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F500-2021-198-BJ's Wholesale Club

Headquartered in Westborough, Mass., the company operates membership-only warehouse clubs on the East Coast of the United States, offering name-brand and house brand products at wholesale prices.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-243-BJs

The East Coast membership wholesale club chain, headquartered in Massachusetts, operates more than 215 locations and has 5.5 million members.

This year's Fortune 500 marks the 65th running of the list.

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BJ’s Wholesale Club is an East Coast members-only warehouse chain where shoppers can find groceries, household essentials, general merchandise, TVs and other electronics, as well as tires and outdoor furniture. It also sells products through its website and mobile app. Founded in 1984, the company was once called Beacon Holding but changed its name to BJ’s Wholesale Club in 2018.

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BJ's Wholesale Club (BJ): Company Profile, Stock Price, News, Rankings

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BJ's Wholesale Club

bj's wholesale club

Good morning, all, and thank you for joining us for BJ Wholesale Club's Q2 twenty twenty five Earnings Conference Call. My name is Carly, and I'll be coordinating today's call. I'd now like to hand over to our host, Ansh Singh, to begin. The floor is yours.

Good morning, and welcome to BJ's Second Quarter Fiscal twenty twenty five Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer Laura Felice, Chief Financial Officer and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward looking statements on this call that are based on our current expectations. Forward looking statements are subject to risks and uncertainties that can cause actual results to differ materially from what we say on this call. Please see the Risk Factors sections of our most recent SEC filings for a description of these risks and uncertainties.

Please also refer to today's press release and latest investor presentation posted on our Investor Relations website for our cautionary statement regarding forward looking statements and non GAAP reconciliations. And now, I'll turn the call over to Bob.

Good morning, everyone. Thanks for joining us today to discuss our second quarter results. Our business delivered solid results in Q2 as we continued to provide our members unbeatable value along with exceptional convenience in an environment that remains very dynamic. Our commitment to taking care of the families who depend on us is more than just a slogan, and we view the performance this quarter as demonstrable proof of the power and relevance of our business model in a volatile backdrop. Now more than ever, we will maintain an unwavering focus on the priorities that will drive value for our members both now and into the future.

Our Q2 results included comparable club sales, excluding gas, of 2.3% led by our fourteenth consecutive quarter of traffic growth and our eleventh consecutive quarter of market share growth. Our membership base continues to grow and I'm happy to announce that we reached the 8,000,000 member milestone this quarter, representing 55 growth in our membership base since our IPO seven years ago. Our digital business continues to shine and represents a generational unlock for us as we deliver value to our members how and where they want. This business grew 34% during the quarter. These results were solid in the face of market environment influenced by both macro uncertainty as well as the unseasonably wet and cold weather to start the quarter, especially in our core Northeast and Mid Atlantic markets.

We saw our business accelerate as the weather improved. Our perishables grocery and sundries division led our Q2 performance with healthy 3% comp growth and a two year stack that held steady with Q1. The investments we've made in both Fresh two point zero and our category management process have driven continued share gains across our consumables franchise. We saw the most strength in perishable categories like dairy, meat and fresh produce. The investments we've made in our Fresh two point zero capabilities continue to deliver value for the company and our members, and we're building on these gains as we expand our efforts to our meat and seafood franchises.

Our GM and services business declined 2.2% on a comp basis in the quarter with the results being impacted by both the weather and macro factors that I noted earlier. Certain higher ticket discretionary categories in GM such as recreation and lawn and garden experienced double digit declines in comp sales. Our team was quick to react to these early quarter trends and we aggressively managed orders and markdowns to ensure we exited the quarter in a prudent inventory position. I'll share more about our inventory results and strategy later in the call. Our GM business did show bright spots, validating the fruits of our transformation efforts.

