BJ - Earnings call transcript Q3 2020 | BJ's Wholesale Club Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the BJ’s Wholesale Club third quarter fiscal 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentations, there will be a question and answer session. To ask a question during the session, you will need to press star, one on your telephone.

If you require any further assistance, please press star, zero. to Freiha, conference Vice like speaker to now Faten today, President, would hand over the your I Investor Relations. go please you, ahead, Thank madam.

Faten Freiha

Factors may third this These Werner, a CEO. the are Please federal Bob forward-looking that filed Thank XX-K are BJ’s securities the description Chief Investor uncertainties. Financial make conference to expectations Good Relations see for for Officer, Eddy, current call, our SEC President, section expectations Lee the quarter actual with and and Risk this remember cause meaning Strategic Administrative involve laws. differ March of Club’s uncertainties of and Bill call. and statements and everyone. call. our on earnings Vice within fiscal that XX, based from on risks XXXX our Please described on President morning Delaney, Form we the risks materially and those on results during and XXXX Senior you statements call. Wholesale could the of joining Planning

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

Lee Delaney

and you was you are and safe. outstanding operational success. with and for hope quarter I joining us. thank strategic, considerable QX morning financial another Good healthy

strengthen combination from unique the business our dramatically to accelerate factors benefiting transformation clearly are We us our allowing and for of a future.

and discuss factors the future. our their balance success to I implications will contributing my our remarks, For describe for of major the

have our our environment as safe team provide They has to our not and incredible our distribution In been all to partnership entire been They priority protocols our our challenges and to teams’ I ensure they too incredible, up have most. stepped safety a office, team them. with members and and our resilience of impressive. creativity, kept has meet has have could extensive dedication home for clubs needed us for highest with when Across so vendors, who healthy First, amazing been continued centers, be community. prouder year.

sincere to has to my Let I partnership. will and who me everyone and success. continue deeply thanks your offer power appreciate our contributions

our continue prioritize investments have to we bonuses, to our safety practices invested measures. enhanced and teams’ to these will support wellbeing. in with continue Year $XXX team date, in and million benefits We

become an capability our to will we continue we merchandising, Importantly, marketing, and as last the membership, even additions over speed in and key recent great six IT. also we upgraded digital, talent attractive expect operations in know have these months hires We transformation invest to with teams’ our employer. further more senior analytics,

trend. savings for we and pandemic given the broad their Second anxiety. Members baskets most trips, response to bigger remain obviously, on and buying searching perhaps are economic in consolidating

broad leading exceptionally category these bulk industry times. in value, and Our sizes participation work well

by categories of twofold track. Furthermore, more share. than more than the the market our IRI share than More growth a outpaced gains considerable half we result, gained growth gained our data. based we have XX% we driven share As on and was in by

at perishable of For grocery outpaced market the more non-edible by the and grew rate Xx market. example, than our business times our two the business

expand relevance the trends. shopping our given ongoing the more elevated northeast into our state trends confidence and core beyond reach markets continue pandemic, gains share XXXX of outside will northeast, gaining can far assert well anticipate These core and vaccine our are current outside unemployment people occurred gains discovered distribution, We we support digitally. likely share of the timeline successful for our relevance. share strongest and geography further Our as that our our we

a competitively focused Third, capacity I allow believe items economics for growth rise. will elevated critical prices wages environments. and sell world. of digital distribution size offer advantaged in marginal are All favorably all a meet nearly larger advantaged should levels under and positioning these out large selection others lower become demand savings. limited We as We We as our operate industry-leading and of stores. consumers us run transparent seek more current to times. value, favorable facilities business efficiently potential model is clubs with us offering expenses, future more for factors closing economics and We with with future labor

Our share structural of profit QX model advantages. gain is evidence and these business

our footprint, lowering have transformation with capital value, improving our position, accelerated six our expanding in digital, our we structure. cost our Finally, growing improving convenience membership, key and areas: delivering

Let each. me metrics. about From standpoint, are membership on of bit we ahead a all expectations a say more our

high remains new We robust. continue retention to at rates members and attract

at Our trips our increased members to levels, tenured and members clubs. new continue elevated to shop driving

new addition, more platforms. continue and skew In our members engage to with younger digital

attracting them engagement. efforts the concentrating on data are are value. lifetime improvement leaning a These we Through with are in drove in ways year. member BJ’s by into investments focused year also also base quality can have total These helping highest the drive We which members our value. of powered discover driven membership meaningful our retaining to investments members the over we growth all and on in membership. XX% Similarly, acquisition approach, deliver

XX% by value. total much greater our the at members basis year of increased compared to rates prior renew to highest prior. Higher penetration and tier tier points have members higher XXX This quarter, lifetime

yield in environment. well We quality expect gains size the benefits beyond membership will and current

a to members. remains to initiative deliver optimization Assortment value key our

to suppliers to challenges. chain categories. levels work to high continue quarter demand in and new mitigate improved hard quickly In-stock and supply essential add to continue have this We remain on stock and we products pivoted

remains demand. into expand consistent: growth strategy with to areas demand high and simplify agile high remain and to meet our space Our member

including in indoor furniture, assortment food were healthy this we fitness drove consumer half where historically market year. the categories. goods, underpenetrated, This These and first in the expanded electronics more options share of We business categories our where of categories, household our quarter, with our grew changes reset organic and select equipment, snacking the we gains market eight in alternative accelerated times several rate. including sales we

