Good morning, all, and thank you for joining us for the BJ Wholesale Club Holdings Inc. Fourth quarter Fiscal 2024 Earnings Conference Call. My name is Carly, and I'll be coordinating the call today. After the company's remarks, there'll be a question-and-answer session. In fairness to all participants today, we ask you to limit yourself to one question and return any additional questions to the queue. I'd like to hand over to your host, Cathy Park, VP of Investor Relations. The floor is yours.

Good morning, and welcome to BJ's fourth quarter fiscal 2024 earnings call. With 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 could cause actual results to differ materially from what we say on this call. Please see the risk factor 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. With that, I'll turn the call over to Bob.

Good morning, everyone, and thank you for joining us. This morning, we are proud to report terrific results with fourth quarter comps and profits that were higher than anticipated. Fiscal 2024 was another milestone year for us, marked by record net sales, membership, and adjusted earnings per share. We consistently drove robust traffic and market share gains both in our clubs and at our gas pumps. These results are a testament to our team's dedication to delivering exceptional value to our members, as well as outstanding execution of our strategic priorities. Membership is at an all-time high above 7.5 million members with another impressive renewal rate performance of 90%. Our merchandising initiatives and digital conveniences are driving greater member engagement. And our new club performance is proof of the power of our accelerating expansion strategy. Our investments in the business are bearing fruit and we are confident in our ability to grow long term. In the fourth quarter, our comparable club sales, excluding gas sales, grew by 4.6%. We are pleased with the continued strength in traffic, which contributed over 3 percentage points to our comp in the quarter. This was our 12th consecutive quarter of traffic growth. Growth in units also drove increased basket size. Our perishables, grocery, and sundries division delivered over 4% comp growth in the fourth quarter, with perishables leading the way. Our strength in perishables has been a recurring theme all year as more members make us their weekly destination for quality essentials, such as produce, dairy, and meat. Our general merchandise and services division comps grew by more than 5% in the fourth quarter, outpacing our consumables business for the first time since the pandemic. Our refined and expanded assortment in our gifting categories built on last year's success. This approach amplified our broader GM offering and drove strong member engagement, especially during the holiday season. Notably, consumer electronics produced high-single digit comps in the quarter, led by video games, tablets, and audio. We're proud of this performance in light of the industry's soft performance. Toys led our seasonal sales with low double-digit comp growth in the quarter. As you know, we significantly improved our toy assortment last year, offering top brands at great value, and we further leaned into that strategy this year. In apparel, our fantastic children's assortment drove the growth, supported by the cold winter weather. We know there's still more to do in general merchandise, but I'm proud of the team's continued progress in differentiating ourselves and growing this important part of our business. Our four strategic priorities are critical to our long-term growth. As a reminder, these priorities are improving member loyalty, giving our members an unbeatable shopping experience, delivering value conveniently, and growing our footprint. Let me touch on our progress in each. Membership is the cornerstone of our business. We reported another record membership year with full year membership fee income increasing by 8.5% and our renewal rate remaining strong at 90%. Over the past couple of years, we enhanced our credit card program, invested in a gas discount for our Club Plus members, and most recently added benefits for Plus members by giving them two free same-day deliveries every year. As a result, we are growing overall member counts and upgrading more members into our higher tiers. Higher tier membership penetration is now nearly 40%. We have much to be excited about in membership, but perhaps our greatest achievement in recent memory is the ability to consistently grow members in comp clubs. This has been years in the making. We enhanced our tools and strategies around member acquisition to open new avenues for growth. Our focus on post-acquisition engagement and member retention has been critical for maximizing lifetime value, alleviating the pressure of replenishing churn. Our strength in membership is what gives us confidence in our ability to sustainably grow the business long term. We're focused on maintaining that strength in the future. Our thriving membership is also a direct reflection of the unbeatable shopping experience we aim to deliver at BJ's. Simply put, satisfied members are more likely to renew, which is why our merchandising strategy is deeply rooted in providing the best value for our members. A strong pricing position is fundamental to our value-driven model. Our advantaged structure allows us to consistently offer up to 25% better pricing than our grocery competitors, and we are relentless in maintaining this edge. While pricing is crucial to delivering great member experiences, the value we provide extends beyond costs, encompassing a highly curated assortment and digital convenience. We're enhancing our assortment across the entire box. As I mentioned earlier, we're making significant strides in improving our general merchandise business and strengthening the treasure hunt at BJ's. Our category management process introduced a more rigorous member-centric mindset to our assortment planning strategy. We also continue to innovate our own brands, offering high-quality products at significant savings to help members stretch their budgets. Our own brands comprise 26% of our merchandise sales in fiscal 2024, and we remain on track to ultimately reach our goal of 30%. Finally, our fresh initiatives have sparked meaningful produce demand since the full rollout in the second quarter. We launched Fresh 2.0 based on a simple yet powerful observation. Members who rely on BJ's as their primary fresh destination are among our most loyal members. As a result, we believe that winning more members' fresh produce shop would lead to greater trip frequency and larger overall baskets. Our Fresh 2.0 journey started with gaining full control of our perishable supply chain several years ago. From there, we enhanced every aspect of our produce business from logistics and team member training to in-club presentation and marketing. Our efforts have boosted our credibility in Fresh, exhibited by our double-digit produce comps in each of the past three quarters. In fiscal 2024, our Fresh business grew at a rate that was 10 percentage points greater than the rest of the market. While our performance in produce alone validates our work, we are especially encouraged by the positive ripple effects on overall member behavior. Early indications since launching Fresh 2.0 show that tenured members, who are completely new to buying fresh produce at BJ's are making more trips and on average, shopping across four more categories than they have in the past. Said differently, our members who are new to fresh produce are beginning to trend toward the same strong behaviors as our most loyal members. It's still early, but we're pleased with the initial results and inspired to broaden our efforts beyond produce to bring even greater value to our members. We are also winning in digital conveniences. These have fueled double-digit, digitally enabled comp sales growth each year for the past four years. In the fourth quarter, digitally enabled comp sales grew by 26% year-over-year and 53% on a two-year stack. Today, our members have multiple ways to save time in addition to money with BJ's, such as BOPIC, curbside pickup, and same-day delivery. Our mobile app supplements the shopping experience when members are in our clubs, allowing them to clip and use coupons digitally, identify the location of products they need, and skip the lines with express pay checkout. We enhanced the app experience to foster member engagement in between trips as well, incorporating personalized messaging, product returns functionality, an AI-powered search engine to facilitate shopping list creation, and other touchpoints to prompt the next BJ's visit. Today, about 60% of members engage with us digitally in some shape or form. And while BOPIC has historically been the largest contributor of our digital growth, member adoption rates for Express Pay and same-day delivery have also been growing nicely to add more profitable growth to the business. As members increasingly embrace our digital conveniences and reward us with their spending and loyalty, we will continue investing to drive lifetime value. Finally, we are making meaningful progress on our real estate strategy, having opened seven new clubs and 12 gas stations in fiscal 2024. We opened our 250th club in Louisville, Kentucky, at the end of the fourth quarter, marking entry into our 21st state. Since the end of our fiscal year, we have opened two additional clubs in Brooksville, Florida, and Myrtle Beach, South Carolina. We expect to open our new club in Southern Pines, North Carolina this Friday, and clubs in Whippany, New Jersey, and Staten Island, New York will follow in the coming weeks. While some of our planned 2024 openings slipped into the early days of fiscal 2025, our growth agenda remains robust, and we ended the year with the largest pipeline of approved new clubs in the company's history. Inclusive of our five new units in the first quarter, we expect to open 25 to 30 clubs across the next two fiscal years. The performance of our new clubs continues to be strong, with clubs opened since 2020 contributing to comp sales at a rate of over two times the chain. This performance continues to give us confidence in our growth plans and our strategy of bringing the value of a BJ’s Wholesale Club to communities in our existing and adjacent geographies in order to serve new members who are tired of paying high grocery store prices. We recently announced our plans to build a fourth ambient distribution center. We've grown meaningfully over the years, both organically and with new club openings. Our new distribution center is strategically placed to drive efficiencies in our current footprint while supporting our continued expansion. Over the past two years, we've expanded into Tennessee, Alabama, and Kentucky. In 2026, we have plans to enter Texas in the Dallas-Fort Worth region. Dallas-Fort Worth is a high-growth market with favorable demographics. There's intense competition as well, but we're confident that our strong offering and value focus will resonate with the broader community. We are eager to serve the families in this exciting market soon. As we assess the health of the consumer today, members remain highly value conscious and especially discerning in any discretionary purchases, as we've seen all year. In these times, members are relying on BJ's as their one-stop shopping destination, as exhibited by the growth in spend and trips across all income levels in the fourth quarter. We expect these dynamics to continue into fiscal 2025, and our teams remain vigilant and ready to navigate the uncertainties that the year will certainly bring. We have an enduring business model that wins in both good times and in times of uncertainty. I'm confident that the advantages inherent in our business, combined with our focus on our long-term priorities continue to position us well for the future. Above all, I'm grateful for our team members who bring our purpose to life every day, taking care of the families who depend on us. I look forward to continuing this journey with you as we grow the company together. I'll now turn it over to Laura to provide more details on our results and outlook for fiscal year 2025.

Thanks, Bob. Net sales in the quarter were $5.1 billion, increasing 5.4% year-over-year on a comparable 13-week basis. Merchandise comp sales, which exclude gas sales, increased by 4.6% year-over-year, led by traffic. We delivered strong traffic and comp unit growth all year, which we believe serves as a testament to members finding significant value in their BJ's membership. Total comparable club sales for the fourth quarter, including gas sales, grew 4% year-over-year. Lower retail gas price per gallon was partially offset by our market share gains, with our comp gallons growing 3% year-over-year in the quarter. This compares to continued year-over-year volume declines across the broader industry in the U.S. Digitally enabled comp sales for the fourth quarter grew 26% year-over-year, contributing significantly to our overall growth. Over 90% of our digital sales are fulfilled by our clubs with services like BOPIC, Express Pay, and same-day delivery, which remain meaningful drivers of our digital growth. Over 60% of our members are now engaging with us through our app today, which we have grown steadily over the past several years. We will continue to leverage our digital conveniences to drive member loyalty in the future. Membership fee income, or MFI, grew 7.9% to approximately $117 million in the fourth quarter led by strong membership acquisition and retention across the chain. Our MFI in the quarter included minimal impact from our fee increase that went into effect on January 1, 2025. Fourth quarter merchandise gross margins decreased by approximately 10 basis points year-over-year. Our members trust us to deliver outstanding value, and we continue to manage our margins prudently to maintain that trust in a dynamic cost environment. While our category management process is yielding profitable growth across a broader assortment, our continued strong fresh produce performance and rising costs in products with outsized impacts to our members, like eggs, contributed to our margin rate for the quarter. Our top line growth affords us the flexibility to invest in our position of strength, and we will continue to manage the business for long-term success. SG&A expenses for the fourth quarter were approximately $758.2 million. The year-over-year increase was primarily due to our new unit growth and other investments to drive our strategic priorities. As a result of the company's performance this year, incentive compensation was also higher on a year-over-year basis. In our fuel business, fourth quarter profit per gallon normalized from last year's higher levels. This resulted in lower year-over-year gas profits as expected, partially mitigated by strong gallon growth in the quarter. All-in, we reported fourth quarter earnings per share of $0.92. Adjusted earnings per share for the quarter was $0.93, including an effective tax rate of 26.3%, driven by an unplanned tax windfall. Our fourth quarter performance reflects our strong membership and traffic, merchandising improvements, and digital conveniences, all reinforced by our investments in the business to drive long-term growth. I'd like to remind you that last fiscal year's results included an extra week, which contributed approximately $350 million of net sales and approximately $0.10 of earnings per share. Let's move on to our balance sheet. We ended the fourth quarter with absolute inventory levels, up 4% year-over-year and approximately flat on a per club basis. In-stocks also improved year-over-year, thanks to our team's great work in allocating the right amount of product to the right clubs at the right time. Our capital allocation strategy is consistent with our historical framework as we continue to take a disciplined approach to maximizing shareholder value. We believe the best use of cash is applying it towards profitably growing the business. As such, investments to support membership, merchandising, digital, and real estate initiatives continue to be funded by our cash flows and enabled by our strong balance sheet. We ended the fourth quarter with the lowest level of debt since our IPO, no near-term maturities and half a turn of net leverage. We also continued to return excess cash to our shareholders. In the fourth quarter, we repurchased 645,000 shares for approximately $62 million. Capital expenditures were approximately $588 million in fiscal 2024, supporting our growing real estate pipeline. Approximately $16 million was related to our new highly automated ambient distribution center that will aid our footprint expansion strategy and drive efficiencies in our broader supply chain. We expect our new distribution center to cost approximately $200 million in aggregate over the next two years. Turning to our outlook for fiscal year 2025. Our business, like the broader industry, continues to face economic and geopolitical uncertainty and unpredictability in conditions that influence costs. Despite the pressure on consumers and operators alike, we remain confident in our drivers of growth that are within our control, keeping us cautiously optimistic about the year. We will leverage our model and remain focused on our long-term priorities to deliver great value to our members and drive continued traffic and market share gains. Starting at the top of our P&L, we expect to grow our fiscal 2025 comp sales, excluding gas, by 2% to 3.5%. Our guidance aligns with the long-term algorithm of our low to mid-single digit growth, while acknowledging the macro uncertainties impacting consumer behavior. We are proud of our achievements in membership, which has performed better than algorithm last year. Our long-term framework for MFI has not changed at mid-single digit growth, but we do anticipate MFI to outpace that goal in fiscal 2025 due to the fee increase. Please also remember the accounting considerations as the roughly $20 million fee increase impact will build through fiscal 2025, benefiting Q1 the least and Q4 the most. From a margin perspective, we continue to exercise strong cost discipline and leverage merchandising strategies, such as our own brands, to drive improvement in our gross margin profile, as we deliver exceptional value to our members. Moving on to SG&A, a few reminders. First, we expect to reinvest the fee increase related MFI into our value proposition. Much of this will be in the form of team member wages and our new plus tier benefit of free same-day deliveries, both of which will impact our SG&A line this year. Please also remember that we are lapping the approximately $20 million benefit from the net impact of legal settlements in the third quarter of last year. Finally, we continue to expect slight deleverage in our SG&A driven by our accelerated new club openings, particularly with continued outsized growth in depreciation, as we opt to own more of our clubs that we open. We are planning for an effective tax rate of approximately 27% for the year with the lowest rate in the first quarter, which we typically see stock compensation-related windfall. Putting all of this together, we expect to deliver adjusted EPS in the $4.10 to $4.30 range, rebasing last year's SG&A to exclude the net legal settlements impact would imply us making considerable progress in getting closer to our long-term EPS algorithm this year. Given the evolving landscape, we are not contemplating the impact of tariffs on our current assumptions. Tariffs could shape the trajectory of inflation and broader consumer demand and ultimately influence our results for the year. As Bob mentioned earlier, we believe BJ's is better positioned than most retailers to weather times of uncertainty. This is due to our strong focus on delivering value to our members. In fiscal 2025, we expect capital expenditures of approximately $800 million, the majority of which will deploy towards this year's new clubs and gas stations. This also includes investments in our pipeline for future years, including Texas and our new distribution center that we mentioned earlier. Longer-term, we remain confident in the underlying strength of the company, as we believe we're well-positioned to deliver sustainable growth to maximize shareholder value. Before I hand it back to Bob, I'd like to thank our team members for their continued dedication to our company purpose and communities and their contributions to another great year. Bob, back over to you.

Thanks, Laura. We've transformed our business over the years, investing in the best talent to execute our strategic priorities and deliver increasing value and convenience to our members. Our membership is reaching new heights. We have a lot of exciting merchandising initiatives in motion to take our performance to the next level. Our digital business is contributing profoundly to our growth, as we help members maximize both cost and time savings. We're applying our new playbook to successfully open new clubs and profitably grow our footprint. We are at a pivotal point where our efforts across each priority are coming together to deliver tangible results, and we're excited. Our phenomenal progress validates our ongoing investments in the business. We know we're on the right path for the future, and we're focused on keeping the momentum going. Thanks again for joining us today and for your support of BJ Wholesale Club. We will now take your questions.

Thank you very much. We now like to open the lines for Q&A. Our first question comes from Edward Kelly of Wells Fargo. Edward, your line is now open.

Yeah. Hi. Good morning, everyone and nice quarter. I wanted to start on the comp and the outlook. I guess, first, maybe could you provide a little bit more color around the cadence of the comp throughout the fourth quarter? And then, I think more importantly, how you're looking at 2025, given the implied slowdown? I'm curious around what you're seeing so far in Q1, how you're thinking about the cadence of the year, and then how you factored in some of the variables that are out there that are obviously uncertain.

Hi, Ed. Thank you for your question. I appreciate everyone's attention and support for our company. We had an excellent fourth quarter, as reflected in our results, and I’m extremely proud of the team's efforts in delivering these outcomes for our members. The comparable sales momentum was strong throughout November and December, and January proved to be our best month. Overall, we did not see any concerning trends during the quarter, with very strong customer traffic, marking our 12th consecutive quarter of growth in this area. I'll let Laura provide more insights regarding the 2025 quarters. In terms of our performance in the first quarter, we have continued to see positive traffic trends in our business so far. While it’s still early, there has been some increased sensitivity to discretionary spending, likely due to the current uncertainty highlighted in the news. However, we are pleased with our membership growth, the traffic resulting from it, and the expanding product assortments provided by our merchants. We will discuss our digital business later, which performed very well in the fourth quarter, so overall, we are very satisfied.

Sure. I can provide some insight into our expectations for the year. We anticipate that the first half will perform better than the second half based on our current analysis. As mentioned earlier, there are multiple factors at play. However, the business is currently showing positive trends in traffic, which shapes our outlook.

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

Hey, Bob. My first question is about tariffs. Can you remind us how you managed them last time and what might be similar or different this time? Also, could you provide some context on your general approach to tariff risk? I have a follow-up after that.

Yeah. Good morning, Robby. Thanks for the question. Look, here's what I would say on tariffs. We all participate and live in a consumer-led economy, and tariffs will potentially raise prices for Americans, which is an issue we will face. In fact, the cost of key commodities is already moving up. Tariffs can also risk some supply chain disruption as the market moves production around to mitigate tariff exposures. Here at BJ's, we believe our purpose is to take care of the families that depend on us. We take that honor and responsibility seriously. We work very hard every day to present the best values to our members. And so tariffs and the resulting rise in prices run counter to our purpose and may disrupt consumer spending and the greater economy in general. After all, consumers have tolerated a lot over the last few years. With that said, periods of rising prices and supply chain disruption have often been good for our company. When consumer wallets are stretched, most consumers search for value, and they come to our channel and they come to BJ's. We also have lesser exposure to tariffs than many retailers out there. And to your point, we have robust muscle around dealing with inflation in our cost of goods sold. It's one of the things our merchants do very, very well. So these structural benefits give us confidence that we can navigate through the uncertain times ahead, and we will focus on what we do best, which is delivering outstanding value to our members every day.

Thank you. My follow-up question is about the strength of digital. What are the main factors driving that? Is it due to expanded online offerings, or are more customers using their app while shopping in-store? How are you promoting that strength?

Look, it's all of the above and more, right? We start out with just trying to save our members time, right? They're saving money just by shopping no matter what they do with us. But we love the idea of making the shop more convenient to our members. The club shop can be cumbersome sometimes, right? You're roaming around a big club, lifting heavy items, and putting them in your car. It's a big basket. So anything we can do to make that shopping experience more convenient brings customers back to us. Those members that shop with us digitally spend more. They are reinvesting that time with us and adding more items to their basket. The team continues to iterate on our digital business and add capabilities. The basic services are the same with BOPIC, curbside pickup, same-day delivery, and Express Pay, which we’ve all talked about before. But the way in which we continue to invest in those areas just gets better and better. So you think about our push into same-day delivery as part of the membership changes we made earlier this year, giving members two free same-day deliveries. That's again, centered in convenience, right? Trying to get people to save that time with their money. It's a simple principle: We can deliver it to your house cheaper than you can get it at a grocery store. And then you think about just changing the way our app and our website work, making sure that people can understand where a particular item is by looking at their app. They know which aisle and which bay in the stores. We've fully rebuilt the search functionality in the app so that it is intuitive. You can put in a term like Super Bowl, and it will come up with all sorts of Super Bowl snacks and televisions, and anything you might need for your Super Bowl party. Our team has done incredible work to just get more relevant in this regard, and our members love it. They tell us all the time that we should continue to invest here, and we will do that in the future.

I think, Robby, the one thing I'd add on there is that 90% of our digital business is fulfilled through our clubs. And so, it's all coming out of our clubs through BOPIC, curbside, same-day, and Express Pay — which is really part of the structural advantage that we have—not shipping it to homes and out of clubs. It’s really our members coming in to see us and using those conveniences every day.

Great. Thanks so much.

Thanks, Robby.

Thank you very much. Our next question comes from Peter Benedict with Baird. Peter, your line is now open.

Hi, guys. Good morning. Thanks for taking the question. One just follow-up on a previous question, and then my real question. The follow-up would just be, are you able to frame for us, maybe remind us the exposure you guys have to China, but then also to Mexico given all that's going on there and around the food business, that would be just a follow-up. But then, my other question is really just around the new club performance. Obviously, you sound pleased with that. I don't know what else you could share in terms of performance metrics or anything that kind of gives you the confidence in accelerating this growth rate in new clubs over the next couple of years. Thank you.

Yeah. Sure. Good morning, Pete. Yeah. Good question on the exposure to China, in particular, it's a few percent of our business, right? Most of our business is our grocery segment, and about 15%-16% of our business is general merchandise. Only a couple of points of our business are imported directly from China, so that's markedly different than many other retailers of general merchandise products. And so overall, we believe we have lesser exposure than others who might do what we do. Certainly, the exposure to Canada and Mexico is greater given the variety of products that they bring in, and it does touch our grocery business for sure. We don't believe we're differentially affected negatively by any exposure in Canada or Mexico at this point. Hopefully, we're able to figure our way through those tariffs as well. We'll use that same muscle that I talked about in negotiating with our suppliers to move things around and do all the things we know how to do to buy things at the lowest cost so we can give that value to our members. Why don't we switch over to the new club performance? I'll let Bill talk about it. All I'll say is we're incredibly pleased with the size and the quality of our pipeline with the new clubs that have opened so far, and we're ready for the 25 to 30 that we expect to open in the next couple of years. So with that, let me hand it over to Bill.

Thanks, Bob. Hey, Peter. Yeah. Maybe I'll offer a couple of points on the new clubs. First of all, for the clubs that we've opened not only this past year but the past couple of years, we're really happy with the performance as a whole. We're well above our plans, both on the top line and the bottom line and that goes for both the new markets that we've entered as well as the infill market. So across the board, we've seen really great results. And it's really driven by the confidence we have in our model. Bob touched on this a little bit, whether it's the digital conveniences or the value that we're bringing to the members. People want a wholesale club in their community. And we've seen that across the board, both in the new markets we've entered into as well as in our existing markets. As we think about the real estate game, we've talked about it a little bit while we've been on the road; the models we use to identify new markets are changing rapidly as we gain share. Especially in areas where the population is expanding, the convergence of those two things continues to open up more and more attractive opportunities for us to bring the value of the BJ's Wholesale Club to those markets. As we look down the road, we highlighted today 25 to 30 new clubs over the next two years. We've talked about the investment that will come with that. The CapEx number we've shared is a little bit higher than where it's been in the past, driven by both the new clubs and distribution centers. To put that in perspective, we now have probably about close to $1 billion of real estate on our balance sheet. We've added 10 new clubs onto our balance sheet in the last three years. And over the next two years, we'll add another 16 clubs onto our balance sheet. We're using the flexibility we have on our balance sheet to help us be more aggressive on the real estate side. Overall, as we sit here today, we're really excited for the future. And maybe the last point I'll make, Peter, because this is probably the most important, is the confidence we have in our growth comes from the culture we've built. Everyone across the company wants to be involved in the new club process because they see the growth, they see the success, and they see the opportunity that creates for both new members and the value that it brings, as well as the opportunities for our team members. So it's really that last point, the culture, that may be the most important in all this as we go forward — the muscle we've built to really drive the success of the long term.

Thanks, guys. Good luck.

Thanks, Peter.

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

Thanks, guys. I'll follow up on Peter's question, if I could, for Bill. Have you talked about and if not, could you point out how many clubs you think you can have over time? Is there any hindrance to this being a nationwide concept during 21 states now? Is there any reason why it can't work anywhere? What happens when you use the third player? And you said markets want clubs probably a Costco or a Sam’s close there, everywhere where you're opening? But just wondering what the long-term could be. Thanks.

Mike, I referenced this on the last question a little bit. As we think about the market in total, right? Our current success in our existing portfolio ultimately drives our models. As we continue to gain share, we look at our models and see more and more opportunities for BJ's to be really successful in different markets. As you think about that opportunity set, whether it's in our existing markets or as we look to adjacent markets and talk about entering a major new market like the Dallas-Fort Worth area, we see opportunities across the board, and we've been really successful. As a company, we've been pretty thoughtful in having measured growth, both in our existing footprint as well as we've expanded into adjacent markets. That is what you can expect from us going forward. As we look at the long term, everything from Bob and Laura, and what we've talked about today from our share growth to our fresh business to our digital business—which is really transforming how members in new markets think about the club business—all point toward the ability for us to be really successful with our growth over the long term.

Yeah. Mike, I'll just add on to that. The share point is really important. It's not just us gaining share, but the whole club industry is gaining share, and that's really because consumers are tired of paying high grocery store prices. We are trying to be prudent with how we allocate capital and not get out over our skis despite the big CapEx number we have in our budget for this year. We can try and grow even faster, but to do it all out of free cash flow is our goal. But we continue to see opportunities in almost every market we look at going forward. We’ll continue to do it at a reasonable and rational pace, but there’s nothing we see today that tells us to slow down.

Thank you very much.

Thanks, Mike.

Our next question comes from Oliver Chen of TD Cowen. Oliver, your line is now open.

Hi, Bob and Laura. As we think about the comp guidance, you had really nice general merchandise momentum. What's embedded in terms of the general merchandise as well as thoughts on fresh momentum and then overall pricing within the comp guidance? On the new store commentary, it is very helpful as well. I would love your thoughts on how new store productivity is trending with the latest vintages relative to present? And any strategies or learning, as I know you have initiatives around optimizing the new store openings as well? Thank you.

Sure. Good morning, Oliver. Listen, the comp was very strong in Q4. As we've talked about, we had traffic and unit growth for the year, and lots of good participation in our fresh business and then general merchandise really shined in the fourth quarter on top of a good Q4 last year. I feel like across our business, we're seeing progress and momentum from a merchandising perspective, putting the right items on the shelves, making sure our pricing is where it needs to be, and communicating those things effectively to our members through great storytelling, visual merchandising, and promotional efforts. I don't see any of that changing. Certainly, the outside world could change on us a little bit. I don't think that means anything bad for our grocery business. It could soften consumer demand for discretionary items and maybe hold back our general merchandise growth a bit—but even there, we're not slowing down on the efforts to continue to modernize and brighten our general merchandise assortment. As you know, that's the emotional part of the shop, that's the treasure hunt part of the shopping experience. People love to wander around and see things. And for years, we didn't give our members that opportunity as well as we could have. The team is doing a wonderful job today, putting things out on the floor that are fun to look at, fun to shop, and great items to put in your basket when you're on your grocery shop. We're trending towards becoming a general merchandise destination again. We saw that certainly in toys and gifting this year in Q4. I'd love to see that continue. We certainly have the effort and expertise to allow it to continue, and we'll just continue to focus on what we can control and provide the best assortment at the best value for our members every day. On the new club performance, I feel like we've sort of answered that question, but I think the incremental thing that I'll add is that there is certainly room to optimize the model. We're in a great place relative to our not-so-distant past from a new club opening perspective; we have figured out how to do it effectively. We've figured out how to get new members in those clubs, build excitement in front of the launch, get them to look great, and operate effectively afterward. But we operate at a somewhat lesser efficiency than an established club. It builds its way into its cost base over time. And so that's what the team is working on now. Are there ways to grow membership and sales even faster? Are there ways to minimize payroll as it grows or to better match payroll to the sales trend? Are there ways to better match other expenses to the sales trend without disrupting that growth of the sales trend over time? We're really pleased with where we are. Opening—I don't even know how many we've opened since 2018, but it's going to be a little bit more than 30. To open potentially another 30 in the next two years should highlight our confidence in the program, but we are by no means done. We really want to continue to build the best BJ's clubs and the best chain for our members. Bill and his team and teams across the company have really done a great job doing that.

Oliver, I'll just add to that. As Bob mentioned, the team and the culture — we feel like we've gotten really, really good about how we open the building. There continue to be opportunities in terms of how we optimize. As a team, we talk about how to drive the club to its material run rate as soon as possible. This is where the team and the culture come into play. As we think about the lifetime value and the things that drive that for new members, especially in new markets, digital plays a huge role in this. We spend a lot of time in the new markets trying to engage people in the app, engage in Express Pay, engage in digital coupons, and curbside to drive the behaviors that we know will drive value over the long term. Even something like our partners at Capital One have been tremendous in helping us think about how to drive credit card adoption in new clubs, as we know that drives long-term lifetime value. Overall, there are a ton of opportunities that the team is working on, and we’re proud of what we've done, but there’s more to go.

Yeah. And we can see it in every new club getting a little bit better. I mean the one that we opened in Myrtle Beach, I think, was the best new club opening I've ever seen. If Ryan and the team or anybody from the team are listening, congratulations to you guys. It really looks special. I noticed that 10 feet inside the door, there was just something a little extra about it. And that's this idea where we know we're not done. We know we can get better. We know we want to present a wonderful experience to our members. We just keep grinding on it and getting better and better.

Congrats on the innovation, best regards.

Thanks, Oliver.

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

Hey. Thanks very much. Good quarter. Bob, can you talk about the success of Fresh 2.0 and the maturation of that effort? And maybe talk about the basket size before and after, say, in the state of Florida, where I believe you first rolled it out? And then, Laura, just on the earnings side, you talked about the comp basing throughout the year. Is there anything on the earnings side that we should be mindful of as we build out our models? Thank you.

Yeah. Good question, Chuck. Let's take them in order here. Look, Fresh 2.0 has been really an unmitigated success so far. We based it on a simple notion that our best members interact with our produce category. If we can get more people into that category, we might get more of those best members. Not surprisingly, those best members visit us more often, put more items in their basket, and renew at markedly higher rates—the interactive categories all over the building, not just our fresh categories. The idea behind Fresh 2.0 is to take a good business and make it great. We feel like we ran a good produce business, but we could all spot opportunities in product selection and execution, promotion and communication, and display. We've been working forever to resource tons of produce products, and we've spent a lot of time training our team across the building in what a great produce experience looks like and what it takes to get there. We’ve started to see it pay off. The test clubs we opened in Florida last year showed great growth in the perishable business, which resulted in overall traffic growth in the box, and that's what pays the bills. Increased purchasing in produce just pays for the supply chain and training, and all those types of things. We need to get that graphic and the rest of the box to get a return on all the investment we're putting in there. That's what we've observed in the test clubs, and we’re beginning to see it in the chain now. We're looking forward to continued great momentum in our produce business and for it to drive traffic across the clubs. We're also going to take it a little lighter and look at the rest of our fresh business, which is also good, but could likely get better as well. When you check the top tier of members, they are those that interact with all of our fresh businesses. If we can get those folks that now have increased confidence and comfort buying produce at BJ's to visit our meat and bakery and dairy departments, they will become unstoppable members. We’re really pleased. We know we can do more, and all growth is good growth, which is exciting.

Yeah. Chuck, from an earnings perspective, I think we called out the two biggest things for consideration. Just as a reminder, from a tax rate perspective, I would plan for the lowest rate in the first quarter, which would be consistent with how the tax rate trends on a historical basis across the quarters. The second thing in Q3 is the fact we're lapping the net legal settlements. So about $0.10 of earnings in there from last year that you should think about from a cadence perspective.

Okay. Great. Thank you.

Yeah.

Thank you very much. Our next question comes from Rupesh Parikh of Oppenheimer. Rupesh, your line is now open.

Good morning, and thanks for taking my question. Congrats on a really nice quarter. I just want to go back to the merchandise margins. Just want to get a sense of what your expectations are for the year and any key puts and takes you highlight for us to think about? Thank you.

Yeah. Good morning, Rupesh. I think we had a good year and a good Q4 from a merchandise margin perspective. Certainly, it showed up a touch short of our expectation, which was due to taking care of our members in the face of some rising commodities. Like I've said before, we will always invest in price. We will always do the right thing for our members. We knew we had the quarter in hand. But even if we didn't, we would always take the opportunity to keep key commodities prices where they need to be for our members. I didn't see anything in the fourth quarter that raised any concerns. The crystal ball is a little unclear at the moment. We certainly have a ton of effort around raising our merchandise margins through better sourcing, co-brand and own brands, and efficiencies in our supply chain—all of these efforts to make a little bit more on each sale while continuing to invest across the business. We've talked a little about tariffs affecting the near-term view of merchandise margins, as they could result in cost increases, along with anticipated consumer responses. We'll do our very best to mitigate any cost increases and continue to provide outstanding value to our members every day. Long term, we’re very bullish on our business and our ability to drive margin while delivering the right value for our members.

Great. Thank you. I’ll pass it on.

Thank you.

Thank you very much. Our next question comes from Simeon Gutman of Morgan Stanley. Simeon, your line is now open.

Hey. Good morning, team, and great job on the results. My question—it’s a little follow-up on the real estate. If you take the next few years of openings, Bill mentioned some infill versus new market, can you give us a sense of what that 25 to 30 looks like for infill versus new markets? And related, you said there will be some deleverage because of store opening costs this year. It might be because also of ownership. Can you tell us, is there a point at which you get enough new stores that are ramping that the comp contribution is great enough such that you leverage those expenses even as this new expansion rolls out?

Yeah. Good morning, Simeon. Let me hand it over to Bill.

Yeah. Sure, Simeon. As we think about long-term leverage, we think we'll hit that pace once we level out a consistent cadence of new store openings over a couple of years. We're still in a period where we're ramping growth, and as we're doing that, we will still have a touch of deleverage. Once we get to a steady state of openings, whether that's 10 or 12 a year for a few years in a row, that’s when we feel like we’ll have consistent basins, and we should see some of that leverage come to life. In terms of comp contribution, we’ve shared on previous calls that we continue to see new clubs comp at a rate of 2 to 3 times the chain rate, and we certainly saw that in Q4. Overall, we see new clubs starting to contribute to the bottom line comp, and while it’s in the pipeline, we should see that go up as we ramp and increase the club base as we look forward.

Thank you.

Thank you very much. This is the time we have left for questions. I'd like to turn it back to Bob Eddy for any closing remarks.

Thanks, Carly, and thanks, everybody for your attention and your support of our company. As you heard today, we're very pleased with our fourth quarter results. We've got a lot of irons in the fire going forward for the long term, and we will do what's prudent for our members in the short term. Thank you so much for your attention, and we will talk to you in the first quarter.

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.