NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
BJ’s Wholesale Club Holdings, Inc. and its wholly-owned subsidiaries is a leading warehouse club operator primarily on the east coast of the United States. As of April 30, 2022, the Company operated 227 warehouse clubs and 159 gas stations in 17 states.
The Company follows and reports based on the National Retail Federation’s fiscal calendar. The thirteen week periods ended April 30, 2022 and May 1, 2021 are referred to herein as the "first quarter of fiscal year 2022" and the "first quarter of fiscal year 2021," respectively.
The novel coronavirus ("COVID-19") pandemic has severely impacted the economies of the U.S. and other countries around the world. In the preparation of these financial statements and related disclosures we have assessed the impact that COVID-19 has had on our estimates, assumptions and accounting policies and made additional disclosures, as necessary.
On May 2, 2022, the Company closed the previously announced acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC. The Company financed the purchase price with a combination of available cash and borrowings under the Company’s ABL Facility.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim financial statements of BJ’s Wholesale Club Holdings, Inc. are unaudited and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair statement of the Company’s financial statements in accordance with GAAP.
The condensed consolidated balance sheet as of January 29, 2022 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the first quarter of fiscal year 2022 are not necessarily indicative of future results or results to be expected for fiscal year 2022. The Company’s business, in common with the business of retailers generally, is subject to seasonal influences. The Company’s sales and operating income have typically been highest in the fourth quarter holiday season and lowest in the first quarter of each fiscal year.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year 2021, as filed with the Securities and Exchange Commission on March 17, 2022.
Recently Adopted Accounting Pronouncements
The accounting policies the Company follows are set forth in its audited financial statements for fiscal year 2021 included in its Annual Report on Form 10-K for the fiscal year 2021. There have been no material changes to these accounting policies and no material pronouncements adopted.
3. Revenue Recognition
Performance Obligations
The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue as it satisfies a performance obligation by transferring control of the goods or services to the customer.
Net sales—The Company recognizes net sales at clubs and gas stations when the customer takes possession of the goods and tenders payment. Sales tax is recorded as a liability at the point of sale. Revenue is recorded at the point of sale based on the transaction price on the shelf sign, net of any applicable discounts, sales tax and expected refunds. For e-commerce sales, the Company recognizes sales when control of the merchandise is transferred to the customer, which is typically at the shipping
point. The following table summarizes the Company’s point of sale transactions at clubs and gas stations, excluding sales tax, as a percentage of both net sales and total revenues:
| | | | | | | | | | | |
| Thirteen Weeks Ended |
| April 30, 2022 | | May 1, 2021 |
Point of sale transactions, excluding sales tax, as a percent of net sales | 92% | | 93% |
Point of sale transactions, excluding sales tax, as a percent of total revenues | 90% | | 91% |
BJ’s Perks Rewards and My BJ’s Perks programs—The Company’s BJ’s Perks Rewards® membership program allows participating members to earn 2% cash back, up to a maximum of $500 per year, on qualified purchases made at BJ’s. The Company also offers a co-branded credit card program, the My BJ’s Perks® program, which allows My BJ’s Perks® Mastercard credit card holders to earn up to 5% cash back on eligible purchases made at BJ’s and up to 2% cash back on purchases made with the card outside of BJ’s. Cash back has been in the form of electronic awards issued in $10 increments that may be used online or in-club at the register and expire six months from the date issued.
Earned awards may be redeemed on future purchases made at the Company. The Company recognizes revenue for earned awards when customers redeem such awards as part of a purchase at one of the Company’s clubs or on the Company’s website or app. The Company accounts for these transactions as multiple element arrangements and allocates the transaction price to separate performance obligations using their relative fair values. The Company includes the fair value of award dollars earned in deferred revenue at the time the award dollars are earned. This liability was $32.5 million at April 30, 2022, $30.3 million at January 29, 2022 and $24.8 million at May 1, 2021.
Royalty revenue received in connection with the My BJ’s Perks co-brand credit card program is variable consideration and is considered deferred until the card holder makes a purchase. The Company’s total deferred royalty revenue related to the outstanding My BJ’s Perks Rewards was $29.2 million, $17.8 million and $18.0 million at April 30, 2022, January 29, 2022 and May 1, 2021, respectively. The timing of revenue recognition is driven by actual customer activities, such as redemptions and expirations. As of April 30, 2022, the Company expects to recognize substantially all of the $29.2 million by the end of fiscal year 2022.
Membership—The Company charges a membership fee to its customers. That fee allows customers to shop in the Company’s clubs, shop on the Company’s website and app and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months. As the Company has the obligation to provide access to its clubs, website, app and gas stations for the duration of the membership term, the Company recognizes membership fees on a straight-line basis over the life of the membership. The Company’s deferred revenue related to membership fees was $185.2 million, $174.9 million and $167.8 million at April 30, 2022, January 29, 2022 and May 1, 2021, respectively.
Gift Card Program—The Company sells BJ’s gift cards in both physical and digital format, which allow customers to redeem the card for future purchases equal to the amount of the original purchase price of the gift card. Revenue from gift card sales is recognized in proportion to its rate of gift card redemptions as the Company’s performance obligation to redeem the gift card for merchandise is satisfied when the gift card is redeemed. The Company also recognizes breakage in proportion to its rate of gift card redemptions. Deferred revenue related to gift cards was $11.2 million, $11.8 million and $9.6 million at April 30, 2022, January 29, 2022 and May 1, 2021, respectively. The Company recognized $10.5 million and $8.8 million of revenue from gift card redemptions in the first quarter of fiscal year 2022 and first quarter of fiscal year 2021, respectively.
Disaggregation of Revenue
The Company’s club retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of its consolidated total revenues, and are the Company’s only reportable segment. All the
Company’s identifiable assets are in the United States. The Company does not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented.
The following table summarizes the Company’s percentage of net sales disaggregated by category:
| | | | | | | | | | | |
| Thirteen Weeks Ended |
| April 30, 2022 | | May 1, 2021 |
Grocery | 67 | % | | 72 | % |
General Merchandise & Services | 11 | % | | 15 | % |
Gasoline and Other | 22 | % | | 13 | % |
4. Debt and Credit Arrangements
The following table summarizes the Company’s debt (in thousands):
| | | | | | | | | | | | | | | | | |
| April 30, 2022 | | January 29, 2022 | | May 1, 2021 |
ABL Facility | $ | 130,000 | | | $ | 50,000 | | | $ | 260,000 | |
First Lien Term Loan | 701,920 | | | 701,920 | | | 701,920 | |
Unamortized debt discount and debt issuance cost | (2,933) | | | (3,352) | | | (4,609) | |
Less: current portion | (80,000) | | | — | | | (210,000) | |
Long-term debt | $ | 748,987 | | | $ | 748,568 | | | $ | 747,311 | |
ABL Facility
The ABL Facility is comprised of a $950.0 million revolving credit facility and a $50.0 million term loan. The ABL Facility is secured on a senior basis by certain liquid assets of the Company and secured on a junior basis by certain fixed assets of the Company. Payment terms on the $50.0 million term loan are restricted in that the term loan cannot be repaid unless all loans outstanding under the revolving credit facility are repaid, and once repaid, cannot be re-borrowed. The availability under the $950.0 million revolving credit facility is restricted based on eligible monthly merchandise inventories and receivables as defined in the agreement governing the ABL Facility. Interest on the revolving credit facility is calculated either at LIBOR plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points; and interest on the term loan is calculated at LIBOR plus a range of 200 to 250 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability. The applicable spread of LIBOR and base rate loans at all levels of excess availability steps down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00. The ABL Facility also provides a sub-facility for issuances of letters of credit subject to certain fees defined in the agreement governing the ABL Facility. The ABL Facility is subject to various commitment fees during the term of the facility based on utilization of the revolving credit facility, which is scheduled to mature on August 17, 2023.
At April 30, 2022, there were $130.0 million outstanding in loans under the ABL Facility and $10.9 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.89%, the interest rate of the term loan was 2.45% and unused capacity was $859.1 million.
At January 29, 2022, there were $50.0 million outstanding in loans under the ABL Facility and $12.7 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.23%, the interest rate of the term loan was 2.10% and unused capacity was $886.9 million.
At May 1, 2021, there were $260.0 million outstanding in loans under the ABL Facility and $15.5 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.24%, the interest rate of the term loan was 2.11% and unused capacity was $650.4 million.
First Lien Term Loan
The Company’s First Lien Term Loan matures on February 3, 2024. Voluntary prepayments are permitted. Principal payments must be made on the First Lien Term Loan pursuant to an annual excess cash flow calculation when the net leverage ratio exceeds 3.50 to 1.00. The First Lien Term Loan is subject to certain affirmative and negative covenants but no financial
covenants. It is secured on a senior basis by certain fixed assets of the Company and on a junior basis by certain liquid assets of the Company.
On April 30, 2021, the Company used $100.0 million of cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan. In connection with the payment, the Company expensed $0.7 million of previously capitalized debt issuance costs and original issue discount.
There was $701.9 million outstanding on the First Lien Term Loan at April 30, 2022, January 29, 2022 and May 1, 2021. Interest rates for the First Lien Term Loan were 2.52%, 2.11% and 2.11% at April 30, 2022, January 29, 2022 and May 1, 2021, respectively.
5. Commitments and Contingencies
The Company is involved in various legal proceedings that are typical of a retail business. In accordance with applicable accounting guidance, an accrual will be established for legal proceedings if and when those matters present loss contingencies that are both probable and estimable. The Company does not believe the resolution of any current proceedings will result in a material loss to the condensed consolidated financial statements.
6. Stock Incentive Plans
On June 13, 2018, the Company’s board of directors adopted, and its stockholders approved, the BJ’s Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the "2018 Plan"). The 2018 Plan provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, other incentive awards, stock appreciation rights, and cash awards. Prior to the adoption of the 2018 Plan, the Company granted stock-based compensation to employees and non-employee directors under the Fourth Amended and Restated 2011 Stock Option Plan of BJ’s Wholesale Club, Inc. (f/k/a Beacon Holding Inc.), as amended (the "2011 Plan") and the 2012 Director Stock Option Plan of BJ’s Wholesale Club Holdings, Inc. (f/k/a Beacon Holding, Inc.), as amended (the "2012 Director Plan"). No further grants will be made under the 2011 Plan or the 2012 Director Plan.
The 2018 Plan authorizes the issuance of 13,148,058 shares, including 985,369 shares that were reserved but not issued under the 2011 Plan and the 2012 Director Plan. If an award under the 2018 Plan, the 2011 Plan or the 2012 Director Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2018 Plan. Additionally, shares tendered or withheld to satisfy grant or exercise price, or tax withholding obligations associated with an award under the 2018 Plan, the 2011 Plan or the 2012 Director Plan will be added to the shares authorized for grant under the 2018 Plan. The following shares may not be used again for grant under the 2018 Plan: (1) shares subject to a stock appreciation right ("SAR") that are not issued in connection with the stock settlement of the SAR upon its exercise and (2) shares purchased on the open market with the cash proceeds from the exercise of options under the 2018 Plan, 2011 Plan or 2012 Director Plan. As of April 30, 2022, there were 5,310,185 shares available for future issuance under the 2018 Plan.
On April 16, 2021, the Compensation Committee approved a modification to the equity awards agreements under the 2011 Plan, 2012 Director Plan and 2018 Plan. In the event that an employee is terminated due to death or disability, the modified equity award agreements provide for: (i) full vesting of all time-based awards, including restricted stock awards and stock options, (ii) pro-rata vesting of all performance-based awards, including performance share units, based on actual performance as of the end of the applicable performance period, pro-rated based on the period of employment during the applicable performance period, and (iii) the extension of the post-termination exercise window for vested stock options.
The following table summarizes the Company’s stock award activity during the thirteen weeks ended April 30, 2022 (shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | Restricted Stock | | Restricted Stock Units | | Performance Stock |
| Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value |
Outstanding, January 29, 2022 | 2,282 | | | $ | 19.68 | | | 1,053 | | | $ | 34.36 | | | 26 | | | $ | 46.82 | | | 674 | | | $ | 39.76 | |
Granted | — | | | — | | | 291 | | | 67.63 | | | — | | | — | | | 181 | | | 67.63 | |
Forfeited/canceled | — | | | — | | | (7) | | | 38.21 | | | — | | | — | | | — | | | — | |
Exercised/vested | (207) | | | 11.16 | | | (518) | | | 30.55 | | | — | | | — | | | — | | | — | |
Outstanding, April 30, 2022 | 2,075 | | | $ | 20.53 | | | 819 | | | $ | 48.55 | | | 26 | | | $ | 46.82 | | | 855 | | | $ | 45.67 | |
Stock-based compensation expense was $9.1 million and $27.3 million for the thirteen weeks ended April 30, 2022 and May 1, 2021, respectively. Stock-based compensation expense in the thirteen weeks ended May 1, 2021 included $17.5 million of stock-based compensation related to the modification of stock awards associated with the passing of a former executive.
On June 14, 2018, the Company’s board of directors adopted, and its stockholders approved, the BJ’s Wholesale Club Holdings, Inc. Employee Stock Purchase Plan (the "ESPP"), which became effective July 1, 2018. The aggregate number of shares of common stock that were to be reserved for issuance under the ESPP was to be equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares as determined by the board of directors. The offering under the ESPP commenced on January 1, 2019. The amount of expense recognized for the thirteen weeks ended April 30, 2022 and May 1, 2021 was $0.2 million and $0.1 million, respectively. As of April 30, 2022, there were 2,128,365 shares available for issuance under the ESPP.
7. Treasury Shares and Share Repurchase Program
Treasury Shares Acquired on Restricted Stock Awards
The Company acquired 229,900 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended April 30, 2022, which were recorded as $15.5 million of treasury stock. The Company acquired 226,404 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended May 1, 2021, which were recorded as $10.0 million of treasury stock.
Share Repurchase Program
On November 16, 2021, the Company's board of directors approved a share repurchase program (the "2021 Repurchase Program"), effective immediately, that allows the Company to repurchase up to $500.0 million of its outstanding common stock from time to time as market conditions warrant. The 2021 Repurchase Program expires in January 2025. The Company initiated the 2021 Repurchase Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing shareholder value.
The Company repurchased 570,506 shares for $35.8 million during the thirteen weeks ended April 30, 2022. As of April 30, 2022, $435.4 million remained available to purchase under the 2021 Repurchase Program.
8. Income Taxes
The effective income tax rate is based on estimated income from continuing operations for the fiscal year, as well as discrete adjustments, if any, in the applicable quarterly periods. The Company projects the estimated annual effective tax rate
for fiscal year 2022 to be 27.2%, excluding the tax effect of discrete events, such as excess tax benefits from stock-based compensation, changes in tax legislation, settlements of tax audits and changes in uncertain tax positions, among others.
The Company’s effective income tax rate from continuing operations was 21.1% and 23.7% for the thirteen weeks ended April 30, 2022 and May 1, 2021, respectively. The decrease in the effective tax rate for the thirteen weeks ended April 30, 2022 compared to the thirteen weeks ended May 1, 2021 is due primarily to higher excess tax benefits from stock-based compensation in the current year period.
The Company is subject to taxation in the U.S. federal and various state taxing jurisdictions. The Company’s tax years from 2017 forward remain open and subject to examination by the Internal Revenue Service and various state taxing authorities.
9. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or "exit price." The inputs used to measure fair value are generally classified into the following hierarchy:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The fair values of the Company’s derivative instruments are based on quotes received from third-party banks and represent the estimated amount the Company would pay to terminate the agreements taking into consideration current interest rates as well as the creditworthiness of the counterparties. These inputs are considered to be Level 2.
Financial Assets and Liabilities
The gross carrying amount and fair value of the Company’s debt at April 30, 2022 are as follows (in thousands):
| | | | | | | | | | | |
| Carrying Amount | | Fair Value |
First Lien Term Loan | $ | 701,920 | | | $ | 701,323 | |
ABL Facility | 130,000 | | | 130,000 | |
Total Debt | $ | 831,920 | | | $ | 831,323 | |
The gross carrying amount and fair value of the Company’s debt at January 29, 2022 are as follows (in thousands):
| | | | | | | | | | | |
| Carrying Amount | | Fair Value |
First Lien Term Loan | $ | 701,920 | | | $ | 702,053 | |
ABL Facility | 50,000 | | | 50,000 | |
Total Debt | $ | 751,920 | | | $ | 752,053 | |
The gross carrying amount and fair value of the Company’s debt at May 1, 2021 are as follows (in thousands):
| | | | | | | | | | | |
| Carrying Amount | | Fair Value |
First Lien Term Loan | $ | 701,920 | | | $ | 701,042 | |
ABL Facility | 260,000 | | | 260,000 | |
Total Debt | $ | 961,920 | | | $ | 961,042 | |
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis.
The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, and accounts payable, approximates their carrying value due to the short-term maturities of these instruments.
10. Earnings Per Share
The table below reconciles basic weighted-average shares of common stock outstanding to diluted weighted-average shares of common stock outstanding for the thirteen weeks ended April 30, 2022 and May 1, 2021:
| | | | | | | | | | | |
| Thirteen Weeks Ended |
| April 30, 2022 | | May 1, 2021 |
Weighted-average shares of common stock outstanding, used for basic computation | 134,244,223 | | | 135,708,783 | |
Plus: Incremental shares of potentially dilutive securities | 2,457,738 | | | 2,953,181 | |
Weighted-average shares of common stock and dilutive potential shares of common stock outstanding | 136,701,961 | | | 138,661,964 | |
The table below summarizes restricted shares that were excluded from the computation of diluted earnings for the thirteen weeks ended April 30, 2022 and May 1, 2021, as their inclusion would have been anti-dilutive:
| | | | | | | | | | | |
| Thirteen Weeks Ended |
| April 30, 2022 | | May 1, 2021 |
Restricted shares | 95,627 | | | 112,759 | |
11. Derivative Financial Instruments
Interest Rate Swaps
On November 13, 2018, the Company entered into three forward starting interest rate swaps (the "interest rate swaps"), which became effective on February 13, 2019. The Company fixed the LIBOR component of $1.2 billion of its floating rate debt at a rate of approximately 3.0% from February 13, 2019 to February 13, 2022. The Company elected hedge accounting for the interest rate swap agreements, and as such, the effective portion of the gains or losses were recorded as a component of other comprehensive income and the ineffective portion of gains or losses were recorded as interest expense.
On April 30, 2021, the Company used $150.0 million of its cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan and $50.0 million of the outstanding amounts on the ABL Facility. The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and released $4.7 million recorded in other comprehensive income to interest expense, net of tax.
On July 30, 2021, the Company used $210.0 million of its cash and cash equivalents to pay $210.0 million of the principal amount outstanding on the ABL Facility. The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and released $3.5 million recorded in other comprehensive income to interest expense, net of tax.
The interest rate swaps expired in February 2022. There was no liability recorded as of April 30, 2022 and $2.2 million and $20.2 million recorded at January 29, 2022 and May 1, 2021, respectively. The net of tax amount for the effective and ineffective interest rate swaps were recorded in other comprehensive income and interest expense, respectively.
There were gains of $0.8 million and $4.4 million recorded in other comprehensive income for the thirteen weeks ended April 30, 2022 and May 1, 2021, respectively. The ineffective portion of gains of $0.3 million and $1.8 million for the thirteen weeks ended April 30, 2022 and May 1, 2021, respectively, were recorded in interest expense.
The fair values of derivative instruments included on the condensed consolidated balance sheets are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Fair Value at |
Accounting for Cash Flow Hedges | | Notional Amount | | Fixed Rate | | Balance Sheet Classification | | April 30, 2022 | | January 29, 2022 | | May 1, 2021 |
Interest rate swap | | $ | 600,000 | | | 3.00 | % | | Other current liabilities | | $ | — | | | $ | (1,540) | | | $ | (14,453) | |
Interest rate swap | | 360,000 | | | 3.00 | % | | Other current liabilities | | — | | | — | | | — | |
Interest rate swap | | 240,000 | | | 3.00 | % | | Other current liabilities | | — | | | (616) | | | (5,777) | |
Net carrying amount | | $ | 1,200,000 | | | | | Total liabilities | | $ | — | | | $ | (2,156) | | | $ | (20,230) | |
12. Subsequent Event
On May 2, 2022, the Company completed its acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC to bring its end-to-end supply chain in-house.
The total consideration paid by the Company in connection with the acquisition was approximately $377 million, inclusive of approximately $90 million of inventory and other working capital adjustments, subject to certain customary post-closing adjustments and excluding transaction costs. The Company recorded transaction costs related to the acquisition of $7.9 million during the three months ended April 30, 2022. These costs are included in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q should be considered forward-looking statements, including, without limitation, statements regarding our future results of operations and financial position, business strategy, transformation, strategic priorities and future progress, including expectations regarding deferred revenue, lease commencement dates, impact of infrastructure investments on our operating model and selling, general and administrative expenses, sales of gasoline and gross profit margin rates, and new club and gas station openings, as well as statements that include terms such as "may", "will", "should", "expect", "plan", "anticipate", "could", "intend", "project", "believe", "estimate", "predict", "continue", "forecast", "would", or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to:
• uncertainties in the financial markets and the effect of certain economic conditions or events on consumer and small business spending patterns and debt levels;
• risks related to our dependence on having a large and loyal membership;
• the effects of competition in, and regulation of, the retail industry;
• our dependence on vendors to supply us with quality merchandise at the right time and at the right price;
• risks related to our indebtedness;
• changes in laws related to, or the governments administration of, the Supplemental Nutrition Assistance Program or its electronic benefit transfer systems;
• the risks and uncertainties related to the impact of the novel coronavirus (COVID-19) pandemic, including the duration, scope and severity of the pandemic, federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures, as well as the effect of any relaxation or revocation of current restrictions, and the direct and indirect impact of such measures;
• risks related to climate change and natural disasters;
• our ability to identify and respond effectively to consumer trends, including our ability to successfully maintain a relevant omnichannel experience for our members;
• risks related to cybersecurity, which may be heightened due to our e-commerce business, including our ability to protect the privacy of member or business information and the security of payment card information;
• our ability to attract and retain a qualified management team and other team members;
• our ability to implement our growth strategy by opening new clubs and gasoline stations; and
• the other risk factors identified in our filings with the Securities and Exchange Commission, including in particular those set forth under "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (the "Annual Report on Form 10-K for the fiscal year 2021") and this Quarterly Report on Form 10-Q.
Given these uncertainties, you should not place undue reliance on any forward-looking statements. Except as required by applicable law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future, and you should not rely upon these forward-looking statements after the date of this Quarterly Report on Form 10-Q.