For example, our apparel business grew comp in the low single digits despite the weather headwinds and further built on the positive trend in this business with a two year comp stack in the high single digits. As we step out of the discrete quarterly results and evaluate the state of our membership base more broadly, we did see members across all income levels turn a bit more cautious during the quarter driven by the uncertain macro environment. Despite this change in consumer sentiment, our members continue to count on BJ's and total spending increased in total and on a per member basis with low income households demonstrating incredible loyalty. This is clear validation of our value proposition at a time when families are under a seemingly endless cost pressure. In what is an exceptionally dynamic environment, I'm proud of how our teams are laser focused on controlling what we can control and continuing to execute our strategy with discipline.

We are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently and growing our footprint. These are the pillars that will drive long term value creation, and we made further progress this quarter. Let me now take a minute to provide an update on each. We continue to put up robust results in membership, growing total member counts, all while maintaining our strong renewal rates. Reaching the 8,000,000 member milestone this quarter is a significant achievement with growth coming not only from the new clubs that we've added to our chain, but also from our legacy comp clubs.

Growing the number of members and retaining them at high levels is an impressive feat, but we are also improving the member mix, signing up a greater percentage of higher tier members who qualify for our best in class rewards, both in the club and at the pump. In the second quarter, higher tier membership penetration continued to set records, improving 50 basis points sequentially to an all time high of 41%, and we continue to see more upside going forward. Our membership growth is the result of our focus on delivering unbeatable shopping experience. Our merchandising transformation is focused on offering the right products at the right price. A fantastic example of this is the sustained success of Fresh two point zero, which we rolled out to win our members shop and grow frequency of trips.

As a proof point to the sustainable nature of this effort, I'm pleased to report that our Fresh two point zero pilot clubs, now in their second year, are continuing to see Perishables comp at chain levels. It's clear that this transformation has driven a significant and durable improvement in these members' behavior. We're now taking our lessons learned and applying this data driven approach to our meat and seafood categories. Let me talk a little about what we are doing in these key categories. We're using our internal member data along with demographic data and competitive insights to inform complex fresh meat and seafood assortment decisions, providing members more of what they want and making it easier for them to shop these categories.

We're also looking to be more regionally relevant to our members as we align offerings with trade area intelligence focusing on ethnic and cultural preferences, all while we continue to deliver outstanding value and quality. In early days, we're seeing exciting results with substantial improvements in sales and salvage expense for these categories. Our focus on convenience is shown in our digital results with growth of 34% this quarter and 56% on a two year stack basis, driven by consistently robust BOPIC and same day delivery expansion and rapidly increasing penetration of Express Pay. Our digital adoption sets new records every quarter, and our app usage continues to grow with more than half of our active members now regularly using the app. We can leverage the convenience of digital to unlock the value of our club, the value creation opportunity for both our company and our members is tremendous.

And last but not least, our new club footprint expansion. We started off fiscal year twenty twenty five strong, opening five clubs in the first quarter. This quarter, we completed our first relocation since our IPO, opening our new club in Mechanicsburg, Pennsylvania on August 1. Our teams did an amazing job executing the transition plan, and early feedback is that our members love their brand new home. Mechanicsburg joins a class of new clubs that continue to exceed expectations, with the clubs on the maturity curve comping about three times the rate of the tenured base.

Looking forward to the rest of the year, we plan to open eight more clubs with our club in Warner Robins, Georgia in early September and seven more clubs in Q4. As we look out to 2026 and beyond, our pipeline of clubs remains stronger than it has been in years and the team is hard at work both building our pipeline and planning for our future openings, including our entry into the Dallas Fort Worth market early next year. We remain on track to add 25 to 30 new clubs in two years. As we look forward to the rest of the year and especially the external factors that will impact our business, the tariff situation and its impact on the broader macro environment and consumer mindset continues to be ever changing. In a difficult backdrop for all parties, we believe that our business becomes increasingly relevant to consumers, and we are better insulated from the impact of imports than most of our competitors.

We're proud of our team members helping us chart through a turbulent environment and allowing us to stand tall for our members as we extend our value proposition. More specifically, our teams are running a playbook that we've successfully used in the past to navigate inflation, and we are dynamically changing our sourcing according to the fluid situation. We took a deep look at our buys for the back half. We repointed the country of origin where applicable, and then we right sized our orders to balance the impact on our business while still standing tall for our members.

I'd be remiss if I did not call out that these decisions likely limit our upside versus original expectations for the year. While we always want to sell more and buying less may hamper that ability if consumer sentiment improves rapidly, we believe prudence is the better part of valor in this constantly changing risky environment. Despite some of the uncertainties I've highlighted today, as we look towards the back half of this year, we do so with confidence. We have record high membership metrics, and we're building on that strength every quarter. We're steadily gaining share against our competitors even as volatility remains pervasive.

We're entering the fall season with healthy inventory levels and do not anticipate any markdown risk of significance. Our teams are energized and we are focused on carrying our momentum into the fall and holiday seasons, being there for our members when they need us most. Before I turn it over to Laura, I want to thank our team members across the organization for their continued commitment to serving our members and delivering unbeatable value while living our purpose day in and day out.

Thanks, Bob. I wanna begin by expressing my appreciation incredible team members in our clubs, club support center, and distribution centers. Your commitment to our company and the communities we serve has helped deliver another solid quarter, showing sustained momentum towards our long term story. Let's now review our second quarter results. Net sales in the quarter were approximately 5,300,000,000 growing 3.2% over the prior year.

Total comparable club sales in the second quarter, including gas sales, decreased 0.3% year over year as the average price of gas declined low double digits year over year. Merchandise comp sales, which exclude gas sales, increased by 2.3% year over year and by 4.7% on a two year stack. We were pleased to grow both traffic and units in the quarter. Our second quarter comp in our grocery, perishables and sundry division grew 3% year over year, driven primarily by strength in comp units, which outpaced the broader market. Our general merchandise and services division comp decreased 2.2% in the second quarter, with general merchandise driving the decline and services about flat for the period.

Digitally enabled comp sales in the second quarter grew 34 year over year and 56% on a two year stack. Over 90% of our digital sales are fulfilled by our clubs with services like OPIC, Express Pay, or same day delivery. All of our digital offerings are intended to deliver value by maximizing convenience. Members who engage with us digitally have a better and more convenient shopping experience, and they, in turn, become some of our best members. We will continue to focus on augmenting our digital capabilities to increase convenience for our members.

Membership fee income, or MFI, grew 9% to approximately 123,300,000 in the second quarter on strong membership acquisition and retention across the chain. We also continue to benefit from the recent fee increase, which went into effect at the beginning of the year. While the fee increase is certainly a component of growing MFI, we are also improving the quality of our member base, improving the mix as well as the size of our member base while keeping retention rates at high levels. We see upside on all of these levers to drive more MFI growth in the future. Moving on to gross margins.

Excluding the gasoline business, our merchandise gross margin rate increased by approximately 10 basis points year over year, led by disciplined cost management and continued execution of our long term initiatives. SG and A expenses for the quarter were approximately $786,400,000 and deleveraged slightly as a percent of net sales year over year. This was primarily attributable to our new unit growth and other investments to drive our strategic priorities. As Bob mentioned earlier, we continue to gain share in our gas business. Our comp gallons in the quarter were flat year over year, significantly outpacing the industry, which declined low single digits on a comp basis over that same time frame.

A reminder that gas gallons can also be affected by wet and colder weather at the beginning of the quarter as people curtail their driving patterns. Elevated market volatility in June contributed to overall gas profits that slightly exceeded our expectations in the quarter. Our second quarter adjusted EBITDA grew approximately 8% year over year to $303,900,000 reflecting our growing top line, increase in merchandise margins and membership trends that remain robust. The growth here underscores the durability and consistency of our business and financial model. Our second quarter effective tax rate was 26.9%, slightly lower than our statutory tax rate of approximately 28%.

All in, our second quarter adjusted earnings per share of $1.14 increased 4.6% year over year. Moving to our balance sheet. We ended the second quarter with absolutely absolute inventory levels down about 2% year over year and down 6% year over year on a per club basis. Note that we are operating 11 more clubs in our chain today compared to a year ago. While some of this decrease relates to tighter inventory buys for the back half, most of it is us doing a much better job allocating inventory for our members.

