Item 1. Financial Statements
Item 1. Financial Statements.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)
(Unaudited)
November 2, 2024 February 3, 2024 October 28, 2023
ASSETS
Current assets:
Cash and cash equivalents $ 33,873 $ 36,049 $ 33,551
Accounts receivable, net 266,718 234,769 224,505
Merchandise inventories 1,720,011 1,454,822 1,661,852
Prepaid expenses and other current assets 76,491 68,366 80,550
Total current assets 2,097,093 1,794,006 2,000,458
Operating lease right-of-use assets, net 2,114,592 2,140,482 2,174,706
Property and equipment, net 1,832,397 1,578,792 1,495,912
Goodwill 1,008,816 1,008,816 1,008,816
Intangibles, net 102,739 107,632 109,600
Deferred income taxes 5,010 4,071 7,429
Other assets 55,575 43,823 40,323
Total assets $ 7,216,222 $ 6,677,622 $ 6,837,244
LIABILITIES
Current liabilities:
Short-term debt $ 245,000 $ 319,000 $ 434,000
Current portion of operating lease liabilities 163,292 153,631 180,490
Accounts payable 1,420,425 1,183,281 1,318,959
Accrued expenses and other current liabilities 913,307 812,136 805,607
Total current liabilities 2,742,024 2,468,048 2,739,056
Long-term operating lease liabilities 2,024,689 2,050,883 2,084,744
Long-term debt 398,663 398,432 398,355
Deferred income taxes 65,531 74,773 65,104
Other non-current liabilities 223,144 226,635 196,289
Commitments and contingencies (see Note 5 )
STOCKHOLDERS’ EQUITY
Preferred stock; par value $ 0.01 ; 5,000 shares authorized, and no shares issued
— — —
Common stock, par value $ 0.01 ; 300,000 shares authorized, 148,776 shares issued and 132,094 outstanding at November 2, 2024; 147,544 shares issued and 132,768 outstanding at February 3, 2024; and 147,470 shares issued and 133,494 outstanding at October 28, 2023
1,488 1,475 1,475
Additional paid-in capital 1,054,912 1,006,409 993,178
Retained earnings 1,579,986 1,168,231 1,022,359
Accumulated other comprehensive income 501 501 1,049
Treasury stock, at cost, 16,682 shares at November 2, 2024; 14,776 shares at February 3, 2024; and 13,976 shares at October 28, 2023
( 874,716 ) ( 717,765 ) ( 664,365 )
Total stockholders’ equity 1,762,171 1,458,851 1,353,696
Total liabilities and stockholders’ equity $ 7,216,222 $ 6,677,622 $ 6,837,244
The accompanying notes are an integral part of the condensed consolidated financial statements.
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BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
November 2, 2024 October 28, 2023
Net sales $ 4,984,385 $ 4,818,670
Membership fee income 114,979 106,053
Total revenues 5,099,364 4,924,723
Cost of sales 4,123,888 4,022,243
Selling, general and administrative expenses 733,580 697,104
Pre-opening expenses 12,513 6,001
Operating income 229,383 199,375
Interest expense, net 12,593 18,004
Income from operations before income taxes 216,790 181,371
Provision for income taxes 61,042 50,904
Net income $ 155,748 $ 130,467
Income per share attributable to common stockholders—basic: $ 1.18 $ 0.98
Income per share attributable to common stockholders—diluted: 1.17 0.97
Weighted-average shares of common stock outstanding:
Basic 132,083 133,069
Diluted 133,333 134,984
Other comprehensive income:
Total other comprehensive income — —
Total comprehensive income $ 155,748 $ 130,467
The accompanying notes are an integral part of the condensed consolidated financial statements.
