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Item 2. Management’s Discussion and Analysis

2025-05-29 compared with 2024-11-27 · 90 added, 133 removed, 185 unchanged (55% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis is intended to promote an understanding of the results of operations and financial condition of the Company and is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and the related notes thereto in our Annual Report on Form 10-K for fiscal year 2023.

The following discussion and analysis is intended to promote an understanding of the results of operations and financial condition of the Company and is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and the related notes thereto in our Annual Report on Form 10-K for fiscal year 2024.

The following discussion may contain forward-looking statements that reflect our plans, estimates and assumptions.

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We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to the last day of January.

Accordingly, references herein to "fiscal year 2024" relate to the 52 weeks ending February 1, 2025, and references herein to "fiscal year 2023" relate to the 53 weeks ended February 3, 2024.

The third quarter of fiscal year 2024 ended on November 2, 2024, and the third quarter of fiscal year 2023 ended on October 28, 2023, and both include thirteen weeks.

Accordingly, references herein to "fiscal year 2025" relate to the 52 weeks ending January 31, 2026, and references herein to "fiscal year 2024" relate to the 52 weeks ended February 1, 2025.

The first quarter of fiscal year 2025 ended on May 3, 2025, and the first quarter of fiscal year 2024 ended on May 4, 2024, and both included thirteen weeks.

BJ’s Wholesale Club is a leading operator of membership warehouse clubs concentrated primarily in the eastern half of the United States.

We deliver significant value to our members, consistently offering up to 25% savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors.

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.

We provide 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 digital capabilities.

Additionally, we provide access to coupons and promotions to deliver further value to our members.

Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 255 large-format, high volume warehouse clubs and 190 gas stations spanning 21 states as of the date of this filing.

In our core New England market, which has high population density and generates a disproportionate part of U.S.

gross domestic product, we operate more than three times the number of clubs compared to the next largest warehouse club competitor.

In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our buy-online-pickup-in-club ("BOPIC") service, curbside delivery, same-day home delivery or traditional ship-to-home service, as well as through the DoorDash and Instacart marketplaces.

We also offer Same-Day Select, which offers BJ’s members the ability to pay a one-time fee for either unlimited or twelve same-day grocery deliveries over a one-year period.

In our originating New England market, which has high population density and generates a disproportionate part of U.S.

gross domestic product ("GDP"), we operate more than three times the number of clubs compared to the next largest warehouse club competitor.

In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our buy-online-pickup-in-club ("BOPIC") service, curbside delivery, same-day delivery or traditional ship-to-home service, as well as through the DoorDash and Instacart marketplaces.

We also offer Same-Day Select, which offers BJ’s members the ability to pay a one-time fee for either unlimited or twelve same-day deliveries over a one-year period.

Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee.

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The annual membership fee for our Club Card membership is generally $60, and the annual membership fee for our Club+ membership, which offers additional value-enhancing features, is generally $120.

Prior to January 1, 2025, the Club Card and Club+ membership fees were $55 and $110 per year, respectively.

We believe that members can save over ten times their $60 Club Card membership fee versus what they would otherwise pay at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries.

In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality.

Our two private label brands, Wellsley Farms® and Berkley Jensen®, represented approximately $4.1 billion in annual sales for fiscal year 2023.

Our two private label brands, Wellsley Farms® and Berkley Jensen®, represented approximately 26% of our total net sales, excluding gasoline, for fiscal year 2024.

Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 25 consecutive years of membership fee income growth.

Our membership fee income was $447.9 million for the trailing twelve-months ended November 2, 2024.

We announced plans to increase our membership fee effective January 1, 2025.

The Club Card membership fee will increase by $5 to $60 a year.

The Club+ membership fee will increase by $10 to $120 a year.

We believe that these membership fee increases will allow us to invest in an even stronger value proposition for our growing member base.

Our membership fee income was $465.5 million for the trailing twelve-months ended May 3, 2025.