Despite the inventory declines, our in stock levels improved by approximately 50 basis points over the same period last year and are at the highest levels we've seen in some time. For some longer term perspective, if we look at the growth in inventory levels versus net sales since pre pandemic times, we have seen our inventories grow approximately 45% with net sales having grown by roughly 60%. Said another way, we are managing our inventories as well as we ever have. This great result is a testament to our investments in our supply chain team and the systems that supports our efficient operating model. Our capital allocation strategy remains consistent.

We believe the best use of our cash is applying it towards profitably growing the business. As such, investments to support membership, merchandising, digital and real estate initiatives will continue to be funded by our cash flows and enabled by our strong balance sheet. We ended the second quarter with net leverage of 0.4 times. Share buybacks are an integral part of our capital allocation framework. And in Q2, we repurchased approximately 375,000 shares for $41,200,000 As of quarter end, we have approximately $953,000,000 remaining under our recently renewed repurchase authorization.

We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value. Looking ahead to the back half, we are maintaining our balanced and thoughtful approach to guidance. The uncertainty and volatility in the macro environment remains elevated, and we expect it to influence costs and consumer spending patterns. But we also remain confident in the underlying strength of our business and our ability to deliver sustained growth. We will continue to be focused on the things that we can control while executing towards our long term priorities.

More specifically, as it relates to top line guidance, while we had contemplated the lack of the port strike in Q3 and the strong general merchandise performance in Q4 when we initially set guidance, we had not anticipated the tariff related macro volatility. While we believe these to be headwinds versus our original expectations for our full year outcome, we do not anticipate them impacting us in delivering towards the ranges shared earlier. As it relates to earnings, we similarly expect there could be some volatility as we manage investments through the back half, but our year to date earnings performance allows us to approach those investments from a position of strength while also increasing our full year earnings guidance. The result is we are maintaining our guidance of comp sales growth excluding gas to be in the range of 2% to 3.5% for the full year. We are also updating our adjusted earnings per share guide to be in the range of $4.2 to $4.35 It is admittedly challenging to provide guidance as the headlines have been changing rapidly.

As we go through the rest of the year, know that we will do the right thing for our franchise for the long term, which likely means investing in the short term. Our efforts to deliver sustainable growth at elevated levels are generating results, and our longer term vision is on track. We remain confident in the underlying strength of our business and believe we are well positioned to build on our momentum and maximize shareholder value in the future. Bob, back over to you.

Thanks, Laura. In closing, I wanted to remark on the undeniable momentum in our business as we evaluate progress against our strategic objectives. We are improving the quality of our membership base while growing it to an ever larger scale. We are making our merchandise increasingly more compelling in terms of both the product and price. Our digital capabilities are improving the convenience of shopping our clubs, and we are well on our path to growing our footprint at an elevated pace in attractive high growth markets.

As we continue to execute on our long term priorities, we will continue to remain focused on taking care of the families that depend on us as well as our members, our teams, and our communities. Thanks again for joining us today and for your support of BJ's Wholesale Club. We will now take your questions.

Our first question comes from Peter Benedict from Baird. Peter, your line is now open.

Hi, good morning guys. Thank you for taking the question. Maybe just two questions here. First, just to give us a sense of maybe how the second quarter played out, it sounded like, obviously, the pressure or first half for the quarter, maybe how you exited would be kind of an interesting view to get for you guys, that weather impact was overall. And then as you think about the back half, 3Q, 4Q, recognizing that there's a lot of puts and takes there, just how would you love in terms of comps and earnings?

Any additional color you can give on that? You've got the port strike to lap in 3Q. You've also got the legal benefit. So just want want to make sure we're all on the same page as we're as we're thinking about the back half of the year. Thank you.

Hey, Peter. Good morning. It's Bob. Thanks your question. Thanks to everybody listening today.