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BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023
Net sales $ 14,883,793 $ 14,299,132
Membership fee income 339,485 312,273
Total revenues 15,223,278 14,611,405
Cost of sales 12,407,836 11,932,120
Selling, general and administrative expenses 2,205,674 2,081,392
Pre-opening expenses 15,955 11,479
Operating income 593,813 586,414
Interest expense, net 39,299 48,968
Income from continuing operations before income taxes 554,514 537,446
Provision for income taxes 142,759 159,666
Income from continuing operations 411,755 377,780
Income from discontinued operations, net of income taxes — 89
Net income $ 411,755 $ 377,869
Income per share attributable to common stockholders—basic:
Income from continuing operations $ 3.11 $ 2.84
Income from discontinued operations — —
Net income $ 3.11 $ 2.84
Income per share attributable to common stockholders—diluted:
Income from continuing operations $ 3.08 $ 2.79
Income from discontinued operations — —
Net income $ 3.08 $ 2.79
Weighted-average shares of common stock outstanding:
Basic 132,304 133,232
Diluted 133,764 135,338
Other comprehensive loss:
Amounts released from accumulated other comprehensive income, net of tax $ — $ ( 501 )
Total other comprehensive loss — ( 501 )
Total comprehensive income $ 411,755 $ 377,368
The accompanying notes are an integral part of the condensed consolidated financial statements.
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BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
(Unaudited)
Common Stock Additional
Paid-in
Capital Retained Earnings Accumulated
Other
Comprehensive
Income Treasury Stock Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance, February 3, 2024 147,544 $ 1,475 $ 1,006,409 $ 1,168,231 $ 501 ( 14,776 ) $ ( 717,765 ) $ 1,458,851
Net income — — — 111,019 — — — 111,019
Common stock issued under stock incentive plans 703 7 ( 7 ) — — — — —
Stock-based compensation expense — — 8,590 — — — — 8,590
Exercise of stock options — — 5,865 — — — — 5,865
Acquisition of treasury stock — — — — — ( 763 ) ( 56,905 ) ( 56,905 )
Balance, May 4, 2024 148,247 $ 1,482 $ 1,020,857 $ 1,279,250 $ 501 ( 15,539 ) $ ( 774,670 ) $ 1,527,420
Net income — — — 144,988 — — — 144,988
Common stock issued under stock incentive plans 450 5 ( 5 ) — — — — —
Common stock issued under ESPP 60 1 3,410 — — — — 3,411
Stock-based compensation expense — — 10,336 — — — — 10,336
Exercise of stock options — — 9,598 — — — — 9,598
Acquisition of treasury stock — — — — — ( 452 ) ( 40,846 ) ( 40,846 )
Balance, August 3, 2024 148,757 $ 1,488 $ 1,044,196 $ 1,424,238 $ 501 ( 15,991 ) $ ( 815,516 ) $ 1,654,907
Net income — — — 155,748 — — — 155,748
Common stock issued under stock incentive plans 19 — — — — — — —
Stock-based compensation expense — — 10,714 — — — — 10,714
Exercise of stock options — — 2 — — — — 2
Acquisition of treasury stock — — — — — ( 691 ) ( 59,200 ) ( 59,200 )
Balance, November 2, 2024 148,776 $ 1,488 $ 1,054,912 $ 1,579,986 $ 501 ( 16,682 ) $ ( 874,716 ) $ 1,762,171
The accompanying notes are an integral part of the condensed consolidated financial statements.
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Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Treasury Stock Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance, January 28, 2023 146,347 $ 1,463 $ 958,555 $ 644,490 $ 1,550 ( 12,444 ) $ ( 559,221 ) $ 1,046,837
Net income — — — 116,077 — — — 116,077
Other comprehensive loss, net of tax — — — — ( 501 ) — — ( 501 )
Common stock issued under stock incentive plans 1,033 10 ( 10 ) — — — — —
Stock-based compensation expense — — 10,007 — — — — 10,007
Exercise of stock options — — 1,675 — — — — 1,675
Acquisition of treasury stock — — — — — ( 560 ) ( 42,369 ) ( 42,369 )
Balance, April 29, 2023 147,380 $ 1,473 $ 970,227 $ 760,567 $ 1,049 ( 13,004 ) $ ( 601,590 ) $ 1,131,726
Net income — — — 131,325 — — — 131,325
Common stock issued under stock incentive plans 2 — — — — — — —
Common stock issued under ESPP 61 1 3,254 — — — — 3,255
Stock-based compensation expense — — 9,624 — — — — 9,624
Exercise of stock options — — 261 — — — — 261
Acquisition of treasury stock — — — — — ( 719 ) ( 44,902 ) ( 44,902 )
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.
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BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 411,755 $ 377,869
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 194,238 166,421
Amortization of debt issuance costs and accretion of original issue discount 830 900
Debt extinguishment charges — 1,830
Stock-based compensation expense 29,640 29,011
Deferred income tax provision ( 10,181 ) 12,149
Changes in operating leases and other non-cash items 10,803 3,684
Increase (decrease) in cash due to changes in:
Accounts receivable, net ( 41,021 ) 15,205
Merchandise inventories ( 265,189 ) ( 283,301 )
Prepaid expenses and other current assets ( 8,279 ) ( 23,628 )
Other assets ( 12,351 ) ( 9,917 )
Accounts payable 237,144 123,262
Accrued expenses and other current liabilities 81,546 29,916
Other non-current liabilities 20 1,130
Net cash provided by operating activities 628,955 444,531
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net of disposals ( 427,553 ) ( 347,951 )
Proceeds from sale-leaseback transactions — 12,310
Net cash used in investing activities ( 427,553 ) ( 335,641 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long term-debt — 305,041
Payments on long-term debt — ( 355,041 )
Proceeds from revolving lines of credit 605,000 564,000
Payments on revolving lines of credit ( 679,000 ) ( 535,000 )
Debt issuance costs paid — ( 1,722 )
Net cash received from stock option exercises 15,465 2,369
Net cash received from ESPP 3,411 3,255
Acquisition of treasury stock ( 158,041 ) ( 101,819 )
Proceeds from financing obligations 14,917 11,691
Other financing activities ( 5,330 ) ( 2,028 )
Net cash used in financing activities ( 203,578 ) ( 109,254 )
Net decrease in cash and cash equivalents ( 2,176 ) ( 364 )
Cash and cash equivalents at beginning of period 36,049 33,915
Cash and cash equivalents at end of period $ 33,873 $ 33,551
Supplemental cash flow information:
Interest paid $ 34,034 $ 44,335
Income taxes paid 144,908 156,632
Operating lease liabilities arising from obtaining right-of-use assets and other non-cash lease-related operating items 116,173 165,931
Non-cash financing and investing activities:
Finance lease liabilities arising from obtaining right-of-use assets 758 4,467
Property additions included in accrued expenses 52,066 32,104
Treasury stock acquisitions included in accrued expenses 1,509 3,325
The accompanying notes are an integral part of the condensed consolidated financial statements.
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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 operator of membership warehouse clubs concentrated primarily in the eastern half of the United States. The Company provides a curated assortment focused on groceries, fresh foods, general merchandise, gasoline, and other ancillary services to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities. Additionally, the Company provides access to coupons and promotions to deliver further value to our members. As of November 2, 2024, the Company operated 247 warehouse clubs and 182 gas stations in 20 states.
2. Summary of Significant Accounting Policies
(a) 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 February 3, 2024 is derived from the audited consolidated balance sheet as of that date. 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 fiscal year 2023, as filed with the Securities and Exchange Commission on March 18, 2024.
(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 November 2, 2024 and October 28, 2023 are referred to herein as the "third quarter of fiscal year 2024" and the "third quarter of fiscal year 2023," respectively. The thirty-nine week periods ended November 2, 2024 and October 28, 2023 are referred to herein as the "thirty-nine weeks ended November 2, 2024" and the "thirty-nine weeks ended October 28, 2023," respectively. Operating results for the thirteen week and thirty-nine week periods ended November 2, 2024 are not necessarily indicative of the results that may be expected for the 52-week fiscal year ending February 1, 2025.
(c) Recent Accounting Pronouncements and Policies
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 2023. There have been no material changes to these accounting policies and no accounting pronouncements adopted that had a material impact on the Company’s financial statements.
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU 2023-09 will require public companies to disclose, on an annual basis, a tabular reconciliation, using both percentages and amounts, broken out into specific categories with certain reconciling items at or above 5% of the statutory tax, further broken out by nature and/or jurisdiction. ASU 2023-09 requires all entities to disclose, on an annual basis, the amount of income taxes paid (net of refunds received), disaggregated between federal, state/local and foreign, and amounts paid to an individual jurisdiction when 5% or more of the total income taxes paid. The new standard is effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. The Company is currently evaluating the impact the adoption of this new pronouncement will have on its financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which expands the segment reporting disclosures and requires disclosure of segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment
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profit or loss, amounts and description of its composition for other segment items, and interim disclosure of a reportable segment’s profit or loss and assets. Additionally, the amendments require the disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and deciding how to allocate resources. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. The new pronouncement will not have an impact on the Company's consolidated balance sheet, statement of operations and comprehensive income, statement of stockholders' equity, or statement of cash flows. The Company continues to evaluate the impact of enhanced disclosure requirements on the notes to the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . ASU 2024-03 requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The disclosures required under the guidance can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures.
3. Revenue Recognition
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, 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.
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. The former BJ's Perks Rewards membership program is now the Club+ program, whereby participating members earn 2 % cash back, up to a maximum of $ 500 per year, on qualified purchases made at BJs and a 5 -cent per gallon discount at BJ's gas locations. Cash back is in the form of electronic awards issued to each member once $ 10 in rewards have been earned. Earned rewards under the Club+ program do not expire.
The Company's co-branded credit card program is now the BJ's One and BJ's One+ program, which allows cardholders with the opportunity to earn up to 5 % cash back on purchases made in BJ's clubs or online at bjs.com and up to a 15 -cent per gallon discount on gasoline when paying with a BJ's One or BJ's One+ Mastercard at our BJ’s gas locations. Cash back is in the form of electronic awards issued to each member monthly on their credit card statement date. Earned rewards under the co-branded credit card program do not expire.
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. Earned awards may be redeemed on future purchases made at the Company. 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, integration costs, and other long-term initiatives in connection with the new co-brand credit card program and will recognize these funds into revenue as performance obligations are satisfied.
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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. In addition, members have access to other ancillary services, coupons, 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.
Gift Card Program
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.
Contract Balances
The following table summarizes the Company's deferred revenue balance related to outstanding performance obligations for contracts with customers (in thousands):
November 2, 2024 February 3, 2024 October 28, 2023
Current:
Rewards programs:
Earned award dollars $ 59,408 $ 49,135 $ 46,816
Royalty revenue 5,898 4,593 5,454
Co-brand initiatives 4,269 4,181 3,996
Total rewards programs 69,575 57,909 56,266
Membership 236,536 231,440 193,879
Gift card program 15,044 15,290 13,644
E-commerce sales 6,383 6,757 6,523
Long-term:
Rewards programs:
Co-brand initiatives 4,068 6,216 7,147
Total deferred revenue $ 331,606 $ 317,612 $ 277,459
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.
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The following table summarizes the Company's revenue recognized during the period that was included in the opening deferred balance as of February 3, 2024 and January 28, 2023 (in thousands) :
Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023
Rewards programs:
Earned award dollars $ 49,135 $ 34,676
Royalty revenue 4,593 17,877
Co-brand initiatives 2,616 7,467
Total rewards programs 56,344 60,020
Membership 213,499 174,678
Gift card program 4,517 4,765
E-commerce sales 6,757 2,731
Total revenue $ 281,117 $ 242,194
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.
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. Substantially all of the Company’s identifiable assets are located 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 Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Grocery 72 % 70 % 71 % 71 %
General Merchandise and Services 10 % 10 % 10 % 10 %
Gasoline and Other 18 % 20 % 19 % 19 %
4. Debt and Credit Arrangements
The following table summarizes the Company’s debt (in thousands):
November 2, 2024 February 3, 2024 October 28, 2023
ABL Revolving Facility $ 245,000 $ 319,000 $ 434,000
First Lien Term Loan 400,000 400,000 400,000
Unamortized original issue discount and debt issuance costs ( 1,337 ) ( 1,568 ) ( 1,645 )
Less: Short-term debt ( 245,000 ) ( 319,000 ) ( 434,000 )
Long-term debt $ 398,663 $ 398,432 $ 398,355
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ABL Revolving Facility
On July 28, 2022, the Company entered into the ABL Revolving Facility with an ABL Revolving Commitment of $ 1.2 billion pursuant to that certain credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent and collateral agent, and the other lenders party thereto. The maturity date of the ABL Revolving Facility is July 28, 2027.
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 and accounts and credit card receivables, subject to specified advance rebates and reserves as set forth in the Credit Agreement. Indebtedness under the ABL Revolving Facility is secured by substantially all of the assets (other than real estate) of the Company and its subsidiaries, subject to customary exceptions. As amended, interest on the ABL Revolving Facility is calculated either at SOFR plus a range of 100 to 125 basis points or a base rate plus 0 to 25 basis points, based on excess availability. 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.
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. The ABL Revolving Facility contains customary events of default (including payment defaults, cross-defaults to certain of our other indebtedness, breach of representations and covenants and change of control). 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 November 2, 2024, there was $ 245.0 million outstanding in loans under the ABL Revolving Facility and $ 12.8 million in outstanding letters of credit. The interest rate on the ABL Revolving Facility was 5.77 % and unused capacity was $ 942.2 million. As of February 3, 2024 and October 28, 2023, the interest rate on the ABL Revolving Facility was 6.44 % and 6.43 %, respectively.
First Lien Term Loan
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.
The Fourth 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, 2027 to February 3, 2029. In addition, the Fourth Amendment reduced applicable margin in respect of the interest rate 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 November 2, 2024, 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. 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 $ 400.0 million outstanding under the First Lien Term Loan as of each of November 2, 2024, February 3, 2024, and October 28, 2023. The interest rate on the First Lien Term Loan was 6.76 %, 7.33 %, and 7.35 % at November 2, 2024, February 3, 2024, and October 28, 2023, respectively.
On November 4, 2024, the Company entered into an amendment (the "Fifth 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.
The Fifth Amendment, among other things, provided for a new tranche of term loans in an aggregate principal amount of $ 400.0 million, which refinanced and replaced in full the existing Tranche B term loans outstanding under the First Lien Term Loan Credit Agreement immediately prior to the effectiveness of the Fifth Amendment. In addition, the Fifth Amendment reduced applicable margin in respect of the interest rate from SOFR plus 200 basis points per annum to SOFR plus 175 basis points per annum.
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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.
The 2018 Plan authorizes the issuance of 13,148,058 shares. If an award under the 2018 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 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. As of November 2, 2024, there were 4,516,202 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 November 2, 2024 (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 (a)
Weighted-
Average
Grant
Date Fair
Value
Outstanding, February 3, 2024 1,655 $ 20.53 621 $ 67.35 22 $ 62.13 677 $ 58.84
Granted (b)
— — 6 85.21 377 75.32 432 76.65
Forfeited/canceled — — ( 17 ) 72.76 ( 8 ) 74.64 ( 10 ) 71.07
Exercised/vested ( 692 ) 22.34 ( 316 ) 61.78 ( 22 ) 62.13 ( 471 ) 44.74
Outstanding, November 2, 2024 963 $ 19.23 294 $ 73.38 369 $ 75.34 628 $ 69.53
(a) Shares outstanding reflect a 100 % payout, however, the actual payout for the remaining performance stock awards granted in fiscal year 2021 is expected to be 200 %. Actual payout for the performance stock awards granted in each of fiscal year 2022 and 2023, which vest in fiscal year 2025 and 2026, respectively, could be below 100 % or up to 200 %. Actual payout for the performance stock awards granted in fiscal year 2024, which vest in fiscal year 2027, could be below 100 % or up to 300 %.
(b) Includes 236 incremental performance stock awards granted in fiscal year 2021 with a weighted-average grant date fair value of $ 44.74 , that vested in fiscal year 2024 at greater than 100 % of target payout based on performance.
Stock-based compensation expense was $ 10.7 million and $ 9.4 million for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and $ 29.6 million and $ 29.0 million for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.
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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 reserved for issuance under the ESPP is 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 $ 0.5 million and $ 0.4 million for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and $ 1.2 million and $ 1.1 million for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively. As of November 2, 2024, there were 2,834,406 shares available for issuance under the ESPP.
7. Treasury Shares and Share Repurchase Program
Treasury Shares Acquired on Restricted Stock and Performance Stock Awards
The Company acquired 11,331 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock and performance stock awards in the thirteen weeks ended November 2, 2024, which was recorded as $ 1.0 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 369,327 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock and performance stock awards in the thirty-nine weeks ended November 2, 2024, which was recorded as $ 27.7 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.
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 repurchased 679,499 shares for $ 58.2 million and 242,000 shares for $ 17.1 million during the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively. The Company repurchased 1,536,591 shares for $ 129.3 million and 1,161,162 shares for $ 77.0 million during the thirty-nine weeks ended November 2, 2024 and October 28, 2023, 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 November 2, 2024, $ 61.0 million remained available to purchase under the 2021 Repurchase Program.
On November 18, 2024, the Company's board of directors approved a new share repurchase program (the "2024 Repurchase Program") that allows the Company to repurchase up to an additional $ 1.0 billion of its outstanding common stock from time to time as market conditions warrant. The 2024 Repurchase Program expires in January 2029. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements, market conditions, and other corporate liquidity requirements and priorities. The Company initiated the 2024 Repurchase Program to mitigate potentially dilutive effects of stock awards granted by the Company, in addition to enhancing shareholder value.
8. Income Taxes
The Company projects the estimated annual effective tax rate for fiscal year 2024 to be 28.1 %, 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 28.2 % and 28.1 % for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively. For the thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Company's effective tax rate from continuing operations was 25.7 % and 29.7 %, respectively.
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The increase in the effective tax rate for the thirteen weeks ended November 2, 2024 compared to the thirteen weeks ended October 28, 2023 was primarily driven by lower excess tax benefits from stock-based compensation in the current period. The decrease in the effective tax rate for the thirty-nine weeks ended November 2, 2024 compared to the thirty-nine weeks ended October 28, 2023 was primarily driven by higher tax benefits from stock-based compensation in the current period.
The Company is subject to taxation in the U.S. federal and various state taxing jurisdictions. The Company’s tax years from 2019 forward remain open and subject to examination by the Internal Revenue Service and various state taxing authorities.
9. Fair Value Measurements
Certain assets and liabilities are required to be carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The Company uses a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than quoted market prices included in Level 1 such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Financial Assets and Liabilities
The fair value of the Company's long-term debt is estimated based on current market rates for our specific debt instrument. Judgment is required to develop these estimates. As such, the estimated fair value of long-term debt is classified within Level 2, as defined under U.S. GAAP.
The gross carrying amount and fair value of the Company’s debt at November 2, 2024 are as follows (in thousands):
Carrying Amount Fair Value
ABL Revolving Facility $ 245,000 $ 245,000
First Lien Term Loan 400,000 401,332
Total Debt $ 645,000 $ 646,332
The gross carrying amount and fair value of the Company’s debt at February 3, 2024 are as follows (in thousands):
Carrying Amount Fair Value
ABL Revolving Facility $ 319,000 $ 319,000
First Lien Term Loan 400,000 401,168
Total Debt $ 719,000 $ 720,168
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
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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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, approximate their fair values 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 and thirty-nine weeks ended November 2, 2024 and October 28, 2023 (in thousands):
Thirteen Weeks Ended Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Weighted-average shares of common stock outstanding, used for basic computation 132,083 133,069 132,304 133,232
Plus: Incremental shares of potentially dilutive securities 1,250 1,915 1,460 2,106
Weighted-average shares of common stock and dilutive potential shares of common stock outstanding 133,333 134,984 133,764 135,338
The table below summarizes awards that were excluded from the computation of diluted earnings for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023, as their inclusion would have been anti-dilutive (in thousands):
Thirteen Weeks Ended Thirty-nine Weeks Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Stock-based awards — 203 112 207
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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 (the "Securities Act"), 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, share repurchases, 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 including, without limitation, as a result of disruptions and instability in the banking and financial services industries, 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;
• risks related to our membership fee increases;
• domestic and international economic conditions, including volatility in inflation or interest rates, supply chain disruptions, construction delays, tariffs, and exchange rates;
• our ability to procure the merchandise we sell at the best possible prices;
• 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 any future pandemic, epidemic or outbreak of any other highly infectious disease on the U.S., regional and global economies and on our business, financial condition and results of operations;
• risks related to climate change and natural disasters, including hurricanes;
• 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;
• risks relating to our ability to attract and retain a qualified management team and other team members;
• risks relating to 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 (the "SEC"), including in particular those set forth under "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (the "Annual Report on Form 10-K for fiscal year 2023") and our other filings with the SEC.
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.
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