Our business is moderately seasonal in nature.

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In general, positive conditions in the broader economy promote customer spending in our clubs, while economic weakness, which generally results in a reduction of customer spending, may have a different or more extreme effect on spending at our clubs.

Macroeconomic factors that can affect customer spending patterns, and thereby our results of operations, include employment rates, changes to the Supplemental Nutrition Assistance Program (SNAP), government stimulus programs, tax legislation, business conditions, changes in the housing market, the availability of credit, interest rates and inflation, tariffs, tax rates, and fuel and energy costs.

Macroeconomic factors that can affect customer spending patterns, and thereby our results of operations, include, among others, employment rates, changes to the Supplemental Nutrition Assistance Program (SNAP), government stimulus programs, tax legislation, business conditions, changes in the housing market, the availability of credit, interest rates and inflation, tariffs, tax rates, and fuel and energy costs.

In addition, unemployment rates and benefits may cause us to experience higher labor costs.

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Therefore, our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

We have grown our membership fee income each year for over 25 consecutive years and the quality of our membership mix is strong as evidenced by our higher tier penetration growth in the first thirty-nine weeks of fiscal year 2024.

Our tenured membership renewal rate, a key indicator of membership engagement, satisfaction and loyalty, was 90% at the end of fiscal year 2024.

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We have made significant investments in our business that we believe have laid the foundation for continued profitable growth.

We believe that expanding our club footprint, bringing substantially all of our end-to-end perishable supply chain in-house, enhancing our information systems, including our distribution center and transportation management systems, and investing in hardware, software, and digitally enabled shopping capabilities for convenience, such as BOPIC, ExpressPay, curbside pickup, and same- day home delivery will enable us to replicate our profitable club format and provide a differentiated shopping experience.

We believe that expanding our club footprint, bringing substantially all of our end-to-end perishable supply chain in-house, enhancing our information systems, including our distribution center and transportation management systems, and investing in hardware, software, and digitally enabled shopping capabilities for convenience, such as BOPIC, curbside pickup, same-day delivery, ExpressPay, and a digital coupon gallery will enable us to replicate our profitable club format and provide a differentiated shopping experience.

We expect these infrastructure investments to support our successful operating model across our club operations.

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Our financial results can be directly impacted by substantial changes in product costs due to commodity cost fluctuations or general inflation, disinflation, or deflation, which could lead to a reduction in our sales, as well as greater margin pressure, as costs may not be able to be passed on to consumers.

Changes in commodity prices and changes in inflation rates have impacted several categories of our business.

Inflationary volatility can be attributed to macro economic factors including supply chain disruptions, government stimulus, interest rates, and other factors.

Changes in commodity prices and changes in inflation rates have impacted several categories of our business and may continue to do so.

Inflationary volatility can be attributed to macro economic factors including supply chain disruptions, government stimulus, interest rates, tariffs, and other factors.

In response to general inflationary volatility, we seek to minimize the impact of such events by sourcing our merchandise from different vendors, changing our product mix or increasing our pricing when necessary.

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The following table summarizes key components of our results of operations for the periods indicated:

Statement of Operations Data Thirteen Weeks Ended Thirty-nine Weeks Ended

(dollars in thousands, except per share amounts) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Statement of Operations Data Thirteen Weeks Ended

(dollars in thousands, except per share amounts) May 3, 2025 May 4, 2024

Net sales $ 5,033,094 $ 4,807,129

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Interest expense, net 11,099 13,951

Income from continuing operations before income taxes 216,790 181,371 554,514 537,446

Income before income taxes 192,546 146,804

Provision for income taxes 42,778 35,785

Income from continuing operations 155,748 130,467 411,755 377,780

Income from discontinued operations, net of income taxes — — — 89

Net income $ 149,768 $ 111,019

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Merchandise comparable club sales (b)

Adjusted net income (b) (c)

$ 157,254 $ 135,538 $ 416,994 $ 384,688

Adjusted EPS (b) (c)

Adjusted net income (b)

$ 150,875 $ 113,408

Adjusted EBITDA (b) (d)

Adjusted EPS (b)

Adjusted EBITDA (b)

285,836 236,386

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Management’s Discussion and Analysis of Financial Condition and Results of Operations for definitions.

