Strong second quarter earnings driven by growth in market share, traffic, and margins

Second Quarter Fiscal 2023 Highlights

• Comparable club sales, excluding gasoline sales, increased by 1.1% year-over-year
• Digitally enabled comparable sales growth was 15.0% year-over-year
• Membership fee income increased by 5.0% year-over-year to $103.7 million
• Merchandise gross margin rate increased by 90 basis points year-over-year
• Earnings per diluted share and adjusted earnings per diluted share of $0.97
• Income from continuing operations of $131.3 million
• Adjusted EBITDA of $268.8 million
• The Company opened one new club and one new gas station

BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) (the "Company") today announced its financial results for the thirteen weeks and twenty-six weeks ended July 29, 2023.

“Our strong performance in the second quarter reflects our continued gains in membership, traffic and market share, driven by the great value that we provide our members every day,” said Bob Eddy, Chairman and Chief Executive Officer, BJ’s Wholesale Club. “We continue to balance gross margins with investments in value and in growing the size and quality of our membership with an eye toward the future. I’m proud of the team’s execution in the quarter and believe that we are well-positioned for continued growth.”

Key Measures for the Thirteen Weeks Ended July 29, 2023 (Second Quarter Fiscal 2023) and for the Twenty-six Weeks Ended July 29, 2023, (First Half of Fiscal 2023):

Additional Highlights:

• Total comparable club sales decreased by 5.3% in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Excluding the impact of gasoline sales, comparable club sales increased by 1.1% in the second quarter of fiscal 2023 compared to the same period in fiscal 2022. Total comparable club sales decreased by 1.9% in the first half of fiscal 2023 compared to the first half of fiscal 2022. Excluding the impact of gasoline sales, comparable club sales increased by 3.3% in the first half of fiscal 2023 compared to the first half of fiscal 2022.

• Gross profit increased to $896.8 million in the second quarter of fiscal 2023 from $860.0 million in the second quarter of fiscal 2022. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased by 90 basis points over the same quarter of fiscal 2022. Gross profit increased to $1,776.8 million in the first half of fiscal 2023 from $1,651.2 million in the first half of fiscal 2022. Merchandise gross margin rate increased by 100 basis points in the first half of fiscal 2023. Merchandise margins were positively impacted by disinflation, moderated supply chain costs and improved inventory management for both comparative periods.

• Selling, general and administrative expenses ("SG&A") increased to $695.0 million in the second quarter of fiscal 2023 compared to $651.2 million in the second quarter of fiscal 2022. SG&A increased to $1,384.3 million in the first half of fiscal 2023 compared to $1,287.2 million in the first half of fiscal 2022. The increase in 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.

• Income from continuing operations before income taxes decreased to $184.0 million in the second quarter of fiscal 2023 compared to $192.0 million in the second quarter of fiscal 2022. Income from continuing operations before income taxes increased to $356.1 million in the first half of fiscal 2023 compared to $334.5 million in the first half of fiscal 2022.

• The effective tax rate increased to 28.6% in the second quarter of fiscal 2023 compared to 26.6% in the second quarter of fiscal 2022. Income tax expense increased to $52.7 million in the second quarter of fiscal 2023 compared to $51.0 million in the second quarter of fiscal 2022. The effective tax rate increased to 30.5% in the first half of fiscal 2023 compared to 24.2% in the first half of fiscal 2022. Income tax expense increased to $108.8 million in the first half of fiscal 2023 compared to $81.0 million in the first half of fiscal 2022. Lower excess tax benefits from stock-based compensation and lower tax credits resulted in increases in the effective tax rates for the second quarter and first half of fiscal 2023. The effective tax rate for the first half of fiscal 2023 was also impacted by an immaterial adjustment to certain deferred tax assets related to prior periods.

• Net income decreased to $131.3 million in the second quarter of fiscal 2023 compared to $141.0 million in the second quarter of fiscal 2022. Net income decreased to $247.4 million in the first half of fiscal 2023 compared to $253.5 million in the first half of fiscal 2022.

• Adjusted EBITDA decreased by 1.8% to $268.8 million in the second quarter of fiscal 2023 compared to $273.7 million in the second quarter of fiscal 2022. Adjusted EBITDA increased by 6.3% to $525.7 million in the first half of fiscal 2023 compared to $494.5 million in the first half of fiscal 2022.

• Under its existing share repurchase program, the Company repurchased 715,122 shares of common stock, totaling $44.6 million in the second quarter of fiscal 2023. In the first half of fiscal 2023, the Company repurchased 919,162 shares of common stock, totaling $59.9 million, under such program.

Fiscal 2023 Ending February 3, 2024 Outlook

“As we look ahead, we remain confident in our ability to maintain the momentum in our traffic and market share gains due to our unrelenting focus on value. However, we also continue to navigate shifts in consumer behavior driven by the broader macroeconomic environment. As a result, we are refining our outlook for the rest of the fiscal year,” said Laura Felice, Executive Vice President, Chief Financial Officer, BJ's Wholesale Club. “For fiscal 2023, we expect our comparable club sales, excluding the impact of gasoline sales, to increase approximately 2% year-over-year. We expect our fiscal 2023 membership fee income to increase approximately 5% year-over-year and merchandise gross margins to improve by approximately 50 basis points year-over-year. Finally, we expect fiscal 2023 GAAP and adjusted EPS to be in the $3.80 to $3.92 range.”

Conference Call Details

A conference call to discuss the second quarter of fiscal 2023 financial results is scheduled for today, August 22, 2023, at 8:00 A.M. Eastern Time. The live audio webcast of the call can be accessed under the “Events & Presentations” section of the Company’s investor relations website at https://investors.bjs.com and will remain available for one year. Participants may also dial (833) 470-1428 within the U.S. or (929) 526-1599 outside the U.S. and reference conference ID 078818. A telephonic replay will be available two hours after the conclusion of the call for one week and can be accessed by dialing (929) 458-6194 or (866) 813-9403 and referencing conference ID 519735.

About BJ’s Wholesale Club Holdings, Inc.

BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) is a leading operator of membership warehouse clubs focused on delivering significant value to its members and serving a shared purpose: “We take care of the families who depend on us.” The Company provides a curated assortment of grocery, general merchandise, gasoline and ancillary services to offer a differentiated shopping experience that is further enhanced by its omnichannel capabilities. Headquartered in Marlborough, Massachusetts, the Company pioneered the warehouse club model in New England in 1984 and currently operates 238 clubs and 168 BJ's Gas^® locations in 19 states. For more information, please visit us at www.bjs.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our strategic priorities; our anticipated fiscal 2023 outlook; and our future progress, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: uncertainties in the financial markets, including, without limitation, as a result of disruptions and instability in the banking and financial services industries, consumer and small business spending patterns and debt levels; our dependence on having a large and loyal membership; domestic and international economic conditions, including inflation and exchange rates; our ability to procure the merchandise we sell at the best possible prices; the effects of competition and regulation; our dependence on vendors to supply us with quality merchandise at the right time and at the right price; breaches of security or privacy of member or business information; conditions affecting the acquisition, development, ownership or use of real estate; our capital spending; actions of vendors; our ability to attract and retain a qualified management team and other team members; costs associated with employees (generally including health care costs), energy and certain commodities, geopolitical conditions (including tariffs); changes in our product mix or in our revenues from gasoline sales; our failure to successfully maintain a relevant omnichannel experience for our members; risks related to our growth strategy to open new clubs; risks related to our e-commerce business; our ability to grow our BJ's One Mastercard® program; and other important factors discussed under the caption “Risk Factors” in our Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2023, and subsequent filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, unless required by law, we disclaim any obligation to do so, even if subsequent events cause our views to change. Thus, one should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Non-GAAP Financial Measures

We refer to certain financial measures that are not recognized under United States generally accepted accounting principles (“GAAP”). Please see “Note Regarding Non-GAAP Financial Information" and “Reconciliation of GAAP to Non-GAAP Financial Information” below for additional information and a reconciliation of the Non-GAAP financial measures to the most comparable GAAP financial measures.

Note Regarding Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with GAAP, including adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to last twelve months (“LTM”) adjusted EBITDA.

We define adjusted net income as net income attributable to common stockholders adjusted for: acquisition and integration costs; home office transition costs; charges related to debt payments; other adjustments and the tax impact of the foregoing adjustments on net income.

We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

We define adjusted EBITDA 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; pre-opening expenses; non-cash rent; acquisition and integration costs and other adjustments.

We define free cash flow as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale leaseback transactions.

We define net debt as total debt outstanding less cash and cash equivalents.

We define net debt to LTM adjusted EBITDA as net debt at the balance sheet date divided by adjusted EBITDA for the trailing twelve-month period.

We present adjusted net income, adjusted net income per diluted share and adjusted EBITDA, which are not recognized financial measures under GAAP, because we believe such measures assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, adjusted EBITDA excludes pre-opening expenses, because we do not believe these expenses are indicative of the underlying operating performance of our clubs. The amount and timing of pre-opening expenses are dependent on, among other things, the size of new clubs opened and the number of new clubs opened during any given period.

Management believes that adjusted net income, adjusted net income per diluted share and adjusted EBITDA are 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. We use adjusted net income, adjusted net income per diluted share and adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures. We also use adjusted EBITDA in connection with establishing discretionary annual incentive compensation.

We present free cash flow, which is not a recognized financial measure under GAAP, because we use it to report to our Board of Directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We present net debt and net debt to LTM adjusted EBITDA, which are not recognized as financial measures under GAAP, because we use them to report to our Board of Directors and we believe they assist investors and analysts in evaluating our borrowing capacity. Net debt to LTM adjusted EBITDA is a key financial measure that is used by management to assess the borrowing capacity of the Company.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net debt to LTM adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or like some of the adjustments in our presentation of these metrics. Our presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA should not be considered as alternatives to any other measure derived in accordance with GAAP and they should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA or net debt to LTM adjusted EBITDA in the future, and any such modification may be material. In addition, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries. Additionally, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Reconciliation of GAAP to Non-GAAP Financial Information

See descriptions of adjustments in the “Reconciliation to Adjusted EBITDA (unaudited)” table above.

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