We gains perishable to also significant with growth market. times share the in categories many three two saw

added. we will know Our new prepared We share. serve well younger have with gained recently business improvements foods the these us new also members

touch planning. holiday Let on our me

Black and in earlier channels a electronics. categories with consumer experience small pulled housewares, our and Friday deals focus furniture, First, fitness and seamless enhanced start to relevant appliances, like recreation, we an on November all across

We buying have party turkeys. our more our small downsizing platters grocery adapted to example, for account offering and by fewer for large gatherings,

We from faster headwinds for experience holiday at will growth it with a enhance recently some optical, services and appliances We feel great many new significantly rate. driver anticipate standpoint, digital and improvement assortment about improved From we a significant be re-launched cellular team assortment. believe Services While a and is continues to growing growth. fewer our business we home including to our holiday services years our come. capabilities. all gatherings, major to the a returned

XXX% by sales enabled quarter. grew Our this approximately digitally

have year’s in or we three are In economics and delivery times day of our came last channels Our nine most grown Club, where digital more than Online in The with growth. the attractive gains BOPIC, Buy last months, the surpass same growth quarters platforms expectations. of continues biggest growth. four to in Pick-Up representing our all by

This quarter, to we curbside include expanded frozen service, chain-wide. grocery including fresh BOPIC and items

expanded still results been have very Although early, from offering promising. this

were post our BOPIC For curbside. XX% example, delivered roughly of orders launch

the into well and aggressively top our invest to their advantaged digital continue will competitively given We us relevance digital believe and will bottom line. for bode shifts platforms We economics. to increased on

our progressing year additional track extend expand existing We in well. open four a focus with we many demographics. this year. of at are clubs locations this total for fiscal to York New year, and further efforts new Our end six as on To clubs remain reach, markets two and are as our footprint new of pursuing in the on to next attractive a

expect performance is clubs aggressively share run greater to openings, invest be far, membership given members Michigan, from with our continues club we gain recent new especially standpoint growth in unit plan in expectations. a growth We performance our our ability XX% are to new so and vector. better of to average than the which multi-year markets a to our We the clubs pleased support told, the per where of ahead All of average. of the chain-wide to latter

We goals transform flexibility balance remain track to used considerable Our balance reduction have sheet Momentum this cost and business afford reduction cash our shareholders. our enhanced and return our in cost with capital to flow invest free us to increased efforts on year’s sheet. and Project

stands now X.X by leverage to returned ago, times X.X opportunistically EBITDA back a Our at and shares. compared buying shareholders to we capital year times

with Before I you takeaways. turn leave to Bob, a let few over me the call

business continue we share Our has transformed to long the and near gain to term. and been expect over

proposition, We are and base, well cost balance sheet. positioned expansion, a and growth upgraded a extremely advantaged capabilities, better an member position and with growing transformed digital and geographic extendable unit relevant faster and strategically value structurally and

call business with cash profitability current that, flows. look higher we a turn the the Bob? As With strong over to Bob. see past I’ll stronger environment, we robust and sales,

Bob Eddy

Thanks good everyone. Lee, morning and

begin, for during I remarkable work our I this members like opportunity year. and take to would their this Before truly thank hard team also dedication to

and quarter increased by Merchandise billion. We $X.X which and the the driven continue drive of sales were were to sales Net XX.X% highest ticket. at comp and by standards industry-leading traffic execute both for sales, results. gasoline, exclude

the our our during baskets, the share the strong month’s XXX increased quarter. expanded These with quarterly food three of tenured comps earlier consistent comp merchandise was consistency have holiday Each and we market that We comp weeks home performance and slightly are shopping. trends their November, clubs, outlast pandemic. the end first were end and all categories. geographies. home categories we Merchandise comp. almost confidence of investments coupled at our the of shopping addition comp see trends sales have more to new, merchandise within XX% over of gained towards to the continue across XX% to We in consumer all strength our will continue the to October’s see of of in expanding monthly basis with In quarter. as running underlying benefits and The strengthened the saw the we us month. points strength north since of across strengthen transient penetrating the continued gives members, was consistently

uncertainties, significant difficult fourth will availability it’s of are play the us we behavior namely such to the the given and inventory of quarter holidays, While predict it as quarter for pleased during member entertaining. our relates how comps, the out with early as rest number to

full digitally grew merchandise XXX% XX.X% our of enabled by sales Our about approximately percentage drove four comp. points and

aggressively investing which Lee we digital and behind As our growth. together of particularly noted, digital delivery are quarters drove three day in same our platforms, BOPIC

are operate skew environment our versus clubs. tickets, As same delivery allowing peers. day as to in to higher you BOPIC significantly economics and sales margins have our sales curbside advantaged our much We baskets traditional average efficient. SKU the with more limited tend warehouse towards be bigger same know, a and sales us

all in appear interact grocery strong division meals, across that means. We XX%. members in fresh in grew meat, more by only us and than our digitally robust frozen notably through we to Comps categories, saw saw produce. fresh growth engaged where those shop comps perishables Additionally, traditional most much with

our of snacks in In rest market. growth the health as beverages grocery, fast grew the and In cleaning those we edible robust see strong Lee we salty and items. more and twice products, categories as growth continued the as the division, fast in division non-edible As rest grew perishables beauty as market well. as twice of in paper grocery noted, to and than our saw supplies,

twofold little by cleaning. growth goods outpaced more the in than and Our a market beauty and and in bit by household health times XX

suppliers. with both quarter Our improved and the team new throughout tirelessly existing in-stock our as worked levels

Our saw driven related appliances. of sales strong by of XX% merchandise and computer growth general and other such small TVs, services indoor categories as equipment, furniture comp home division and

XX% services comp in fee during is in although new business, income, for great membership MFI year our X%. ramping This new progress, gallons great gasoline its MFI to by great our or members, renewals of run market. growth $XX and the by lower increased mix. a In was Membership made performance million. we in significant the grew rate the by impacted by about potential over prices, outpaced decline overall our yet were represents still back is This share. at another full and to our market sold the sales continued opportunity third business year. year Although example gains clubs quarter driven growth

paid in year. have improved perspective, We a added members a continue Along to members to membership put net this and memberships little grow bit more last members than on adding count, with To in total year, net our historically over significantly. our XXX,XXX XXX,XXX of between we compared increases year also we XXX,XXX would quality terrific basis. the new

For higher we’ve on year is expect growth example, significantly acquiring recently renew our they best focused will credit be We at rates. co-brand retaining given we tier to at our we passed These their Also, who easy and membership shopping one and our penetration important millionth are these behavior. sticky enrolment another remain members XX% excited milestone card of the date to increased membership XX%. renewal are very members, and by higher seen holder. about

to move now gross margins. Let’s our

Excluding SG&A merchandise areas the our of costs in increased gasoline value our in $XX inflation. and $XXX particularly in our tough million expenses costs program. These gross some XX principle increased a especially partially in and COVID-related experiencing business, and by with these CPI Investing bonus times. sanitation costs basis included initiatives outstanding were the associated increased price driven is investments incentive which points driven by total the order labor, distribution pandemic. costs sustain were by to offset by quarter rate we price, primarily million that business safety of our in were bedrock members, and approximately margin for

little by During points. we a XXX SG&A the able basis were than third better quarter, our to more leverage

members $XX be the $XX to associated pandemic, related more expenses with incur team Costs current safe Given COVID-XX are and of and bonuses trajectory keep million members we member ensuring in to the to healthy and QX. incremental expect team to we expected million.

by or Our by offset the reflected robust slightly third growth to was $X.XX Adjusted members. disciplined incredible grew EBITDA management, investments our quarter income on adjusted reflecting in the $XXX the per-share of team million, and growing per and beat, basis. an margins, $XXX million net XXX% and safety XX% year-over-year sales business a our in expense share

expense. disciplined Our expense earnings management, growth highlights revenues, our and the reduced interest strength our of

we this typically We of about Coming strategy far cash $XXX cash allocation million in of the game, From holiday remains much for have inventory free in our our generated position year-to-date a so to great a record feel capital QX. don’t flow year. our consistent. out as our build the generate QX standpoint, We on ahead season. performance of ability we QX

business in investing footprint. is priority overwhelming our Our expanding and our

times. quarter in EBITDA tremendous is priority flow the continuing repay sheet. next X.X the ended free funded allowed with us a cash has of current improvement to our year’s $XXX of to nearly million Our adjusted balance ratio debt Ultimately, The net we debt.

forward, funded level a EBITDA. will go look we debt X approximately times of we adjusted As target to

of returned towards From date, capital look back the we return $XX repurchasing bought returns X.X shares. approximately to to capital Year by standpoint, of our in quarter. shareholders. will million shareholders a shares worth to $XX we we million Finally, million have

We opportunistically balance to sheet. will also our look optimize

a in changes on rate million savings of we annualized with basis. these of approximately value. by During reduce will from and conclusion quarter, $XXX and million to million first transaction combination $XX notional million. expense quarter, In million our of one lien this revolver $XXX after $XXX the an borrowed our of total the we $XXX used with terminated The our debt interest interest connection the result cash excess shortly third of of swaps

touch and behavior, outlook. now and remains on government The unpredictable. the are pandemic, environment our unemployment current that factors There would levels. challenging consumer impact uncertainties of Let’s evolution business, several the our and stimulus, including

a great specificity. it or for fourth to in next As us forecast difficult result, out the play extremely remains how will year quarter

improve aspects With we business. are will again a with more compass larger and we Given and guidance. membership our these from investments incredible of we that industry-leading trends, to business uncertainties, all offering accelerating meaningful refrain and have said,

Given and trends the food remain next well robust push public crisis, the in that will current into year. we believe the at QX home toward health the for

we We Both may stimulus believe to items that how new also with others, coming continue Washington. for months, a all be the behind should momentum through of us, those gain challenges our entertaining Like package us. to availability election drive potential the the that note in inventory work plays have more out factors bullish more. even these await should in business and but holiday

a news and public vaccine, enough be inoculated future. our advantage to in in for likely some race will to change changed many the behavior take good people this consumer we’ve it health months the to to for Further, the expect get had we improve our geographies certainly While most has crisis. sustained foreseeable

continue growth IPO. performance. we result, extremely the our years we financial are long set a our we our pleased To year. stage As up, at for Investments great algorithm the with outpaces prior wrap out believe plan laid so significantly to in performance term that have this far made our

challenging strategic this We leverage as invest our behind continue priorities of extraordinary to and set circumstances. we

environment, today’s model, business beyond and gains, the our of look sizeable we balance we given nature share we well transformed our our positioned sheet. believe are As

that truly team expectations, bolder Finally, to highest enabling we execute Club. have continues BJ’s Wholesale level the to us against a transform at and elevated

the begin turn session. over I’ll Now, the to to Operator the call Q&A back

Operator

from comes Ohmes Robbie BofA of Securities. question first Your instructions] [Operator

is open. line Your

Robbie Ohmes

Thanks, good morning guys, and terrific quarter.

accelerated a just you just the slowdown growth, like, what any how maybe you’re One, some think quarter, year? for ask there give in also this is that Then really the and was further stores store you for can next might more little going we us over to new rate might you’re accelerating from just few about second doing XX% happening looks northeast, it given growth Thanks. think as maybe bit, could that us year, about start what question I so it sequentially the how Can thoughts remind regions my Actually two new is should what moving into about I on looking great outside stores, color you think wanted quarter. a execution. the how member look membership forward, next - and to to more look and growth you could second look Just how that the it like years. on much out be in in you seeing accelerate the on questions.

Bob Eddy

Hey good is the both I’ll is take Bob. the quarter. them questions. Robbie, of for wishes Thank great of of this both those the a on for business. and you Membership bedrock

and sit we record and membership stare a of here with improving size momentum great see numbers, and As we at quality. strong the

second the and In terms on accelerated record QX our with very X total feature. members member a From of year, size, we’ve from and QX are growth. perspective, on from a on quarter, momentum and up that’s the year MFI XX% continued P&L, impressed the net million basis we’re over growth built that so an important

More are throughout did quarter. the importantly, investments responding the to we’re so making and members

the forward. which see believe premium to were important improve robust the that As to XX% makes shopping continue these get sticky to to million XX%, membership, across and co-brand going the is we the behaviors us penetration portfolio, improve be to gains our growing X to quality which overall milestone, also tier point, will able renewal easy our to cardholder, an despite penetration we

is guide the what correct a miss of hopefully We by miss estimation, MFI, say our don’t see a our I and and dollars. think and there thousand member about absolute year, guess on quarter a slight those momentum, at we this the size, on calendar You’re that think slowing great slowdown, - continue as campaign consider record view, the we of hundred quality. things on, easy look in the slight including rest and view, those point fiscal to club to get quarter footsteps did quality. couple many timing impact fiscal the count, next so is and renewals, better to our phases and I’d as TYLY and and and momentum the to through it touch performance, was one to relates and record in the or it really slowdown. in a of on three and acquisition end versus things on into out to strong to build down all we is gains year The on and I size way

talked in priority clubs investment think building you made strides store to being a we’ve we We’ve company. of the of that about certainly great in portfolio As in biggest our terms growth, can bring bear. about

year year. track Pensacola, one clubs We already are - as this four one you we know, get opened Michigan to to in and on this in Florida

set Newburgh, two open January, that have open our to in We Long great and our York. team Island is York in on working get last in one are done. January, City, haste New to right and New as call, to on in Those one earnings said track we with

clubs. those We’re excited for

get talked we to on next and still that. more, do As we or about year, to six track we’ve are

I chain. hopefully markets will clubs into throughout Pittsburgh pursue some existing market sprinkle we our year the and get will us you next and see so then think markets, new other

we a from that. look see but following year, are As to we clubs, path way XX a towards forward the away we long

of markets function you as least one get will same game know, year I market hold, through look estate we’ll think we go. that. we to surprises, full update into a open that certainly robust real existing But add our as in a more we at year, give so and As the will where next is then new into

Robbie Ohmes

much. great. sounds That so Thanks

Bob Eddy

No problem, thanks Robbie.

Operator

comes next Grom Gordon Haskett. of from Your question Chuck

open. Your line is

Chuck Grom

Thanks. quarter. great Hey,

quarter into of then just the the and basis strength, had to regards ahead, than thoughts if is better the gross up margin you which of year, play could half the we with could points XX how if dive the you fourth wondering components looking Just out. think any front

Bob Eddy

margin from margin. can XX on and Gasoline total gain program our pile gross assortment we the basis of as effort takes our the a great great - and box. were of continues Lee we inside-the-box have continuing had margin and moving CPI versus go. the you tactics, just performance quarter was as There we the COVID about with we’ve - related. heavier saw categories on some Certainly great Bob that gross more success puts classic talked to points in a forward see getting biggest it’s quarter know, a in so talked again. prepared did touch in from success terms inside growthier changes margin remarks. primarily Maybe about we Chuck, had margin past, increased move against gross about one as perspective Hey The great and negotiation that towards into that, the as merchandise CPI were and We talked perspective. costs distribution I’ll

in the half significant centers front year, particularly that not about as a doing go, and the our position, everyone inventory third our try first those are healthy our to in we we safe clubs apparel, quarter. Versus had on quarter apparel, keep the same the are just home and bit. experience We we a doing that we where we talked and, of in in pretty distribution much profit and markdowns the did so better things in weighed in and in office, gross frankly,

typically of we investments with do just part as the in everyday. price, that Finally the

and to inflation very beef, profile and as in so offer know, some we tremendous We price the membership of particularly see during a fees. we they and made their those QX the quarter. what in invest part happy As with big up. margin and material, a we did the our industry, in which did is it’s it the members, that value others quarter, pay went few maintaining All terribly throughout together, why although you club not the categories

Chuck Grom

for thoughts how XQ could Any out? play

Lee Delaney

it’s jump Lee. fourth Chuck, in on I’ll quarter. Hey

membership, that Just We some great Bob is the said reiterate it let membership. about the bedrock. for question, me the set because feel to what stage of the on just

digitally track and the seeing of looking many quality, The so strong, how is or really underlying to October. how shopping more every more couple and they’re pay, weeks have we began have strengthen much we’re at paying in and less more We back more members, cohort the cohorts, engaged, we particularly last in in The members. them different people younger, they they’re quality with QX, half business of of they’re the more.

As that’s said we November. into continued prepared remarks, in the

QX period to the about it pandemic with business. and big a as is parties. more that weather, in was relative of would clearly relates a The as If gatherings the the ability to you obviously changes footprint, eat think warmer question expect to in environment, strong the normalcy see our etc., broader restaurants, and we holiday

we gift good We are those, as overall is expecting in increase home, of in business, here in feel an in for giving a fewer very consumption which investment QX just is of the investment shape. today, holidays, but like big our food part at-home and and so we sit

Chuck Grom

on rat SKU you major bit helping little guys you talk line. potentially categories. furniture help the into is a then could kind just margin lean to about and core seems margin driver these program. assortment margins, being baton great progress for just Thanks. passed gross CPI the if changes about--it getting little home rationalization on a the of and about bit changing Bob’s holiday, of continue also you on SKU great. Then Can the that of rates from that, a follow on could higher some comments some the like things talk up categories to with you’re make the dovetail to in how Okay, merchandise Maybe guys the you just or

Lee Delaney

Sure.

on team, you’re well overall merchants, running planning extraordinarily at been keeping the chain I team, premise think term, when In Clearly supply of the focused the stocked. short your changes question so is made the stock, system the team have comp the there’s right. keep we’ve stores satisfied. have been we it stretch in levels a shortages to key running, on just of products, buildings begins to and the number members thin been the the and the the

on business. the we’re we right some includes That in you’re how you about think in core investment historically like but do we’re categories the thinking where driving, longer been and term things we drive shifts where As over-assorted the about are played. we - into in and of simplification categories organic an haven’t that also healthy categories that alternative snacking, foods, we’ve about trend, the growth talked

been more excitement services where worth just that the is It’s services growth incredibly to make. in new in has away past have team, fitness is club, that also at normally just places over-assorted and a we where, than concentration good significantly example, and ability exercise bike categories more we’re our we’re brings business, that potential. items. area were a This with really AURs our launched the an an and including really right carry, would we fantastic highlighting an historically as travel and excited this we with and areas. are frankly, and that, are we those business, from exciting the like in about As change we treadmill shift new results play, just overall real a quarter a merchant growing higher That growth seeing finding where to we trend, optical invest in felt we’ll opportunities shift, dedicated to on equipment

us. and focus only for on to less appliances forward, so been the members you’ll The said, that focused buildings, improved will term, well. so area quarter values as contributor given That touch just over product continue major in long better In economics a label. at re-launched a the on getting a on alone the ability we short a that material term obviously be believe be bit us we’ve going offer this major really to path. that but growth private label, down little focus keep to the we can As see that’s to past private going didn’t piece is we

Operator

Benedict next question Baird. of Peter from comes Your

Your line is open.

Peter Benedict

current questions morning. good given specific what growth, is first, sign-ups you numbers, guys, think year asking kind year curve? in bit, rate of just growth shape the the that, That’s peak? the how a not and how you understand the about think on think note the of but to would question. given then of to curious growth - peaks Two moderate the that Hey I’m earlier you or have. just just dynamics first for MFI little of you today, you my about next starts the Just trying this XQ

Lee Delaney

see through right is bulk out the I so seek headlines we normalcy the with seem proposition, relative out think clearly QX, the There’s trends in those to members buying although are The value and run, you’ve pandemic hard forward. that and flow our of the sizes is somewhat at of the as that into to doubt think bit that aligned home in at the return rolling public little the and trends terribly into months, hope start heavily is particular suspect of in and are short being doesn’t value, where move answer or causing seen we’re well crisis QX, controlled, say. the more overall growth I broader a in people a broad kind you’ll of as heading the geography eating value. it’s to seeking no with I in affected that pandemic situation particularly the health as playing the QX, falls they’re the that are in business, more winter northeast

onto We’re good on now, be those returns just The latter is feel the part see many hold in able to hopefully of about we world Based the to what we term year. to question will on that. we middle of next normal trend. incredibly long the members as how

with hope gains high. and pandemic is onto able a have we we’ve way of to the quality to and we’ll normally membership the see. engaging see hold know who multi-year the story we so the of growth The that that the base in We elevated changes that, created is experience, our wanted things fall members membership a has a are experiencing people a us We to and one-time be platform the more platform would of we’re are than made unique do event now. to out lot

Peter Benedict

so know, - we how that buying that. you you’re of curious last slowdown, material you. planning your guess here, unfortunately how of you be for on sense through to ’XX, trends least are like the I certainly a at now It these of you times, Thank any could I’m things feels for doing I’m the to overall second moving you’re the alluded that just wanted first the are the first just continue first hear ’XX? you question handle of benefit ’XX. half, may expecting something half the Lee. hindsight this into to half able spring, be obviously expect ahead? year, with went had Given you’re out earlier similar to helpful, That’s we’re sounds of just--you like first my that is there experience what of some but curious better it lockdown position couple kind this you you on not to through

Lee Delaney

could The of particularly from some a is as still we just we quickly are turning at If would running hard in-stock buying like. up. and general categories, There standpoint, an inventory, level of the we are been inventory an number so that. definitely clean we frankly it’s trade have buildings aggressively can. categories shortages that to and we in would below in as merchandise the very We’re do inventory keep cash what for

I public distribution, rates disease, we’re the here at quickly think health today sit possible, incidence unfortunately all a hope for and testing abates as like the certainly the as anticipating that we look continues but you vaccine the in likely at hardship, we term. business, of for as the it crisis on don’t seems as for elevated pass, etc. and come short timeline buy extended and but an restaurants, things you hope the of for to eating period we’re renewed Again, that home, those bans we plan demand

Peter Benedict

so enough. much. Okay, fair Thanks

Operator

of Chris JP comes next Your from Morgan. question Horvers

line Your is open.

Chris Horvers

and couple A questions follow-up. Thanks. expense one

you much say - the you parcel all, COVID ship margin, in about to expect higher would the relative talked gas, on quarter in front, First what in fourth models building year? the gross XQ? plus expansion would COVID costs gas we’re that, costs third our higher you margin if out profitability fourth on within over-earned accelerating the the the drives quarter as at merchandise you and on how Then here in then quarter costs side, to for next any mitigate expense

Bob Eddy

QX we had on one incredible story a great Hey the leverage Chris, see Bob. SG&A. as frankly, you in was, The it’s expense can

our COVID this to the tremendous in crisis gained think why path better prepared everything as home done business from our and of look won’t entirety of guidance really increasing in it tying better; the office. that and our towards team in chose do Unfortunately simple what accelerating public protect bit our I thing a be great we’ve the really that $XX Certainly of are Should do disease that the spend in safe. throughout the so and share, members will We’ve incredibly neighborhood fact. we out give that. twice guidance. do improve, the an more COVID-related it the talked health we’ll members looks same the quarter little we of all about the that forward That’s to the and expenses Hopefully and This dovetails worse, it’s power entire view be to to gas course put we’ll that this had our and public able like as It’s in health the a has of comments we that will stores get about centers the of is hard crisis. to of members do somewhere should there, it year. million estimate of quarter we’ve nicely QX we remarks. updating predict, team costs but members they’re more and and keeping virus the with thing we’ve our bad. as our as Lee’s distribution

growth it gathering year about market’s set-up share. we XX, year, omni about year handful next were in as business. been sold our so market parcel in a profit the dollars not a the a extra jump are down X trend quarter this a call and we for I’ll great That’s QX about all million let talk to gross for your at and question think little Lee going Profitability-wise, and Our overall bend talk but you our tremendous as gallons as of comp quarter go. well. next bit so Maybe sure fact up it clubs double digits, of call on the for

Lee Delaney

I in some parcel Yes, rates. certainly including freight market, we’re constraints the broader think seeing

of demand a the day omni growing As noted remarkable delivery, think good things are. - in negotiated and you our standpoint inventory how costs, at When aren’t increased terribly to freight an same lighter the worried of that and working bulk which given overall like XXX% turning, expense given which of services. those expect is along feel challenge the about other items the Buy we about see business, chain, it broad to of growth just so The we’re demand levels is rate through than bulk than impacted ahead still from it and our the store In see those broad quickly well curbside comes Online the growth, we up Club, on both for will levels and for we directly of we as supply of likely rates item. just other very the with business, by the getting of about be Curbside, exposure in to fresh Pick-up we regards, factors. increased every was so particular the parcel those normal, pretty this home coming are comes demand, markdown us. contracts time, shift inventory where to did margin have, and parcel we not those

Chris Horvers

Got it, that’s very helpful.

the give reacceleration maybe in and the recent a but understand of I Just quarter third we for customer out over to a XQ. acquisition, building another that then at shot you looking and a XX% is in the membership in guide, relative on now, model. to variables consensus sign-ups of there’s the as maybe don’t try year half, dollars follow-up to lot year MFI you surge take us MFI helped as gain XX%, cash saw could in the want side, the and Right first about you just the XX%

Bob Eddy

because before, about I’ll it prior Yes, never that it lot had talked and business, momentum won’t. thought offer MFI illustrate offered cash in a the while in that, the quarters, also and that, would investor and have two analyst communities. the confusion incredible misunderstanding done Chris. having behind might help it we we probably take it didn’t We quarter the created statistic this We and

MFI, growth stepping know, it’s illustrate you we We’ve member membership have trying member a our like folks business, I’d about Instead, data so hesitate look up on was trends counts, and XX. problem created to pace second throughout again. You give offer hopes about talked We’ve well. quarter, back quality net we the MFI. which membership and we up talked cash might in certainly were total We’ll the the hesitate to accounting tremendous I when after it improving momentum will the the would talk to concentrate we’ve we MFI, thought about record the just so the for as the be these record the our sticky, rates as renewal strong had the XXX,XXX.

Chris Horvers

transition running basis to year-over-year membership the and in baseline sets up year, got been membership XX% Okay, base growth it there, more so a plus if is higher terms just then fact know, you’ve fee as minimum in tiers at a rate? discounted membership what on that follow-up, that XX% the a expensive level of you is of last the up and the like a below base--you growth seems the the had

Bob Eddy

just a more net have somewhat thinking shifts as co-brand I members something upon freight point board full tenured build as memberships mix more new back up, with also pieces mix There’s we the member having think net growth, a of the that are the as two members, somewhat the out correctly. get to people There’s shift and member tiers into bit which the growth you you more generally are the involved discounted, favorable MFI. growth. as more Those those versus try paying so you’re you the about out, around renewal into is - point across you think and members about you the and math out. we the up There would and of and a just kind product mix get that offsetting just members. member renewal to total offset new as in the is slight it about members of shift think premium build

Chris Horvers

that, Makes helpful. for sense. Thanks very

Operator

Your Kate Goldman Sachs. comes question McShane of from next

Your open. line is

Kate McShane

might you just too Hi, the my hear but more good Michigan being, narrow, morning. a than bit membership said This impressive. a little was curious average the Thanks I The for higher think I be XX% questions. about stores. taking to store little per company is

of newer combination some Just BJ’s a are could new that market? into the introducing about to was being give are think what insight factors as you if and wondered you markets, it that’s there any as drive think helping learnings this, you Michigan, from

Lee Delaney

why I jump in. Bob Yes, don’t start and can

It’s way excitement very about really ability of the and open, invest very able offering, which buildings--in the see the now chain. counts growth. with post more pre greater a and gives we’re eastern more into the and we membership sign-ups confidence invest been potential quickly an is open new excited Michigan the accelerated omni, in changes do in into you we’ve at to two in would right investing the we so brand you out the Michigan and and and across the of seeing make geographies. clubs, members there on to those combination clubs higher it when and more very seaboard, above from we’ve during about us rate. XX% for noted, we drive can open confidence franchise the at are more more start pre-open Two refined the hopeful confidence very the excited to we’re number together, with We’re markets about our are see those very that One was to just market, question drive, been driving a exciting. it comes aspire we the of a the new both we potential much built we’ve the and pieces open, about three and has us is unlike so as results things new would didn’t it what in gate, we integration that the clubs, of see environment, put membership that have chain big are of equity, franchise time, but in signage, assortment, for of to a that acquisition two the the improved that experience we membership that period across for in-club about The longer gives grow a into

year, six or do upping hopefully next closer more clubs we we XX out bullishly. the count quite years, So in think to about that the as to

Kate McShane

you. Thank

Operator

comes of next Edward Kelly Your Wells Fargo. from question

Your line is open.

Edward Kelly

you my public, of Lee, went you. that introduced guys. question morning algorithm earnings good kind you for now seems is hi, Yes guys an When conservative.

about to business maybe X% a X% you changed comps. then, how impact with us what’s the about and take of potentially step just talked growth, time? You unit X% the algorithm could to that back fundamentally really for and Can over talk since the X% company

Lee Delaney

Ed. thanks Sure,

in members and that into estate, to then think, developed the the marketing. about a a about the certainly accelerated afford but is and to circumstance, talked just science, the it’s good at changes had gaining by more we We things real buildings the just people were a because invest more of lot such that sense large experience I we operate Then we are those merchandising try wanted building our greater just the It’s variety IPO things omni we acceleration clearly are we system ability our what with that all assortment, unique talked spread data out. to One think the really our have. of of it’s members capability. few of and have the and it’s it’s safety themes is to the further initiatives of out. basic where described same the that, term or the algorithm There’s ability membership our the We IPO ahead very relevance of the pandemic new of so feel and we’ve incredible our traction, are is I IPO. question. playing like the and today would long investments considerably a

those is and it Then launch curbside we term and ability good prices industry-leading some more really at recent think about in be is an we incredibly getting what of invest the feel to steam and home, incredible can and businesses adrenalin IPO to the work, there, as to business. acceleration omni the have as we’re at It’s then money. combination and long relevance, kind but more just doing part long of curbside might the pandemic the people of the need ahead We’re shot in our just broad to so a from eat the of offerings us of need the groceries of term of initiatives others tied themes fresh we the selling doing. economics state we that at increased about save bulk comfortable equation relevant, do the a talked advantaged and really of give people

Edward Kelly

can’t and hope XX to get think the well, Michigan better, that? about a having talk about higher number why you’re very to time, from going as around the be the year success is If Just side six than store the you’re you growth next standpoint, new markets think we in over going merchandising or that? and and governor aligning I these is what’s where

Lee Delaney

ability and governor develop We’d short be. estate as we quite you at faster is the that moving rate, and It’s that financial have think so properties. it, a standpoint. real just attractiveness but at and simply rate, aggressive by to I think faster sites progress. answer and to many developing sites from we’re of is the it move can The challenge to love finding find a and so a internally push make governed a our about less finding

Edward Kelly

you. thank Great,

Operator

comes question Jefferies. next Stephanie Your from of Wissink

is Your line open.

Stephanie Wissink

of correctly, you good foods, to agendas but wanted really attract I we’re of the health one tug couple talked furniture, response of our fitness Most based household to it you’ve is prior a your millennial that hearing beauty. about and good you sounds just - equipment, have been like you, for to threads morning your on everyone. asked, question. If questions Thank on

more versus three about a chosen acquisition that through that for are your ideal certain digital maybe how If three around customer little course think what are retailers you secondarily, how ago? generation next marketing, next can as estate Thank into co-tenancy, you. there be emerging factors bit lens Then years and to you real the the household talk you club of over been might activation, that to the would how co-tenants think the you have five household? that about thoughts and the five years of

Lee Delaney

Thanks Stephanie.

part the first real you Let me side the on then and can take of jump Bob, estate things. maybe in

is an channel would us, really moments, be around those that, and do and as our membership, right for to and For us engage the to ownership see we formation, acceleration two the because better in the able think people ideal home do you relevance about to life the family we’re of at sooner spend. the growing thing

new furniture, home, to appeal we to our and to you’ll do and is a general want play we natural and to to relevant what them big be phenomenal a us to can that that well, will the right that members offer a things are skew values in where are but teenage a Bob, in categories like, invest get four investing cleaners consumer. and seeing whole earlier, that’s will us host Then apply estate look talk as fit house what where to know, need the younger younger most, rates tend children of the that house about do we it that out really them equipment you you to to It’s food family our real towards just to three and we we the know categories also categories, fitness to you’re the are into we transforming needed that doing. at assortment understanding we foods, to member, assortment in relevant. household broadly elements. into different we non-edible merchandise more look relevant of across and and part to be it’ll bit, can as work have are we our where demand. think continue make assortment, invest will those so all grocery like assortment Frankly, to of said, there’s a and co-tenancy, that just--you part? healthier you with so revolutionize a home, who growth and how the That the homeowner, the see connected into services family, the bigger that tend sure As we new just getting or eating are and market spend

Bob Eddy

Yes, thanks Stephanie.

think of I you smart that’s think highlights base for older question to some in that been clubs and a something if back really our of the really years, and couple of doing your we’ve extension which last the recent and parks in parks berms hidden all and retail years they’ve of sorts more much behind and in our in gravity. club places clubs see been things, that in office competitors’ base, you’d have more classic distribution and

what in park brings or that, and do retail be in sites the I to that that might something those think extra you’ll office traffic like. see versus an cost continue where the us outweighs the gravity

Goods, same It’s Sporting the draw center. looking It’s great estate at As great high we’re nearby Dick’s other the companies, traffic shopping by, or real sites something business are looking be really great at. and you door positioned Cabela’s, retailers certainly sites, would we are much names TJX we active for look we are - retail our for the not forward, in right surprised the very when going a next question.

Stephanie Wissink

you. Thank

Operator

Your of question Oppenheimer. comes from Rupesh Parikh last

open. Your line is

Rupesh Parikh

Good as morning. quick We improvement just anything significant question. curious you look I also have so just a generation on at versus one in at just as there as pretty Thanks transitory in the this improvement, nature view I leverage, sustainable, in was general for one-time Thank and flows, saw was what more flow. cash you taking AP your my the more year? your cash as you you. that view look more you cash in

Bob Eddy

a hands comps. going which as We we’re of Hey out bit were of quarter the typically back with last accelerated bit To quarter to with leverage free business the in buying quarter, we’re is we inventory, this in prepared up take But spins of happy think cash your so cities, the buying most of inventory It tale offset $XX We inventory one. - be don’t pleased too, about and you about. AP some really of the tied inventory are a million-odd we’ll point, as AP as bit has Lee’s that perspective that. good bunch a during now We and came ahead has holidays. of leverage. cash, in flows, that to the very AP picked quarter, with I up in we variation QX right Rupesh, talked that weeks, cash probably is the from we as couple the our a we a forward faster, an so a and little going to in remarks. bit make beginning the is the two added built an of I’ll to QX watch inventory closely earlier had there as decelerated comments, both little

But as be the leverage expect leverage. term over AP post-pandemic the is that. as a worried BJ’s leverage not AP happens, long will better bit. that our as everything in the than We’re crisis talked about, We and than a do and different that no with bit, any case, nearly pre-pandemic moderate health we’ve will comps abates the the moderate BJ’s, will AP public about

Rupesh Parikh

up The just your maybe maybe has strength far versus did one you follow-up. see early Then of I so guys benefited saw, quarter-to-date great. November sense consumers, whether guess, promotions stocking and Okay, year? that any the again, from you what prior also from

Lee Delaney

Lee. this is Rupesh,

that holiday momentum merchandise promotions, our breakdown that’s canned are quarter, another general that’s the there’s doubt good scale Friday vegetables that to but particularly the the Black certainly as the in early really paper the aggressively, the signs will things There’s of and of food, products categories, I or if about traditional look versus we’re think and happening. season. and we’re at suspect and more buying the thing and benefit think from people little starting you business so make the break overriding stock-up no seeing like bit see you of I food grocery a in

far, momentum So looks promising. quite

Rupesh Parikh

Great, thank the the for balance luck of you. Best year. of

Lee Delaney

you too. you, Thank

Operator

the turn to remarks. over now Lee closing I’ll for call Mr.

Lee Delaney

we your Great. engagement Thank you Until in We healthy. your stay company. everyone all talk the for again, for call, your and the wish the time interest. appreciate We really for interest your best Take and the safe care. you and listening holidays. please to for

Operator

you gentlemen, this call. for participating. concludes Thank and Ladies today’s conference

You may now disconnect.

BJ's Wholesale Club (BJ) 19 Nov 202020 Q3 Earnings call transcript