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Item 1. Financial Statements

2023-11-22 compared with 2023-08-25 · 142 added, 103 removed, 352 unchanged (41% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

July 29, 2023 January 28, 2023 July 30, 2022

October 28, 2023 January 28, 2023 October 29, 2022

Current assets:

27 unchanged sentences

Common stock, par value $ 0.01 ;

300,000 shares authorized, 147,443 shares issued and 133,720 outstanding at July 29, 2023;

300,000 shares authorized, 147,470 shares issued and 133,494 outstanding at October 28, 2023;

146,347 shares issued and 133,903 outstanding at January 28, 2023;

and 146,157 shares issued and 135,052 outstanding at July 30, 2022

and 146,243 shares issued and 134,429 outstanding at October 29, 2022

1,475 1,463 1,461

2 unchanged sentences

Accumulated other comprehensive income 1,049 1,550 2,010

Treasury stock, at cost, 13,723 shares at July 29, 2023;

Treasury stock, at cost, 13,976 shares at October 28, 2023;

12,444 shares at January 28, 2023;

and 11,105 shares at July 30, 2022

and 11,814 shares at October 29, 2022

( 664,365 ) ( 559,221 ) ( 515,163 )

6 unchanged sentences

Thirteen Weeks Ended

July 29, 2023 July 30, 2022

October 28, 2023 October 29, 2022

Net sales $ 4,818,670 $ 4,685,834

29 unchanged sentences

(Amounts in thousands, except per share amounts)

Twenty-six Weeks Ended

July 29, 2023 July 30, 2022

Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022

Net sales $ 14,299,132 $ 14,090,673

24 unchanged sentences

Amounts released from other comprehensive income, net of tax $ ( 501 ) $ 117

Unrealized gain on cash flow hedge, net of income tax provision of $ 229 , at July 30, 2022

Unrealized gain on cash flow hedge, net of income tax provision of $ 229 , at October 29, 2022

Total other comprehensive income (loss) ( 501 ) 705

25 unchanged sentences

Balance, July 29, 2023 147,443 1,474 983,366 891,892 1,049 ( 13,723 ) ( 646,492 ) 1,231,289

Net income — — — 130,467 — — — 130,467

Common stock issued under stock incentive plans 27 1 ( 1 ) — — — — —

Stock-based compensation expense — — 9,380 — — — — 9,380

Exercise of stock options — — 433 — — — — 433

Acquisition of treasury stock — — — — — ( 253 ) ( 17,873 ) ( 17,873 )

Balance, October 28, 2023 147,470 $ 1,475 $ 993,178 $ 1,022,359 $ 1,049 ( 13,976 ) $ ( 664,365 ) $ 1,353,696

The accompanying notes are an integral part of the condensed consolidated financial statements.

BJ’S WHOLESALE CLUB HOLDINGS, INC.

24 unchanged sentences

Balance, July 30, 2022 146,157 1,461 928,548 384,770 2,010 ( 11,105 ) ( 463,198 ) 853,591

Net income — — — 129,942 — — — 129,942

Common stock issued under stock incentive plans 86 — — — — — — —

Stock-based compensation expense — — 9,463 — — — — 9,463

Exercise of stock options — — 1,844 — — — — 1,844

Acquisition of treasury stock — — — — — ( 709 ) ( 51,965 ) ( 51,965 )

Balance, October 29, 2022 146,243 $ 1,461 $ 939,855 $ 514,712 $ 2,010 ( 11,814 ) $ ( 515,163 ) $ 942,875

The accompanying notes are an integral part of the condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Twenty-six Weeks Ended

July 29, 2023 July 30, 2022

Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

22 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of long term-debt 305,041 —

Payments on long-term debt ( 355,041 ) ( 150,000 )

8 unchanged sentences

Net cash (used in) provided by financing activities ( 109,254 ) 36,088

Net (decrease) increase in cash and cash equivalents ( 7,705 ) 118,245

Net decrease in cash and cash equivalents ( 364 ) ( 10,792 )

Cash and cash equivalents at beginning of period 33,915 45,436

6 unchanged sentences

Finance lease liabilities arising from obtaining right-of-use assets 4,467 7,443

Financing obligations arising from failed sale-leasebacks — 3,487

Property additions included in accrued expenses 32,104 29,192

Treasury stock repurchases included in accrued expenses 3,325 770

The accompanying notes are an integral part of the condensed consolidated financial statements.

