BJ's Wholesale Club Holdings, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Membership Growth: Reached the 8 million member milestone, with 55% growth since IPO 7 years ago. Higher tier membership penetration set a record at 41%, improving 50 basis points sequentially.
• Digital Business: Grew 34% in Q2 and 56% on a 2-year stack basis, driven by BOPIC, same-day delivery expansion, and ExpressPay penetration.
• Fresh 2.0 Initiative: Pilot clubs in their second year continue to see perishables comp at chain levels. Applied data-driven approach to meat and seafood categories, showing improvements in sales and salvage expense.
• Club Expansion: Opened 5 clubs in FY '25 Q1, completed a relocation in Mechanicsburg, PA, and plans to open 8 more clubs by year-end, with a strong pipeline for 2026 and beyond.

Segment Performance

• Perishables Grocery and Sundries: Q2 comp growth of 3%, with a 2-year stack holding steady with Q1. This division led Q2 performance, with strength in perishable categories like dairy, meat, and fresh produce.
• GM and services: Declined 2.2% on a comp basis in Q2, impacted by weather and macro factors. Certain higher-ticket discretionary categories in GM (e.g., recreation, lawn and garden) saw double-digit comp sales declines. However, the apparel business grew in the low single digits, with a 2-year comp stack in the high single digits.

Guidance

• Maintains balanced and thoughtful guidance despite macro uncertainty. Full-year comp sales growth excluding gas is expected to be in the range of 2% to 3.5%. Adjusted earnings per share guide updated to $4.20 to $4.35.
• Acknowledges tariff-related macro volatility as a headwind but expects to stay within previously shared ranges. Anticipates some volatility in earnings due to back-half investments but remains confident in underlying business strength.

Risks

• Macro Uncertainty: Volatile macro environment influencing cost and consumer spending patterns.
• Tariff Impact: Tariff-related macro volatility posing headwinds to full-year outcomes.
• Weather Impact: Unseasonable weather at the start of the quarter affected sales, particularly in GM and services categories.

Question and Answer Q: Give a sense of how Q2 played out and back-half comps and earnings.

A: Bob Eddy noted Q2 had a tough start weather-wise but strengthened as weather improved. Inventory is in best shape in 5 years. Laura Felice mentioned Q3 lap of port strike and Q4 strong general merchandise, but tariff-related volatility is a factor.

Q: About membership sourcing and fee income.

A: Bob Eddy said membership grew to 8 million, renewal rates high, higher tier membership at 41%. Laura Felice added membership growth rate expected to accelerate through the year.

Q: On consumer behavior change and weather impact on GM.

A: Robert W. Eddy said consumer is choosier with dollars, weather in early quarter impacted GM sales, with southern clubs doing better than northern ones.

Q: On back-half comp guidance and inventory ordering.

A: Bob Eddy said guidance range is wide due to uncertainty, and inventory ordering is more cautious in discretionary categories with high tariffs but aggressive in others like apparel.

Q: On Fresh 2.0 and meat/seafood categories.

A: Robert W. Eddy said Fresh 2.0 was a success, pilot clubs still comping at chain levels, early results on meat and seafood show improvements in sales and salvage expense.

Q: On GM outlook and expenses.

A: Robert W. Eddy said GM transformation continues, with apparel performing well; Laura Felice noted expenses controlled but slight deleverage from new club openings expected in back half.

Q: On gas market share and assortment changes.

A: William C. Werner discussed gas gallon market share growth, and Robert W. Eddy said assortment changes in GM are category-by-category, with less ordering in tariff-impacted categories but aggressive in others like apparel