What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-28 compared with 2025-05-29 · 70 added, 51 removed, 224 unchanged (35% of the section changed)

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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.

The second quarter of fiscal year 2025 ended on August 2, 2025, and the second quarter of fiscal year 2024 ended on August 3, 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.

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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.

We also offer Same-Day Select, which offers BJ’s members the ability to pay a one-time fee for unlimited 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.

We have over 7.5 million members p aying annual fees to gain access to savings on groceries, general merchandise, services, and gasoline.

We have approximately 8 million members p aying annual fees to gain access to savings on groceries, general merchandise, services, and gasoline.

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.

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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 $465.5 million for the trailing twelve-months ended May 3, 2025.

Our membership fee income was $475.7 million for the trailing twelve-months ended August 2, 2025.

Our business is moderately seasonal in nature.

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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 thirteen weeks of fiscal year 2025.

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, 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 believe that expanding our club footprint, having 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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The following table summarizes key components of our results of operations for the periods indicated:

Statement of Operations Data Thirteen Weeks Ended

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

Statement of Operations Data Thirteen Weeks Ended Twenty-six Weeks Ended

(dollars in thousands, except per share amounts) August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Net sales $ 5,256,907 $ 5,092,279 $ 10,290,001 $ 9,899,408

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Adjusted EPS (b)

1.14 1.09 2.28 1.94

Adjusted EBITDA (b)

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

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.

Net sales for the second quarter of fiscal year 2025 were $5.3 billion, a 3.2% increase from net sales reported for the second quarter of fiscal year 2024 of $5.1 billion.

Net sales for the first six months of fiscal year 2025 were $10.3 billion, a 3.9% increase from net sales reported for the first six months of fiscal year 2024 of $9.9 billion.

The increase for both comparative periods was due primarily to traffic and unit growth, particularly in the perishables, grocery, and sundries division, as well as a net increase of 11 clubs from the prior year period, partially offset by a decrease in the average retail price-per-gallon of gasoline.

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

Thirteen Weeks Ended Twenty-six Weeks Ended

August 2, 2025 August 2, 2025

Merchandise comparable club sales 2.3 % 3.1 %

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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 3.9% 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.

Merchandise comparable club sales increased 2.3% and 3.1% in the second quarter and the first six months of fiscal year 2025, respectively, compared to the same periods in fiscal year 2024, primarily driven by increased sales in the perishables, grocery, and sundries division, partially offset by a decline in sales of general merchandise and services.

In the perishables, grocery, and sundries division, growth was led by fresh meat and produce, dairy, candy, and snack categories when compared to the second quarter and the first six months of fiscal year 2024, partially offset by decreased demand for alcohol.

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

The impact of gasoline sales is primarily a result of a decrease in retail prices year over year for both comparative periods.

Comparable gallons sold remained flat in the second quarter of fiscal year 2025 compared to the second quarter of fiscal year 2024, while total gallons sold in the first six months of fiscal year 2025 increased compared to the first six months of fiscal year 2024.

Membership fee income

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.

Membership fee income was $123.3 million in the second quarter of fiscal year 2025 compared to $113.1 million in the second quarter of fiscal year 2024, a 9.0% increase.

Membership fee income was $243.7 million in the first six months of fiscal year 2025 compared to $224.5 million in the first six months of fiscal year 2024, an 8.6% increase.

The increase for both comparative periods 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.

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and vendor allowances, rebates, and cash discounts.

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.

Cost of sales was $4.4 billion, or 83.2% of net sales, in the second quarter of fiscal year 2025 compared to $4.2 billion, or 83.4% of net sales, in the second quarter of fiscal year 2024.

Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 10 basis points compared to the prior year period.

Cost of sales was $8.6 billion, or 83.2% of net sales, in the first six months of fiscal year 2025 compared to $8.3 billion, or 83.7% of net sales, in the first six months of fiscal year 2024.

Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 20 basis points compared to the first six months of fiscal year 2024.

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

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

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.

SG&A increased by 4.8% to $786.4 million in the second quarter of fiscal year 2025 from $750.3 million in the second quarter of fiscal year 2024.

SG&A increased by 5.1% to $1.55 billion in the first six months of fiscal year 2025 from $1.47 billion in the first six months of fiscal year 2024.

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.

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

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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 $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 were $3.3 million in the second quarter of fiscal year 2025 compared to $2.6 million in the second quarter of fiscal year 2024.

Pre-opening expenses were $8.3 million in the first six months of fiscal year 2025 compared to $3.4 million in the first six months 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 $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.

Interest expense, net was $10.4 million in the second quarter of fiscal year 2025 compared to $12.8 million in the second quarter of fiscal year 2024.

Interest expense, net was $21.5 million in the first six months of fiscal year 2025 compared to $26.7 million in the first six months of fiscal year 2024.

The decrease for both comparative periods 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 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.

The effective income tax rate was 26.9% and 24.1% for the second quarter of fiscal years 2025 and 2024, respectively.

The effective income tax rate was 24.6% and 24.2% for the first six months of fiscal years 2025 and 2024, respectively.

The increase in the effective income tax rate for both comparative periods was primarily driven by a decrease in tax benefits from stock-based compensation compared to the prior year period.

Non-GAAP Financial Measures

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

Thirteen Weeks Ended

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

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands, except per share amounts) August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Net income as reported $ 150,705 $ 144,988 $ 300,473 $ 256,007

Restructuring (a)

1,043 1,878 2,580 5,185

Tax impact of adjustments to net income (b)

(292) (534) (722) (1,452)

Adjusted net income $ 151,456 $ 146,332 $ 302,331 $ 259,740

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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

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Net income $ 150,705 $ 144,988 $ 300,473 $ 256,007

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Restructuring (a)

1,043 1,878 2,580 5,185

Other adjustments (b)

410 323 745 635

Adjusted EBITDA $ 303,861 $ 281,349 $ 589,697 $ 517,735

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Our primary sources of liquidity are cash flows generated from club operations and borrowings from 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.

As of August 2, 2025, cash and cash equivalents totaled $47.3 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 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.

In the first six months of fiscal year 2025, we repurchased 430,000 shares under the 2024 Repurchase Program for a total purchase price of $47.4 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:

Thirteen Weeks Ended

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

Twenty-six Weeks Ended

(in thousands) August 2, 2025 August 3, 2024

Net cash provided by operating activities $ 457,957 $ 422,198

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Net cash used in financing activities (132,800) (180,569)

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

Net increase in cash and cash equivalents $ 19,001 $ 2,009

Net Operating Cash Flows

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;

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.

Net cash provided by operating activities was $458.0 million for the first six months of fiscal year 2025 compared to $422.2 million for the first six months of fiscal year 2024.

The increase was primarily due to a $44.5 million increase in net income, inclusive of a $13.0 million increase in depreciation and amortization.

Also impacting net operating cash flows were fluctuations in working capital, including a positive impact of $79.7 million related to merchandise inventories, primarily driven by changes in inventory levels in our general merchandise and grocery divisions, and $32.2 million related to accounts receivable due to timing of vendor and customer cash receipts;

offset by $91.8 million related to accounts payable as a result of timing and volume of inventory purchases and vendor payments;

$43.4 million related to accrued expenses, primarily driven by accruals for vendor invoices and the change in accrued incentive compensation as a result of differences in the expected achievement from period-to-period;

and $28.7 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:

the timing and mix of sales, which are typically higher in the second and fourth quarters due to seasonality;

the timing of inventory purchases as the Company prepares for holiday seasons;

the timing and volume of inventory purchases as the Company prepares for holiday seasons;

lease-related activity;

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Net Investing Cash Flows

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.

Net cash used in investing activities was $306.2 million for the first six months of fiscal year 2025 compared to $239.6 million for the first six months of fiscal year 2024.

This fluctuation is primarily driven by an increase in capital spending of $66.4 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 three months of fiscal year 2025 was $54.6 million compared to $96.1 million for the first three months of fiscal year 2024.

Net cash used in financing activities for the first six months of fiscal year 2025 was $132.8 million compared to $180.6 million for the first six months of fiscal year 2024.

The decrease in cash used is primarily due to a $32.0 million decrease in net payments on our ABL Revolving Facility and a $17.1 million decrease in the acquisition of treasury stock compared to the prior year period.

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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

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

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Net cash provided by operating activities $ 249,864 $ 221,351 $ 457,957 $ 422,198

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Adjusted free cash flow $ 87,291 $ 87,472 $ 154,887 $ 182,578

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.

Adjusted free cash flow remained relatively flat for the second quarter of fiscal year 2025 compared to the second quarter of fiscal year 2024.

Adjusted free cash flow decreased to $154.9 million for the first six months of fiscal year 2025 compared to $182.6 million for the first six months of fiscal year 2024.

The fluctuations are primarily the result of an increase in capital spending, partially offset by higher cash flows from operating activities driven by higher net income.

Debt and Borrowing Capacity

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.

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.

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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.

At August 2, 2025, there was $105.0 million outstanding in loans under the ABL Revolving Facility and $19.6 million in outstanding letters of credit.

The interest rate on the revolving credit facility was 5.45% 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.

At August 2, 2025, the interest rate for the First Lien Term Loan was 5.88% and there was $400.0 million outstanding.

Material Cash Commitments

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

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.

As of August 2, 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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There were no material changes in critical accounting policies and estimates during the period covered by this Quarterly Report on Form 10-Q.

Refer to Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Estimates," in our Annual Report on Form 10-K for fiscal year 2024 for a complete list of our Critical Accounting Policies and Estimates.

Refer to “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Estimates,” in our Annual Report on Form 10-K for fiscal year 2024 for a complete list of our Critical Accounting Policies and Estimates.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis