BJ's Wholesale Club Holdings, Inc. Q3 FY2024 earnings call

• Strong membership growth: Achieved over 8% growth in membership fee income, hit 7.5 million members, with 40% growth in member base since 2018 and highest renewal rates. Announced first membership fee increase in 7 years, effective Jan 1, with base fee up $5 to $60 and plus tier up $10 to $120, plus new benefits like two free same-day deliveries for plus members.
• Investments: Raised average hourly wages by nearly 40%, enhanced rewards and gas benefits, launched co-brand credit card. Fresh initiatives showing progress with produce categories delivering low double-digit comp growth. CMP initiative rolled out across key grocery and sundries categories yielding better member engagement and share gains. Digital business growing rapidly with 30% growth in digitally enabled comp sales, improved order process, and new AI-powered search engine for holidays.
• Real estate: Opened 3 new clubs and 4 gas stations in Q3, on track to open 8 more clubs by next earnings call, with growing pipeline for future club openings.

Net sales in the quarter were close to $5 billion, increasing 3.4% over the prior year. Merchandise comp sales (excluding gas sales) increased by 3.8% year-over-year. Total comparable club sales in the third quarter, including gas sales, grew 1.5% year-over-year. Membership fee income (MFI) grew 8.4% to approximately $115 million in the third quarter, with the member count surpassing 7.5 million. The perishables, grocery and sundries division delivered over 4% of comp growth in the third quarter. The General Merchandise and Services division had approximately flat comps. Digitally enabled comp sales in the third quarter grew 30% year-over-year.

• Raised full-year fiscal 2024 guidance; fourth quarter 2024 comp sales excluding gas expected to grow between 2.5% and 3%.
• Adjusted EPS expected to range from $0.78 to $0.88 in Q4 and $3.90 to $4 for full-year fiscal 2024.
• Announced new $1 billion share repurchase program effective Feb 1, 2025.
• Expect merchandise gross margin to be approximately flat year-over-year as executing long-term initiatives while investing in the business.

No specific risks detailed in the transcript beyond general forward-looking statement disclaimers, referring to Risk Factors sections in 10-K/10-Q for uncertainties like economic conditions, port strikes, weather events impacting results.

Q: Peter Benedict asked about membership tiers and attrition rates.

A: Bob Eddy and Laura Felice responded on membership performance, higher tier members being high lifetime value, first-year renewal rates at all-time highs, and fee increase impact.

Q: Peter Benedict followed up on SG&A growth.

A: Laura Felice and Bill Werner discussed SG&A deleverage due to unit growth, new club openings pressure on near-term earnings, and long-term shareholder value from real estate investment.

Q: Robby Ohmes inquired about Q4 comps, GM performance, and fresh margins.

A: Bob Eddy and Laura Felice talked about better GM performance in Q4 vs Q3, digital business growth and its cost impact, and fresh initiatives' long-term value despite lower margin in the short term.

Q: Edward Kelly asked about fee increase timing and member growth momentum.

A: Bob Eddy spoke about strong membership momentum, all-time high renewal rates, and the right time for fee increase to invest in member value.

Q: Kate McShane asked about gas station impact and CMP timeline.

A: Bob Eddy discussed gas stations improving club performance in comps and renewal rates, and CMP being embedded in merchandising with costs persisting but yielding good results.

Q: Unidentified participant asked about Q4 pre-opening expenses and Fresh 2.0 vendor support.

A: Laura Felice mentioned Q4 pre-opening expenses around $15 million, and Bob Eddy talked about vendor support and Fresh 2.0's long-term payback through member lifetime value.

Q: Chuck Grom asked about merch margins and membership expansion.

A: Bob Eddy and Laura Felice discussed merch margin flatness for the year, and membership expansion progress with high renewal rates and growth in comp clubs.