniences. Today, our members have multiple ways to save their time in addition to 25% lower grocery store prices through Bopic, Express Pay, curbside pickup, and same-day delivery. These have helped fuel double-digit growth and digitally-enabled comp sales each year for the past four years. In the first quarter, digitally-enabled comp sales grew by 35% year-over-year and 56% on a two-year stack.

Speaker Change: Speaking of what members low let's talk about our digital conveniences today are members of multiple ways to save their time. In addition to 25% lower grocery store prices through <unk> Express pay curbside pickup and same day delivery.

Speaker Change: These have helped fueled double digit growth in digitally enabled comp sales each year for the past four years.

Speaker Change: In the first quarter digitally enabled comp sales grew by 35% year over year and 56% on a two year stack.

Robert Eddy: We're using technology to achieve greater labor efficiencies and accommodate the continued growth of our digital business. Consider our journey with digital order fulfillment. Today, POPIC, Curbside, and Same Day Delivery comprise the majority of our digitally enabled sales, and our team members are picking these orders in our club. Over the past 18 months, with the product location data provided by our autonomous inventory robots and the help of AI, we developed and rolled out tools that optimized order batches and pick routes. This has enabled us to reduce the time required to pick an item by over 45%.

Speaker Change: We're using technology to achieve greater labor efficiencies and accommodate the continued growth of our digital business.

Speaker Change: Our journey with digital order fulfillment.

Speaker Change: Today, <unk> curbside and same day delivery comprise the majority of our digitally enabled sales and our team members are picking these orders in our clubs over.

Speaker Change: Over the past 18 months with the product location data provided by our autonomous inventory robots and the help of AI, we developed and rolled out tools that optimized order batches and pick routes. This has enabled us to reduce the time required to pick an item by over 45%.

Robert Eddy: As more members adopt our digital conveniences and reward us with their spending and loyalty, we will continue investing to drive operational efficiencies and member lifetime value.

Speaker Change: As more members adopt our digital conveniences and reward us with their spending and loyalty, we will continue investing to drive operational efficiencies and member lifetime value.

Robert Eddy: Finally, we're making meaningful progress on our real estate strategy. We hit the ground running in the first quarter, opening five new clubs, including our very first club on Staten Island, as well as four gas stations. Our new clubs are performing well against our expectations, and our future growth pipeline is strong. We remain on track to open 25 to 30 new clubs over the next two years.

Speaker Change: Finally, we're making meaningful progress on our real estate strategy, we hit the ground running in the first quarter opening five new clubs, including our very first club on Staten Island, as well as for gas stations.

Speaker Change: Our new clubs are performing well against our expectations and our future growth pipeline is strong.

Speaker Change: We remain on track to open 25 to 30, new clubs over the next two years.

Robert Eddy: As we continue to demonstrate the success of our new club playbook, we've also asked ourselves how we can bring the same level of premium experience to the existing chain. In the past several years, we've updated our clubs with the latest sign packages and invested to support our key growth initiatives, including Digital and Fresh 2.0. We're also looking to identify relocation opportunities to better position our fleet for tomorrow. As part of this strategy, we expect to open a relocated club in the coming months in Mechanicsburg, Pennsylvania. We'll have more relocations planned over the next several years, including in Rotterdam, New York, next year.

Speaker Change: As we continue to demonstrate the success of our New club Playbook. We've also asked ourselves how we can bring the same level of premium experience to the existing chain.

Speaker Change: In the past several years, we've updated our clubs with the latest sign packages and invested to support our key growth initiatives, including digital and for us to point out.

Speaker Change: We're also looking to identify a relocation opportunities to better position our fleet for tomorrow.

Speaker Change: As part of this strategy, we expect to open a relocated club in the coming months in Mechanicsburg, Pennsylvania.

Speaker Change: I'll have more relocations planned over the next several years, including in Rotterdam in New York next year.

Robert Eddy: Stepping back and assessing the current state of the consumer, broader uncertainty in the marketplace continues to drive consumers toward value, and our members are relying on BJ's to provide it. Spending behavior remained solid across our membership in the first quarter as we drove healthy year-over-year growth in spend and trips across our high, mid, and low-income cohorts. Even in these uncertain times, some things remain constant, and here's what you can expect from us. You can expect us to stay committed to delivering the value our members rely on every time they shop with us. You can also expect us to remain focused on our long-term growth priorities.

Speaker Change: Stepping back and assessing the current state of the consumer.

Speaker Change: Broader uncertainty in the marketplace continues to drive consumers toward value and our members are relying on bj's to provide it.

Speaker Change: Spending behavior remains solid across our membership in the first quarter as we drove healthy year over year growth in spend in trips across our high mid and low income cohorts.

Speaker Change: Even in these uncertain times, some things remain constant and here's what you can expect from us.

Speaker Change: You can expect us to stay committed to delivering the value our members rely on every time they shop with us.

Speaker Change: You can also expect us to remain focused on our long term growth priorities. Our business model is built to win in both good times and times when consumers feel pressured this especially holds true today is the investments we're making in the business are driving results.

Robert Eddy: Our business model is built to win in both good times and times when consumers feel pressured. This especially holds true today as the investments we're making in the business are driving results.

Robert Eddy: This year is turning out to be more dynamic than we all thought, and I'd like to thank our team members who continue to rise to the occasion and work tirelessly to take care of the families who depend on us. I'm confident in our ability to execute through the near term together, and more convinced than ever that we're set up for long-term sustainable growth.

Speaker Change: This year is turning out to be more dynamic than we all thought and I'd like to thank our team members, who continue to rise to the occasion and worked tirelessly to take care of the families who depend on us.

Speaker Change: I am confident in our ability to execute through the near term together and more convinced than ever that we're set up for long term sustainable growth.

Laura Felice: I'll now turn it over to Laura to provide more details on our results and outlook. Thanks, Bob. First, I'd like to echo Bob's gratitude for our team members across our clubs, supply chain, and club support center, whose dedication to BJ's led to another strong quarter. Net sales in the first quarter were $5 billion, increasing 4.7% year over year. Merchandise comp sales, which exclude gas sales, increased by 3.9% year-over-year, led by traffic and units, as our value prop continues to resonate with our members. Our performance was consistently strong in February and April, with the later Easter shift impacting March.

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

Laura Police: Thanks, Bob first I'd like to Echo Bob's gratitude for our team members across our supply.

Laura: Supply chain and clubs support center, whose dedication to Bj's led to another strong quarter.

Speaker Change: Net sales in the first quarter were $5 billion, increasing four 7% year over year.

Speaker Change: Merchandise comp sales, which exclude gas sales increased by three 9% year over year led by traffic and units as our value prop continues to resonate with our members.

Laura: Our performance was consistently strong in February and April with the later Easter shift impacting March.

Laura Felice: Total comparable club sales in the first quarter, including gas sales, grew 1.6% year over year. Lower year-over-year retail gas prices partially offset our market share gains at our pump. First quarter comp gallons rose about 2% year over year, with total volume growing even faster due to new stations coming online. This compares to continued year-over-year volume declines across the broader industry in the U.S. Digitally enabled comp sales in the quarter grew 35% year over year, contributing significantly to our overall sales growth. Members who use our digital conveniences are better members with greater spend and higher MPS scores than members who only shop in-club.

Laura: Total comparable club sales in the first quarter, including gas sales grew one 6% year over year.

Speaker Change: Lower year over year retail gas prices, partially offset our market share gains at our pumps.

Speaker Change: First quarter comp gallons rose about 2% year over year with total volume growing even faster due to new stations coming online.

Speaker Change: This compares to continued year over year volume declines across the broader industry in the U S.

Speaker Change: Digitally enabled comp sales in the quarter grew 35% year over year.

Speaker Change: <unk> significantly to our overall sales growth.

Speaker Change: Members, who use our digital conveniences are better members with greater spend and higher NPS scores the members who only shop in club.

Laura Felice: As a result, we will continue to invest in enhancing our digital conveniences in the future. Membership Fee Income, or MFI, grew 8.1% to approximately $120.4 million in the first quarter, led by strong membership acquisition and retention across the chain. MSI also benefited from a fee increase that went into effect on January 1, 2025. First quarter merchandise gross margins increased by approximately 30 basis points year over year with minimal tariff related impacts in the quarter. We continue to manage our margins prudently, and our category management process is yielding profitable growth across the broader assortment. SG&A expenses in the first quarter were approximately $760.9 million, resulting in approximately 10 basis points of year-over-year deleverage as a percentage of net sales.

Speaker Change: As a result, we will continue to invest in enhancing our digital conveniences in the future.

Speaker Change: Membership fee income or MSI grew eight 1% to approximately $124 million in the first quarter led by strong membership acquisition and retention across the chain.

Speaker Change: MSI also benefit benefited from a fee increase that went into effect on January 1st 2025.

Speaker Change: First quarter merchandise gross margins increased by approximately 30 basis points year over year with.

Speaker Change: With minimal tariff related impacts in the quarter.