Happy to talk about our good Q2 results this morning. I think the second quarter comp that you pointed out was a little bit interesting to look at given the tough start from a weather perspective and notably better weather in in the back half. So certainly, saw the the quarter strengthen as we as we went through it. May was a pretty weak month, and June got better as well as July. And, much of that, I think, we we think relates to that that weather.

I think we had 14 or 15 consecutive rainy weekends here in here in Boston. So you're not you're not out there, shopping for for cookouts or, little league games or or buying patio sets or whatever you whatever you do when it's warm. And to some degree, that stuff doesn't sell if you sell it early in the season. And so I think our team did a phenomenal job navigating through the quarter and ending where we did from an inventory perspective. They took action early and often to try and number one motivate our members to shop, but number two make sure we ended in a clean inventory position.

I think our inventory is in the best shape it's been in five years or so. We talked a little bit about that in the prepared remarks with the perk club inventory down about 6%, while raising in stock levels 50 basis points. That's a huge achievement. It's great testament to our planning and allocation team and our supply chain team to make sure that we're doing the right thing every single day for our members. And it obviously has financial benefits as we go forward.

So I think we're in good shape, but it was sort of an interesting quarter to wade through from a sales cadence perspective. To your second question, maybe I'll let Laura comment on some of the puts and takes in the back half, but I think you you summarized them nicely. In the in the third quarter, we've got port strike, we've got some some other stuff in fourth quarter. But let me hand that over to Laura.

Hey. Good morning, Peter. You know, Bob hit the the big pieces as as we enter into the back half and and we're looking at the business. I think, you know, in in q three, we've got the port strike that you called out. In q four, remember, we had very strong results that we were proud of, from our general merchandise transformation, last year.

And so we're thinking about those things as well as the legal settlements that you you raised, on on earnings. You know, I I think Bob's comments that he said earlier on the comp cadence in the quarter and as weather improved gives us confidence as we enter into the back half. And so, you know, we'll continue to watch it and and make the right decisions for our member to make sure we're offering them value and getting them into our clubs and shopping digitally. But I think, you know, all of that said and all that put together, we we are confident as we head into the back half.

That's great. Thanks. And and I guess my fault would be around membership. Really encouraging ads in terms of new member ads. Seems like that pace in the first half of the year has been been, I guess, even historically has been.

But just curious kinda where you're sourcing these new members, what's the profile there? And then as you think about membership fee income over the balance of the year, just kind of level set us and where you think you can end the year in terms of your membership fee income? Thank you.

Yeah. It's a good question. That's another bright spot for the quarter, for the year to date period, Peter. So thank you for bringing that up. We're very proud of our membership results over the past quarter, the past two quarters, the past few years.

Certainly, we continue to grow it nicely. We were very pleased to tip over the 8,000,000 member threshold this quarter. And we thought it was fun to look at how fast we achieved that versus hitting the last 500,000 member threshold. We achieved it a lot faster this time. And a lot of that is obviously opening new clubs at faster pace that I'm sure we'll talk about today.

But it's also the good work that our teams are doing from an acquisition perspective and from a renewal perspective. We've got continuing to have very high renewal rates in our franchise, which obviously is among the most important financial statistics. Our team continues to iterate to figure out new ways to acquire members in our comp clubs as well. Certainly, we had the fee increase this year that, that has gone through really still two quarters in here, no surprises to to think about on on how that, has has rolled through. It's played out almost exactly the way the team modeled it, so we're we're very grateful for that one as well.

And then, and then the last bright spot to talk about there is is is higher tier. Right? 41. It's the highest we've ever seen from that penetration perspective. Grew at 50 bps this quarter.

And, that continues to be a goal of ours. We know some of our competitors have higher numbers than that, and we've got a lot of work to do to get to where they are. But we're pleased that our members are you know, hearing the value from us at at the at the desk and in the communications that we send out, and they're reacting to that and and signing up for for those higher tier memberships. We we now have to make sure that we show them that value every day, and we we convert them to spend into to those higher tier memberships in the way that they should. But it's a great, it's a great initial vote of confidence from our our new members, and those existing members that are upgrading into into the higher tier memberships.

Yeah. I think I'd I'd just add, on a on a quarter by quarter basis, we expect, the rate of growth to accelerate through the year. That's largely the fee increase coming in, but it's also coupled with all the things Bob touched on, the great work that the team's doing from an acquisition, and retention perspective.

Thank you very much. Our next question comes from Kate McShane from Goldman Sachs. Kate, your line is now open.

Hi, good morning. Thanks for taking our question. I just wanted to ask a little bit more about your comment on the change in consumer behavior that you saw during the quarter. I think you mentioned it was in each income cohort. Obviously, there's been a lot with regards to inflation and other items that are impacting the consumer, but wondered if you had any additional insight there.

And just what are you exactly seeing when it comes to the behavior?

Yeah. Good morning, Kate. You know, I think we're seeing overall a pretty resilient consumer in the face of everything going on with the the tariffs and the new cycle and the resulting inflation that's come through. You know, as a side note, the inflation that's come through wasn't all that much yet in the quarter. It was about one point of inflation, very similar to what you've heard from our competitors that have reported this week.

But I do think you're you're seeing a consumer that is is really frustrated by the the whole thing. And, you know, when we look at the economic cohorts that we we talked to you all about, the high, medium, and low segments, All of them look like they're a little bit concerned about what what they're what they're seeing out there and what they're hearing. You know, although total spending, you know, increased in each of those cohorts and on a per member basis within each of those cohorts, you could definitely see behaviors that, you know, indicate that that they're on the lookout for for value. Their their propensity to use coupons or to react to deals is a is a bit higher. You know, certainly looking at private label a little bit more than they have in the past, which which may be good for us in the long term, but it's it could be an indication of of consumer stress out there.

You know, discretionary categories were more impacted, than the nondiscretionary, which, again, was not too much different from the first quarter. But all these are indications of a consumer that's a little bit more choosy with their dollars. And, you know, it's what I think we'll see for the remainder of the year until we get through this cycle. But this is this is what we do. Right?

I mean, our our our whole business is taking care of the members that that that depend on us, and and that requires us to put the right thing in front of them at the right value. Our teams are working very hard to do that. I'm I'm extremely proud of our of our merchant team and our general merchandise team in particular. They've had a heck of a time, you know, trying to figure out, how to how to source their way through this, this this past couple of months. And we're confident in this I mean, on the posture that with which we go into the back half.

But, you know, certainly, the consumer is a little bit, you know, a little bit more challenged at this point, and and we'll have to make sure that we're you know, the the the offers that we have out there are on point to make sure that we do our jobs and take care of the members.

Thank you. And then we just wanted to ask a quick follow-up question. Is there any way to measure what kind of impact weather had on the general merchandise category during the quarter?

There are a bunch of different ways to measure it. I I I don't know that any of them are are are wonderful. You know, the the best the best way that we, look at it is is really the simplest way, sort of the beginning half of the the quarter and the the back half of the quarter. And it was pretty it was pretty noticeable. You know, we've looked at it sort of, north versus south as well as the southern, clubs did better than the northern clubs.

And and it's important to to note, Kate, it doesn't just impact the general merchandise business. You know, when you have that continuous rainy cold cycle, it impacted our our whole traffic trend. And so, you know, I I think, I think that was, you know, about half of the difference between where we thought we would land and where we ended up landing. And certainly, you know, I I I I think we tried to do our best to operate through it, but there's only so much you can do when, you know, when it's when it's 20 degrees colder than it than it should have been in in in June. So, you know, we'll take that as it comes.

It it it some years, it's great. Some years, it's bad. Certainly, there was a plus and minus during the quarter because we went from terrible weather to pretty great weather in July. But it's difficult thing to really measure it with any terrific accuracy.

Thank you very much. Our next question comes from Edward Kelly from Wells Fargo. Edward, your line is now open.

