What changed in this filing

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Item 1A. Risk Factors

2025-03-14 compared with 2024-03-18 · 42 added, 39 removed, 447 unchanged (15% of the section changed)

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Risks Relating to Our Business

Our business may be affected by issues that affect consumer spending.

Our business may be affected by macroeconomic and other market issues that affect consumer spending.

Our results of operations are affected by the level of consumer spending and, therefore, by changes in the economic factors that impact consumer spending.

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higher insurance and health care costs;

and product cost increases resulting from an increase in commodity prices or supply chain issues, could reduce or shift consumer spending generally, which could cause our customers to spend less or to shift their spending to our competitors.

and product cost increases resulting from an increase in commodity prices or supply chain issues, could reduce, and in some cases have reduced, consumer spending generally, which could cause our customers to spend less or to shift their spending to our competitors.

Reduced consumer spending may result in reduced demand for our items and may also require increased selling and promotional expenses.

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Finding qualified vendors who meet our standards and acquiring merchandise in a timely and efficient manner are significant challenges, especially with respect to vendors located and merchandise sourced outside the United States.

We have no assurances of continued supply,

pricing or access to new products, and, in general, any vendor could at any time change the terms upon which it sells to us or discontinue selling to us.

We have no assurances of continued supply, pricing or access to new products, and, in general, any vendor could at any time change the terms upon which it sells to us or discontinue selling to us.

In addition, member demand may lead to insufficient in-stock quantities of our merchandise.

Additionally, if a significant vendor, particularly a vendor that supplies high demand products and for which we have limited alternative sources, has a supply chain disruption for any reason that negatively impacts their ability to supply us with the products we need in a timely or cost-effective manner, such disruption could have, and in the past has had, a material impact on our sales and results of operations.

Competition may adversely affect our profitability.

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Any such program changes or reductions in funding for the SNAP program overall could alter consumer shopping habits resulting in decreased sales at our clubs and thereby materially and adversely affect our business, financial condition and results of operations.

Natural disasters and other incidents beyond our control could negatively affect our business, financial condition and results of operations.

Our business could be severely impacted by natural disasters, such as hurricanes or earthquakes, or other incidents beyond our control, such as global or regional pandemics, epidemics or outbreaks of infectious diseases, terrorism, war/conflict, geopolitical tensions or events, riots, acts of violence and other crimes (including looting or vandalism), particularly in locations where our centralized operating systems and administrative personnel are located.

Natural disasters, extreme weather conditions and catastrophic events beyond our control could negatively affect our business, financial condition and results of operations.

Our business could be severely impacted by natural disasters and extreme weather conditions, such as hurricanes, earthquakes, floods, wildfires or other incidents beyond our control, such as global or regional pandemics, epidemics or outbreaks of infectious diseases, terrorism, war/conflict, geopolitical tensions or events, riots, acts of violence and other crimes (including looting or vandalism), particularly in locations where our centralized operating systems and administrative personnel are located.

For example, our operations are concentrated primarily on the eastern half of the United States, and any adverse weather event or natural disaster, such as a hurricane or heavy snowstorm, could have a material adverse effect on a substantial portion of our operations.

Such natural disasters or other incidents beyond our control could result in, among other things, physical damage to one or more of our properties;

Such natural disasters or catastrophic events beyond our control could result in, among other things:

physical damage to one or more of our properties or inventory;

the temporary closure of one or more of our clubs, Company-operated or contracted distribution centers or our home office facility;

the temporary reduction in the availability of products in our clubs and online or a reduction in demand for certain of our products;

the temporary lack of an adequate work force in a market;

a temporary or long-term disruption in merchandise distribution, including issues with the transport of goods to or from overseas;

the temporary reduction in the availability of products in our clubs and online or a reduction in demand for certain of our products, each of which could have a negative adverse effect on our business, financial condition, cash flows and results of operations.

a temporary or long-term disruption in merchandise distribution, including issues with the transport of goods to or from overseas, each of which could have a negative adverse effect on our business, financial condition, cash flows and results of operations.

Disruptions in our merchandise distribution could adversely affect sales and member satisfaction.

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All of our end-to-end perishable supply chain has been contained in-house since mid-2022.

Although we believe that our receiving and distribution process is efficient, unforeseen disruptions in operations due to fires, tornadoes, hurricanes, earthquakes or other catastrophic events, labor issues, war or other civil unrest, or other shipping problems (which may include, but are not limited to, strikes, slowdowns or work stoppages at the ports of entry for the merchandise that we import) may result in delays in the delivery of merchandise to our clubs, which could adversely affect sales and the satisfaction of our members.

In addition, increases in distribution costs (including, but not limited to, trucking and freight costs) could adversely affect our expenses, which could adversely affect our operating profit and results of operations.

Although we believe that our receiving and distribution process is efficient, unforeseen disruptions in operations due to extreme weather, including hurricanes, earthquakes, tornados, wildfires, floods, or other catastrophic events, labor issues, war or other civil unrest, or other shipping problems (which may include, but are not limited to, strikes, slowdowns or work stoppages at the ports of entry for the merchandise that we import) may result in delays in the delivery of merchandise to our clubs, which could adversely affect sales and the satisfaction of our members.

In addition, increases in distribution costs (including, but not limited to, trucking and freight costs, or otherwise) could adversely affect our expenses, which could adversely affect our operating profit and results of operations.

We may not timely identify or respond effectively to consumer trends, which could negatively affect our relationship with our members, the demand for our products and services and our market share.

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We are subject to payment-related risks, including risks to the security of payment card information.

We accept payments using an increasing variety of methods, including cash, checks, our co-branded credit cards and a variety of other credit and debit cards, as well as Paypal, Apple Pay ® , Google Pay, EBT payments and Buy Now, Pay Later financed through Citizens Pay™.

Our efficient operation, like that of most retailers, requires the transmission of information permitting cashless payments.

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Any such incident could result in significant legal and financial exposure, damage to our reputation and harm to our relationship with our members, any of which could have an adverse effect on our business.

Our co-brand credit card program may be affected by economic and regulatory conditions.

Deterioration in economic conditions could adversely affect our co-brand credit card program, including the volume of new credit accounts, the amount of credit card balances and the ability of credit card holders to pay their balances.

Our co-branded credit card program may be affected by economic and regulatory conditions.

Deterioration in economic conditions could adversely affect our co-branded credit card program, including the volume of new credit accounts, the amount of credit card balances and the ability of credit card holders to pay their balances.

These conditions could result in the Company receiving lower payments under the co-branded credit card program.

Additionally, new laws or regulations on credit card operations may impose certain requirements and limitations on credit card providers.

Additionally, new

laws or regulations on credit card operations may impose certain requirements and limitations on credit card providers.

Compliance with these regulations may negatively impact the operation of our co-branded credit card program, resulting in lower revenue streams derived from our co-branded credit card program.

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Given the very high volume of transactions we process each year, it is important that we maintain uninterrupted operation of our business-critical computer systems and infrastructure.

result in the compromise of confidential customer or team member data, ransomware or other malware attacks, social engineering, catastrophic events such as fires, earthquakes, tornadoes and hurricanes and errors by our team members.

Our systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, internal or external security incidents, including tampering with hardware and breaches of our transaction processing or other systems that could result in the compromise of confidential customer or team member data, ransomware or other malware attacks, social engineering, catastrophic events such as fires, earthquakes, tornadoes and hurricanes and errors by our team members.

Phishing attacks have emerged as particularly pervasive, including as a means for ransomware attacks, which have increased in both frequency and breadth.

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Any material interruption to these systems or infrastructure could have a material adverse effect on our business and results of operations.

Additionally, we rely on third party technology and vendors and other service providers for certain of our critical business functions, and any system failures of these third party providers, whether caused by security breaches, fraud or otherwise, and our our inability to find suitable alternatives in a timely and efficient manner and on acceptable terms, or at all, could disrupt our operations and subject us to losses or costs to remediate any of these deficiencies.

In addition, the cost of securing our systems against failure or attack is considerable, and increases in these costs, particularly in the wake of a security incident, could be material.

Global or regional pandemics, epidemics or outbreaks of infectious disease, could have an adverse effect on our business, financial condition and results of operations.

The extent to which global or regional pandemics, epidemics or outbreaks of any highly infectious disease, including the emergence of additional COVID-19 variants, impacts our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others.

Any global or regional pandemic, epidemic or outbreak of any highly infection disease, including the emergence of additional COVID-19 variants, may materially adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in this "Risk Factors" section, including:

The extent to which global or regional pandemics, epidemics or outbreaks of any highly infectious disease impacts our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others.

Any global or regional pandemic, epidemic or outbreak of any highly infectious disease, may materially adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in this "Risk Factors" section, including:

• a complete or partial closure of, or a decrease in member traffic at, one or more of our clubs, due to government restrictions or the spread of disease among our team members or employees at a specific location;

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For example, we continue to add private label products to our assortment of product offerings at our clubs, sold under our Wellsley Farms ® and Berkley Jensen ® private labels.

We generally price these private label products lower than the manufacturer branded products of comparable quality that

we also offer.

We generally price these private label products lower than the manufacturer branded products of comparable quality that we also offer.

Accordingly, a shift in our sales mix in which we sell more units of our private label products and fewer units of our manufacturer branded products would have an adverse impact on our overall net sales.

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Even if a product liability claim is unsuccessful or is not fully pursued, negative publicity could adversely affect our reputation with existing and potential members, as well as our corporate and brand image, including that of our Wellsley Farms ® and Berkley Jensen ® private labels, and could have long-term adverse effects on our business.

If we do not successfully maintain a relevant omnichannel experience for our members, our results of operations could be adversely impacted.

Omnichannel retailing is rapidly evolving, with the use of digital platforms by consumers continuing to increase, and we must keep pace with changing member expectations and new developments by our competitors.

Our members are increasingly using mobile phones, tablets and other devices to shop and to interact with us through social media, with digitally-enabled comparable sales growth of 28.0% as of the fourth quarter of fiscal year 2023.

If we do not successfully maintain a relevant digital experience for our members, our results of operations could be adversely impacted.

Digital retailing is rapidly evolving, with the use of digital platforms by consumers continuing to increase, and we must keep pace with changing member expectations and new developments by our competitors.

Our members are increasingly using mobile phones, tablets and other devices to shop and to interact with us through social media, with digitally-enabled

comparable sales growth of 26.0% as of the fourth quarter of fiscal year 2024.

We continue to make technology investments in our website and mobile application.

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cybersecurity and consumer privacy concerns and regulation;

and reliance on third parties for same-day home delivery.

and reliance on third parties for same-day delivery.

Problems in any of these areas could result in a reduction in sales;

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We are subject to a number of risks because we import some of our merchandise.

We imported approximately 3% of our merchandise directly from foreign countries such as China, Vietnam, Bangladesh and India during fiscal year 2023.

In addition, many of our domestic vendors purchase a portion of their products from foreign sources.

We imported approximately 3% of our merchandise directly from overseas countries such as China, Vietnam, Bangladesh and India during fiscal year 2024.

In addition, many of the products we purchase from domestic vendors are imported and would be subject to tariffs before reaching our clubs.

Foreign sourcing subjects us to a number of risks generally associated with doing business abroad, including lead times, labor issues, shipping and freight constraints, product and raw material issues, political and economic conditions, government policies, tariffs and restrictions, epidemics and natural disasters.

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To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.

Tariffs, or the threat of tariffs, may also significantly disrupt our ability to offer competitive prices as a result of negatively impacting consumer behavior and the assortment of goods we carry.

Tariffs also can impact our ability or our vendors’ ability to source product efficiently or create other supply chain disruptions.

We may not be able to fully or substantially mitigate the impact of current or future tariffs, pass price increases on to our customers or secure adequate alternative sources of products, which would have a material adverse effect on our business, operating results and financial performance.

Because of our international sourcing, we could be adversely affected by violations of the U.S.

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Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, cash flows and results of operations.

Factors associated with climate change could adversely affect our business.

We use natural gas, propane, diesel oil, refrigerants and electricity in our distribution and sale operations.

Increased government regulations relating to climate change, including regulations designed to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs, which could materially affect our profitability.

Climate change could affect our ability to procure needed commodities at costs and in the quantities that we currently experience.

We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns about climate change and which could face increased regulation Additionally, climate change may be associated with extreme weather conditions and increased frequency of such conditions, such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels, which could cause significant physical and monetary damage to our clubs, including those we recently opened in Florida and Alabama, two states which have experienced such extreme weather conditions in the past several years.

See “Natural disasters and other incidents beyond our control could negatively affect our business, financial condition and results of operations.” for more information.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.

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We estimate the reporting unit’s fair value by estimating the future cash flows of the reporting units to which the goodwill relates, and then we discount the future cash flows at a market-participant-derived weighted-average cost of capital.

The estimates of fair value of the reporting unit is based on the best information available as of the date of the assessment.

The estimates of fair value of the reporting unit is based on the

best information available as of the date of the assessment.

If the carrying value of the reporting unit exceeds its estimated fair value, then goodwill is impaired and is written down to the implied fair value amount.

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If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.

Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

Because our decision to issue securities in any future offering

will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

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We are required to comply with Section 404 of the Sarbanes-Oxley Act, which requires management assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures.

If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements, restrict access to capital markets and adversely impact our stock price.

If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report

financial information accurately and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements, restrict access to capital markets and adversely impact our stock price.

We do not currently expect to pay any cash dividends.

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We use a combination of insurance and self-insurance plans to provide for potential liability for workers’ compensation, general liability, property, cyber, trucking liability, fiduciary liability and employee and retiree health care.

Liabilities associated with the risk retained by the Company are estimated based on historical claims experience and other actuarial assumptions believed to be reasonable under the circumstances.

Our results of operations could be adversely impacted if actual future occurrences and claims differ from our assumptions and historical trends.

Liabilities associated with the risk retained by the Company are estimated based on historical claims experience and other actuarial assumptions believed to be reasonable under the circumstances, but which are subject to a high degree of variability.

To the extent that we are subject to a higher frequency of claims, are subject to more serious claims or insurance coverage is not available, we could have to significantly increase our reserves, and our liquidity and operating results could be materially and adversely affected.

It is also possible that some or all of the insurance that is currently available to us from third parties will not be available in the future on economically reasonable terms or at all.

Certain legal proceedings could adversely impact our results of operations.

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As tax rates vary among jurisdictions, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision.

Additionally, changes in the enacted tax rates, adverse outcomes in tax audits, including potential future transfer pricing disputes, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations.

Additionally, changes in the enacted tax laws, adverse outcomes in tax audits, including potential future transfer pricing disputes, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.

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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-K

Item 1A. Risk Factors