Speaker Change: We continue to manage our margins prudently and our category management process is yielding profitable growth across the broader assortment.

Speaker Change: SG&A expenses in the first quarter were approximately $769 million.

Speaker Change: Resulting in approximately 10 basis points of year over year deleverage as a percentage of net sales.

Laura Felice: This was primarily driven by our continued investments to drive our strategic priorities, and more specifically, an outsized growth in depreciation as we accelerate new club openings. In our fuel business, first quarter profit per gallon ran above last year's levels and slightly higher than our expectations, resulting in year-over-year growth in gas profits. All in, we reported first quarter earnings per share of $1.13 and adjusted earnings per share of $1.14. Our first quarter performance reflects our strong membership and traffic, merchandising improvements, and digital conveniences, all reinforced by our investments in the business to drive long-term growth. Our effective tax rate of 22.2% was driven by higher than anticipated tax windfall.

Speaker Change: This was primarily driven by our continued investments to drive our strategic priorities and more specifically an outsized growth in depreciation as we accelerate new club openings.

Speaker Change: And our fuel business first quarter profit per gallon ran above last year's levels and slightly higher than our expectations.

Speaker Change: <unk> and year over year growth in gas profits.

Speaker Change: All in we reported first quarter earnings per share of $1 13.

Speaker Change: And adjusted earnings per share of $1 14.

Speaker Change: Our first quarter performance reflects our strong membership and traffic merchandising improvements and digital conveniences.

Speaker Change: Reinforced by our investments in the business to drive long term growth.

Speaker Change: Our effective tax rate of 22, 2% was driven by higher than anticipated tax windfall.

Laura Felice: Let's move to our balance sheet. We ended the first quarter with absolute inventory levels down 2% on a per club basis. In stocks, also improved by 30 basis points year over year, thanks to the team's great work in allocating the right amount of product to the right clubs at the right time. Our capital allocation strategy is consistent with our historical framework as we continue to take a disciplined approach to maximize shareholder value. We believe the best use of cash is applying it towards profitably growing the business. As such, investments to support membership, merchandising, digital, and real estate initiatives continue to be funded entirely by our cash flows in the first quarter, and our capital expenditures were approximately $140.5 million.

Speaker Change: Let's move to our balance sheet.

Speaker Change: We ended the first quarter with absolute inventory levels down 2% on a per club basis.

Speaker Change: In stocks also improved by 30 basis points year over year, thanks to the team's great work and allocating the right amount of product to the right clubs at the right time.

Speaker Change: Our capital allocation strategy is consistent with our historical framework as we continue to take a disciplined approach to maximize shareholder value.

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

Speaker Change: As such investments to support membership merchandising digital and real estate initiatives continues to be funded entirely by our cash flows in the first quarter and our capital expenditures were approximately $148 5 million.

Laura Felice: Our strong balance sheet provides meaningful flexibility, allowing us to look past the short-term noise and continue pursuing our long-term growth agenda. We ended the first quarter with less than half a turn of net leverage. In light of these priorities, our share repurchases were lower than our typical ranges in the first quarter. Our overall philosophy around buybacks has not changed and we will continue to return excess cash to shareholders this year.

Speaker Change: Our strong balance sheet provides meaningful flexibility, allowing us to look past the short term noise and continue pursuing our long term growth agenda.

Speaker Change: We ended the first quarter with less than half a turn of net leverage.

Speaker Change: In light of these priorities our share repurchases were lower than our typical ranges in the first quarter.

Speaker Change: Our overall philosophy around buybacks has not changed and we will continue to return excess cash to shareholders. This year.

Laura Felice: Turning to our outlook for fiscal 2025. We are operating in uncertain times. Despite the greater level of unpredictability, we are confident in our team, our positioning in the marketplace, and the growth drivers that are within our control. We will stay focused on our long-term priorities to drive continued traffic and market share gain.

Speaker Change: Turning to our outlook for fiscal 2025.

Speaker Change: We are operating in uncertain times.

Speaker Change: Despite the greater level of unpredictability, we are confident in our team our positioning in the marketplace and the growth drivers that are within our control.

Speaker Change: We will stay focused on our long term priorities to drive continued traffic and market share gains.

Laura Felice: In terms of our financial outlook, the range of potential outcomes have become wider since we issued our annual guidance. We expect the current environment to increasingly influence costs and consumer spending patterns, which may ultimately impact our financial performance. Based on what we know today, we are keeping our initial full year guidance unchanged, which as a reminder, with 2% to 3.5% comp sales growth, excluding gas, and $4.10 to $4.30 in adjusted earnings per share. We will continue to evaluate this guidance as the year progresses.

Speaker Change: In terms of our financial outlook the range of potential outcomes have become wider since we issued our annual guidance.

Speaker Change: We expect the current environment to increasingly influenced cost and consumer spending patterns, which may ultimately impact our financial performance.

Speaker Change: Based on what we know today, we are keeping our initial full year guidance unchanged, which as a reminder, was 2% to three 5% comp sales growth, excluding gas and $4 10 to $4 30, and adjusted earnings per share.

Speaker Change: We will continue to evaluate this guidance as the year progresses.

Laura Felice: With these caveats in mind, here's how we're broadly thinking about the year. On the top line, please remember from our last call that we expect our first half comps X-Gas to be a little bit better than the back half. In other words, we expect our first quarter comps X-Gas to be the high watermark for the year. On the margin side, we will continue to exercise strong cost discipline while investing in our value proposition for the long term. This becomes especially important in a rising cost environment. We remain confident in the underlying strengths of our company, and we believe we're well positioned to deliver sustainable growth to maximize shareholder value.

Speaker Change: With these caveats in mind, here's how we're broadly thinking about the year.

Speaker Change: On the top line please.

Speaker Change: Remember from our last call that we expect our first half comps ex gas to be a little bit better than the back half in other words, we expect our first quarter comps ex gas to be the high watermark for the year.

Speaker Change: On the margin side, we will continue to exercise strong cost discipline, while investing in our value proposition for the long term.

Speaker Change: This becomes especially important in a rising cost environment.

Speaker Change: We remain confident in the underlying strength of our company and we believe we are well positioned to deliver sustainable growth to maximize shareholder value.

Robert Eddy: Bob, back over to you. Thanks, Laura. We've made tremendous progress transforming our business, investing in the right talent, sharpening our strategic focus, and delivering more value and convenience to our members. Membership is at record levels, and we're launching exciting merchandising initiatives to drive even stronger performance. Our digital capabilities are playing a key role in our growth, and we're scaling our new club playbook to expand our footprint profitably. Our long-term strategies remain crystal clear. We will continue to invest for the future and do the right thing for our members, team members, and communities in order to take care of the families that depend on us.

Bob Eddy: Bob back over to you.

Bob Eddy: Thanks, Laura.

Bob Eddy: We've made tremendous progress transforming our business investing in the right talent sharpening, our strategic focus and delivering more value and convenience to our members.

Bob Eddy: Membership is at record levels, and we are launching exciting merchandising initiatives to drive even stronger performance.

Bob Eddy: Our digital capabilities are playing a key role in our growth and we are scaling our new club playbook to expand our footprint profitably.

Bob Eddy: Our long term strategies remain crystal clear.

Bob Eddy: We'll continue to invest for the future and do the right thing for our members team members and communities in order to take care of the families that depend on us.

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

Bob Eddy: Again for joining us today and for your support of Bj's Wholesale club, we will now take your questions.

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

Bob Eddy: We will now start the Q&A session. As a reminder, we ask all participants limit themselves to one question and return to the queue. So Nathan labs.

Operator: As a reminder, we ask all participants limit themselves to one question and return to the queue for any follow-ups.

Peter Benedict: Our first question comes from the line of Peter Benedict from Baird. Oh, hey, guys. Good morning. Thanks for taking the question. Hey guys, can you hear me? Yeah. All right. Great. Yeah. Good morning. Yeah. Thanks for thanks for taking the question.

Speaker Change: Our first question comes from the line of.

Peter Benedict: Peter Benedict from Baird.

Peter Benedict: Oh, Hey, guys. Good morning, Thanks for taking the question.

Speaker Change: Hey, guys can you hear me.

Speaker Change: Alright, great Yeah. Good morning, Yeah. Thanks for thanks for taking the question.

Peter Benedict: I guess I'm just going to ask about the the real estate strategy. Can you just remind us kind of how you think about locations as you as you kind of accelerate the pace of club openings here, how you think about the target market? You know, the competitive considerations, the pool of potential members in a market. I'm just kind of curious, kind of, for an update on that as you're going to accelerate these club openings the next couple of years. Thank you.

Speaker Change: I guess I'm, just going to ask about the.

Speaker Change: The real estate strategy can you just remind us kind of how you think about.

Speaker Change: Locations as you as you kind of accelerate the pace of club openings, how you think about the target markets.

Speaker Change: The competitive considerations.

Speaker Change: Pool of potential members in our market.

Speaker Change: I'm, just kind of curious kind of for an update on that.

Speaker Change: As you can accelerate these come up into the next couple of years. Thank you.

Robert Eddy: Yeah, thanks for the question.

Speaker Change: Yes. Thanks for the question, maybe I'll start off and handing over to Paul.

William Werner: Maybe I'll start off and hand it over to Bill. You've seen us in the last few years get pretty aggressive from a real estate perspective, given the success of the effort and the new clubs that we've been able to open to serve members around our geography and into new geographies. The success of those clubs has given us the confidence to continue to do that and push into new markets while opportunistically expanding existing markets. As that success has built in the last couple of years, we continue to put pressure on Bill and team to go even faster.

Paul: So you've seen us in the last few years get pretty aggressive from a real estate perspective, given the success of the.

Speaker Change: The effort and the new clubs that we've been able to through open to serve members around our geography and into new geographies.

Speaker Change: The success of those clubs has given us the confidence to continue to do that in.

Speaker Change: Push into new markets, well opportunistically expanding existing markets.

Speaker Change: And so.

Speaker Change: Is that successes both in the last couple of years, we continue to put pressure on volumes seem to go even faster.

William Werner: I think we're at a place where discount retail in the club sector is winning. We're trying to go as fast as we can. We're really excited about what we've seen so far in our real estate portfolio. The pipeline is as big as it's ever been. We're very pleased with the team's work.

Speaker Change: I think we're in a place where we're a discount retailer in the club sector is winning and so we're trying to go as fast as we can.

Speaker Change: We're really excited about what we've seen so far in our real estate portfolio.

Speaker Change: And the pipeline is as big as it's ever been so.

Bill Werner: So we're very pleased with what the team's working maybe I'll hand, it over to bill.

William Werner: Maybe I'll hand it over to Bill. Yeah, thanks, Bob. You know, Peter, I would say that we are more excited about our real estate progress than, you know, any time in the company's history that I've been here. And I think certainly for people who've been here a long time, it's probably the most exciting point in time maybe since the company was founded. And it really starts with the share gains that we've seen across the portfolio. As we gain share, you know, that opens up the models for more and continue to build new clubs. And we talked about year-end accelerating the transformation to 25 to 30 clubs over the next two years.

Speaker Change: Some of your specific points yet.

Speaker Change: Yes, Thanks, Bob Peter.

Speaker Change: Peter I would say that we are more excited about our real estate progress then.

Speaker Change: Any time in the company's history that I've been here and I think certainly for people who've been here a long time, it's probably the most exciting point in time, maybe since the company was founded and it really starts with the share gains that we've seen across the portfolio.

Speaker Change: As we gained share.

Speaker Change: That opens up the models for more and more opportunities for us to continue to build new clubs.

Speaker Change: And we talked about year end accelerating the transformation at <unk> 25 to 30 clubs over the next few years, we continue to put our foot on the gas in terms of opportunities both in new and existing markets. We've seen broad based success.

William Werner: We continue to put our foot on the gas in terms of opportunities, both in new and existing markets. We've seen broad-based success, you know, across both some of our core infill clubs. We just opened up our first club here in Staten Island this quarter, which was a great win for the team. That club's, you know, off to an amazing start, as well as new markets. Like we just opened up in Myrtle Beach and Southern Pines, both clubs in the Carolinas. And the response of the community has been amazing so far to us coming to town.

Bob Eddy: Across both some of our core infill clubs.

Bob Eddy: We just opened up our first club here in Staten Island, this quarter, which was a great win for the team that clubs you off to an amazing start as well as new markets like we just opened up in Myrtle.

Bob Eddy: Myrtle Beach in southern Pines.

Bob Eddy: Both clubs in the Carolinas and the response of the community has been amazing so far to us coming to town. So.

William Werner: So, you know, all the proof points we have are great. We continue to be, you know, pretty aggressive in terms of getting to market and trying to get the clubs on the ground. And we'll continue to do that going forward.

Bob Eddy: All the proof points, we have a great we continue to be.

Bob Eddy: Pretty aggressive in terms of.

Bob Eddy: Of getting to market and trying to get the clubs on the ground.

Bob Eddy: We will continue to do that going forward.

Peter Benedict: Great. Thanks so much, guys. Good luck.

Bob Eddy: Great. Thanks, so much guys. Good luck.

Peter Benedict: Thanks Peter.

Katharine McShane: Next question is from Kate McShane from Goldman Sachs. Hi, good morning. Um, we wanted to ask a long...

Peter Benedict: Next question please.

Peter Benedict: From Kate Mcshane from Goldman Sachs.

Peter Benedict: Hi, good morning, Thanks for taking our question.

Bob Eddy: We wanted to ask a longer term question with regards to the longer term algorithm just as you see the continued strength and membership is there anything we should be considering that could change in the longer term algorithm and should we still be thinking of a three year maturity ramp for new customers or has anything changed there as you enter new markets with new stores.

Katharine McShane: Thank you. longer term algorithm, and should we still be thinking of a three-year maturity ramp for new customers? Morning, Kate. Thanks for the question. You know, we're very pleased with what's going on in membership, for sure. We continue to build the size and the quality of the membership, as we've talked about for many quarters now. Our ability to attract new members, our ability to renew them at all-time high rates, our ability to engage them and push them up into the premium tiers. We talked about a new all-time high there this morning as well. And, you know, our next opportunity really is to continue to figure out how to better activate and engage these members.

Bob Eddy: Okay.

Speaker Change: Thanks for the question.

Bob Eddy: We're very pleased with what's going on in a membership for sure.

Bob Eddy: We will continue to build the size and the quality of our membership.

Bob Eddy: <unk> talked about for many quarters now our ability to attract new members our ability to renew them at all time high rates, our ability to engage them and push them up into the premium tiers, we talked about a new all time high or this morning as well.

Bob Eddy: And our next opportunity really is to continue to figure out how to better activate and engage these members.

Robert Eddy: And to the degree that we're able to make progress doing that, then I think, you know, you might see your way forward to changing certain components of the algorithm. But as we sit here today, for the past few years, we've been working towards that economic algorithm that we put forward a couple of years ago on our investor day. This quarter was nice progress towards that, and we don't necessarily see that changing all that much at this point in time, particularly given the level of uncertainty out there in the market.

Bob Eddy: To the degree that we're able to make progress doing that then I think you might see a way forward to changing certain components of the algorithm, but as we sit here today for the past few years, we've been working towards that economic algorithm.

Bob Eddy: Look forward a couple of years ago in our Investor day.

Bob Eddy: This quarter was nice progress towards that end.

Bob Eddy: You don't necessarily see that.

Bob Eddy: Changing all that much at this point in time, particularly given the level of uncertainty out there in the market.

Laura Felice: Anything to add, Laura? No, I think you covered it all, Bob. I think, Kate, I'll just maybe pick up on your second point about the membership, the maturity of our members and similar to Bob's commentary on Acquisition of members and how they're shopping, I think that hasn't changed either from what we're seeing right now. You know, we will continue to watch that. But that plays into how we're thinking about the long-term algo and leaving it as is right now.

Bob Eddy: Anything to add.

Bob Eddy: No I think I think you covered it all.

Speaker Change: I think I'll, just maybe pick up on your second point about the membership.

Bob Eddy: The maturity of our members and.

Bob Eddy: Similar to Bob's commentary on <unk>.

Bob Eddy: Acquisition of members and how they're shopping I think.

Bob Eddy: That hasn't changed either from what we're seeing right now.

Bob Eddy: We will continue to watch that.

Bob Eddy: But that that plays into how we're thinking about the long term algo, leaving it as is right now.

Bob Eddy: Thank you.

Bob Eddy: Okay.

Robert Ohmes: Next question comes from the line of Robbie Ohmes from Bank of America.

Speaker Change: Next question comes from the line of Robbie <unk> from Bank of America.

Robert Ohmes: Hey, good morning, guys. I, I want to follow up on, you know, Laura's commentary, you know, at the at the end there before Q&A, you know, the high watermark of the comps, but also the margin investments that, you know, you mentioned, is that like on the margin investment side? Is that the fresh impact? Is that the meat and seafood launch, you know, that you're thinking about? Or is it? You know, tariffs or is it competition or signs of the consumer weakening? Maybe, you know, more color on how you guys are thinking about margin investments for the rest of the year and, you know, and also a little more color on the, you know, why the comps, you know, could could fade as you move through the year.

Robbie: Hey, good morning, guys.

Speaker Change: I wanted to follow up on Lauren's commentary.

Speaker Change: At the end there before Q&A.

Speaker Change: The high watermark of the comps, but also the <unk>.

Speaker Change: The margin investments that you mentioned is that like on the margin investment side is that the fresh impact is that the meat and seafood launch that youre thinking about or is it.

Speaker Change: Tariffs or is it competition or signs of the consumer weakening maybe more.

Speaker Change: More color on how you guys are thinking about margin investments for the rest of the year.

Speaker Change: And also a little more color on.

Speaker Change: Why the comps.

Speaker Change: Could could fade as you move through the year.

Robert Ohmes: Hey, Robbie, good morning.

Ravi: Hey, Ravi and good morning.

Robert Ohmes: Thanks for the question.

Speaker Change: Thanks for the question, maybe I'll start with your second point on.

Laura Felice: Maybe I'll start with your second point on margin investments. And so, you know, nothing has changed how we how we think about the business and value continues to be our North Star. And so we're always looking at pricing and making sure we're delivering the best value to our members every day. And so that's how we'll continue to think about it as the year progresses. As you know, it's a dynamic environment. But I think value, if we continue to stay with that, that is what our members are rewarding us with as they continue to show up in our clubs and shop and thrive their baskets.

Speaker Change: Margin investments and so.

Speaker Change: Nothing has changed how we how we think about the business and value continues to be our north star.

Speaker Change: And so we're always looking at pricing and making sure we're delivering the best value to our members every day.

Speaker Change: And so that's how we'll continue to think about it as the year progresses as you know, it's a dynamic environment.

Speaker Change:

Speaker Change: But I think value if we continue that.

Speaker Change: Okay with that.

Speaker Change: That is that is what our members are rewarding us with as they continue to show up in our clubs.

Speaker Change: And shop and.

Speaker Change: Got their baskets.

Laura Felice: Your second question on comp cadence for the year, you know, it's a similar answer to when we set out our guidance in Q4 in looking at the year, we thought that the first half would be stronger than the second half from a cadence perspective that is unchanged as we see the environment right now. Some of that is lapse of last year, and some of it is how we're thinking about, you know, fresh 2.0 and other points of our business. So I think nothing new to report there, but we will continue to watch it as we go through the year.

Speaker Change: Your second question on comp cadence for the year.

Speaker Change: It's a similar answer to when we set out.

Speaker Change: Guidance in Q4.

Speaker Change: In looking at the year, we thought that the first half would be stronger.

Speaker Change: In the second half from a cadence perspective.

Speaker Change: Is unchanged as we see the environment right now some of that is lacks of last year.

Speaker Change: And some of it is how we're thinking about.

Speaker Change: Thanks to <unk> and other points of our business. So I think nothing new to report there, but we will continue to watch as we go through the year.

Robert Ohmes: And just to clarify, Fresh 2.0 and then the meat and seafood launch, are they, you know, kind of a significant headwind to margin or not so much?

Speaker Change: And just to clarify fresh 2.0, and then the meat and seafood launch or are they kind of a significant headwind to margin or not so much.

Robert Ohmes: Hey, Robbie. Good morning. I think what we'd say is, and you'll remember this because we've talked about it so much, The gross margin rates across our four divisions are about the same. The contribution margin rates might differ with perishables being lower, given the increased labor associated with from a gross margin perspective, they're all within striking distance of one another. So mixing towards perishables doesn't necessarily help or hurt gross margin all that much, provided we don't mess up from a salvage perspective. What it does do is drive the engagement of our members, right? That was the entire thesis behind Fresh 2.0, right?

Rob: Hey, Rob Good morning, I think I think what we'd say is and Youll remember that since we've talked about it so much.

Speaker Change: The gross margin rates across our R. R.

Speaker Change: Affordable units.

Speaker Change: Or about the same the contribution margin rates might differ.

Speaker Change: With Perceval as being lower given the increased labor associated with it from a gross margin perspective, they're all within striking distance of one another so mixing towards perishables doesn't necessarily help or hurt.

Speaker Change: <unk>.

Speaker Change: Gross margin.

Speaker Change: Much provide.

Speaker Change: Provided we don't mess up from a salvage perspective.

Speaker Change: What it does do is drive.

Speaker Change: The engagement of our members right that was the entire thesis behind brush to paint all right. How can we get people we know our best numbers are.

Robert Eddy: How can we get people, we know our best members are involved in produce in particular and meat as well, how do we get more of our members to engage with us in those categories? And even though that takes some effort and it takes some investment, particularly in places below gross margin, as I talked about, You know, the more people we can get into those categories, the better off we are. So, we certainly saw that from a produce perspective in the first innings of FRESH 2.0. And now in the middle innings, we're sort of taking those lessons that we learned and that same thesis towards meat and seafood, and we'll ultimately take it to bakery and dairy and the other disciplines within the perishables complex.

Speaker Change: <unk> and produce in particular.

Speaker Change: Beef as well how do we get more of our members to engage with us in those categories.

Speaker Change: Even though that that takes some effort and it takes some investment, particularly in places below gross margin as I talked about.

Speaker Change: The more people, we can get into those categories are better off.

Speaker Change: So we certainly saw that.

Speaker Change: Proteus perspective in the first innings of a.

Speaker Change: <unk> two point all in now not in the middle innings of taking those lessons that we learned in that same thesis towards meat and seafood and will ultimately take it to the bakery and dairy and the other the other disciplines.

Speaker Change: Disciplines within within the personal is complex.

Robert Eddy: It's the same thesis that arguably, hopefully, will be the same result. If we can continue to make our clubs a weekly shopping destination for our members, that augurs towards all sorts of good things, participation in other categories, growth in general merchandise, more trips, more traffic, more renewal rate, all the things that we hope to prove out. And we're certainly seeing We've seen great results in produce, and we're hoping for the same type of a thing to be seen in meat. It shouldn't be a margin story. If we do things right, it should be a sales story and a membership story.

Speaker Change: The same thesis arguably hopefully will be the same the same result, if we can continue to make our our clubs, but weekly shopping destination for for our members.

Speaker Change: That augers towards all sorts of good things participation in other categories growth in general merchandise.

Speaker Change: More trips more traffic more renewal rate all the things that we.

Speaker Change: We hope to prove out.

Speaker Change: Certainly seeing.

Speaker Change: Seeing great results in <unk>, and we're hoping for the same type of a thing can be seen in meat.

Speaker Change: It shouldnt it shouldnt be a margin story.

Speaker Change: Things right it should be attributes a sales story on our membership story.

Robert Ohmes: Sounds great.

Speaker Change: Sounds great. Thank you.

Robert Ohmes: Thank you.

Speaker Change: Okay.

Michael Baker: Next question comes from the line of Mac Baker from DA Davidson. I have a 2.0 question with a couple of, just digging in a little bit deeper. You said you're seeing high single digit to low double digit growth in produce from that initiative.

Speaker Change: Next question comes from the line of Matt.

Speaker Change: <unk> <unk> from D. A davidson.

Speaker Change: Fresh.

Speaker Change: You pointed out question with a couple of.

Speaker Change: Just digging in a little bit deeper you said youre seeing high single digit to low double digit growth in produce from that initiative.

Michael Baker: If you said it, I missed it, but can you tell us what kind of, understanding it's early innings, what kind of lists are you seeing in meat and seafood? And then can you sort of quantify the relative size of the opportunity in meat and seafood and then dairy and bakery to come relative to the size of the produce business? Thanks.

Speaker Change: If you said it I missed it but can you tell us what kind of understanding it's early innings, but what kind of lift are you seeing in meat and seafood and then can you sort of quantify the relative size of the opportunity and meat and seafood and dairy and bakery to come relative to the size of the produce.

Speaker Change: Business. Thanks.

Speaker Change: Yes.

Robert Eddy: Hi, Mike. Good morning. Thanks for the question. I guess what I would say is, individually, produce and meat are about the same size from a category perspective. They're not exactly the same, but they're somewhat comparable. So, you know, obviously produce helped drive our business all last year. We did talk about the high single digits, the low double digit unit movement in produce. That's certainly something we continue to see in the first quarter. We would anticipate a similar result in meat. And the thing that we that we don't yet understand. sort of a building reaction to that, right?

Speaker Change: Hi, Mike Good morning, Thanks for the question.

Speaker Change: I guess, what I would what I would say is individually produce and meat are about the same size from a category perspective, they're not exactly the same but they are somewhat comparable.

Speaker Change: <unk>.

Speaker Change: So obviously produce helped to drive our business all last year, we did talk about.

Speaker Change: High single digits to low double digit unit movement.

Speaker Change: That's certainly something we tended to see in the first quarter.

Speaker Change: We would anticipate.

Speaker Change: A similar result in meat.

Speaker Change: The thing that we that we don't yet understand.

Speaker Change: And hopefully occurs is sort of a building reaction to that right, meaning one plus one equals equals three.

Robert Eddy: Meaning, one plus one equals three. shopping heavily in produce and in meat, it should really change their member profile and their number of trips and their renewal rate. You know, so we've seen we've seen good results in meat so far. That was certainly a category that we liked the results of in the first quarter. It's way too early to see how.

Speaker Change: If people are are.

Speaker Change: Shopping heavily in Proteus and indeed.

Speaker Change: It should really change their their member profile in a number of scripts in their renewal rates.

Speaker Change: So we've seen we've seen good results and meet so far that would certainly.

Speaker Change: A.

Speaker Change: A category that we like the results are in the first quarter, but it's way too early to see how.

Robert Eddy: How it might drive trips in total, how it might be, you know, that, that And it's just getting started in terms of Multiplier effect with with Protis given it's only been Out of the Wild for a few weeks now. But we are. We are excited about what we're seeing. We're excited about the member engagement. And we'll continue to. Invest in these categories.

Speaker Change: How it might drive trips in total how it might be.

Speaker Change: Sure.

Speaker Change: Multiplier effect with <unk>.

Speaker Change: <unk> given it's only been up.

Speaker Change: While for a few weeks now.

Speaker Change: While we're excited about what we're seeing we're excited about the member engagement.

Speaker Change: And.

Speaker Change: And we will continue to.

Speaker Change: Invest in these categories, we haven't quite flushed out.

Robert Eddy: We haven't quite flushed out really anything yet from bakery and dairy and other categories yet. We've been focusing on meat this year, but I think what you should take away from this conversation is it's a big opportunity for us. If we do it right, it could materially change our business for the long term. And so we'll continue to really invest heavily in getting this stuff right. And hopefully it works out for our members first and foremost, because if it works out for them, it will work out for us. Excellent. Great. Thank you.

Speaker Change: Anything yet from from bakery, and dairy and other categories, yet where <unk> been focusing on this year, but.

Speaker Change: Doug.

Speaker Change: What you are what you should take away from from this conversation as a big opportunity for us if we do it right.

Speaker Change: It could materially change our business for the long term and so we'll continue to really invest.

Speaker Change: Heavily in getting this stuff right.

Speaker Change: And hopefully hopefully it works out for our members first and foremost because if it works out for them that will work out for us.

Speaker Change: Great. Thank you I'll pass it along.

Michael Baker: I'll pass.

Speaker Change: Thanks, Mike.

Charles Grom: Next question comes from Charles Grom from Golden Hospital. Hey, good morning, congrats on a great quarter. Laura, on the guide and the expectation for a wider range of outcomes, I think we can all appreciate that given where we are. But is there a way to think about how much you exceeded your internal first quarter plan by to assess some of that conservatism? And then one near term question, just curious, how May sales are running relative to the April strength?

Speaker Change: Next question comes from Charles Grom from Gordon Haskett.

Charles Grom: Hey, good morning, Congrats on a great quarter, Laura on the guide and the expectation for a wider range of outcomes I think we can all appreciate that given where we are.

Speaker Change: But is there a way to think about how much you you exceeded your internal first quarter plan, but to assess some of that conservatism.

Speaker Change: And then one near term question just curious.

Speaker Change: How may sales are running relative to the April strength.

Laura Felice: Hey, good morning, Chuck. Thanks for the question. Look, I think, as you can appreciate and you alluded to, it's a dynamic environment and very fluid right now. And so that is kind of a piece of what we took into consideration as we maintained our guidance for the full year. You know, we, the teams are working diligently to make sure that we continue to deliver value to our members and we're doing it in the right places across the business. And so that's kind of how we're thinking about the year as we go forward. Your question on May sales, you know, we don't really comment on current trends, so maybe I'll leave that for now.

Chuck: Hey, good morning, Chuck.

Chuck: Thanks for the question.

Speaker Change: Look I think as you can appreciate and you alluded to it's a dynamic environment.

Chuck: And very fluid right now and so.

Chuck: That is kind of a piece of what we took into consideration as we maintained our guidance for the full year.

Chuck: The teams are working diligently.

Chuck: To make sure.

Chuck: We continue to deliver value to our members.

Chuck: And we're doing it in the right places across the business and so.

Chuck: That's kind of how we're thinking about the year as we go forward.

Chuck: Your question on May sales.

Chuck: Really commentary comment on.

Chuck: Current trends so.

Chuck: Ill leave that for now, but we were really happy with the first quarter I think that that three 9% comp.

Laura Felice: But we were really happy with the first quarter. I think that that 3.9% comp was fantastic and proved the strength of our membership and continued momentum. After this.

Chuck: Fantastic.

Chuck: Proves the strength of our membership and continued momentum.

Chuck: Of the business.

Chuck: Okay.

Edward Kelly: Next question is from Edward Kelly. Sorry, next question is from Edward Kelly from Wells Fargo.

Chuck: Next question from Edward Kelly.

Edward Kelly: Alright next question is from Edward Kelly from Wells Fargo.

Edward Kelly: Hi, good morning. I wanted to follow up on the subject of tariffs. Curious, just to start, you know, if you think about the guidance that you provided and reiterated today, I'm assuming that the guidance includes your best estimate of... If you could just confirm, you know, what's in guidance related to that. And then the second part of the question is just related to how you're thinking about pricing and elasticities on the items that, you know, you have that are impacted. And then how you're planning inventory, you know, against that uncertainty just to ensure that you don't have...

Edward Kelly: Hi, Good morning, everyone I wanted to follow up on.

Chuck: On the subject of tariffs I'm curious just to start.

Chuck: You think about the guidance that you provided and reiterate it today.

Chuck: Im assuming that the guidance includes your best estimate of the current tariff rates and the impact that that might have on you.

Chuck: If you could just confirm whats in guidance related to that and then the second part of the question is just related to how youre thinking about.

Chuck: Pricing and elasticity on the items that you have that are impacted and then how youre planning inventory against that uncertainty just to ensure that you don't have markdown issues.

Chuck: As it relates to the.

Chuck: The consumer response, thank you.

Robert Eddy: All right, good morning. So I appreciate the nature of the question. It's certainly an uncertain market out there. It's something we're all really trying to figure out. While it's hard to quantify the impacts, given that uncertainty, what I would tell you is, first, we import less than many of our competitors, so we will likely be a bit less affected than others. With that said, even for us, this is a large, complex problem to figure out. You know, we have we have significant muscle around dealing with inflation and cost changes. We've been employing all sorts of tactics.

Speaker Change: Alright, good morning.

Speaker Change: <unk>.

Speaker Change: I appreciate the nature of the question certainly.

Speaker Change: Certain market out there.

Speaker Change: Something we're all really trying to figure out.

Speaker Change: Well, it's hard to quantify the impacts given that uncertainty.

Speaker Change: What I would tell you is.

Speaker Change: First we import less than many of our competitors. So we will likely be a bit less affected.

Speaker Change: But others with that said even for US. This is a large complex problem to figure out.

Speaker Change: <unk>.

Speaker Change: We have we have significant muscle around dealing with inflation and cost changes, we've been employing all sorts of topics.

Robert Eddy: None of which will surprise you to blunt the impact, including resourcing items from different countries, changing items, even eliminating items from our assortment where the elasticity might.

Speaker Change: None of which will surprise you too.

Speaker Change: Lumpy impact.

Speaker Change: Resourcing items.

Speaker Change: Securities changing items, even eliminate items from our assortment, where we're the elastic siem right.

Speaker Change: I did not make any sense to our members.

Robert Eddy: Thank you. And, you know, I guess finally, what I would say, we will act according to our purpose in taking care of the families that depend on us. These actions might differ day to day, but our performance in the past quarters and years has all been centered around that powerful idea of doing the right thing for our members. We would expect to invest for the long term as much as possible within the framework of our economic structure. For example, during the first quarter, we invested heavily in eggs and gas prices have come down meaningfully as well.

Speaker Change: Certainly we're spending a ton of time with our supplier partners working the problem collaboratively.

Speaker Change: And I guess finally, what I would say we will.

Speaker Change: According to our purpose and taking care of their families that depend on us.

Speaker Change: These actions might differ.

Speaker Change: Day to day, but our performance in the past quarters and years.

Speaker Change: <unk> incentives around that.

Speaker Change: Powerful idea of getting the right thing for our members.

Speaker Change: We would expect to invest for the long term.

Speaker Change: As much as possible within the framework of our economic structure.

Speaker Change: For example, during the first quarter, we invested heavily in and exiting gas prices come down meaningfully as well.

Robert Eddy: And we would expect to, and we're looking to gain market share in these times of disruption. So when consumers are challenged, they come towards value, and we're a great place to... To come for them to achieve that goal, and we'll have to be agile, because the answer seems to change by the hour or by the day, but you can expect steadfast support of our members as we go through whatever's coming in the next few weeks. We've tried to run a range of scenarios. You know, obviously today's tariff situation. Maybe whatever could happen tomorrow. All of that is sort of embedded in our guidance ranges.

Speaker Change: We would expect to and we're looking to gain market share in these times of disruption. So when consumers are challenge they come towards towards value and we're a great place to go.

Speaker Change: Come for them to achieve that goal and we'll have to be agile as the answer seems to change by the hour by the day.

Speaker Change: But you can expect steadfast support of our members as we go through whatever is coming in the next the next few weeks, we've tried to run a range of scenarios.

Speaker Change: Obviously, today's tariff situation and maybe whatever could happen tomorrow.

Speaker Change: All of that is sort of embedded in our guidance ranges if I could obviously change we all know what's coming tomorrow. So we try to make our best our best guesses.

Robert Eddy: That could obviously change. We don't know what's coming tomorrow. So we try to make our best guesses. And as we've talked about in the prepared remarks, our inventory is in pretty good shape. Our team has done pretty remarkable work over the past couple of quarters, both increasing in stock, which is obviously incredibly important to running a great business for our members. And reducing inventory levels overall down 2% on a per club basis. So, we're trying to be very judicious from a buying perspective. We're trying to do the right thing for our members. And hopefully that gets us through this period of disruption.

Speaker Change: And we've talked about in the prepared remarks, our inventory is in pretty good shape. Our team has done.

Speaker Change: Pretty remarkable work over the past couple of quarters, both increasing in stock, which is obviously incredibly important to running a great business for our members.

Speaker Change: And reducing inventory levels overall down 2%.

Speaker Change: On a per call basis.

Speaker Change: So we're trying to be very judicious from from a buying perspective, we're trying to do the right thing for our members.

Speaker Change: Hopefully that gives.

Speaker Change: Gets us through this period of disruption.

Robert Eddy: Great.

Speaker Change: Great. Thank you.

Speaker Change: You bet.

Simeon Gutman: Next question comes from Simeon Gutman from Morgan Stanley.

Speaker Change: Next question comes from Simeon Gutman from Morgan Stanley.

Simeon Gutman: Good morning, everyone. Good quarter.

Simeon Gutman: Good morning, everyone good quarter.

Simeon Gutman: I wanted to ask and make it two parts. First, share gain. Well, it seems like you kind of bent the curve on other categories, discretionary, which you're taking share. I can't see, given the markets, how granular that share gain looks like. Curious how you feel or you would assess your share gain in non-food categories. And then is there visibility on where that higher-tier penetration can get to? Are there leading indicators in how a member is spending such that that penetration rate can keep going northward?

Simeon Gutman: I wanted to ask I'll make it two parts first share gains our food retail clearly continues and it's going well it seems like you're kind of bent the curve on other categories discretionary, which you are taking share we can't see given the markets how granular that share gain looks like curious how you feel where you would assess your share gain in non food categories.

Simeon Gutman: Then.

Simeon Gutman: Is there visibility on where that higher tier penetration can get to or they are the leading indicators in how our members spending such that that penetration rate can keep going north of 40%.

Robert Eddy: Thanks. Good questions. We're pretty happy with our shared gains in the past quarter, in the past few quarters. We continue to grow it in both food and non-food. The general merchandise share is a bit harder to measure. But as we look across Cercana data and other sources of data that we have, certainly we're building in the grocery business quarter after quarter after quarter after quarter, in the GM business, even though those costs were slightly negative during the quarter, we still took share in categories. So we're doing the same things that we've been doing in the past few quarters to make it work by putting the right stuff on the shelf, being sensitive to what the right value is, what the right price is, how we're displaying it as we transform general merchandise.

Simeon Gutman: Yeah. Thanks, good questions.

Simeon Gutman: Yes.

Simeon Gutman: Pretty happy with our.

Simeon Gutman: Sure.

Simeon Gutman: Our share gains in the past quarter in the past few quarters, we continue to grow in both food and non food.

Simeon Gutman: The general merchandise shared.

Speaker Change: Harder to measure.

Simeon Gutman: But as we look across <unk> data and other sources of data that we have.

Speaker Change: Certainly we're building in the grocery business quarter after quarter after quarter after quarter.

Speaker Change: In the GM business, even though.

Speaker Change: Those comps.

Speaker Change: Slightly negative during the quarter, we still took share in key categories. So.

Speaker Change: Where we are.

Speaker Change: We're doing the same things.

Speaker Change: We've been doing in the past few quarters, so to make it work I play and the right stuff on the shelf being sensitive to what the right value alright prices our displaying it.

Speaker Change: As we transform general merchandise and Thats.

Robert Eddy: And that's. That's helping us gain share. Electronics is a great example. This quarter we had a great share in electronics. We both share in a number of GM categories. And even if we look back longer term, you know, so kind of data all the way back through. The pandemic has just gone up in all four of our big businesses.

Speaker Change:

Speaker Change: That's helping us gain share electronics is a great example, this quarter, we made great share in electronics.

Speaker Change: We built share in a number of GM categories.

Speaker Change: If we look back longer term.

Speaker Change: So final data all the way back through.

Speaker Change: The pandemic has gone up in all four of our businesses.

Robert Eddy: One important thing outside the club, obviously, from a shared perspective. Your Tremendous amounts of share with positive gallon growth quarter in quarter out while the market continues to go backwards from a a gallon perspective. So we're gaining tremendous amounts of share and that that dovetails nicely into the higher tier penetration question that you that you put forward. We're gaining share in fuel, not just because of our fantastic everyday pricing, where on average, we're about 20 cents lower than what the average market price would be. But we've as you know, we've done a tremendous job trying to integrate gas into our membership.

Speaker Change: One important thing outside the club obviously from a share perspective is this rule.

Speaker Change: We continue to gain tremendous amounts of share.

Speaker Change: With positive gallon growth quarter in quarter out while the market continues to go backwards for months.

Speaker Change: A gallon perspective, we're.

Speaker Change: We're gaining tremendous amounts of share in that.

Speaker Change: Dovetails nicely into the higher tier penetration question that you.

Speaker Change: That you've put forward, we're gaining share in fuel not just because of our fantastic everyday pricing where on average we're about 20 lower than what.

Speaker Change: The average market price would be.

Speaker Change: As you know we've done a tremendous job trying to integrate gas into our membership.

Robert Eddy: offering, where every tier of our members, our hierarchy members now has a gas discount, whether you have a credit card or not. So all the way up to 15 cents a gallon. for our highest tier members. And that's on top of that great opening price point gas that's 20 cents lower than the market. We're also having some fun with our team members who are running 25 cents off a gallon on top of all the other things that they can get too. So we're trying to get those team members even more involved in the field game so that they can tell our members about it.

Speaker Change: Offerings.

Speaker Change: Sure.

Speaker Change: Every tier of our our members our heart team members now.

Speaker Change: Guests discount whether you have a credit card or not so all the way up to 15 cents a gallon.

Speaker Change: For our highest tier members.

Speaker Change: On top of that.

Speaker Change: Great opening price point guests.

Speaker Change: <unk> slower than the market.

Speaker Change: We're also having some fun with our team members, who are running 25 25 cents off per gallon on top of all the other things.

Speaker Change: But they can get to so we're kind of trying to.

Speaker Change: Get those team members, even more involved in the field game. So that they can they can tell our members about it.

Robert Eddy: I think the overriding goal for higher tier membership is somewhere over 50%. That's where our club competitors are. We did the quarter right around 41. And so we still have tremendous amounts of headroom. To do that, we need to make sure that we're putting the right offer out there for people. We're making sure that they're engaged in the business and getting the rewards associated with doing that. And that will, you know, sort of build momentum by itself.

Speaker Change: <unk>.

Speaker Change: I think the overriding goal.

Speaker Change: Our higher tier membership is somewhere over 50%.

Speaker Change: Where our club competitors are.

Speaker Change: We ended the quarter at around 41.

Speaker Change: And so we still have tremendous amounts of headroom.

Speaker Change: To do that we need to make sure that we were putting the right offer out there for people who are making sure that they're engaged in the business and getting the rewards associated with.

Speaker Change: With doing that.

Speaker Change: And.

Speaker Change: And that will sort of fill.

Speaker Change: <unk> built momentum by itself.

Robert Eddy: I thought this was a cool quarter to look at because With the fee increase out there, there probably was some pressure to not grow. higher tier penetration. So to grow it at the fastest rate that we've grown it, in a while, we were up well over 100 basis points sequentially, was impressive to me and to us. The team did a nice job. figure out the right offers to put out there. The team in the field at the desk, the membership desk did a nice job converting people. Our digital team did a great job getting in front of people when they're on the website or playing on the app.

Speaker Change: I thought this is a cool a full quarter to look at because.

Speaker Change: With a fee increase out there.

Speaker Change: But it could have been.

Speaker Change: Probably was some pressure too.

Speaker Change: Not grow higher.

Speaker Change: Higher tier penetration and so to grow at the fastest rate that we've grown it.

Speaker Change: In a while or we were up.

Speaker Change: Over 100 basis points sequentially.

Speaker Change: It was impressive to me and to US the team did a nice job.

Speaker Change: Figuring out the right offers to put out there the team in the field at the best.

Speaker Change: The membership desk did a nice job converting people our digital team did a great job getting in front of people. When they are there on the website are playing on the App.

Robert Eddy: So we're excited about it. We think it's a great road to. to grow the franchise, to grow the lifetime value of our membership, and we'll continue to invest to do that in the future.

Speaker Change: And so we're excited about it we think it's a great road too.

Speaker Change: You have to grow the franchise to grow the lifetime value of our membership and will continue to invest too.

Speaker Change: To do that in the future.

Speaker Change: Okay. Thanks, good luck.

Speaker Change: Thank you.

Oliver Chen: Next question comes from Oliver Chen from TD Cohen. Hi, good morning.

Speaker Change: Next question comes from only bird Chen from TD corn.

Speaker Change: Hi, good morning, as Tom NASA on for Oliver I wanted to ask on digital convenience seems to be trending quite impressively.

Oliver Chen: It's Tom Nasson for Oliver. I wanted to ask on digital convenience. Seems to be trending quite impressively. Is there any color you could give on the impact that may or may not have on margins for the business overall? And then as a follow up, it'd be great to hear your outlook for the year on the general merchandise category. And then related to that, how private label fits into the equation with any opportunities or developments planned there?

Speaker Change: Is there any color you could give on the impact that may or may not have on margins for the business overall and then as a follow up it would be great to hear your outlook for the year on the general merchandise category.

Speaker Change: And then related to that how private label fits into the equation with any opportunities your development plans there.

Robert Eddy: Yeah, Tom, thanks for the question. Digital has been more and more important over the past several years. We're trying to save our members time, in addition to 25% off their groceries. And, you know, what they're telling us is they love what we're doing. It grows week in, week out, quarter in, quarter out. You know, two-year stock in digital sales, well over 50% again this quarter. So what we're doing is clearly resonating. The predominance of that business, you'll remember, is in Philpick and curbside and same-day delivery. And as we fulfill those orders, obviously, they cost a little bit more.

Speaker Change: Yes, Tom Thanks for the question.

Speaker Change: Digital has been more and more important over the past several years, we are trying to save our members time in addition to 25% off their groceries.

Speaker Change: And what they are what.

Speaker Change: What they're telling us is the level or what were doing it grows. It grows we can retail quarter quarter in quarter out.

Speaker Change: To your to your stock and digital sales well over 50% again this quarter.

Speaker Change: So what we're doing is clearly resonating with the predominance of that business, you'll remember is in Flotek and curbside and same day delivery.

Speaker Change: And as we.

Speaker Change: As we fulfill those orders obviously, they cost a little bit more.

Robert Eddy: It can cost a little bit more because our members are, our team members are doing the picking for our members, and even in the case of curbside, putting it in, putting it in their basket, but their car. But Remember, shopping behavior tends to increase the more And our members are telling us every day that these conveniences are incredibly helpful. We also made nice gains inside the club in another element of our digital sales, which is ExpressPay, the ability to check out using your phone. Once upon a time, that was an incredibly small part of our business, and it's growing every day there, too.

Speaker Change: They can cost a little bit more because of our members are our team members are doing the picking for our members.

Speaker Change: And even in the case of curbside, putting it out and put it in their basket, but other their car.

Speaker Change: But.

Speaker Change: Member shopping behavior tends to increase the more.

Speaker Change: Engage people get on these digital conveniences, and so incrementally tends to pay the bill for.

Speaker Change: For the increased costs those costs are largely below gross margins. So specifically to your marketing question, it's not really a gross margin story again.

Speaker Change: From a from a.

Speaker Change: Contribution margin perspective, these sales will be slightly less accretive but.

Speaker Change: But certainly the instrumentality is what we're what we're looking for we're trying to grow.

Speaker Change: Lifetime value or trying to grow engagement on the business and our members are telling us every day.

Speaker Change: These conveniences are incredibly helpful.

Speaker Change: We also made nice gains inside the club and another element of our digital sales, which is which is express pay the ability to check out using your phone.

Speaker Change: Once upon a time that was an incredibly small part of our business.

Speaker Change: It's growing it's growing everyday there too.

Robert Eddy: General merchandise, you know, a little bit softer in the first quarter. You know, all of that was in discretionary, high ticket goods. And I think what you're seeing is the consumer confidence playing out in there and some weather, quite honestly. I mean, it's pouring here today in front of Memorial Day weekend, so not a great incentive to go buy a patio set or lawn fertilizer at this point. You know, I think as we go forward, I think the consumer will ebb and flow with whatever happens from an economic standpoint. Certainly in other Less discretionary or smaller ticket businesses within GM because of the strength, we did well in apparel, we did well in electronics.

Speaker Change: General merchandise, a little bit little bit softer in the first quarter.

Speaker Change: <unk>.

Speaker Change: All of that was was in discretionary.

Speaker Change: High ticket goods and I think what Youre seeing is the consumer confidence playing out in there and some weather quite honestly, it's pouring every day in front of US for Memorial day weekend. So.

Speaker Change: Not a great incentive to go buy a patio set or a.

Speaker Change: Lawn fertilizer at this point, but.

Speaker Change: Yeah.

Speaker Change: I think as we go forward I think the consumer.

Speaker Change: We will ebb and flow with whatever.

Speaker Change: From an economic standpoint.

Speaker Change: Certainly in other.

Speaker Change: Less discretionary are smaller ticket businesses with MGM, we saw some strength.

Speaker Change: While apparel, we did well.

Speaker Change: And electronics.

Robert Eddy: But I think what you're seeing is people hearing more towards need categories than want categories until there's greater certainty about what's going to happen in the economy. And I would expect that situation to persist for as long as that uncertainty persists.

Speaker Change: But I think what youre seeing as people hearing more towards need categories unlock categories until there's greater certainty about what's going to happen in the economy and I would expect that situation to persist for as long as that uncertainty persists.

Robert Eddy: And then your final question on private label, another all-time record in private label penetration. That's, I think, owing to two things. One, the continuing search for value for members. You're definitely seeing members be a little bit more promotionally sensitive. You're definitely seeing them look at their own brands a little bit more. But our team is doing a phenomenal job creating on-brand products that are great, of great quality, of great value, and now we're even, in some cases, displaying them more prominently in the clubs.

Speaker Change: And then your final question on private label another another all time record and private label penetration.

Speaker Change: So I think all of them for two things one the <unk>.

Speaker Change: And search for value for four for members of you're definitely seeing numbers be a little bit more promotional expense that you're definitely seeing them look at that on brands a little bit more.

Speaker Change: But our team is doing a phenomenal job, creating olin brass products that are that are great.

Speaker Change: Great quality at great value.

Speaker Change: And now we're even some cases displaying them more prominently in the clubs.

Robert Eddy: Thank you. And we're changing packaging and doing all sorts of other things to really put those in place.

Speaker Change: And.

Speaker Change: We're changing packaging and doing all sorts of other things too to really put those in.

Speaker Change: Based upon a more robust way so.

Speaker Change: I would anticipate the consumer continuing to search for value as we've talked about with the highlights of mom brands and then we will try and exercised some help some self help as well and we continue to improve our own brands business is incredibly important as you know.

Speaker Change: For our margin story perspective, as well as from a loyalty perspective, even if it comes with a little bit of topline degradation. We will we'll take the margin on the loyalty all day long.

Steven Zaconne: Next question comes from Steven Zaconne from Cedar. Great. Good morning. Thanks very much for taking my question. I was going to ask two in one. So, the first was just really strong merchandise margin strength in the first quarter. Maybe how should we think about that over the course of the year because the compares get a little bit tougher, but just help us understand your outlook there. And then follow up on Chuck's question earlier. I guess what I was curious on is the commentary around the wider range of outcomes while still maintaining the guidance. Is that just acknowledging the macro has gotten much more uncertain?

Speaker Change: Next question comes from Steven Zaccone from seating.

Steven Zaccone: Great. Good morning, Thanks, very much for taking my question.

Steven Zaccone: I was going to ask two in one so the first is just really strong merchandise margin strength in the first quarter, maybe how should we think about that over the course of the year because the compares get a little bit tougher, but just help us understand your outlook. There and then follow up on Chuck's question earlier, I guess, what I was curious on the commentary around the wider range of outcomes loss.

Steven Zaccone: Maintaining the guidance is that just acknowledging the macro has gotten much more uncertain. It doesn't sound like anything you are seeing in the business as it has.

Laura Felice: It doesn't sound like anything you're seeing in the business has changed, right? It seems like still pretty good momentum from your specific business.

Speaker Change: Is this change strength it seems like some pretty good momentum from your specific business.

Laura Felice: Yeah, look good morning. We're quite pleased with the margin strength during the quarter. You know, there's a little bit of probably our easiest compare during the year. We had some stuff going on last year, as we launched FRESH 2.0. that we were able to sort of clean up this quarter. But, you know, look, we have we have a bunch of different irons in the fire to grow margins over time that we've talked about. We just talked about the last question. That's that's a good one. CMPs. category management process as we continue to figure out how to put the right brands and products on the shelves at the right value.

Speaker Change: Yes, good morning.

Speaker Change: Quite pleased with those the margin strength during the quarter.

Speaker Change: It was a little bit.

Speaker Change: Probably our easiest compare during the year, we had some stuff going on last year as we launched for us too.

Speaker Change: But.

Speaker Change: That we were able to sort of clean up this quarter.

Speaker Change:

Speaker Change: But look we have a bunch of different irons in the fire to grow margins over time that we've talked about probably just telephone payroll on the last question that that's a good one.

Speaker Change: <unk>.

Speaker Change: Category management process as we continue to figure out how to put the right.

Speaker Change: Brands of products on the shelves at the right value. We're also we're also trying to figure out what the right margin mixes in each category as well.