Hi. Good morning, everyone. I wanted to ask you about, I guess, just a follow-up on comp and the back half guidance. You know, the range is it looks a little wide. I mean, I I guess if you round it, it's sort of like 1% to 4%.

And I get that there's uncertainty and and some tougher compares. But, you know, zooming out, you know, you're taking share. You've got a big grocery offering. There's inflation out there and sort of like both sides of the business, which seems like it might accelerate. I'm just kinda curious as to, you know, how you're thinking about, you know, the back half and, you know, maybe what it would take for you to be at the high end versus the low end?

And I guess, probably most importantly, where are you running today, versus that range?

Good morning, Ed. Thanks for your question. It's a it's a good one. It's it's one that we think a lot about. And I think you highlighted a lot of the things that we think about.

Certainly, there are tougher compares as we go through the rest of the year. We highlighted that in the guidance initially for the year. I don't think any of that's changed, obviously. And and as we go forward through through the year, I do think you'll see more inflation as more more suppliers pass on increasing tariff costs and some of that makes its way, you know, to the consumer. But I I do think, as I've said all along, building on your your your comment of our our growing market share, I do think as as times get tougher, the relevance of our channel increases, and and I think you'll see consumers come to us.

We have to do our jobs and make sure that we're taking care of those members and and investing behind the the prices and promotions and things that we show them. But I I I think that, you know, we we have the right we have the right plan. We're in the right segment of retail, and and and our team is doing is doing good good things. We left the range alone, really, because we still think we'll fall within the range. And to your point, it's a it's a fairly wide range at this point.

And given the level of uncertainty out there, we thought that that was that was prudent. So I think, we've got a lot of, places to to go and and to win. But, you know, this year of all years, I think, was was, probably the right move to just leave it as a pretty wide range.

Okay. And then maybe, Lara, could you expand on your commentary around the potential for, I I think you said maybe even likely, second half investment, and what that potentially means for the second half gross margin, and what are the factors that would dictate the level of investment that you're contemplating?

Yeah. Hey. Good morning, Ed. You you hit it. My commentary was was really on the the margin part of the story.

And so you you know and and we consistently talk about delivering the right price and value to our members and making sure you know, we are in the business of taking care of the families that depend on us. They they pay to show up at our clubs and shop, And so delivering them great value is important every day and continues to be important. And so as we think about the uncertainty that Bob touched on a little bit earlier, as we head into the back half and and some of the behaviors we're seeing from our cohorts that we talked about earlier and some sensitivity. I think that that's really all we're getting at. So we will, you know, potentially make short term investments, but, that is important for the long term health of the business and for our membership.

Add a little a little bit of color. I I think, you know, with the the complexion of the guidance that we put forward this quarter, I think, should indicate a little bit of confidence to you. Right? We we raised the bottom line into a fairly choppy environment, and we've had two two pretty profitable quarters here. So so we're we're pretty bullish from a a bottom line perspective.

In spite of those investments, we will and we do have plans to make more investments in the back half than we did in the front half. And we're we're going to try and be aggressive and lean into, those things that we we talked to you about in gaining share and the relevance of our model and speaking to our members in a way that that better illustrates that. Because I do think this is this is the time for club. You know? It it is the it's what we do is to try and save our members' money.

And so that requires us to put really sharp price points on things. And in an inflationary environment, that's tough. It requires investment. It's no different than what we saw in 2022, which we we navigated very, very effectively. And so we know what to do.

We we've just gotta go out and do it. That's, that's what's gotten us here from 2022, and we're gonna continue to do that going forward because it will drive us into the future.

Thank you very much. Our next question comes from Robbie Owens from Bank of America. Robbie, your line is now open.

Hi, this is Maddie on for Robbie. Thanks for taking our questions. Your Fresh two point zero initiative in meat and seafood launched in May. How did meat and seafood performed versus your expectations? And now that you've fully lacked the rollout of Fresh two point zero in produce and recognizing it's still early days, are you seeing signs of a multiplier effect of members shopping you for more of both produce and meat? Thank you.