2 unchanged sentences

BJ’s Wholesale Club Holdings, Inc.

and its wholly-owned subsidiaries is a leading warehouse club operator concentrated primarily in the eastern half of the United States.

As of July 29, 2023, the Company operated 238 warehouse clubs and 168 gas stations in 19 states.

The Company follows and reports based on the National Retail Federation’s fiscal calendar.

The thirteen-week periods ended July 29, 2023 and July 30, 2022 are referred to herein as the "second quarter of fiscal year 2023" and the "second quarter of fiscal year 2022," respectively.

and its wholly-owned subsidiaries is a leading operator of membership warehouse clubs concentrated primarily in the eastern half of the United States.

The Company provides a curated assortment focused on grocery, general merchandise, gasoline and other ancillary services, coupon books, and promotions to offer a differentiated shopping experience that is further enhanced by its omnichannel capabilities.

As of October 28, 2023, the Company operated 238 warehouse clubs and 169 gas stations in 20 states.

Summary of Significant Accounting Policies

Basis of Presentation

(a) Basis of Presentation

The accompanying interim financial statements of BJ’s Wholesale Club Holdings, Inc.

1 unchanged sentence

The condensed consolidated balance sheet as of January 28, 2023 is derived from the audited consolidated balance sheet as of that date.

The unaudited results of operations for the second quarter of fiscal year 2023 are not necessarily indicative of future results or results to be expected for fiscal year 2023.

The Company’s business, in common with the business of retailers generally, is subject to seasonal influences.

The Company’s business, as is 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 2022, as filed with the Securities and Exchange Commission on March 16, 2023.

Recent Accounting Pronouncements and Policies

(b) Fiscal Year

The Company follows the National Retail Federation’s fiscal calendar and reports financial information on a 52- or 53-week year ending on the Saturday closest to January 31.

The thirteen-week periods ended October 28, 2023 and October 29, 2022 are referred to herein as the "third quarter of fiscal year 2023" and the "third quarter of fiscal year 2022," respectively.

The thirty-nine week periods ended October 28, 2023 and October 29, 2022 are referred to herein as the "thirty-nine weeks ended October 28, 2023" and the "thirty-nine weeks ended October 29, 2022," respectively.

Operating results for the thirteen-week and thirty-nine week periods ended October 28, 2023 are not necessarily indicative of the results that may be expected for the 53-week fiscal year ending February 3, 2024.

The Company’s accounting policies are set forth in the audited financial statements included in the Company’s Annual Report on Form 10-K for fiscal year 2022.

1 unchanged sentence

Revenue Recognition

Performance Obligations

(a) 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.

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.

Revenue is recorded at the point-of-sale based on the transaction price, 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 time of shipment.

1 unchanged sentence

Thirteen Weeks Ended

Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Point-of-sale transactions, excluding sales tax, as a percent of net sales 92 % 92 % 91 % 92 %

Point-of-sale transactions, excluding sales tax, as a percent of total revenues 90 % 90 % 89 % 90 %

BJ’s Perks Rewards and My BJ’s Perks programs—The Company’s BJ’s Perks Rewards membership program which was in place in fiscal year 2022 and the first month of fiscal year 2023, allowed 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 offered a co-branded credit card program, the My BJ’s Perks program, which allowed My BJ’s Perks Mastercard credit card holders to earn up to a 10 cent-per-gallon discount on gasoline, 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 was in the form of electronic awards issued in $ 10 increments that could be used online or in-club at the register and expired six months from the date issued.

Rewards programs

The Company’s BJ’s Perks Rewards membership program which was in place in fiscal year 2022 and the first month of fiscal year 2023, allowed 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 offered a co-branded credit card program, the My BJ’s Perks program, which allowed My BJ’s Perks Mastercard credit card holders to earn up to a 10 cent-per-gallon discount on gasoline, up to 5 % cash back on eligible purchases made in BJ’s clubs or online at bjs.com, and up to 2 % cash back on purchases made with the card outside of BJ’s.

Cash back was in the form of electronic awards issued in $ 10 increments that could be used online or in-club and expired six months from the date issued.

In the first quarter of fiscal year 2023, the Company rebranded the rewards program.

6 unchanged sentences

The Company includes the fair value of award dollars earned in deferred revenue at the time the award dollars are earned.

This liability was $ 43.1 million at July 29, 2023, $ 34.7 million at January 28, 2023, and $ 40.0 million at July 30, 2022 and is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

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 mobile app.

During the twenty-six weeks ended July 29, 2023, the Company recognized $ 34.7 million of revenue that was included in the deferred liability as of January 28, 2023.

The Company expects to recognize $ 43.1 million of deferred revenue during the remainder of fiscal year 2023.

During the twenty-six weeks ended July 30, 2022, the Company recognized $ 30.3 million that was included in the deferred liability as of January 29, 2022.

The Company’s total deferred royalty revenue related to the outstanding My BJ's Perks and BJ's One and BJ's One+ credit card program was $ 5.6 million, $ 17.9 million, and $ 28.5 million at July 29, 2023, January 28, 2023, and July 30, 2022, respectively, and is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

The timing of revenue recognition of these awards is driven by actual customer activities, such as reward redemptions and expirations.

During the twenty-six weeks ended July 29, 2023, the Company recognized $ 17.9 million of revenue that was included in the deferred liability as of January 28, 2023.

As of July 29, 2023, the Company expects to recognize $ 5.6 million of deferred revenue during the remainder of fiscal year 2023.

In connection with the new co-brand credit card program, the Company had deferred revenue of approximately $ 11.9 million and $ 18.9 million for funds received related to marketing and other integration costs as of July 29, 2023 and January 28, 2023, respectively.

During the twenty-six weeks ended July 29, 2023, the Company recognized $ 5.0 million of revenue that was included in the deferred liability as of January 28, 2023, related to these marketing and other integration costs.

The Company expects to recognize approximately $ 2.1 million of deferred revenue during the remainder of fiscal year 2023, which is included in accrued expenses and other current liabilities.

The Company expects to recognize approximately $ 9.8 million thereafter, of which $ 2.6 million is included in accrued expenses and other current liabilities and $ 7.2 million is included in other non-current liabilities in the condensed consolidated balance sheets.

Membership—The Company charges a membership fee to its customers, which allows customers to shop in the Company’s clubs, shop on the Company’s website, and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months.

The Company recognizes revenue related to 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 mobile app.

The Company recognizes royalty revenue related to the outstanding My BJ's Perks and BJ's One and BJ's One+ credit card programs based upon actual customer activities, such as reward redemptions.

Additionally, the Company deferred revenue for funds received related to marketing and other integration costs in connection with the new co-brand credit card program and will recognize these into revenue as performance obligations are satisfied.

The Company charges a membership fee to its customers, which allows customers to shop in the Company’s clubs, shop on the Company’s website, and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months.

In addition, members have access to other ancillary services, coupon books, and promotions.

As the Company has the obligation to provide access to its clubs, website, 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 $ 195.3 million, $ 183.7 million, and

$ 185.4 million at July 29, 2023, January 28, 2023, and July 30, 2022, respectively, and is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Gift Card Programs—The Company sells BJ’s gift cards that allow customers to redeem the card for future purchases equal to the amount of the face value of the gift card.

Revenue from gift card sales is recognized upon redemption of the gift card because the Company’s performance obligation to redeem the gift card for merchandise is satisfied when the gift card is redeemed.

Deferred revenue related to gift cards was $ 13.4 million, $ 14.1 million, and $ 11.9 million at July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

The Company recognized $ 10.9 million and $ 12.7 million of revenue from gift card redemptions in the second quarters of fiscal years 2023 and 2022, respectively.

The Company recognized $ 22.5 million and $ 23.2 million of revenue from gift card redemptions in the twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively.

Disaggregation of Revenue

Gift Card Programs

The Company sells BJ’s gift cards that allow customers to redeem the cards for future purchases equal to the amount of the face value of the gift card.

Revenue from gift card sales is recognized upon redemption of the gift cards and control of the purchased goods or services is transferred to the customer.

(b) Contract Balances

The following table summarizes the Company's deferred revenue balance related to outstanding performance obligations for contracts with customers:

October 28, 2023 January 28, 2023 October 29, 2022

Rewards programs:

Earned award dollars $ 46,816 $ 34,676 $ 44,490

Royalty revenue 5,454 17,877 23,255

Co-brand marketing & integration 3,996 6,960 —

Total rewards programs 56,266 59,513 67,745

Membership 193,879 183,692 178,297

Gift card programs 13,644 14,092 12,080

Rewards programs:

Co-brand marketing & integration 7,147 11,895 —

Total deferred revenue $ 270,936 $ 269,192 $ 258,122

Current and long-term deferred revenue balances are included within accrued expenses and other current liabilities and other non-current liabilities, respectively, in the condensed consolidated balance sheets.

The following table summarizes the Company's revenue recognized during the period that was included in the opening deferred balance as of January 28, 2023 :

Thirty-Nine Weeks Ended

October 28, 2023

Rewards programs:

Earned award dollars $ 34,676

Royalty revenue 17,877

Co-brand marketing & integration 7,467

Total rewards programs 60,020

Membership 174,678

Gift card programs 4,765

Total revenue $ 239,463

Performance obligations related to earned award dollars, royalty revenue and membership fees are typically satisfied over a period of twelve months or less.

Funds received related to marketing and other integration costs in connection with our co-brand credit card program are recognized as performance obligations are satisfied.

The timing and recognition of gift card redemptions varies depending on consumer behavior and spending patterns.

(d) 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.

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 Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Grocery 70 % 70 % 71 % 67 %

3 unchanged sentences

The following table summarizes the Company’s debt (in thousands):

July 29, 2023 January 28, 2023 July 30, 2022

October 28, 2023 January 28, 2023 October 29, 2022

ABL Revolving Facility $ 434,000 $ 405,000 $ 295,000

6 unchanged sentences

The maturity date of the ABL Revolving Facility is July 28, 2027.

In connection with this transaction, the Company extinguished the previous senior secured asset based revolving credit and term facility.

Revolving loans under the ABL Revolving Facility are available in an aggregate amount equal to the lesser of the aggregate ABL Revolving Commitment or a borrowing base based on the value of certain inventory, accounts and credit card receivables, subject to specified advance rebates and reserves as set forth in the Credit Agreement.

2 unchanged sentences

The Company will also pay an unused commitment fee of 20 basis points per annum on the unused ABL Revolving Commitment.

Each borrowing is

for a period of one , three , or six months , as selected by the Company, or for such other period that is twelve months or less requested by the Company and consented to by the lenders and administrative agent.

Each borrowing is for a period of one , three , or six months , as selected by the Company, or for such other period that is twelve months or less requested by the Company and consented to by the lenders and administrative agent.

The ABL Revolving Facility places certain restrictions (i.e., covenants) upon the Borrower’s, and its subsidiaries’, ability to, among other things, incur additional indebtedness, pay dividends and make certain loans, investments, and divestitures.

1 unchanged sentence

The occurrence of an event of default under the ABL Revolving Facility would permit the lenders to accelerate the indebtedness and terminate the ABL Revolving Facility.