Laura Felice: We're also trying to figure out what the right margin mix is in each category as well. And that should hopefully let us auger margin rates more. And there are a few other ones around the business, working better with salvage, changing what we do from a transportation perspective, doing retail media advertising, Those things are all not transformationally large, but they're all individually important. So we'll continue to work on all those things. I would hope that... Margins continue to perform well during the year. The big question mark, obviously, is what happens from a cost-based perspective. And as I said, in the response to...

Speaker Change: It should hopefully lead us order.

Speaker Change: <unk> rates north.

Speaker Change: And there are a few other ones around around the business working better with salvage changing what we do from a transportation perspective.

Speaker Change: Doing retail media advertising.

Speaker Change: Those things are all not transformational large, but they're all they're all individually are important.

Speaker Change: So we will continue to work on all of those things I would I would hope that.

Speaker Change: <unk>.

Speaker Change: Margins continue to perform well during during the year.

Speaker Change: The Big question, Mark obviously is what happens from a cost base perspective.

Speaker Change: As I said.

Speaker Change: And the response to.

Laura Felice: Ed's question about tariffs, we will go forward and invest to gain market share and do the right thing for our members, almost no matter what happens. in the economic structure of what we can afford. And so while we do see some daylight from a margin perspective, we also We also anticipate investing more as we go through the year. So that's really why we left the guidance unchanged for the year. Certainly a dynamic environment. Nobody really knows what's going to happen, but we can control on the operational side and the merchandising side, and we will invest for the future of the business.

Speaker Change: Yeah.

Speaker Change: To Ed's question about tariffs, we will we will go forward and invest to gain market share and do the right thing for our members almost no matter what happens with them.

Speaker Change: The economic structure of what we can afford and so while we do see some daylight from a margin perspective, we also.

Speaker Change: We also anticipate investing more as we go through the year. So that's really why we are we left the guidance unchanged for the year and it's certainly.

Speaker Change: A dynamic environment, nobody really knows what's going to happen.

Speaker Change: But we will control what we can control on the operational side on the merchandising side.

Speaker Change: We will invest for the future of the business.

Laura Felice: Even if that means margins suffer a bit. And I think that answers your question on the wider range as well. It does. Yeah, thank you very much.

Speaker Change: Even if that means.

Speaker Change: Can suffer a bit.

Speaker Change: Uh huh.

Speaker Change: And I think that answers your question on the wider range as well.

Speaker Change: Yes, thank you very much.

Rupesh Parikh: Next question comes from Rupesh Parikh from Oppenheimer. Good morning and thanks for taking my question.

Speaker Change: Next question comes from.

Speaker Change: Cash per week from Oppenheimer.

Speaker Change: Good morning, and thanks for taking my question. So I guess just going back to your relocation commentary.

Rupesh Parikh: So I guess just going back to your relocation commentary, you know, I guess as you look at your store base, you see a number of opportunities there and then if you think of relocation opportunities, would this be incremental to what you typically would open in a typical year?

Speaker Change: I guess as you look at your store base do you see a number of opportunities there and then as you think of relocation opportunities would this be incremental to what you typically would open in a typical year for stores.

William Werner: Hi Rupesh, let me let me pass it over to Bill. Yeah, hey, Rupesh. We talked a little bit about the relocations in the script, and we have a couple right now in the pipeline. I think what you can expect of us is to continue to look at the markets and the communities that we serve, and look for opportunities within our existing store base where we have opportunities to serve more members, in the instance where either the retail landscape in the market has changed or the population in the market has changed. And so as we think about the real estate program broadly, like I said in my first response, the models are changing pretty quickly, probably quicker than they've ever had in terms of population changes as well as our share growth.

Bill Werner: Higher personnel I mean, let me pass it over to Bill.

Bill Werner: Yeah, Hey refresh.

Bill Werner: Can you talk a little bit about the relocations in the script and we.

Speaker Change: We have a couple right now in the pipeline I think.

Speaker Change: What you can expect of US is to continue to look at.

Speaker Change: The markets in the communities that we serve and look for opportunities within our existing store base, where we have opportunities to serve more members in the instance, where either the.

Speaker Change: Retail landscape and the market has changed in the population and the market has changed and so as we think.

Speaker Change: The real estate program broadly.

Speaker Change: Like I said the.

Speaker Change: My first six months the models are changing.

Speaker Change: Pretty quickly probably quicker than they've ever had in terms of population changes as well as our share growth.

William Werner: And I think our investor base should expect us to play offense and look for these very opportunistic opportunities that become available to us to reposition for the future. And we should absolutely go take advantage of them when it makes sense for our members and the company.

Speaker Change: And I think our Investor base should expect us to play offense and look for these very opportunistic.

Speaker Change:

Speaker Change: Opportunities have become available to us to reposition for the future and we should have absolutely will take advantage of them when it makes sense for our members and the company.

Mark Carden: Great. Thank you.

Speaker Change: Great. Thank you.

Mark Carden: Next question comes from Mark Carden from UBS. Good morning. Thanks so much for taking the question.

Speaker Change: Next question comes from Mark Carden from UBS.

Mark Carden: Good morning, Thanks, so much for taking the question. So another one on real estate just as you think about store growth. How are you thinking about the potential impact from higher materials cost related to tariffs do you see it.

Mark Carden: So another one on real estate, just as you think about store growth, how are you thinking about the potential impact from higher materials costs just related to tariffs? Do you see it providing much of a risk impacting the timing of your new store in DC growth? Does it impact how you think about prioritizing new market entry versus say, boosting store counts in your existing markets? Is it an opportunity to play offense? Just any color there.

Speaker Change: Providing much of a risk impacting the timing of your new store and DC growth.

Speaker Change: Does it impact how you think about prioritizing new market entry versus say boosting store counts in your existing markets.

Speaker Change: As an opportunity to play offense, just any color there.

Speaker Change: Yeah.

William Werner: Yeah, hey Mark, and thanks for bringing up the point about the DC. We haven't talked about that much, but the, you know, the construction of our new DC is going great. We're making tremendous progress with that. And we'll be very excited for us to get that online, you know, here in the coming year or so. You know, in terms of the costs, you know, obviously, we've seen some impact of costs within, you know, within the construction portfolio. So, And as we think about that over the long term, these are 20, 40-year investments that we're making in new buildings.

Speaker Change: Yeah, Hey, Mark and thanks for bringing up the point about the D. C. We haven't talked about that much but the.

Speaker Change: The construction of our new D. C is going great, we're making tremendous progress with that.

Speaker Change: And we will be very exciting for us to get that online.

Speaker Change: Here in the coming year or so.

Speaker Change: In terms of the cost.

Speaker Change: Obviously, we've seen some impact of of cost within <unk>.

Speaker Change: Within the construction portfolio.

Speaker Change: And.

Speaker Change: As we think about that over the long term right. These are 2040 year investments that we're making a new buildings and so we're certainly working as we would with any other.

William Werner: And so we're certainly working as we would with any other product that we buy, whether it's our products for merchandise resale in our clubs or our construction costs to leverage our scale, given the number of projects that we have in the pipeline right now to deliver the savings where we can and get these things built as efficiently as possible. But as we step back, we feel really great about the overall investment envelope of a new club and the returns that we've generated. So we're going to keep going.

Speaker Change: Product that we buy whether it's our products for merchandize retail in our clubs.

Speaker Change: Or our construction costs and leverage our scale.

Speaker Change: Given the number of projects that we have in the pipeline right now.

Speaker Change: <unk> savings, where we can get these things built as efficiently as possible, but as.

Speaker Change: As we step back we feel really great about the overall.

Speaker Change: Investment envelope of a new club and the returns that we generated so we're.

Speaker Change: Hugo.

Operator: Great, thanks so much, and good luck, guys. Thanks, Mark. Thank you.

Speaker Change: Great. Thanks, so much and good luck guys.

Speaker Change: Thanks Mark.

Bob Eddy: Thank you that's all the time, we have left for questions I will now turn it back over to Bob <unk> for closing remarks.

Operator: That's all the time we have left for questions.

Robert Eddy: I will now turn it back over to Bob Eide for closing remarks. Well, thank you everybody for your attention this morning. Thank you for your support of our company. We've got a lot going for us. We have had great results over the past couple of quarters, certainly a more dynamic environment that we face today than maybe we've ever faced, but we will continue to do the right things to take care of the families that depend on us, and that will power our growth going forward.

Bob Eddy: Well thanks, everybody for your attention. This morning, and thank you for your support of our company. We've got a lot going for US we have had great results over the past couple of quarters, certainly a more dynamic environment.

Bob Eddy: So we face today than maybe we've ever faced but we will continue to do the right things to take care of their families that depend on us and that will power our growth going forward. So we will.

Operator: So we wish you a great summer. We will talk to you at the end of the next quarter.

Bob Eddy: Wish you a great a great summer, we will talk to you at the end of the next quarter.

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

Bob Eddy: This concludes today's conference call you may now disconnect.

Bob Eddy: [music].