Hi, Maddie. Good morning. Thanks for the thanks for the question. You know, Fresh two point o is is perhaps the best illustration of our transformation in the past couple of years. Really was a a true 360 degree program where we looked at our entire produce business and tried to say how do we make this thing the the best we can.

And, obviously, we've talked to you about it before. We made changes across the the business in terms of the spec and quality of what we provided, how we merchandise it, how we talk to our members about the value, how we promote it, how we train our team members, you know, where we located in the clubs, all sorts of different things changed. And I would I would call it an overwhelming success in the in the first year. We we find ourselves now, as you say, starting to lap that. And we still see perishables driving the business, which which is fantastic.

Grocery had a good quarter for us with a free comp. Perishables led that and was and was roughly double that comp. And, you know, it was it was a tremendous, you know, unit growth story embedded in there that's that was really driven driven by the Fresh two point o initiative in large degree. And, you know, as I talked about in my prepared remarks, I think the the really cool proof point is to look at our Florida clubs, which were our pilot clubs a couple of years ago, to see what's happening there. And they're still comping at the chain level.

Right? They're they're doing the same thing in year two that they did in year you know, chained in year one, which tells you it has that multiplier effect within, within the parish of the produce business particularly, but it we believe it's driving trips in those clubs as well. So as we move forward in the meat and seafood, you know, we're sort of in the early innings of those changes. We've redesigned assortments. We're still testing a few things here and there, but we are seeing benefits.

Our meat business was was great during the quarter. Our seafood business improved. We're seeing units move. And, you know, you you know, the whole idea behind this is if we can stack a bunch of these categories, one on top of the other, that are real, important weekly shop categories that they will benefit us in the long term to to member engagement and, trips and an overall spend and then, obviously, renewal rate. So, so we're really pleased with Fresh two point o overall.

Early results on on meat and seafood are good, but they're they're early. We need to continue to iterate on that and make sure that we continue to build on the on the power of this program going forward.

Thank you very much. Our next question comes from Chuck Brom from Gordon Haskett. Chuck, your line is now open.

Hey, guys. This is Ryan Bolger on for Chuck here. Thanks for taking the question. I do want to ask about your general merchandise outlook for the back half of the year. I know you guys gave us some color on some of the categories in 2Q, but just how you're thinking about it overall and then both on a category basis.

Any color you could provide there would be great. Thanks very much.

Good morning. Look, GM lost a little bit of ground in the second quarter but into into some really tough headwinds that we've talked about. I still think our transformation is is underway and on track, and I think the the GM team has done a done a nice job both to manage through the quarter and to prepare for the for the back half. You know, we talked a little bit about how we how we're thinking about managing through the the tariffs and re resourcing things and repointing to different countries of origin. I think our team has done a great job doing that.

And, you know, I think they've taken a prudent stance from from an inventory buying perspective. We're certainly in a low margin business, so we need to be careful from from an inventory perspective, particularly when, you know, prices rise a considerable way because you need to understand the elasticity of those those categories. And some of the some of the tariffs could put changes on prices that, you know, would would be tough to understand from an elasticity perspective. And so I think we've we've chosen to be conservative in some categories that that we think are more discretionary, But other categories are being very aggressive in. And you saw a little bit of that in Q2 despite the fact that we had overall headwinds on the GM business.

You still saw apparel do incredibly well, and that's a great mark of our continuing relevance to our consumer and general merchandise. So obviously, the first category, I know we've talked about this a few times. The first category, we started from a transformation perspective, and it continues to grow quarter in, quarter out. We're putting the right stuff on the shelf in a clean assortment with great values, and that that that resonates with our members. We need to continue to do that, you know, category by category going through through the back half, and and hopefully, our members react to it.

Thank you very much. Our next question comes from Michael Baker from D. A. Davidson. Michael, your line is now open.

BJ's Wholesale Club Q2 2026 Earnings Call Transcript | Fortune

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BJ's Wholesale Club (BJ) Q2 2026 Earnings Call Transcript

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