(c) Adjusted net income for the thirteen and thirty-nine weeks ended October 28, 2023 has been recast to include adjustments for restructuring charges, and the corresponding tax impact, to conform to the current period presentation.

(d) Adjusted EBITDA for the thirteen and thirty-nine weeks ended October 28, 2023 has been recast to exclude adjustments for pre-opening expenses and non-cash rent expense to conform to the current period definition, and to include adjustments for restructuring charges to conform to the current period presentation.

Net sales are derived from direct retail sales to our customers, net of merchandise returns and discounts.

Fluctuations in net sales are impacted by opening new clubs and gas stations and comparable club sales.

Net sales for the third quarter of fiscal year 2024 were $5.0 billion, a 3.4% increase from net sales reported for the third quarter of fiscal year 2023 of $4.8 billion.

Net sales for the first nine months of fiscal year 2024 were $14.9 billion, a 4.1% increase from net sales reported for the first nine months of fiscal year 2023 of $14.3 billion.

The increase for both comparative periods was due primarily to traffic and unit growth, particularly in the perishables, grocery, and sundries division, an increase of nine clubs from the prior year period, as well as gasoline sales at our gas stations.

Net sales for the first quarter of fiscal year 2025 were $5.0 billion, a 4.7% increase from net sales reported for the first quarter of fiscal year 2024 of $4.8 billion.

The increase was due primarily to traffic and unit growth, particularly in the perishables, grocery, and sundries division, as well as an increase of 11 clubs from the prior year period, partially offset by a decrease in gasoline sales.

Comparable Club Sales and Merchandise Comparable Club Sales

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The higher comparable club sales, the more we can leverage certain of our selling, general and administrative ("SG&A") expenses, reducing them as a percentage of sales and enhancing profitability.

Thirteen Weeks Ended Thirty-nine Weeks Ended

November 2, 2024 November 2, 2024

Comparable club sales 1.5 % 2.0 %

Impact from gasoline sales 2.3 % 0.3 %

Thirteen Weeks Ended

Merchandise comparable club sales 3.9 %

impact from gasoline sales (2.3) %

Comparable club sales 1.6 %

Merchandise comparable club sales represents comparable club sales from all merchandise other than our gasoline operations for the applicable period.

Merchandise comparable club sales increased 3.8% in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023, primarily driven by increased sales of perishables with sales of general merchandise and services remaining relatively flat.

Additionally, we estimate that an increase in sales, temporarily driven by a port strike and recent hurricanes, had a favorable impact of slightly less than one percentage point on its third quarter sales.

In the perishables, grocery, and sundries division, growth was led by fresh produce, dairy, fresh beef and poultry, beverages, candy, snacks, nutrition, vitamins, packaged goods, household cleaning, and paper categories when compared to the third quarter of fiscal year 2023, slightly offset by decreased demand for alcohol.

General merchandise and services remained flat in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023, with the continued strength in home and seasonal categories, offset by decreased sales in apparel and electronics.

The impact of gasoline sales is a result of a decrease in retail prices year over year, partially offset by an increase in comparable gallons sold in the third quarter of fiscal 2024 as compared to the third quarter of fiscal year 2023.

Merchandise comparable club sales increased by 2.3% in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 driven by increased sales of groceries, partially offset by decreased sales of general merchandise and services.

In the perishables, grocery, and sundries division, growth was led by fresh produce, dairy, nutrition, beverages, fresh beef, and paper categories when compared to the first nine months of fiscal year 2023, partially offset by a decrease in sales of candy, snacks, and alcohol.

General merchandise and services decreased in the first nine months of fiscal 2024 as compared to the first nine months of fiscal year 2023, primarily driven by the impact of our co-brand credit card economics as we cycled past the anniversary of the rebranded program launch in the first quarter of fiscal year 2023, as well as lower consumer spending in certain seasonal categories.

The impact of gasoline sales is a result of a decrease in retail prices year over year, partially offset by an increase in comparable gallons sold in the first nine months of fiscal 2024 as compared to the first nine months of fiscal year 2023.

Merchandise comparable club sales increased 3.9% in the first quarter of fiscal year 2025 compared to the first quarter of fiscal year 2024, primarily driven by increased sales in the perishables, grocery, and sundries division, partially offset by a slight decline in sales of general merchandise and services compared to the prior year period.

In the perishables, grocery, and sundries division, growth was led by fresh meat and produce, dairy, candy, snacks, nutrition, household cleaning, and paper categories when compared to the first quarter of fiscal year 2024, slightly offset by decreased demand for alcohol.

General merchandise and services declined in the first quarter of fiscal year 2025 compared to the first quarter of fiscal year 2024 due primarily to decreases in large ticket discretionary items in home and seasonal categories, partially offset by increases in consumer electronics, toys, and apparel.

The impact of gasoline sales is a result of a decrease in retail prices year over year, partially offset by an increase in comparable gallons sold in the first quarter of fiscal 2025 as compared to the first quarter of fiscal year 2024.

Membership fee income

Membership fee income was $115.0 million in the third quarter of fiscal year 2024 compared to $106.1 million in the third quarter of fiscal year 2023, an 8.4% increase.

Membership fee income was $339.5 million in the first nine months of fiscal year 2024 compared to $312.3 million in the first nine months of fiscal year 2023, an 8.7% increase.

The increase for both comparative periods was primarily driven by strength in membership acquisition and retention across both new and existing clubs.

We continued to add new members from our four new club openings in fiscal year 2024 as well as the five new clubs that opened in the fourth quarter of fiscal year 2023.

As noted above, we announced an increase in membership fees effective January 1, 2025 which we anticipate will positively impact membership fee income in fiscal year 2025.

Membership fee income was $120.4 million in the first quarter of fiscal year 2025 compared to $111.4 million in the first quarter of fiscal year 2024, an 8.1% increase.

The increase was primarily driven by strength in membership acquisition, retention and higher tier membership penetration across both new and existing clubs, as well as the increase in annual membership fees which became effective in January 2025.

We anticipate the annual membership fee increase will positively impact membership fee income for the remainder of fiscal 2025.

Cost of sales

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and vendor allowances, rebates, and cash discounts.

Cost of sales was $4.1 billion, or 82.7% of net sales, in the third quarter of fiscal year 2024 compared to $4.0 billion, or 83.5% of net sales, in the third quarter of fiscal year 2023.

Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 20 basis points compared to the prior year period, primarily driven by the continued execution of our long-term initiatives and improved cost management.

Cost of sales was $12.4 billion, or 83.4% of net sales, in the first nine months of fiscal year 2024 compared to $11.9 billion, or 83.4% of net sales, in the first nine months of fiscal year 2023.

Merchandise gross margin rate, which excludes gasoline sales and membership fee income, remained flat compared to the first nine months of fiscal year 2023.

Cost of sales was $4.2 billion, or 83.1% of net sales, in the first quarter of fiscal year 2025 compared to $4.0 billion, or 83.9% of net sales, in the first quarter of fiscal year 2024.

Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 30 basis points compared to the prior year period.

The Company continues to manage the business to drive profitable growth across the broader merchandise assortment.

Selling, general and administrative expenses

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SG&A includes both fixed and variable components and, therefore, is not directly correlated with net sales.

We expect that our SG&A will increase in future periods due to investments to drive comparable club sales growth and our expanding footprint as we open new clubs.

We expect that our SG&A will increase in future periods due to investments to drive comparable club sales growth and our expanding footprint as we open new clubs and distribution centers.

In addition, any future increases in wages or stock-based grants or modifications will increase our SG&A.

SG&A increased by 5.2% to $733.6 million in the third quarter of fiscal year 2024 from $697.1 million in the third quarter of fiscal year 2023.

SG&A increased by 6.0% to $2.2 billion in the first nine months of fiscal year 2024 from $2.1 billion in the first nine months of fiscal year 2023.

The increase in SG&A for both comparative periods was primarily driven by increased labor and occupancy costs as a result of new club and gas station openings in addition to other investments to drive strategic priorities, such as the restructuring of certain corporate functions, and an increase in accrued incentive compensation.

Additionally, an increase in the number of owned clubs has resulted in increased depreciation expense.

The increases in SG&A were partially offset by the favorable net impact of legal settlements reached of approximately $20 million during the third quarter of fiscal year 2024.

SG&A increased by 5.4% to $760.9 million in the first quarter of fiscal year 2025 from $721.8 million in the first quarter of fiscal year 2024.

The increase in SG&A was primarily driven by increased labor and occupancy costs as a result of new club and gas station openings.

Additionally, an increase in the number of owned clubs has resulted in increased depreciation expense year-over-year.

We remain focused on investing in member engagement, marketing, and digital strategies.

Pre-opening expenses

Pre-opening expenses include startup costs for new clubs and costs for relocated clubs.

Pre-opening expenses include startup costs for new clubs and distribution centers and costs for relocated clubs.

Expenses will vary based on the number of club openings, geography of the club, whether the club is owned or leased, and timing of the opening relative to our period end.

Pre-opening expenses were $12.5 million in the third quarter of fiscal year 2024 compared to $6.0 million in the third quarter of fiscal year 2023.

Pre-opening expenses were $16.0 million in the first nine months of fiscal year 2024 compared to $11.5 million in the first nine months of fiscal year 2023.

Pre-opening expenses fluctuated due to timing of spend and the number of club openings year-over-year for both comparative periods.

Pre-opening expenses were $5.0 million in the first quarter of fiscal year 2025 compared to $0.9 million in the first quarter of fiscal year 2024.

Pre-opening expenses fluctuated due to timing of spend and the number of club openings year-over-year.

Interest expense, net

Interest expense, net was $12.6 million in the third quarter of fiscal year 2024 compared to $18.0 million in the third quarter of fiscal year 2023.

Interest expense, net was $39.3 million in the first nine months of fiscal year 2024 compared to $49.0 million in the first nine months of fiscal year 2023.

The decrease for both comparative periods was primarily due to a reduction in outstanding borrowings, fluctuations in interest rates year-over-year, and a decrease in debt extinguishment charges as the third quarter of fiscal year 2023 included charges related to the Fourth Amendment of the First Lien Term Loan.

Interest expense, net was $11.1 million in the first quarter of fiscal year 2025 compared to $14.0 million in the first quarter of fiscal year 2024.

The decrease was primarily due to a reduction in outstanding borrowings as well as fluctuations in interest rates year-over-year.

Provision for income taxes

The effective income tax rate from continuing operations was 28.2% and 28.1% for the third quarter of fiscal years 2024 and 2023, respectively.

The increase in the effective income tax rate was primarily driven by lower tax benefits from stock-based compensation in the current year period.

The effective income tax rate from continuing operations was 25.7% and 29.7% for the first nine months of fiscal years 2024 and 2023, respectively.

The effective income tax rate was 22.2% and 24.4% for the first quarter of fiscal years 2025 and 2024, respectively.

The decrease in the effective income tax rate was primarily driven by higher tax benefits from stock-based compensation in the current year period.

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Adjusted free cash flow is discussed within the Liquidity and Capital Resources section below.

Adjusted Net Income

Adjusted Net Income and Adjusted EPS

The adjusted net income and adjusted EPS metrics are important measures used by management to compare the performance of core operating results between periods.

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We also use adjusted EPS in connection with establishing long-term incentive compensation.

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands, except per share amounts) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

(in thousands, except per share amounts) May 3, 2025 May 4, 2024

Net income as reported $ 149,768 $ 111,019

Charges related to debt (a)

— 1,830 — 1,830

Restructuring (b)

2,091 5,213 7,276 8,427

Other adjustments (c)

Tax impact of adjustments to net income (d)

(585) (1,972) (2,037) (2,652)

Adjusted net income (e)

$ 157,254 $ 135,538 $ 416,994 $ 384,688

Restructuring (a)

Tax impact of adjustments to net income (b)

Adjusted net income $ 150,875 $ 113,408

Weighted-average diluted shares outstanding 132,749 134,111

Adjusted EPS (e) (f)

Adjusted EPS (c)

$ 1.14 $ 0.85

(a) Represents the expensing of fees and deferred fees and original issue discount associated with the amendment of the senior secured first lien term loan in fiscal 2023.

(b) Represents charges related to the restructuring of certain corporate functions, including costs for severance, retention, outplacement, consulting fees, and other third-party fees.

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

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

(e) Adjusted net income for the thirteen and thirty-nine weeks ended October 28, 2023 has been recast to include adjustments for restructuring charges, and the corresponding tax impact, to conform to the current period presentation.

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

(a) Represents charges related to the restructuring of certain corporate functions, including costs for severance, retention, outplacement, consulting fees, and other third-party fees.

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

Adjusted EBITDA

Adjusted EBITDA is defined as income from continuing operations before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense, restructuring, and other adjustments.

Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense, restructuring, and other adjustments.

We believe that adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments.

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We also use adjusted EBITDA in connection with establishing annual incentive compensation.

The following is a reconciliation of our income from continuing operations to adjusted EBITDA and adjusted EBITDA as a percentage of net sales for the periods presented:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Income from continuing operations $ 155,748 $ 130,467 $ 411,755 $ 377,780

The following is a reconciliation of our net income to adjusted EBITDA for the periods presented:

Thirteen Weeks Ended

(in thousands) May 3, 2025 May 4, 2024

Net income $ 149,768 $ 111,019

Interest expense, net 11,099 13,951

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Restructuring (a)

2,091 5,213 7,276 8,427

Other adjustments (b)

425 364 1,060 1,112

Adjusted EBITDA (c)

$ 308,292 $ 271,738 $ 826,027 $ 791,385

Adjusted EBITDA as a percentage of net sales 6.2 % 5.6 % 5.5 % 5.5 %

Adjusted EBITDA $ 285,836 $ 236,386

( a) Represents charges related to the restructuring of certain corporate functions, including costs for severance, retention, outplacement, consulting fees, and other third-party fees.

Adjusted EBITDA for the thirteen and thirty-nine weeks ended October 28, 2023 has been recast to include adjustments for restructuring charges to conform to the current period presentation.

(b) Other non-cash items, including non-cash accretion on asset retirement obligations and obligations associated with our post-retirement medical plan.

(c) Adjusted EBITDA for the thirteen and thirty-nine weeks ended October 28, 2023 has been recast to exclude adjustments for pre-opening expenses and non-cash rent to conform to the current period definition.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows generated from club operations and borrowings from our ABL Revolving Facility.

As of November 2, 2024, cash and cash equivalents totaled $33.9 million and we had $942.2 million of unused capacity under our ABL Revolving Facility.

As of May 3, 2025, cash and cash equivalents totaled $39.5 million and we had $1.0 billion of unused capacity under our ABL Revolving Facility.

Our principal liquidity needs for the next twelve months and beyond are to fund normal recurring operational expenses and anticipated capital expenditures, fund share repurchases, and meet debt service and principal repayment obligations.

We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under our ABL Revolving Facility, will be sufficient to finance our operations for at least the next twelve months.

In the first nine months of fiscal year 2024, we repurchased 1,536,591 shares under the 2021 Repurchase Program for a total purchase price of $129.3 million, inclusive of associated costs.

In the first three months of fiscal year 2025, we repurchased 55,000 shares under the 2024 Repurchase Program for a total purchase price of $6.2 million, inclusive of associated costs.

We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have, a current or future material effect on our results of operations or financial position.

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A summary of our cash flows from operating, investing and financing activities is presented in the following table:

Thirty-nine Weeks Ended

(in thousands) November 2, 2024 October 28, 2023

Thirteen Weeks Ended

(in thousands) May 3, 2025 May 4, 2024

Net cash provided by operating activities $ 208,093 $ 200,847

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Net cash used in financing activities (54,590) (96,061)

Net decrease in cash and cash equivalents $ (2,176) $ (364)

Net increase (decrease) in cash and cash equivalents $ 11,212 $ (955)

Net Operating Cash Flows

Net cash provided by operating activities was $629.0 million for the first nine months of fiscal year 2024 compared to $444.5 million for the first nine months of fiscal year 2023.

The $184.4 million increase was primarily due to fluctuations in working capital, including $113.9 million related to accounts payable as a result of timing of inventory receipts and vendor payments;

$51.6 million related to accrued expenses, primarily driven by the change in accrued incentive compensation as a result of differences in the expected achievement from period-to-period;

Net cash provided by operating activities was $208.1 million for the first three months of fiscal year 2025 compared to $200.8 million for the first three months of fiscal year 2024.

The increase was primarily due to a $38.7 million increase in net income, inclusive of a $6.2 million increase in depreciation and amortization and a net decrease in deferred income tax provision of $6.3 million.

Also contributing to the increase in net operating cash flows were fluctuations in working capital, including $36.2 million related to accounts receivable due to timing of vendor and customer cash receipts;

$20.4 million related to merchandise inventories, primarily driven by changes in inventory levels in our perishables, grocery, and sundries divisions;

partially offset by $56.2 million related to accounts receivable due to timing of vendor and customer cash receipts.

Also contributing to the increase in net operating cash flows was an $33.9 million increase in net income, inclusive of a $27.8 million increase in depreciation and amortization and a net decrease in deferred income tax provisions of $22.3 million.

offset by $79.2 million related to accounts payable as a result of timing of inventory receipts and vendor payments, as well as $27.3 million of lease-related activity primarily due to an increase in prepaid rent based on the timing of quarter-end.

Our net cash from operating activities can fluctuate from period to period due to several factors, including:

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Net Investing Cash Flows

Net cash used in investing activities was $427.6 million for the first nine months of fiscal year 2024, compared to $335.6 million for the first nine months of fiscal year 2023.

This fluctuation is primarily driven by an increase in capital spending of $79.6 million primarily due to an increase in the number clubs under construction.

Net cash used in investing activities was $142.3 million for the first three months of fiscal year 2025 compared to $105.7 million for the first three months of fiscal year 2024.

This fluctuation is primarily driven by an increase in capital spending of $34.8 million as we continue to execute on our growth strategy with new clubs in our pipeline.

Net Financing Cash Flows

Net cash used in financing activities for the first nine months of fiscal year 2024 was $203.6 million, compared to $109.3 million for the first nine months of fiscal year 2023.

The increase in cash used is primarily due to a $103.0 million increase in net payments on our ABL Revolving Facility , as well as an increased outflow of $56.2 million for the acquisition of treasury stock compared to the prior year period;

partially offset by a $50.0 million net decrease in principal payments on our First Lien Term Loan, and by an increase in net cash received from stock option exercises of $13.1 million.

Net cash used in financing activities for the first three months of fiscal year 2025 was $54.6 million compared to $96.1 million for the first three months of fiscal year 2024.

The decrease in cash used is primarily due to a $24.0 million decrease in net payments on our ABL Revolving Facility and a $16.0 million decrease in the acquisition of treasury stock compared to the prior year period.

Adjusted Free Cash Flow

We present adjusted free cash flow because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity.

We present adjusted free cash flow because we believe it assists investors and analysts in evaluating our liquidity.

Adjusted free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure.

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The following is a reconciliation of our net cash provided by operating activities to adjusted free cash flow for the periods presented:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

(in thousands) May 3, 2025 May 4, 2024

Net cash provided by operating activities $ 208,093 $ 200,847

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Adjusted free cash flow $ 67,596 $ 95,106

Adjusted free cash flow decreased to $18.8 million for the third quarter of fiscal year 2024 compared to $47.6 million for the third quarter of fiscal year 2023.

This decrease in adjusted free cash flow is primarily the result of an increase in capital spending, partially offset by higher cash flows from operating activities due to favorable fluctuations in working capital and higher net income.

Adjusted free cash flow increased to $201.4 million for the first nine months of fiscal year 2024 compared to $108.9 million for the first nine months of fiscal year 2023.

This increase is primarily the result of higher cash flows from operating activities due to favorable fluctuations in working capital and higher net income, partially offset by an increase in capital spending.

Adjusted free cash flow decreased to $67.6 million for the first quarter of fiscal year 2025 compared to $95.1 million for the first quarter of fiscal year 2024.

This decrease in adjusted free cash flow is primarily the result of an increase in capital spending, partially offset by higher cash flows from operating activities primarily due to higher net income.

Debt and Borrowing Capacity

Our primary sources of borrowing capacity are the ABL Revolving Facility and the First Lien Term Loan, which are further discussed in Note 4 , "Debt and Credit Arrangements," included in this Quarterly Report on Form 10-Q.

Our primary source of borrowing capacity is the ABL Revolving Facility, which is further discussed in Note 4 , "Debt and Credit Arrangements," included in this Quarterly Report on Form 10-Q.

On July 28, 2022, we entered into the ABL Revolving Facility with an aggregate ABL Revolving Commitment of $1.2 billion pursuant to that certain credit agreement with Bank of America, N.A., as administrative agent and collateral agent, and other lenders party thereto.

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

On October 12, 2023, we amended the First Lien Term Loan to extend the maturity date from February 3, 2027 to February 3, 2029 and reduce 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.

At 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 revolving credit facility was 5.77% and unused capacity was $942.2 million.

At November 2, 2024, the interest rate for the First Lien Term Loan was 6.76% and there was $400.0 million outstanding.

On November 4, 2024, we entered into the Fifth Amendment with Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent, and the lenders party thereto.

On November 4, 2024, we entered into the Fifth Amendment of the First Lien Term Loan 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.

The maturity date of the First Lien Term Loan is February 3, 2029.

At May 3, 2025, there was $150.0 million outstanding in loans under the ABL Revolving Facility and $13.5 million in outstanding letters of credit.

The interest rate on the revolving credit facility was 5.42% and unused capacity was $1.0 billion.

At May 3, 2025, the interest rate for the First Lien Term Loan was 6.07% and there was $400.0 million outstanding.

Material Cash Commitments

Our material cash commitments consist primarily of debt obligations, interest payments, leases, and purchase orders for merchandise inventory, agreements for capital items, gasoline, products and services used in our business, information technology, and executive employment.

These material cash commitments impact our short-term and long-term liquidity and capital needs.

As of November 2, 2024, other than those items related to the ordinary course of operations of our business such as inventory purchases, agreements for capital items, and new leases and lease amendments, there were no material changes to our material cash commitments from those described in our Annual Report on Form 10-K for fiscal year 2023.

As of May 3, 2025, other than those items related to the ordinary course of operations of our business such as inventory purchases, agreements for capital items, and new leases and lease amendments, there were no material changes to our material cash commitments from those described in our Annual Report on Form 10-K for fiscal year 2024.

Critical Accounting Policies and Use of Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis