BJ BJs Wholesale Club Holdings Inc

Record first quarter net income and adjusted EBITDA led by strong growth in traffic, market share and merchandise margin

First Quarter Fiscal 2023 Highlights

• Comparable club sales, excluding gasoline sales, increased by 5.7% year-over-year

• Digitally enabled comparable sales growth was 19.0% year-over-year

• Membership fee income increased by 6.1% year-over-year to $102.5 million

• Merchandise gross margin rate increased 100 basis points year-over-year

• Earnings per diluted share and adjusted earnings per diluted share of $0.85

• Income from continuing operations increased by 3.1% year-over-year to $116.0 million

• Adjusted EBITDA increased by 16.4% year-over-year to $257.0 million

• The Company opened two new clubs and three new gas stations

• The Company successfully launched its co-branded credit card with Capital One

BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) (the "Company") today announced its financial results for the thirteen weeks ended April 29, 2023.

“We reported a record first quarter in net income and adjusted EBITDA, demonstrating the power of our business model and the warehouse club channel,” said Bob Eddy, President and Chief Executive Officer, BJ’s Wholesale Club. “We drove topline growth bolstered by robust traffic and share gains. We also made significant improvements on our merchandise margins largely due to waning supply chain pressures and moderating inflation. We remain focused on our strategic priorities and believe that we are well-positioned to maximize long-term shareholder value.”

Key Measures for the Thirteen Weeks Ended April 29, 2023 (First Quarter Fiscal 2023):

BJ'S WHOLESALE CLUB HOLDINGS, INC.

(Amounts in thousands, except per share amounts)

 

 

13 Weeks Ended April 29, 2023

 

13 Weeks Ended April 30, 2022

 

% Growth

Net sales

$

4,620,620

 

$

4,399,810

 

5.0 %

Membership fee income

 

102,522

 

 

96,625

 

6.1 %

Total revenues

 

4,723,142

 

 

4,496,435

 

5.0 %

 

 

 

 

 

 

Operating income

 

186,770

 

 

150,317

 

24.3 %

Income from continuing operations

 

115,988

 

 

112,457

 

3.1 %

Adjusted EBITDA (a)

 

256,983

 

 

220,801

 

16.4 %

Net income

 

116,077

 

 

112,450

 

3.2 %

EPS (b)

 

0.85

 

 

0.82

 

3.7 %

Adjusted net income (a)

 

115,646

 

 

118,426

 

(2.3) %

Adjusted EPS (a)

 

0.85

 

 

0.87

 

(2.3) %

Basic weighted-average shares outstanding

 

133,312

 

 

134,244

 

 

Diluted weighted-average shares outstanding

 

135,902

 

 

136,702

 

 

 

(a) See “Note Regarding Non-GAAP Financial Information.” (b) EPS represents net income per diluted share.

Additional Highlights:

• Total comparable club sales increased by 2.0% in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022. Excluding the impact of gasoline sales, comparable club sales increased by 5.7% in the first quarter of fiscal 2023 compared to the same period in fiscal 2022.

• Gross profit increased to $880.0 million in the first quarter of fiscal 2023 from $790.6 million in the first quarter of fiscal 2022. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 100 basis points over the same quarter of fiscal 2022. Merchandise margins were impacted by inflation, moderated supply chain costs and improved inventory management.

• Selling, general and administrative expenses ("SG&A") increased to $689.3 million in the first quarter of fiscal 2023 compared to $635.4 million in the first quarter of fiscal 2022. The increase was primarily driven by increased labor and occupancy costs as a result of new club and gas station openings in addition to other investments to drive strategic priorities.

• Operating income increased to $186.8 million, or 4.0% of total revenues, in the first quarter of fiscal 2023 compared to $150.3 million, or 3.3% of total revenues, in the first quarter of fiscal 2022.

• Income from continuing operations before income taxes increased to $172.1 million in the first quarter of fiscal 2023 compared to $142.5 million in the first quarter of fiscal 2022.

• The effective tax rate increased to 32.6% in the first quarter of fiscal 2023 compared to 21.1% in the first quarter of fiscal 2022. Income tax expense increased to $56.1 million in the first quarter of fiscal 2023 compared to $30.0 million in the first quarter of fiscal 2022, as a result of higher taxable income as well as a $21.6 million unexpected tax expense, approximately half of which should have been applied in prior periods in immaterial amounts.

• Net income increased to $116.1 million in the first quarter of fiscal 2023 compared to $112.5 million in the first quarter of fiscal 2022.

• Adjusted EBITDA increased 16.4% to $257.0 million in the first quarter of fiscal 2023 compared to $220.8 million in the first quarter of fiscal 2022.

• Inventory increased $69.9 million to $1.53 billion at the end of the first quarter of fiscal 2023. Inventory balances at the end of the first quarter of fiscal 2023 include $147.4 million of perishable inventory related to the acquisition of four distribution centers and related private transportation fleet from Burris Logistics in Q2 of fiscal 2022. Excluding inventory in our perishable distribution centers, inventory balances declined $77.5 million from Q1 fiscal 2022 to Q1 fiscal 2023.

• Under its existing share repurchase program, the Company repurchased 204,040 shares of common stock, totaling $15.3 million in the first quarter of fiscal 2023.

• The Company launched its new credit card program with Capital One and Mastercard on February 27, 2023, officially named the BJ's One Mastercard® program. We believe this program will provide a first-class rewards and customer service experience, delivering more value back to its members. The program will offer up to 5% rewards on in-club earnings and up to 2% rewards on out-of-club earnings as well as up to 15 cents off/gallon at BJ’s Gas.

Fiscal 2023 Ending February 3, 2024 Outlook

“Our fiscal 2023 outlook on our business remains unchanged given the sustained strength in our grocery business and our gains in market share,” said Laura Felice, Executive Vice President, Chief Financial Officer, BJ's Wholesale Club. “We are confident that the strength of our core business and our intense focus on delivering value will continue to drive long-term growth.”

Conference Call Details

A conference call to discuss the first quarter of fiscal 2023 financial results is scheduled for today, May 23, 2023, at 8:00 A.M. Eastern Time. The live audio webcast of the call can be accessed under the “Events & Presentations” section of the Company’s investor relations website at https://investors.bjs.com and will remain available for one year. Participants may also dial (833) 470-1428 within the U.S. or (929) 526-1599 outside the U.S. and reference conference ID 230611. A telephonic replay will be available two hours after the conclusion of the call for one week and can be accessed by dialing (929) 458-6194 or (866) 813-9403 and referencing conference ID 817043.

About BJ’s Wholesale Club Holdings, Inc.

Headquartered in Marlborough, Massachusetts, BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) is a leading operator of membership warehouse clubs primarily in the Eastern United States focused on delivering significant value to its members. The Company provides a curated assortment of grocery, general merchandise, gasoline and ancillary services to offer a differentiated shopping experience that is further enhanced by its omnichannel capabilities. The Company pioneered the warehouse club model in New England in 1984 and currently operates 237 clubs and 167 BJ's Gas® locations in 18 states. For more information, please visit us at www.bjs.com or on Facebook, Twitter or Instagram.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our strategic priorities; our anticipated fiscal 2023 outlook; and our future progress, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause 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, including, without limitation, as a result of disruptions and instability in the banking and financial services industries, consumer and small business spending patterns and debt levels; our dependence on having a large and loyal membership; domestic and international economic conditions, including inflation and exchange rates; our ability to procure the merchandise we sell at the best possible prices; the effects of competition and regulation; our dependence on vendors to supply us with quality merchandise at the right time and at the right price; breaches of security or privacy of member or business information; conditions affecting the acquisition, development, ownership or use of real estate; our capital spending; actions of vendors; our ability to attract and retain a qualified management team and other team members; costs associated with employees (generally including health care costs), energy and certain commodities, geopolitical conditions (including tariffs); changes in our product mix or in our revenues from gasoline sales; our failure to successfully maintain a relevant omnichannel experience for our members; risks related to our growth strategy to open new clubs; risks related to our e-commerce business; our ability to grow our BJ's One Mastercard® program; and other important factors discussed under the caption “Risk Factors” in our Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2023, which is accessible on the SEC’s website at www.sec.gov. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, unless required by law, we disclaim any obligation to do so, even if subsequent events cause our views to change. Thus, one should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Non-GAAP Financial Measures

We refer to certain financial measures that are not recognized under United States generally accepted accounting principles (“GAAP”). Please see “Note Regarding Non-GAAP Financial Information" and “Reconciliation of GAAP to Non-GAAP Financial Information” below for additional information and a reconciliation of the Non-GAAP financial measures to the most comparable GAAP financial measures.

 

BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)

 

Thirteen Weeks Ended April 29, 2023

 

Thirteen Weeks Ended April 30, 2022

Net sales

$

4,620,620

 

$

4,399,810

Membership fee income

 

102,522

 

 

96,625

Total revenues

 

4,723,142

 

 

4,496,435

Cost of sales

 

3,843,150

 

 

3,705,838

Selling, general and administrative expenses

 

689,328

 

 

635,380

Pre-opening expense

 

3,894

 

 

4,900

Operating income

 

186,770

 

 

150,317

Interest expense, net

 

14,690

 

 

7,841

Income from continuing operations before income taxes

 

172,080

 

 

142,476

Provision for income taxes

 

56,092

 

 

30,019

Income from continuing operations

 

115,988

 

 

112,457

Income (loss) from discontinued operations, net of income taxes

 

89

 

 

(7)

Net income

$

116,077

 

$

112,450

Income per share attributable to common stockholders - basic:

 

 

 

Income from continuing operations

$

0.87

 

$

0.84

Income from discontinued operations

 

—

 

 

—

Net income

$

0.87

 

$

0.84

Income per share attributable to common stockholders - diluted:

 

 

 

Income from continuing operations

$

0.85

 

$

0.82

Income from discontinued operations

 

—

 

 

—

Net income

$

0.85

 

$

0.82

Weighted-average number of shares outstanding:

 

 

 

Basic

 

133,312

 

 

134,244

Diluted

 

135,902

 

 

136,702

BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

(Unaudited)

 

 

April 29, 2023

 

April 30, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

23,387

 

$

37,952

Accounts receivable, net

 

217,866

 

 

210,405

Merchandise inventories

 

1,532,006

 

 

1,462,098

Prepaid expense and other current assets

 

69,048

 

 

58,814

Total current assets

 

1,842,307

 

 

1,769,269

 

 

 

 

Operating lease right-of-use assets, net

 

2,124,621

 

 

2,177,777

Property and equipment, net

 

1,364,815

 

 

989,658

Goodwill

 

1,008,816

 

 

924,134

Intangibles, net

 

113,536

 

 

122,332

Deferred taxes

 

6,728

 

 

4,595

Other assets

 

33,672

 

 

22,240

Total assets

$

6,494,495

 

$

6,010,005

 

 

 

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Short-term debt

$

400,000

 

$

80,000

Current portion of operating lease liabilities

 

178,939

 

 

169,423

Accounts payable

 

1,281,676

 

 

1,267,102

Accrued expenses and other current liabilities

 

758,724

 

 

692,530

Total current liabilities

 

2,619,339

 

 

2,209,055

 

 

 

 

Long-term operating lease liabilities

 

2,037,844

 

 

2,107,532

Long-term debt

 

448,004

 

 

748,987

Deferred income taxes

 

66,699

 

 

58,511

Other non-current liabilities

 

190,883

 

 

164,578

 

 

 

 

STOCKHOLDERS' EQUITY

 

1,131,726

 

 

721,342

Total liabilities and stockholders' equity

$

6,494,495

 

$

6,010,005

 

BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except per share amounts)

(Unaudited)

 

Thirteen Weeks Ended April 29, 2023

 

Thirteen Weeks Ended April 30, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net income

$

116,077

 

$

112,450

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

54,190

 

 

47,109

Amortization of debt issuance costs and accretion of original issue discount

 

324

 

 

832

Stock-based compensation expense

 

10,007

 

 

9,115

Deferred income tax provision

 

14,445

 

 

6,299

Changes in operating leases and other non-cash items

 

(750)

 

 

29,892

Increase (decrease) in cash due to changes in:

 

 

 

Accounts receivable

 

21,871

 

 

(36,454)

Merchandise inventories

 

(153,455)

 

 

(219,163)

Accounts payable

 

85,979

 

 

154,319

Accrued expenses and other current liabilities

 

(4,977)

 

 

(58,780)

Other operating assets and liabilities, net

 

(24,579)

 

 

(1,311)

Net cash provided by operating activities

 

119,132

 

 

44,308

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Additions to property and equipment, net of disposals and proceeds from sale leaseback transactions

 

(92,084)

 

 

(90,533)

Net cash used in investing activities

 

(92,084)

 

 

(90,533)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Proceeds from revolving lines of credit

 

149,000

 

 

115,000

Payments on revolving lines of credit

 

(154,000)

 

 

(35,000)

Net cash received from stock option exercises

 

1,675

 

 

2,306

Acquisition of treasury stock

 

(42,369)

 

 

(51,342)

Proceeds from financing obligations

 

9,104

 

 

8,072

Other financing activities

 

(986)

 

 

(295)

Net cash (used in) provided by financing activities

 

(37,576)

 

 

38,741

Net decrease in cash and cash equivalents

 

(10,528)

 

 

(7,484)

Cash and cash equivalents at beginning of period

 

33,915

 

 

45,436

Cash and cash equivalents at end of period

$

23,387

 

$

37,952

Note Regarding Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with GAAP, including adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to last twelve months (“LTM”) adjusted EBITDA.

We define adjusted net income as net income attributable to common stockholders adjusted for: acquisition and integration costs; home office transition costs; other adjustments and the tax impact of the foregoing adjustments on net income.

We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

We define adjusted EBITDA as income from continuing operations before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including: stock-based compensation expense; pre-opening expenses; non-cash rent; acquisition and integration costs and other adjustments.

We define free cash flow as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale leaseback transactions.

We define net debt as total debt outstanding less cash and cash equivalents.

We define net debt to LTM adjusted EBITDA as net debt at the balance sheet date divided by adjusted EBITDA for the trailing twelve-month period.

We present adjusted net income, adjusted net income per diluted share and adjusted EBITDA, which are not recognized financial measures under GAAP, because we believe such measures assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, adjusted EBITDA excludes pre-opening expenses, because we do not believe these expenses are indicative of the underlying operating performance of our clubs. The amount and timing of pre-opening expenses are dependent on, among other things, the size of new clubs opened and the number of new clubs opened during any given period.

Management believes that adjusted net income, adjusted net income per diluted share and adjusted EBITDA are helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We use adjusted net income, adjusted net income per diluted share and adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures. We also use adjusted EBITDA in connection with establishing discretionary annual incentive compensation.

We present free cash flow, which is not a recognized financial measure under GAAP, because we use it to report to our Board of Directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We present net debt and net debt to LTM adjusted EBITDA, which are not recognized as financial measures under GAAP, because we use them to report to our Board of Directors and we believe they assist investors and analysts in evaluating our borrowing capacity. Net debt to LTM adjusted EBITDA is a key financial measure that is used by management to assess the borrowing capacity of the Company.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net debt to LTM adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or like some of the adjustments in our presentation of these metrics. Our presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA should not be considered as alternatives to any other measure derived in accordance with GAAP and they should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA or net debt to LTM adjusted EBITDA in the future, and any such modification may be material. In addition, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries. Additionally, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Reconciliation of GAAP to Non-GAAP Financial Information

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation of net income to adjusted net income and adjusted net income per diluted share

(Amounts in thousands, except per share amounts)

(Unaudited)

 

 

13 Weeks Ended April 29, 2023

13 Weeks Ended April 30, 2022

Net income as reported

$

116,077

$

112,450

Adjustments:

 

 

Acquisition and integration costs (a)

 

—

 

7,879

Home office transition costs (b)

 

—

 

599

Other adjustments (c)

 

(601)

 

(165)

Tax impact of adjustments to net income (d)

 

170

 

(2,337)

Adjusted net income

$

115,646

$

118,426

 

 

 

Weighted-average diluted shares outstanding

 

135,902

 

136,702

Adjusted EPS (e)

$

0.85

$

0.87

 

(a) Represents costs related to the acquisition and integration of assets from Burris Logistics, including due diligence, legal, and other consulting expenses.

(b) Represents incremental rent expense as the Company transitioned home office locations in fiscal 2022.

(c) Other non-cash items related to the reclassification into earnings of accumulated other comprehensive income/ loss associated with the de-designation of hedge accounting and other adjustments.

(d) Represents the tax effect of the above adjustments at a statutory tax rate of approximately 28%.

(e) Adjusted EPS is measured using weighted-average diluted shares outstanding

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation to Adjusted EBITDA

(Amounts in thousands)

(Unaudited)

 

13 Weeks Ended April 29, 2023

 

13 Weeks Ended April 30, 2022

Income from continuing operations

$

115,988

 

$

112,457

Interest expense, net

 

14,690

 

 

7,841

Provision for income taxes

 

56,092

 

 

30,019

Depreciation and amortization

 

54,190

 

 

47,109

Stock-based compensation expense

 

10,007

 

 

9,115

Pre-opening expenses (a)

 

3,894

 

 

4,900

Non-cash rent (b)

 

1,551

 

 

846

Acquisition and integration costs (c)

 

—

 

 

7,879

Other adjustments (d)

 

571

 

 

635

Adjusted EBITDA

$

256,983

 

$

220,801

 

(a) Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.

(b) Consists of an adjustment to remove the non-cash portion of rent expense.

(c) Represents costs related to the acquisition and integration of assets from Burris Logistics, including due diligence, legal, and other consulting expenses.

(d) Other non-cash items, including non-cash accretion on asset retirement obligations, obligations associated with our post-retirement medical plan and incremental rent expense as the Company transitioned home office locations in fiscal 2022.

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation to Free Cash Flow

(Amounts in thousands)

(Unaudited)

 

 

13 Weeks Ended April 29, 2023

 

13 Weeks Ended April 30, 2022

Net cash provided by operating activities

$

119,132

 

$

44,308

Less: Additions to property and equipment, net of disposals

 

92,084

 

 

90,533

Plus: Proceeds from sale leaseback transactions

 

—

 

 

—

Free cash flow

$

27,048

 

$

(46,225)

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation of Net Debt and Net Debt to LTM adjusted EBITDA

(Amounts in thousands)

(Unaudited)

 

 

April 29, 2023

Total debt

$

848,004

Less: Cash and cash equivalents

 

23,387

Net Debt

$

824,617

 

 

Income from continuing operations

$

517,793

Interest expense, net

 

54,311

Provision for income taxes

 

202,335

Depreciation and amortization

 

208,015

Stock-based compensation expense

 

43,509

Pre-opening expenses

 

23,927

Non-cash rent

 

4,696

Acquisition and integration costs

 

4,445

Home office transition costs

 

14,706

Other adjustments

 

578

Adjusted EBITDA

$

1,074,315

 

 

Net debt to LTM adjusted EBITDA

0.8x

 

See descriptions of adjustments in the “Reconciliation to Adjusted EBITDA (unaudited)” table above.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230523005377/en/

Investor Contact: Catherine Park Vice President, Investor Relations cpark@bjs.com 774-512-6744

Media Contact: Peter Frangie Vice President, Corporate Communications pfrangie@bjs.com 774-512-6978