As of July 29, 2023, there was $ 411.0 million outstanding in loans under the ABL Revolving Facility and $ 11.3 million in outstanding letters of credit.

As of October 28, 2023, there was $ 434.0 million outstanding in loans under the ABL Revolving Facility and $ 12.3 million in outstanding letters of credit.

The interest rate on the ABL Revolving Facility was 6.43 % and unused capacity was $ 753.7 million.

First Lien Term Loan

On January 5, 2023, the Company entered into the Third Amendment to the First Lien Term Loan Credit Agreement, with Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent and the lenders party thereto.

BofA Securities, Inc., Deutsche Bank Securities Inc., and Wells Fargo Securities LLC acted as joint lead arrangers and joint bookrunners of the Third Amendment.

The Third Amendment, among other things, extended the maturity date with respect to the term loans outstanding under the First Lien Term Loan Credit Agreement from February 3, 2024 to February 3, 2027.

In addition, the Third Amendment transitioned the interest rate, immediately, from LIBOR to SOFR and changed the applicable margin from LIBOR plus 200 – 225 basis points per annum to SOFR plus 275 basis points per annum.

On October 12, 2023, the Company entered into an amendment (the “Fourth Amendment”) to the First Lien Term Loan Credit Agreement, with Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent and the

lenders party thereto.

Deutsche Bank Securities Inc.

acted as the left lead arranger and bookrunner, and Nomura Securities International, Inc., BofA Securities, Inc.

and Wells Fargo Securities LLC acted as joint lead arrangers and joint bookrunners of the Fourth Amendment.

The Fourth Amendment, among other things, extends the maturity date with respect to the term loans outstanding under the First Lien Term Loan Credit Agreement from February 3, 2027 to February 3, 2029.

In addition, the Fourth Amendment reduces applicable margin in respect of the interest rate, effective immediately, from SOFR plus 275 basis points per annum to SOFR plus 200 basis points per annum.

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.

As of July 29, 2023, the Company's net leverage ratio did not exceed 3.50 to 1.00, and therefore, no incremental principal payments were required.

As of October 28, 2023, the Company's net leverage ratio did not exceed 3.50 to 1.00, and therefore, no incremental principal payments were required.

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.

There was $ 450.0 million outstanding on the First Lien Term Loan at July 29, 2023 and January 28, 2023, and $ 701.9 million outstanding at July 30, 2022.

The interest rates were 7.89 %, 7.11 %, and 3.96 % at July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

Total fees incurred in connection with the refinancing were approximately $ 1.7 million.

The Company expensed $ 1.4 million of previously capitalized debt issuance costs and original issue discount and expensed $ 0.4 million of new third-party fees.

The Company deferred $ 1.3 million of new debt issuance costs.

As of October 28, 2023, there was $ 400.0 million outstanding under the First Lien Term Loan, which reflects the Company's repayment of $ 50.0 million of the principal amount outstanding under the First Lien Term Credit Agreement during the third quarter of fiscal year 2023 prior to the Fourth Amendment.

There was $ 450.0 million outstanding on the First Lien Term Loan at January 28, 2023 and $ 601.9 million outstanding at October 29, 2022.

The interest rates were 7.35 %, 7.11 %, and 5.35 % at October 28, 2023, January 28, 2023, and October 29, 2022, respectively.

Commitments and Contingencies

11 unchanged sentences

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.

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(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 July 29, 2023, there were 4,916,649 shares available for future issuance under the 2018 Plan.

The following table summarizes the Company’s stock award activity during the twenty-six weeks ended July 29, 2023 (shares in thousands):

As of October 28, 2023, there were 4,932,865 shares available for future issuance under the 2018 Plan.

The following table summarizes the Company’s stock award activity during the thirty-nine weeks ended October 28, 2023 (shares in thousands):

Stock Options Restricted Stock Restricted Stock Units Performance Stock

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Exercised/vested ( 126 ) 18.78 ( 409 ) 43.03 ( 19 ) 58.61 ( 640 ) 24.35

Outstanding, July 29, 2023 1,695 $ 20.33 647 $ 66.50 22 $ 62.13 677 $ 58.84

Outstanding, October 28, 2023 1,662 $ 20.47 618 $ 67.28 22 $ 62.13 677 $ 58.84

(a) Includes 320 incremental Performance Stock awards granted in fiscal year 2020 with a weighted-average grant date fair value of $ 24.35 , that vested in fiscal year 2023 at greater than 100 % of target based on performance.

Stock-based compensation expense was $ 9.6 million and $ 9.4 million for the thirteen weeks ended July 29, 2023 and July 30, 2022, respectively, and $ 19.6 million and $ 18.5 million for the twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively.

Stock-based compensation expense was $ 9.4 million and $ 9.5 million for the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively, and $ 29.0 million and $ 28.0 million for the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively.

On June 14, 2018, the Company’s board of directors adopted, and its stockholders approved, 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 Company's board of directors.

The amount of expense recognized related to the ESPP was $ 0.4 million and $ 0.3 million for the thirteen weeks ended July 29, 2023 and July 30, 2022, respectively, and $ 0.7 million and $ 0.5 million for the twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively.

As of July 29, 2023, there were 2,463,889 shares available for issuance under the ESPP.

The amount of expense recognized related to the ESPP was $ 0.4 million and $ 0.3 million for the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively, and $ 1.1 million and $ 0.8 million for the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively.

As of October 28, 2023, there were 2,463,889 shares available for issuance under the ESPP.

Treasury Shares and Share Repurchase Program

Treasury Shares Acquired on Restricted Stock and Performance Stock Awards

The Company acquired 3,625 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended July 29, 2023, which was recorded as $ 0.3 million of treasury stock.

The Company acquired 5,945 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended July 30, 2022, which was recorded as $ 0.3 million of treasury stock.

The Company acquired 359,827 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock and performance stock awards in the twenty-six weeks ended July 29, 2023, which was recorded as $ 27.4 million of treasury stock.

The Company acquired 235,845 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the twenty-six weeks ended July 30, 2022, which was recorded as $ 15.9 million of treasury stock.

The Company acquired 11,052 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended October 28, 2023, which was recorded as $ 0.8 million of treasury stock.

The Company acquired 24,885 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended October 29, 2022, which was recorded as $ 1.9 million of treasury stock.

The Company acquired 370,879 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock and performance stock awards in the thirty-nine weeks ended October 28, 2023, which was recorded as $ 28.1 million of treasury stock.

The Company acquired 260,730 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the thirty-nine weeks ended October 29, 2022, which was recorded as $ 17.8 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") 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 715,122 shares for $ 44.6 million and 353,000 shares for $ 22.8 million during the thirteen weeks ended July 29, 2023 and July 30, 2022, respectively .

The Company repurchased 919,162 shares for $ 59.9 million and 923,506 shares for $ 58.6 million during the twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively .

As of July 29, 2023, $ 258.8 million remained available to purchase under the 2021 Repurchase Program.

The Company initiated the 2021 Repurchase Program to mitigate potentially dilutive effects of stock awards granted by the Company, in addition to enhancing shareholder value.

The Company repurchased 242,000 shares for $ 17.1 million and 684,819 shares for $ 50.1 million during the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively.

The Company repurchased 1,161,162 shares for $ 77.0 million and 1,608,325 shares for $ 108.7 million during the thirty-nine weeks ended October 28, 2023 and October 29, 2022,

respectively.

The Company accounts for treasury stock under the cost method based on the fair market value of the shares on the dates of repurchase plus any direct costs incurred.

As of October 28, 2023, $ 241.9 million remained available to purchase under the 2021 Repurchase Program.

The Company projects the estimated annual effective tax rate for fiscal year 2023 to be 28.2 %, 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 28.6 % and 26.6 % for the thirteen weeks ended July 29, 2023 and July 30, 2022, respectively, primarily due to a reduction in excess tax benefits from stock-based compensation and tax credits in the current period.

