BJ's Wholesale Club Holdings, Inc. (BJ) Earnings

Management highlights

- Membership Growth and Base Quality * Total members reached an all-time high, with 10% growth in membership fee income driven by strong acquisition, retention, and higher-tier membership penetration across new and existing clubs * Higher-tier members are more engaged, shop more frequently, and deliver higher lifetime value; the company continues to prioritize improving membership base quality over just raw member count * Membership fee income growth is expected to moderate through the year as the company laps the prior year membership fee increase - Value Proposition and Pricing Investment * The company passed all tariff refunds received in the quarter to members via price reductions, resulting in 0.5% retail price deflation and improved price gaps versus competitors * In an environment of pressured consumer spending, the company prioritizes long-term franchise growth by investing any incremental gains (tariff refunds, potential gas market downside gains) back into member value * Lower-income households face greater pressure from elevated costs, with increased value-seeking behavior, while the majority of current comparable sales growth comes from higher-income members; the company targets improved assortment to cater to this growing segment - Convenience and Digital Innovation * Digitally enabled comparable sales increased 28% year-over-year, driven by growing adoption of curbside pickup, same-day delivery, and ExpressPay * Newer clubs see higher digital tool adoption and correspondingly higher member spend; most digital engagement is fulfilled through existing clubs, allowing for convenient service at low incremental cost * The company is rolling out new AI-powered operational tools (e.g., Buddy) to support team members with operational, training, and product location questions, improving member service efficiency - New Club Expansion and Market Entry * The company opened its first Texas club in Q1 2026, followed by three additional openings in May, expanding BJ's footprint to 22 states * Texas membership is running 33% ahead of internal plan, with approximately 100,000 total members in the Dallas-Fort Worth market as of the call; it is the strongest new market launch in company history * Clubs opened in the last 5 years delivered 6% comparable growth (over 4x the chain average), with newer markets (Tennessee, Alabama, Indiana, Pittsburgh) delivering over 10% comp growth; 2/3 of clubs opened in the last 2 years are on track to exceed their 5-year maturity sales projection in their first year * The company is on track to deliver 26 new clubs against its prior 2-year 25-30 club opening commitment, and expects to continue a similar opening pace in 2027 and 2028 - Leadership Update * The company hired Stephanie Reibling as the new Chief Merchandising Officer, bringing deep club and retail experience with a track record of driving assortment evolution, private brand growth, and omnichannel merchandising

Guidance

- Management maintained its full-year 2026 guidance, with no upward or downward revision from prior projections - Comparable club sales (excluding gasoline) are expected to grow in the range of 2% to 3% for the full year, with Q2 through Q4 expected to fall within this range - Adjusted full-year earnings per share is projected to be between $4.40 and $4.60 - All known factors (including additional preopening expenses for Texas market entry, higher freight and fuel costs, and planned price investments) are already incorporated into the current guidance

Segment performance

Overall: Net sales increased 10% year-over-year to $5.5 billion, with total comparable club sales up 6.3% and merchandise comparable sales (excluding gasoline) up 1.5%. Membership fee income rose 10% to $132 million, reaching an all-time high. Adjusted EBITDA increased 4% year-over-year to $298 million, and adjusted earnings per share was $1.10. Merchandise gross margin decreased 10 basis points year-over-year, while SG&A as a percentage of net sales improved year-over-year. - Core Consumables (Grocery, Perishables, Sundries): Delivered 0.7% comparable sales growth, with strength in grocery. Perishables comps were held back by egg deflation, but underlying unit growth (especially for fresh fruit from the Fresh 2.0 initiative) remains healthy. This segment contributes the majority of weekly shopping traffic for the business. - General Merchandise and Services: Delivered 7.1% comparable sales growth, led by strong performance in consumer electronics. Performance is variable quarter-to-quarter, with mixed results across subcategories (home and seasonal were positive, apparel was slightly negative). This segment contributed approximately 15% of total comparable sales growth for the quarter. - Gas: Comparable gallon sales increased nearly 8% year-over-year, reaching over 10% growth in March and April as the company gained share against a broader market 4% comparable gallon decline. Profit dollars for the segment were in line with management plans, despite early-quarter margin pressure from rapid price increases. Gas drives significant membership value and traffic to the club.

Risks & headwinds

- Elevated gas and diesel prices create inflationary pressure across the broader economy, which may increase merchandise costs through the second half of the year and pressure consumer household budgets - Discretionary general merchandise categories remain unevenly performing, with variable quarter-to-quarter results - Lower-income consumers face disproportionate pressure from elevated costs, leading to shifts in spending behavior that can impact overall sales trends - Gas price volatility creates near-term margin pressure during periods of rapid price increases, requiring active execution to stay aligned with profit plans - Ongoing changes to the tariff environment create uncertainty around the timing and amount of future refunds available for price investment

Analyst Q&A

• Q: What are the plans for future price investment from tariff refunds, and how will merchandise margins trend over coming quarters? /

  A: The company used Q1 2026 tariff refunds to invest directly in lower prices for members, improving competitive price gaps. Management will continue to use incremental gains from any source (including future tariff refunds and potential gas market declines) to invest in member value, prioritizing long-term franchise growth over short-term margin gains. All currently known costs and investments are already incorporated into full-year guidance, and margin comparisons get easier through the year as the company laps prior year headwinds. The company will continue to monitor the evolving tariff environment for future opportunities. (308 characters)

• Q: What has early membership performance looked like in the new Texas market, including higher-tier penetration, and what has competitive response been? /

  A: Early Texas results are the strongest new market openings in company history, with total membership 33% ahead of internal plan, and sales also exceeding projections. The member base mirrors BJ's core broader demographic of local families, with the highest ExpressPay penetration across the entire chain and strong early engagement with the gas business and higher-tier membership offerings. While Texas has strong existing retail competition, the early membership and sales results speak for themselves, showing BJ's value proposition is resonating with local consumers. (367 characters)

• Q: How has incremental gas trip conversion to club visits changed recently, and what are the key priorities for new Chief Merchandising Officer Stephanie Reibling? /

  A: Gas delivered strong share gains in Q1, with comp gallon growth exceeding 10% late in the quarter amid widespread gas price increases. While more gas customers visited the parking lot, the company did not see an increase in the percentage of gas customers that also enter the club, as consumers adjusted to higher gas costs by managing in-Club spending. For merchandising, Reibling's top priorities are strengthening the merchandising team culture, shifting the assortment mix from mostly "good" tier to more "better" and "best" tier products to cater to growing affluent member demand, and simplifying assortment to fit the club model. (421 characters)

• Q: Does the Q1 deflation reflect a change in pricing outlook, and how has monthly sales trended through the quarter? /

  A: Q1 deflation came from two sources: natural egg deflation and intentional price investments from tariff refunds. The investments were not a response to competitors, but a strategic choice to play offense and build long-term membership value. Management expects potential inflationary pressure from high fuel and diesel costs to build through the second half of the year, which will impact pricing across the industry. February was weak due to weather and pull-forward demand from Q4, March and April were stronger, and May (early Q2) shows a better traffic trend than Q1 overall. (342 characters)

• Q: Can you confirm the full-year core comp outlook and quantify Q1 tariff benefits? /

  A: The full-year core (ex-gas) comparable sales guidance of 2% to 3% remains on track, with Q2 through Q4 expected to fall within that range as originally guided. The Q1 tariff benefit to merchandise margin was 50 basis points, equal to approximately $20 million, which is slightly lower than the $30 million estimate. Q1 was always expected to be outside the 2% to 3% range, so the full-year guidance remains unchanged. (229 characters)