BJ - Earnings call transcript Q3 2018 | BJ's Wholesale Club Holdings, Inc.

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Operator

Good day ladies and gentlemen and welcome to BJ's Wholesale Club, Third Quarter Fiscal 2018 Earnings Conference Call. My name is Christine and I will be your lead operator today. After the presentation we will conduct a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Faten Freiha, Vice President of Investor Relations. Please go ahead.

Faten Freiha

you. Thank everyone. afternoon Good joining Club's you earnings quarter conference call. BJ's appreciate third Wholesale XXXX We and Eddy, Strategic CEO; Administrative Chairman call. Baldwin, Chris Bob Bill Relations on Senior Investor Officer; Chief Werner, Vice and President, Planning are the and and Financial provide Bob an with by will results, overview Q&A session. Chris our followed you and of a

to and Laws. of differ SEC forward-looking the Please meaning expectations the this today's risks of those we our remember materially during see from risks that our and within Before involve release. with description are this on call, filed on Federal on that statements our actual and uncertainties. Securities These uncertainties September of expectations press begin, section prospectus call please described we statements based XX, the XXXX, may could make results factors and the current risk a in for cause

that, of GAAP. turn reconciliation to certain that on press information today's as accordance the comparable I'll over information in please that refer intended measures refer for on today's for most call is or information Chris. considered of The provide to financial information the with website release useful the the With investors the will accordance substitute we and will not be Please measures with in these non-GAAP GAAP. to non-GAAP measures section to our a for posted financial in of to this prepared call believe isolation Finally, a financial presentation investors. presented note we

Christopher Baldwin

joining us and afternoon. Thanksgiving. for Happy Good Thank you

the Relations know team UNFI, have who are a XX%. to BJ's Leonard of Faten million welcome look with Many the was of previously secondary of First a to & to Vice you This offering want and Freiha, Faten of Partners to In approximately shares. month. I President thrilled on Investor of Green this joined quarter as earlier ownership her CVC approximately her. and XX forward successfully we at third we who reduces executed working our combined all,

result, our Board. To Vice to valuable Dominoes Werthauser, we and more Chief a welcome her As also experience independent Board. Judy Board. have on add our Executive to Based a Pizza at started at Judy Officer our that People I to want President will at addition end, directors Target, Dominoes to and to be

our third with pleased performance. are We quarter

sales and quarter million two-year While X.X%, third an all-time of is margin. and our stages we're and quarter. exceeded earnings, an of continue merchandise our transformation, was fifth straight high make sales, acceleration company positive which third expectations at early the EBITDA our Adjusted In sales in $XXX we gross to last progress of comp over X.X% year and growth for of we saw the in quarter our X.X% merchandise our up comps the is for stack. of we

was our in performance core Northeastern strong markets. particularly Our

progress across Our by disciplined these priorities. in driving our believe driven potential unlock time. strategic to are investments We necessary true investments our the capabilities continues growth over to be

base. Membership increase fee member the company. and instituted like membership QX expectations on is In our the our continue exceed trends our acquiring year. despite earlier to rate and of you First, foundation in I'd the to retaining high update our renewal

we having showcasing particularly to and members out members year be that We're We expect the as highs. renewal with historic lapsed to transformation. focused pleased in report end reaching re-engaging on and rates we're will at membership our success previous

a attracting the are We same of Through key we focus digital ago. have members through than younger to channels versus acquired to which on year members more acquiring number continue doubled period members. QX new the digitally

house talk acquisition event to QX extension our delivery. open digital showcase and our successfully some now and In and in deals to membership we quarter a app, offer, Black Services merchandise of value, most an house features transformation nearly an our The same convenient nonmembers the day the course our We of Holiday new are improved have we Friday In our addition, launched to premium like of showcase prospective members open membership was several to lapsed we highlight program with we services season. used users. tiers. the to of and to higher us to the coupons members and opportunity gave moving also prior levels holiday over held previewed importantly the and months. our and past buy-online-pick-up-in-club, the

value second shopping. get to deliver members priority Our is strategic to

outstanding delivering a based strive value give continue We unbeatable on pricing deliver to every to single and fee to members. on Our in their progress value membership to members day. our is return XXx invest

we As times than year. recall, may shop more a more than you who us a million have members XX

member Our fresh to committed this to are sharp we maintaining in business frequency is and and area. key delivering value driving pricing extremely

categories, on execution we sales focus up unit to While team. as and our environment operations QX perishable many much value deflationary were continued field a saw improved by in

brands private-label to outstanding at to Our products are great value members. delivering crucial

very of brand packet fresh seafood products in owned and a and QX strong soups the in have items We Farms' marketplace. pipeline launched Wellsley

For the was quarter XX%. owned penetration brand's

transformation engages treasure to We merchandise. and This clubs. drives to also key our hunt is in deliver great members the assortment. that by trips creating by We focusing outstanding on value started offering category assortment members our general

were show results the effect X% quarter. recent of the this work as Our up in GM comps

as like to double the capabilities. benefit offer Our We're QX in grew able seasonal investment improved clubs unbeatable HD now in delivered our to us allowing New continues apparel we assortment to from In trends of in at prices. value year Earlier signals TV [ph], this latest by business digits Jones apparel XK better apparel we IZOD brands invested with display York. Levi's, and to our TVs. great Champion,

time. and results have increases Lee in two baby strong shopping his Overall have toys, to brands we including We from as TVs freed one-stop we clubs assortment reduced location items. relaunched strong growth food, outside year our one merchandise and the space updated categories. our in our work with We're in first XX%. Beauty & this focused and section electronics increases. diapers, assortment Health performance a more and and are enhanced of well improved marketing. accelerating with been a categories team car moving training TV assortment the for saw we by to members, business for pants up convenient our approximately national result category as wipes, used comp Earlier the in other in much fewer X% The items the of a and seats general signals Friday bodes also double-digit formula. As baby driving quarter well This Black with in diapers. sales create

who We just but rolling are of starting be a key XXXX. our and we'll this stages assortment category families of in early the many newest improved chain in this members for our out change, wide are is

at when and members whether We've taken via priority attempt A transformation to more let's want, online it shop omnichannel our develop offering and Wholesale allows features. it approach a shop to BJ's new is or our element in-club, Our make key of our is that an quickly convenient a us to that strategic launch they how third agile Club. is building true mobile app.

the and Club, Up Grocery Next past Day Buy Online year In an Same Digital Installation. Pick Delivery, recently Day Over app, we most Coupons, launched Tire

launched on year ago A our mobile a few little comments Let me each. app. a we make over

and app continue In added in the by downloads more quarter. We clipped QX even digital the we BJ's history convenient. by members will coupons continue grew on lets based feature enhance to of app. which also we XX% from making unlock delivery XXs membership Members the shopping orders same-day features the purchase of a reorder from add we the already millions their value launched place app that the of have and to help

us when in we members Our our our they We deliver investments shows both from convenience value tire even this save and work make business more how purchase can convenient tires process that our members. know to for members. area and this to $XXX-$XXX

tire and installation next we members tires can allows order installation to next day quarter This scheduled which day online. launched

This members, sales this traffic example our sales our the is convenience digitally to how to drive can enabled physical we improve tire an doubled and more online than Following to excellent value of quarter. launch locations. our deliver and for platform use

scale also deliver get to delivered to means it beginning offers members This a high have personalized shop rate offers forward. but help offers. that effort just and trips categories. in Our and new drive investments response further us significant non-personalized we opportunity moving These plan to allowing and personalization than through traditional are both still see is digital

performance. using expand to our that opening Club new We plan has better much model a data-driven we strategic BJ's reinvented the yielded Finally approach club footprint.

approach. to spring. Clearwater, add track this South Virginia represents Somerville new pleased to the new club This As company. BJ's the In New thrilled future. as the Michigan's a in exceeded clubs Eastern XXXth four we XXXth clubs and opened which families us fit for for in plans new set opened a our I'm Eastern open market for stations At club two using part initial to membership Kearny we're with we gas We our is and serve middle reminder, of we our see class and in also this goals open our before XXXX used a and approach on be at to great clubs Carolina this we're in to outperformed QX announce proudly Florida clubs our and Roanoke in Michigan in Michigan. opened hard-working next Jersey club least station. gas and

the Taylor the in our Madison in late looking and clubs We in results. open to actively Overall, and we're stations gas Michigan growth expect pleased are and with additional opportunities for QX region. Heights XXXX

us. on to opportunities continue significant of have and transformation progress We our make ahead

With for who the on detail. We Bob? turn year that, outlook review to have Bob plans our in will results in our momentum. strong more forward to look and holiday building I'll the for call over the place

Robert Eddy

afternoon Thanks Chris, everyone. good

and quarter during to drives noted, see trends. in Chris encouraging As gains the membership sales we third continued

to we our enabling improved to margin us addition, further fuel our topline In and invest capabilities growth. gross

flow strong. Finally and results our very were cash profitability

shopping, performance retaining convenient expanding execution at BJ's, get to priorities, attracting strategic and our delivering shop against it our Our strategic more continued members, to footprint. our value and demonstrates them making

Let's turn to our results.

increased quarter net sale traffic. $X.X driven by gasoline. by including Merchandise to by sales X.X% exclude billion. increased from gasoline favorable the sales X.X% of primarily impact increased X.X%, increased X.X% sales the a For Comp which sales, comp by

that give on factors the Let two quarter. some me you sales performance impacting our for color

we back Chris half represented our of open in and performed as approximately results. comp house the earlier, mentioned a historical events similar with sales in to quarter the line the merchandise event membership First, X.X% that of ran contribution

sales We expect to see benefits additional this from membership over event. time and

X.X% approximately in inflation impact division Second, half total the primarily the deflation third in accelerated after company on deflation on quarter. in or of for Perishables first little year, division. our net experiencing this merchandise third X.X% the or net the very was The quarter, Perishables deflation of the comp our comp

We comps the fiscal year. have the since across beginning all four improved our of of divisions

mentioned sales momentum TV Merchandise we in categories. business and grocery the business and during drivers earlier Comp changes Chris X% our This our categories X% by impacts stack division General our our with represents sales led second grocery sales our during the by non-edible of by Chris merchandise apparel primarily of continues X% quarter edible our strong assortment of comp due gains the specialty success that comp and HBA driven here to the beverage X% quarter. of division Our and driven for GM by quarter. some that the mentioned the laundry categories. key our our water a during saw Comp primarily at the comp increased earlier. quarter increased are of

by fresh quarter. and The comp offset saw deflationary impact all the the Our for fresh perishable growth was pork flat category deflation. Unit pressure the beef fresh quarter. fruits the and were during during such sales and as vegetables quarter

XX we growth of margin categories, approximately the grew unit Approximately quarter during quarter. the While continue gross increase and pressures by over to by last one these two by deflationary third Membership expect are Gross growth the the increased with fee the thirds increased income XX% into we pleased fourth in fee margin quarter. these points by growth. was dollars XX.X% to basis $XX our million by year. member rate membership and third driven third

sold is than margins gasoline our of merchandise. know, gross you much lower other As at

XX by Excluding our over basis initiatives. procurement merchandise impact gross gas rate margin our points increased driven year approximately of the by last sales

Our nearly three been began ago has years reinvention which of procurement considerable.

in due the next quarter savings the innovate surpassed continue $XXX and million million third $XXX procurement have an efforts to We million in cost drive we prior in compared to SG&A optimized waves and savings. expenses to assortment achieve these year. of $XXX were to the

investments income expenses Excluding as continue the million percentage membership in quarter increased for to expenses $XXX million to SG&A by to last XX Operating reflects continued and the marketing $XX associated priorities. with basis our This other compared one-time $XX $XXX revenue drive to increase secondary talent was QX year. third the million expenses, offering for company's compared adjusted was a and strategic mentioned prior million the of in earlier year points year-over-year. total in

to continue approach to in investing quarter. to also from our We $XX Interest year's improving remain while million in last balanced decreased our expense third $XX profitability. million

financing $X you As transaction included loan transactions and and that deferred during for related costs quarter. facilities fees repricing know those transactions. a this repricing term write interest expense the note to completed our lien we ABL quarter's of Please first off million

primarily $XX by to liabilities. in from tax windfall approximately two our an offering $X normalized the rate in tax options reported million deferred prior our totaling expense had was additional reduction and items of exercised the million driven connection $X approximately stock our to reserves million an benefit million with rate related $X and X% tax between approximately variance tax compared secondary we benefit quarter XX% in the For of and of The year. income

be benefit as Going they These $XX to amounts are in items income stock ABL net share secondary the and our of tax treated expect term realize with we in net deferred period or which $X.XX fees year. forward to of per to the Again estimate Adjusted normalized of $XX along occur. third lien costs windfall comparable rate year's in was the and the period million are our the first the benefits to share this financing compared and or $X.XX in Timing Adjusted we quarter are to third discrete quarter windfall XX%. million tax tax related windfall effective for estimate. as options last benefits the benefits difficult approximately repricing excludes offering. to per related loan income tax write-off exercised. transaction facility, primarily

net have calculating XX%. purposes rate adjusted approximately used of the income, of normalized For we tax a

increased income Our third level we're GAAP the a press XX for release Adjusted the reconciles table the last income that us in adjusted million to million EBITDA to increase in on per-share from basis. quarter past the net including a includes a and quarters. consecutive continued proud record $XXX year. comparable net period over $XXX is in This significant profitability

used to included please our adjustments at arrive figures, the on the see clarity For these non-GAAP in tables press release.

year's balance Moving last inventory over was sheet, now to total by the up X% changes quarter driven of third timing and receipts. the inventory

prior $XX included Our we of strong appropriate as Year-to-date cash discipline inventories to XXXX period. XX% for AP continued the million million by inventory into prior million our capital and our cash amount prior-year we in which recapitalization. our outflow improved profitability In flow $XX inventory That improved Therefore in flow versus a that one-time $XXX more going in investments. same came our define holiday are the how much Recall in this million. season. The QX in well-positioned flow related $XX have the is CapEx, to versus year year's year. year disciplined we prior a comparative driven and February strength strong sold our operating cash free less XX% ratio, quarters which is of pay very inventory been management. at to it before measures approximately last working is cash

LTM our at quarter the a X.X ratio net continued was end pay the we have EBITDA debt times. to result to and As adjusted down leverage of

fiscal our the of pleased all strong have far the our a I'd note thus with like we the are in it on and metrics to guidance items supported updated fourth guidance. key leverage that to have cash delivered We're generation further the by results There quarter. expect reduce as we in earnings our pertains our We few to release year. for

me XX a fiscal let this $XXX take $XX compared into represent and was week XX fourth XXXX a get the you in to million moment the week quarter as remind quarter sales normal week XX-week million result EBITDA. year approximately to and We to XXrd quarter estimate a in was I year. Before a details, year a that net the

adjusted in to to in perishables we quarter that net fundamentals Our comp our $XXX our now and X.X% On sales quarter year. $XXX EBITDA our expect is guidance million and QX for we the discussed we to slightly full-year income the underlying comps report perspective. our EBITDA view remain million from be we second place, have adjusted projection of fourth more $XXX quarter discussed the in in $XXX to Those our the that business. QX X.X%. expect affected reflect third We've be favorable than to and comparable to income fourth net the of and of the range deflation million call sales late that view updated a adjusted full-year by quarter seen our to range million fiscal looks

count be year We expect diluted end. our to fully shares million share at XXX

Our full year guidance in guidance. remains our line prior expense with interest

As our week that lien rate fix into XXXX. know, Last LIBOR debt of at loan $X.X rate a our series are in floating February of we you billion facilities. first both term X% swaps XX% rate approximately ABL or of entered a interest and beginning

we As significantly. debt percentage repay to continue that of debt, increase fixed-rate will

QX In I call. well-positioned We've happy with performance a that result outlook am and performance right financial and proud We to on sales release that we to the we repricing in for and guidance. continue transactions. long-term the remain yielded that profitability meaningful committed its manage to our we now providing exceeded closing, transformation earning continuing to rate full guidance debt last our earnings of our also forward reflects QX look on believe the growth. a has great future is to the for year year-to-date remainder of you flows five a quarter on delivering business details our enabling to grow year cash I along comp highlighted an for our have more in to XXXX goals reported have I table for encouraging you expectations. our we refer consecutive risks. membership to press with As interest seen growth. are substantial that to updated quarters would invest impact us trends future increases am our

solidified result of the outlook in Finally, long-term and call the expense transactions Q&A days Chris our as our hedging I Chris? to now begin turn over back the of I'll the QX. rate we opening delivering interest for before forward a we the on goals consummated closing year remainder of the session. have for to look comments

Christopher Baldwin

close want pleased QX results. saying to with that I by we're our

reduced Our track our performance want that thank to we're in Q&A. we help on targets. many, transformation margin, one proud and many earnings, highs for shows ability very who've We every making so our go reach like plans exceeded progress transform Happy to and the I'd Thanksgiving. company. membership miles continue to have and for to And think to operator, feel transformation. we'll of remain on our go I importantly efforts to debt. our that their expectations We're we very hard holiday term a to most historic our everybody With and wish team about our our rates. renewal good our members call on worked as us deliver of sales, long on to We

Operator

first Your Merrill comes Bank of Instructions] from Robby from of America Ohmes Lynch. [Operator line the question

open. is line Your

Robert Ohmes

a growth on the congrats any was any house, forward? Actually thoughts open like do you're know first on quarter. the converting how on are that member well some data to now you beyond two how you membership just questions, do have good of that help the people trends those quick you members, look on guys Hey, what that, might going

Christopher Baldwin

to we'll and ability growth that in but XX% news approaches as right over indicated different we members overall. investment is Membership I and to lapsed and with changing money over lapsed of acquired been probably a to us and into to the the The members year pull, earn about started to to in dramatically his good think company's our do to members continue a Robby, grow good that. use ability about we've We're reinvesting most half the our over digitally new we'll very improving. is started tactic the we not big to total acquired members feel the time so last Look transformation In they're we have and how get really going to overall we or make little frankly Bob and the comments. important the about specifics earning every members. membership continue for our as bit important of appeal think year feel we both Robby, in

Robert Ohmes

sounds Bob. thoughts headwind - and And about guess gasoline just gas is quarter for in on guidance great. think then, might we give in how reported I any to then tailwind should fourth this you maybe your quarter? Can you a for profitability That year-over-year the us on be was it or it the

Robert Eddy

Robby, market end little gas there. but QX provided certainly and been incredible of the an at the of benefit here has bit some of the certainly Hey beginning QX, has tailwind not Yes. a a tailwind,

to As you a quarters gasoline tends pricing volatile QX, most the perspective. be from think QX about of the

far we've So could the favorability QX so seen easily away. that go in

So a putting been it's the but bit so bank had we're yet, tailwind certainly it far. not in of a little

Robert Ohmes

helpful. guys. Thanks really That's it. Got

Christopher Baldwin

Robby. Thanks problem. No

Operator

the question from Your next J.P. comes of Christopher Horvers from line Morgan.

is open. line Your

Christopher Horvers

sound it's Horvers. You fancy, very

Christopher Baldwin

said you was really going be tempted. glad I'm I because that to Chris,

Christopher Horvers

you've got guess. we you is implied of one the X.X comp pretty said it's guide. X.X quarter, wide. It's it continue but drafted if of sort be So, deflation, you sort better model Bob to XQ expect first to question the in complex on to than then third like the

pencil So just guide? XQ on comp the you sharpen the could

Robert Eddy

we around right, quarterly had bit that think X call off that think absolutely that's about all Yes, in little up prior Chris, that year a we the - believe implied that we've come of long ex and QX we shaping how rationalize you was you're still QX about, trend when better, deflation. the impact range to told the the somewhere we of and

So we that bit applied a up took little up we would hadn't for it taken if we than more from range standpoint. probably have seen deflation the QX what this

is which of or trend X that less seen, deflation reflects the perspective. from range is midpoint that more we've that but headwind a So a

the that feeling pretty pricing nicely. about at about a the and we point even we've feel growth deflationary is in our a not growing the those we're it’s So issue and this business seen unit temporary good business great in categories categories that us tells traffic issue

So about we're of worried any so not that.

Christopher Horvers

Understood. just as what quarter being up margin tangential as in up as think in has And you CPI year, your deflation the a a then is and the second we implied fourth fresh end a quarter you quarter. in perspective? And strong expansion about this how to does the been question, much then think the a or to follow-up I look is rate from the all Thanks. outlook merchandise a CPI similar do which question, benefit, Can is third pretty legs XXXX? benefit the that headwind XX on talk merchandise there

Robert Eddy

and roughly a side from thing bit better on do we came QX, CPI expect is in little than perspective say, for said everything are and hope when to the lower a we're and happen done. than we to little would out that. in XX same forecasting high certainly, the forecasted, XX beat QX I So and we we our expectations had of lower

of right assortment to CPI started new thoughts coming assortment the that now of and talked to that about forward have have already expect the We process on one ideas the little my sourced this the talked in in and get continue as merging we some to right process comments, as how bit we've at we've shelves and iterations. HBA. In evolving I future Baby things and process Chris a we made are iteration fell changes we're coherent the going its about program well of that like those so the out current cost. categories as Those two savings

So proven what holistic brands to is us should each strength our that relevant understanding it so and in assortment how are brands from that in we CPI perspective We've continues as bets from be leg and with far we a category a the of as perspective. it a will out particular Baby, the growth taking to our an on at roll bolder see owned CPI where from and QX, really chain work perspective happy understanding that's the in versus making apparel shelves, throughout but works some we categories we next in look go. we are HBA in

We are very QX. in pleased with the results

back of CPI we at We was our continue, fresh categories. basis you were when The growth I or done of that of I'd our And that was discussions four process, significant long results. any tell growth we you should CPI that have first perspective cost so what highest in really our tell in ask perishables categories. about guidance of to our in We is in put QX vast, talked categories pricing than that this hadn't of perishables and I'd that had you growth is, changes efforts lot point chart of a to margin due earlier telling everybody guess a different majority in our whole the up a year associated done on front about chart. we with categories That first that we that enter QX rather our see margin no deflationary of margin has vast saw that's divisions we vigor. you. be It and any in would and great from chosen yielded with conservative remember touched lot some that a as next our to points the that what by hopefully a have pun intended to we coming we and year. From I fresh perspective,

Christopher Horvers

Thanks very much.

Christopher Baldwin

No problem.

Operator

Your next line of question Bank. from comes Deutsche from the Mike Baker

is line Your open.

Mike Baker

one of XQ you what I couple at thanks. you hear the are A more a it, I was reasons about seeing you're that didn’t all, touch at if you didn’t in toys talked acceleration, so expecting why and could merchandising on comp that Hi, category? least questions, know

Christopher Baldwin

is us. about toy the We Yes, the our important all Toys assortment very we Mike, assortment our We have. your thanks hi feel good last feel really weeks. about category clubs in few question. an for at you’re good if in

expect We grow to it substantially.

grow better toys online as well. expect in in doing and much We particular we're share toys a with to job

us fourth So disruption makes feel category. market good into the we the given the go that combination really in as quarter

Mike Baker

as of trends can guess sales, a or I Mid-Atlantic, and strong regional et said topic rain any same-store weather, hurricanes, And Northeast you Okay. from you same discuss because was followup in on other cetera? calls the the this impacts is than monthly

Christopher Baldwin

overall the little, it all to. the be we as as wanted quarter the in was business a strong and was the right of Yes, in not to because good middle month the refer was it of rain last you

them, you rainfall fact our you just in that but to you Northeast XXX% in our that despite folks strength between hurricane and hurricane we there had which government live is period quite a these the a spending we issue And in Florida So was really, give provided were the talked which intent call well bit last markets, in of really in ago we ago up so year report, the up have. felt mostly year against where markets, like with the you the after never this rainfall, weather some basin we year. a performed our was from XX% the the to in in we about associated comp

quarter. give XXth about consider in another quarter, very batteries down to got a Mike, because you headwind the ago in that cold half impact of hurricane southeast. So million the that's company quarter feel be in all weather that point hurricane happened was a that we the the comp period in it's a the comp the $X year-on-year and been year point a year through on on a but just we some texture To last what about it, we despite a wet was on to of of and

Mike Baker

Thank you. the Okay. color. appreciate I

Christopher Baldwin

Thank you.

Operator

question Simeon Your from comes line Stanley. next the Morgan from Gutman of

open. Your line is

Simeon Gutman

existing and directionally per you you'll to you number now is, think it to the those that’s of number first a sounds strip probably perishable and trending we you basis, numbers? can My how normalize if evening. guess Good but I that us spend and looks everyone. try what weather away at I Hi, us fuel, question should don't tell tell about some deflation look on like think

Robert Eddy

important members Yes Simeon, the there traffic on little tell you've I guess well, – got per what comments core we at bringing we you bit more as about an been the his one member just average. the more are That's up we I see members. in good we're a that you is of member the bit, affecting at trends also would things gains, the some but shopping, going look a of feel business right, is on and spend in that member got too go. us thing business mentioned look that for lapses the Chris you've little spend the back as

a with pleased portfolio, the across member pretty as So we're what see. look we lot of we

Simeon Gutman

is is initiatives of the the rate business on followup my at take reasonable it surrounding hold And these this and assortments, the result should topline terms that continue or steady efforts? expect you're run to should that these that topline of business the rate in as surrounding memberships, it is on growth initiatives working of as a look the accelerate Okay.

Robert Eddy

I our this now around. business we've a the fast first I together been my It's world the is we pace a as started that the seeing and through on a for answer categories out playing ourselves. tenure general team to working We're was move is of way you're business company comp a the business was perspective possible in trying of and that so is our job think we've that stacking bear growth than would a nice with year rest. business together from longest less declining turned than as one it's with we're But which comps. of that the so and that faster competitive look that most lens satisfied merchandise with there, the that rest no the and doing the fruit the comping the as

every assortment critical have. on to that in how we're we We fast moving change deliver and category are very value ourselves of the

up some can to good our we runs to wins but seeing early investors we forward know to on the us so more And there putting you're all our put we here of numbers responsibility that and understand board, make out look we also hit.

never at hear least so don't And I to us, going comp expectations. you're think grandiose out put

You're going to business. hear us balanced have our reasonably of views

other categories be will and we're in ones. bullish bullish will be We the that the in reasonable

far ready until guidance, last think around. you we about wouldn't long-term year move you told a what from guidance term too really I to longer from perspective stray as we’re that So

Simeon Gutman

Bob. Yes, thanks

Robert Eddy

Simeon. Thanks

Operator

line comes Citi. from next Your from Kate question McShane of

is line open. Your

Kate McShane

saw gains perspective Hi, the just question. taking the and good to quarter to my comment Club quarter you in Club you market closures? all I from third if in about how Sam’s the comp share afternoon. on anything with general contributed and any at Thanks it Sam’s during the could for regards or contribution wondered

Christopher Baldwin

was in market put flat we Thanks Overall general about merchandise stack. fresh grew X up as in a Kate. believe share share grocery we was business we our five in and comp

we overall. a the make overall time. really little story business and by is investments shareholders for the to long ability the a in on be reinvest how on health company comments in the So and Bob's our make over balanced bit where based we cost to earlier our grew And of this term we're progress trying structure to benefit probably

to exited of the the about is meet to our sure on work ability the In they and to feel needs don't which services those markets we we're continue those terms in continue we Sam's making into want we get specifics, members. giving good in of members but Sam's

Kate McShane

categories general Okay ask the be apparel? from followup offset toys margin in great. just the standpoint I And merchandise mix in if by on a from of a a some perspective in higher categories and question with margin just this QX the like investment will lines could hard

Christopher Baldwin

looks guidance, why Bob don’t gave sense some Bob? what give like you of that some Yes, you

Robert Eddy

a merchandise mean around general margin performs fair. that's think really a I is merchandise statement general perspective. I the from company average

years wouldn't very mix margin. a wouldn't some the you high have moves of helped very I it's I made margin, of from we've tell So perspective. couple Certainly low tell the past in it's you

might QX lower from expect. more margin promotional little a As specifically, a you a you it's QX perspective GM is about time as think as

and So we've looking our beating we're forward that quarter for the modeled into it. to guidance

Christopher Baldwin

how let on want about and one deliver how the market me that about an quarter just guidance Hey on, as how the are basis on to mix outstanding but thing. company promote. into Lee have to quite add good provided. to job and to Delaney think we helping assortment Kate, from everything been head the When manages I on team this. his usually fourth it we don't And able frankly where in we feel done we we'll Bob I we add that

Kate McShane

you. Thank

Operator

comes Your question line Benedict Baird. Peter from next of from

Your line is open.

Peter Benedict

thanks. Hey guys

relative auto question a us expectations? give that's it's auto year what's maybe I your happening Can renew. last you renew? assume sense just versus up First of how tracking but to with

Robert Eddy

is Auto have number. renewal XX% the our bit just on is, we members little XX over a of renewal, auto now

Peter Benedict

terrific. right All

to are to units? to based anyone that is in maybe you anything market something on try drive guys doing or price push is On the or purely deflation, commodities doing the

Robert Eddy

cost it's through. places more the commodity disconnected you would than or tell but the little are might through, that it's down some gone less There all a based. little prices it's be a bit where statement mostly as bit cost coming the I a general

in categories. And it unit we've seen through my seeing play comments growth you're in those way. most I So that great as of said

as fruit, but perspective take not a as fresh X% were units, in we well. five category we're So up so units dropping from go cost down not we like a we're

our other in that be we just and process the fine. we we'll through be and helpful know the can and we'll side way manage CPI So as it do come out

Peter Benedict

more question the you. maybe should Michigan Thank your to opening expect And then and when store great. up to little why color other come markets a new and Okay, last we as just on plan? maybe

Christopher Baldwin

Bill have markets and be team job have of fortune a base to and working we pretty a compelling looked our to at serve about we that us the going the of environment and was would Michigan, his to Eastern the consumers the as was the consumer excited that next on good one good combination there done we're think value that we add offering really year. late competitive the

will and we posted any we'll expansion on So keep you as further forward. go -

Peter Benedict

Thanks much, great. Okay guys. so

Christopher Baldwin

Peter. Thanks

Operator

line Edward of from question Kelly comes next Your Wells from Fargo.

Your line is open.

Edward Kelly

this an just the, about especially category little know on maybe I mean like what about progress had afternoon. you're sluggish, fresh but focused asking Hi about is forward flat. This to seem about want units driving in I units you quarter, underlying seeing standpoint? guys. you Can Good are do an Can how know execution you, feeling the for momentum talk I I so a ask start business. opportunity deflation is from and we going the here? update club share how an you you better just are on there,

Christopher Baldwin

of deflation units wouldn't whole been a offset sluggish. flat, and point was the half category was that The that question. Yes, say as by for sure. have I but a our Thanks unit.

many flat So like particular in really key nice categories. many, it's units. in not and in seen units categories We've even or bleeding we're growth the

quarter. ago the quarter, think as about up during I vegetables up you X if vegetables are during fruit was second So and fruit the said X a

right more in that the out consistent, behind it place desk. operations the right at in really tremendous directly back the growth members So execution right membership great the like that seeing of have and a there, putting pressure that We've we're behind key execution team unit right getting talked the to amount resources the sure training put team making We've improved team members. and those the from team. we club fixing categories links members time, our about

just it's making not of feel great about All sure entire things, that those fresh thing the a for it's us, business. we

an us. And for so, fresh It we're opportunity pleased the business. pretty remains with

we term that here whole the from long a very happy it's we are years see but ago know started you sit as we we As made more of that we've today a progress rebuild and lot the coming. place with we've business, two

Edward Kelly

line out for where and just of about on to harder upside top value process, And that process important how value taking comps that thoughts some about then and just relates pushing you that bucket think level around the some of CPI of that the a when upside on seeing followup looking to bit is little you're balance? with whole that, business and the a of thinking as today, one, when from the from the the upside any get and thoughts as bucket complex that at that's you the

Christopher Baldwin

investors talked a Ed, to between me Overall And managing overall you sales my on have the team is really his let approach good Lee that. we've done balanced but about job pretty of at perspective that in approach to give you where and sacrosanct a CPI. and our are, that to model will talked is length we deliver tenure earnings and some growth, here. come we in about pricing we've never off the ability on pricing my

have for assortment. trading, delivered, team the continue we the value ability a apparel, really we've in we've to we work record better track ability baby. the - some done We've about job doing that. our over good Lee variety to several the board place feel better to well improved as right doing great But drive some do and that talked and our the is about talked quarters about across of about. do talked The proposition what where trading something are value so improve is in his in to as has a to leads continue And jewelry wares house really, work to right stacks and of think market categories time able we what

going to offer value And single to to and day. continue in price so every we're going invest leading continue to market are we

Edward Kelly

you. Okay. Thank

Christopher Baldwin

ask I'd club think is drive investing terrific, stores to it's thing like tire we're how technology convenient. in not but about in the other that The to business value is Ed you

technology my also the trip in more investing bucks XXX in comments investments in but make I about it's save us. think convenient, and convenient, of can we're technology. comments we're a couple making to that you help I not So can made the

Edward Kelly

it, Got thanks.

Christopher Baldwin

Ed. thanks you, Thank

Operator

question line next the from Nomura/Instinet. Your comes Simeon Siegel from of

open. is line Your

Simeon Siegel

or as is if Thanks. keep go? wage this then we Thanks, Chris, keep color where maybe next label to penetration in update any say that can you private And mind? year, on the out any you year last year good do year, and versus period this there in Bob, quarter. things for was to freight or on anything afternoon expenses think mind what things an related guys. same just Nice round just

Christopher Baldwin

a take the patio seasonal private fourth at because I’ll big the label private us quarter. that have shot the we number quarter and number at Yes, then in Bob XX%. Simeon, Seasonally it's better private don't we expect quarter was label some both in in label low an for like add. things sets look of can a frankly flow we're we doing and to even as through things

to that answer points time, XX about to and we up number the get this is think Over least far private XX% we're year expect question year and going a good our So about we’re basis grow feel we at label This a we about point year. XX%. so business. that to to

the there's with dealing wage there's and to that wage deal markets you continue to expenses a some in in consider macro, I'd know with certain questions inflation On to question inflation on a that. we'll lower we're that I dedicated also wage no one of lot ask this relative that a about the locally. us general, we inflation labor model, suppliers cost so an fleet that with it's in think On of you is for as have other of retailers about others. we freight, less than impact work our but

freight to been it's through have but add nowhere freight what pressure manage to are dealing some for have sure, Bob, near is do that? able pressure, with. anything We you others there some to

Robert Eddy

investors two on and those the think you guidance we'll year. the next big call about most our fiscal we detailed for are give talk to ones I No, next

Simeon Siegel

for guys. Best of Thanks luck holidays.

Christopher Baldwin

Siegel, Thank you Simeon.

Robert Eddy

Thank you.

Operator

Your next from Grom the Gordon of from comes Haskett. question Chuck line

is line Your open.

Gordon Grom

guys thanks, Hey afternoon. good

to and mix you of to you quickly the can it out some on circle the the going then five think settle ago equation, do back just that narrow was ahead? to perspective I side guess XXXX maybe to Just and general years percentage where as merchandize a it's give in XX of how where gap looking

Christopher Baldwin

company low watermark the was Probably mid-XXs. in for to the the high

Chuck. We’re the teens up now, higher in

back in about days, have I've company XX% Lee to pretty accurately no written times you've good as think question of XX. the in it and done we lower in expect I it think his the back team really we’re probably now, from get the job and range take really, about there's to assortment. a a to this back couple that XX had XX, done a XX said numbers managing and

that. investments continue and out and in feel we've material that there's made like good to TV of Our team room a things we there lot figure about is, to signals

Gordon Grom

then Bob, from you in to from as that percentage general year? mix XQ any last comparable sense of pretty much as a merchandise of that Okay, implies just have XQ category how the a easy

Robert Eddy

QX. We I say mix, we’ve guidance do, it's results a margin we're from that it's to guidance baked certainly got here certainly benefit the the in but comp we've got there. tremendous expecting wouldn't into our good the some that and team out

Gordon Grom

be about picture Okay, your frame from in how work on the there, if any pretty back, done attracting great remarks to wondering the seems out it and just then members, just Chris, the opportunity go big? more out lapsed about about you've them bigger sort of that's because can you you opportunity it opening catalog talked just

Christopher Baldwin

Jersey we New that which is my north of two to miles we where nine it's ago opportunity. club in really Airport and has interesting we think or about more approach we lapsed most were been XX% was members in which Kearny, strategically a we're mind Yes, it the successful - is Chuck pretty us club and saturated, think thing brought I an that probably the little this and very in years infill that opened frankly Newark think got which market the that how members of a had about eight

understand today progress Brian BOPIC, we think done our more able fact reaching offer have saying we general to membership I using been on those digitally has made that we make into back progress, better team it about in marketing getting Poulliot get tools but prop the said our as sure a proposition member assortment of members. we've much in. compelling made do with job keep we've value at lapsed we've as the go most delivery, them to thing about day led to And but my to combination capabilities roles we as and merchandise the company some is miles the in that So a the they have and by good on emphasis particular membership I the same a comments what and the with back

Gordon Grom

Thanksgiving of Okay, Happy both great. lot, to guys. you Thanks a

Robert Eddy

Chuck. you, Thank

Christopher Baldwin

Chuck. Thanks

Operator

next question Laura from Your comes the Capital. Champine line of from Loop

Your line is open.

Laura Champine

Thank you.

interest a question expense is my think where Bob on can fiscal likely maybe I and for is comment you year balance your give more out sheet goals to you look fall generally? next and us think into

Robert Eddy

chunk a this prepared hi tried the on color big Certainly, and during more that exposure got we've give a given point. Laura. we've Yes, fixed to at visibility lot my I remarks, you of LIBOR

of and year, year neighborhood you should before get per be to this down times. We'll We've end obviously Going the how made first it. of paying think year. next of forward, couple progress do three there do by we're and what below the in debt is a the against that foremost is million about goal $XXX somewhere trying year that leverage should considerable

at believe. model, running XXX is X% X% LIBOR spread and you're now your our ABLs first So got you've if fixed at a and I lien spread, at our rate

run year. little next opportunity of bit market repricing model might way. be be kind There it’s So a better, can that might the get you a a there

the was for believe call sideways, forward earlier there soft that look probably early market QX that, we one the went February. I in place in As equity in got before to us but we've expires,

we up and as mark that we as look, flow and to get interest do times down So that lower getting expense cash that we three the to de-lever to will look and lower possible best job as and free will hit soon can use go. obviously

Laura Champine

you. Great, thank

Robert Eddy

Laura. Thanks

Operator

next Your Mushkin question from Research. Scott Wolfe from the comes of Instructions] line [Operator

line Your open. is

Scott Mushkin

Hey my guys, taking thanks question. for

house guess I'm of three little is I I half months did you free. three So the that when you year? is, to free promotion question open of around a first months the I your next my last guess you that understand and it ran, then that bit think off trying time called of the kind

Christopher Baldwin

The in like company XXXX. ran this an event

answer. So that's the

Scott Mushkin

it that an story, looking look us is most is Okay, then obviously the annuity of lot a fallow call followup gross great. margin And kind as Costco ways away this one a question investors guess not at given a but and almost membership memberships different at margin we're guys how then competitor? comparing in I'm going little my I trying are of investors of and understand at on from it the your closest gross you do as in to being free, we're to supposed improvement. to for to just look

Christopher Baldwin

I in Scott, over free. year million notion membership and challenge would experience a the we're giving offering us that come almost paid and the of bucks X We we on have. to average that value for away members, they pay got the XX

adjusted almost free, So away it for million our that we're not answer EBITDA. simple $XXX of half giving profit is it's roughly of

So start from that perspective.

together. year every renewal improving they've team rates, have has been this We been single great

of it backbone time a a if of members we best at and got and a that good and in We the is theirs. our best play still a threatens we of the just certainly about that's business in whole get annuity to how is are this and neighborhood why the of come rates talking all give it that look experience membership end the value annuity to We in so because when business lot day Costco's of that renewal high price the there, rates. of every of in it that good and are spend annuity. and in in impressive row experience hopefully provide our is buy whole the year work the is now at the going to, the we getting but to a trend and lot they can absolutely fourth as our to We've way do don't thinking the of existence renewal we them report time single then

investor about through great lens over as at business. company I’d our membership that look It's years improving of about value it couple feel last we of they think So the the and value annuity of and out there the our stock. our been to every encourage dramatically

Robert Eddy

that's important driven ability our better is pricing taking think Scott our buy thing margin improve to other I period. entirely is ability The to in by this, not

and to company’s was as capability good have that about really we weak a do we're think in price we feel procure first thing in capability came as So was Thanks we obvious ago, the obvious here - about a progress. right our marketplace. it team your was the that and of ability couple But the that question. we sure reset years procurement the we how when it is for make do

Operator

Research. question Northcoast next from Your comes of Cerankosky Chuck line the from

open. Your is line

Christopher Baldwin

Chuck. Hi,

Robert Eddy

Hi, Chuck.

Chuck Cerankosky

and in in them levels higher say gets everybody. Congratulations Good afternoon deflation And closer quarter. merch should both and at merch and there. and grocery a lower numbers I good general I'd good pretty the comps those there, looking leve?. a on together then general Thanks. at Hi got the at be in the and food what X% some know you've is

Christopher Baldwin

the member those make about on market. business, and to our center feel mid I'm store business I ever how consistent all how to benefit and make we company grocery is of quickly. create to we move time. in incented great have good the run and make is doing not business a assort the how investment and And the little that price, grocery capabilities, going we're Yes, to our how fresh we're and to continue high to expect been some we invest about, I that time we core the really and do And combination progress. digits. to we I sure progress one starting But which continue we is time we that think do for Chuck at investing will are boring capabilities well to grow over about do what not particularly pools bit think GM to accept think the all what probably I've do our we are, single in I'll is we're more going we're over to progress it over a the business to think clearly experience accept, ability I

Chuck Cerankosky

for opportunity Do prepared and you that? include fresh see foods as part of

Christopher Baldwin

certainly We do.

us We food rotisserie than prepared You'll the this encouraging makes over like terrific fresh sure. in even that in the Frankly, private for see is think label do has talked it and fresh in regard we some a fresh, don't is from more soup progress about category. more time. in of quarter, and that about future much chicken encouraged that seafood we been prepared more things today us made

Chuck Cerankosky

Good the quarter. much. very in right, luck thank you final All

Christopher Baldwin

Thanks Chuck.

Robert Eddy

you. Thank

Operator

session turn That Chris closing for question-and-answer like conference you. back comments. to would our any for Baldwin Thank now concludes the today. to I

Christopher Baldwin

you your a wish healthy importantly time. Thank Thanksgiving. and you a day. We very most happy safe a Have much and all of great for

Operator

This call. conference concludes our

may disconnect. You now

BJ's Wholesale Club (BJ) 20 Nov 182018 Q3 Earnings call transcript