For the twenty-six weeks ended July 29, 2023 and July 30, 2022, the Company's effective tax rate from continuing operations was and 30.5 % and 24.2 %, respectively, and the increase was primarily due to an immaterial adjustment to certain deferred tax assets related to prior periods, as well as lower excess tax benefits from stock-based compensation and lower tax credits in the current period.

The Company’s effective income tax rate from continuing operations was 28.1 % and 26.8 % for the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively.

For the thirty-nine weeks ended October 28, 2023 and October 29, 2022, the Company's effective tax rate from continuing operations was and 29.7 % and 25.1 %, respectively.

The increase for both comparative periods was primarily driven by lower tax benefits from stock-based compensation.

The increase for the first nine months of fiscal 2023 was also due to an immaterial adjustment to certain deferred tax assets related to prior periods.

The Company is subject to taxation in the U.S.

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The Company’s tax years from 2018 forward remain open and subject to examination by the Internal Revenue Service and various state taxing authorities.

On August 16, 2022, the Inflation Reduction Act was signed into law in the United States.

We currently do not expect the legislation to have a material impact on our financial statements.

Fair Value Measurements

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As such, the estimated fair value of long-term debt is classified within Level 2, as defined under U.S.

The gross carrying amount and fair value of the Company’s debt at July 29, 2023 are as follows (in thousands):

The gross carrying amount and fair value of the Company’s debt at October 28, 2023 are as follows (in thousands):

Carrying Amount Fair Value

First Lien Term Loan $ 450,000 $ 450,311

ABL Revolving Facility $ 434,000 $ 434,000

First Lien Term Loan 400,000 400,252

Total Debt $ 834,000 $ 834,252

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Carrying Amount Fair Value

First Lien Term Loan $ 450,000 $ 450,482

ABL Revolving Facility $ 405,000 $ 405,000

First Lien Term Loan 450,000 450,482

Total Debt $ 855,000 $ 855,482

The gross carrying amount and fair value of the Company’s debt at July 30, 2022 are as follows (in thousands):

The gross carrying amount and fair value of the Company’s debt at October 29, 2022 are as follows (in thousands):

Carrying Amount Fair Value

First Lien Term Loan $ 701,920 $ 700,797

ABL Revolving Facility $ 295,000 $ 295,000

First Lien Term Loan 601,920 601,920

Total Debt $ 896,920 $ 896,920

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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 and twenty-six weeks ended July 29, 2023 and July 30, 2022 (in thousands):

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

The table below reconciles basic weighted-average shares of common stock outstanding to diluted weighted-average shares of common stock outstanding for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 (in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Weighted-average shares of common stock outstanding, used for basic computation 133,069 134,091 133,232 134,225

Incremental shares of potentially dilutive securities 1,915 2,530 2,106 2,405

1,812 2,226 2,201 2,342

Weighted-average shares of common stock and dilutive potential shares of common stock outstanding 134,984 136,621 135,338 136,630

The table below summarizes awards that were excluded from the computation of diluted earnings for the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022, as their inclusion would have been anti-dilutive (in thousands):

Thirteen Weeks Ended Twenty-six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Restricted shares 304 193 203 145

Restricted stock units 11 12 5 6

The table below summarizes awards that were excluded from the computation of diluted earnings for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022, as their inclusion would have been anti-dilutive (in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Stock-based awards 203 — 207 100

FORWARD-LOOKING STATEMENTS

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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;

• uncertainties in the financial markets including, without limitation, as a result of disruptions and instability in the banking and financial services industries or as a result of wars and global political conflicts, 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;

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• risks relating to our ability to implement our growth strategy by opening new clubs, and gasoline stations;

• 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 28, 2023 (the "Annual Report on Form 10-K for the fiscal year 2022").

Given these uncertainties, you should not place undue reliance on any forward-looking statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements