BJ's Wholesale Club Q2 2027 Earnings Call Transcript

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Provided by Quartr
August 21, 2026

Key Takeaways

  • Positive Sentiment: Strong second-quarter performance: Net sales rose 15.9% to $6.1 billion, merchandise comparable sales increased 3.1%, and adjusted EPS grew 19.3% to $1.36, aided by better-than-planned fuel profits.
  • Positive Sentiment: Membership and customer engagement continued to expand. Members reached 8.5 million, membership fee income grew 9.9%, higher-tier penetration reached 43%, and digitally enabled sales increased 30%.
  • Positive Sentiment: BJ’s reported sustained market-share and traffic gains, including its 18th consecutive quarter of traffic growth and 15th consecutive quarter of market-share gains. Comp fuel gallons rose 10.5% while industry fuel gallons declined approximately 5%.
  • Positive Sentiment: The company raised its full-year adjusted EPS outlook to $4.60–$4.80 while maintaining its 2%–3% comparable sales guidance, and continues to pursue expansion with 25–30 new clubs planned every two years.
  • Neutral Sentiment: Management plans to remove roughly 20% of SKUs over the next several years to reduce unnecessary assortment overlap and improve margins, but cautioned that membership-fee growth should moderate to about a 6% exit rate as the prior fee increase laps.
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Earnings Conference Call
BJ's Wholesale Club Q2 2027
00:00 / 00:00

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Operator

Hello, everyone. Thank you for joining us, and welcome to BJ’s Wholesale Club quarter two 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Diana Rashkow, VP of Investor Relations. Diana, please go ahead.

Diana Rashkow
Diana Rashkow
VP of Investor Relations at BJ's Wholesale Club

Good morning, and welcome to BJ's second quarter fiscal 2026 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 could cause actual results to differ materially from what we say on this call. Please see the Risk Factors section 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. Now, I'll turn the call over to Bob.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Good morning, everyone. Thank you for joining us today. I'm very pleased to share that we delivered a strong second quarter, one that came in ahead of our expectations and reflects the continued momentum in our business. Net sales were up nearly 16% year-over-year, and merchandise comps grew 3.1% with traffic accelerating during the quarter. This marks our 18th consecutive quarter of traffic growth and our 15th consecutive quarter of market share gains. On a two-year stacked basis, merchandise comps were 5.4%, in line with where we were last quarter, which speaks to the durability of our momentum. The comp was driven by a healthy balance of traffic and ticket, and we delivered for our members when it mattered most, including during events like the World Cup and America250.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Simply put, our value proposition continued to resonate, and I want to thank our teams for their commitment to executing at a high level across our company. Our perishables grocery and sundries division delivered solid comp growth of 2.8% in the quarter, led by grocery. We saw particular strength in beverages and active nutrition, where assortment updates through our category management process have been resonating well with members, and we're pleased with the momentum we're building in this part of the business. Our general merchandise and services division sustained comp growth of 5.3% in the quarter, and I'm pleased with the breadth of performance across the division. Consumer electronics continued to lead the way, and home was a strong contributor. The results reflect the work our teams have been doing to put the right products at the right value in front of our members.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Gas prices remained elevated during the quarter and our members continued to seek us out for the value we offer at the pump. Comp gallons were up double digits, accelerating from the strong results we saw in Q1 and a clear signal of the share we continue to take. Gas prices are about as visible as it gets for consumers. There's a price on every street corner, and our members know that we offer great value. Strong volume growth, combined with favorable pullback from peak gas prices, drove fuel profit dollars ahead of plan, which was a meaningful contributor to our overall results. Taking a step back to assess the consumer environment, the K-shaped economy persists, though we did see some sequential improvement during the quarter. We drove comp growth across all income cohorts, which is encouraging, and our value proposition continues to resonate broadly.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

That said, the vast majority of our growth continues to be driven by our higher income members, which is consistent with what we've seen for some time now. In an environment where consumers remain discerning with their dollars, we know our job is to make sure we're putting the right products at the right value in front of every member who walks through our doors. All told, it was a strong quarter across the board. Sales, membership, margin dollars, and the bottom line all came in ahead of our expectations. Adjusted EPS was $1.36, up 19% year-over-year. To put that in perspective, we earned more in this single quarter than we did in the entire year we went public back in 2018. That's a remarkable statement about how far this business has come.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

With that as a backdrop, let me turn to the progress we're making on our strategic priorities. Let me start where I always do, with membership, which remains the foundation of everything we do. We reached a new milestone of 8.5 million members this quarter, and that's worth pausing on. Over the last 25 years, we've grown our membership fee income at an 8% CAGR. Since our IPO, we've added more than 3 million members, and in just the past two years, we've added over 1 million members. That kind of compounding growth is earned by consistently delivering the value and convenience our members expect from us. The current quarter was no exception. Membership fee income grew nearly 10% year-over-year, and what matters most to us isn't just the number, it's the quality of the membership base we're building.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

One of the best measures of that quality is MFI per member, which has grown consistently year-over-year, reflecting the strength of our acquisition, retention, and higher tier penetration across both new and existing clubs. On experience, our price gaps continue to improve, and the market dynamics are working in our favor. Traditional grocers have been raising prices, creating an even more favorable backdrop for our value proposition. We continue to gain share and as our price gaps improve, unit share has become an even clearer signal of member preference. Based on industry data in the markets where we operate, the rest of the market saw unit sales decline while we saw unit gains, with units growing more than 300 basis points faster than the market in the quarter. And that's not just a Q2 story. We've outpaced the market on units over the past year as well.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

That's an important distinction. Our model is built to grow both sales and units by delivering value, and that's exactly what we're doing. Delivering great value isn't just about price, though, it's about making sure that we have the right products on the shelf at the right price. Part of delivering great value is knowing when to lean into a moment, and our merchants did just that this quarter. America turns 250 this year, and our team found a great way to celebrate with our members. We brought in truckloads of watermelons at $3.99 while many other retailers were charging $5.99. About one in five of our members had one in their basket during this promotion. It's a simple example of what we do well, finding the right product at the right price and delivering real value to our members.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We're building that capability systematically across our entire assortment through our category management process. CMP is about going deep on what our members want from us, category by category, making sure we have the right assortment at the right cost, and we're already seeing it show up in our results. The strength we saw in beverages and active nutrition this quarter is a direct reflection of that work. In home, we've seen strong member response to renovated assortments across several categories, including housewares, textiles, and refrigeration, where we've made meaningful changes to our assortment and value positioning. We'll keep going systematically, and over time, this will become embedded in how our merchandising team goes to work every day. Turning to convenience, the investments we've been making here continue to pay off. Digitally enabled comp sales grew 30% in the quarter, reflecting two-year stacked comp growth of 64%.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Our members are telling us loud and clear they love what we're doing. What we're really focused on is saving our members time in addition to saving them money, and that combination is powerful. Our members are engaging with us digitally in many ways, from Buy Online, Pickup In-Club and same-day delivery, to ExpressPay in the club, and growth is strong across all of them. ExpressPay penetration, in particular, continues to grow, and members who engage with our digital conveniences spend significantly more with us and are more loyal over time. Bev, our AI-powered shopping assistant, is live and gaining momentum. She's now had over 100,000 conversations with members, helping them find products, check club hours, and get more out of their membership. It's a great example of how we're using technology to take care of our members in new ways. Finally, our footprint.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

New clubs are a key engine of long-term growth for our business, and our team is delivering. We're making excellent progress on our footprint expansion. In the second quarter, we opened three new clubs in Texas, Waxahachie, Fort Worth, and Grand Prairie, bringing our total in the state to four. We also added a new gas station in Edison, New Jersey. We have seven additional club openings and one relocation plan for the remainder of the year, and we remain committed to our pace of 25-30 new clubs every two years. We also announced a new club coming to Tyler, Texas, further expanding our presence in the greater Dallas market. The performance of our new club portfolio remains very strong and is a key piece of our long-term strategy. For Texas specifically, we're very pleased with what we're seeing.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Membership continues to track more than 30% ahead of plan. Member behavior is consistent with what we see in the other new clubs. Strong engagement across the box with higher GM penetration. And our gas volumes have been outstanding. To put a finer point on the value of gas to our members in Texas, all four gas stations are in the top 30% of our chain for gallons, with two of the stations cracking the top 10%. This performance in Texas should not be a surprise as it follows the track record of success we've built with expansion in both new and existing markets. Last quarter, 22 of the 23 clubs we opened across 2022 to 2024 comped above the chain average, with the 2024 class of seven clubs comping double digits last quarter.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

The consistency of our performance is a testament to the teams who show up with the goal to make the next opening the best one yet, and I'm proud to say our teams are delivering on that promise. Before I turn it over to Laura, I just wanted to say that this was a quarter we can all be proud of, and it doesn't happen without an incredible team. Our team members across the clubs, distribution centers, supply chain, and club support center show up every single day to take care of the families who depend on us, and results like these are a reflection of their hard work and dedication. I'm proud of what we've accomplished together. I'll now turn it over to Laura.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Thank you, Bob. I'd like to echo Bob's gratitude for our team members across our clubs, supply chain, and club support center, whose dedication to our members and our purpose made this quarter possible. Let's dig into the results. Net sales in the second quarter were $6.1 billion, increasing 15.9% year-over-year. Total comparable club sales increased 11.9%, and excluding the impact of gasoline sales, merchandise comparable sales increased 3.1%, driven by a balance of traffic and ticket. Inflation was just under a point in the quarter. Our perishable grocery and sundries division comped up 2.8%, led by grocery. General merchandise and services grew 5.3%, driven by strength in consumer electronics and home. Membership fee income grew 9.9% to $136 million, reaching a new milestone of 8.5 million members.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Please note that we continue to expect MFI growth to moderate throughout the year as the impact of last year's fee increase normalizes. Gross profit increased 10.3% to $1.11 billion, and merchandise gross margin rate decreased approximately 20 basis points year-over-year, reflecting the balance of our continued investments in value for our members and our commitment to delivering for our shareholders. Fuel profit exceeded plan, supported by strong execution and favorable market conditions during the quarter. Comp gallons increased 10.5% and we continued to take share, as industry data indicates overall comp fuel gallons declined by approximately 5% during the period. SG&A was $851 million and improved as a percentage of net sales year-over-year.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

The increase in absolute dollars was largely driven by the costs that come with opening new clubs and gas stations, including labor, occupancy, and depreciation, as we continue to grow our owned club base. This was partially offset by a gain from a sale leaseback transaction on our new ambient distribution center in Ohio. Adjusted EBITDA increased 14.3% to $347 million, and adjusted EPS was $1.36, up 19.3% and ahead of our expectations, largely driven by the outperformance in our gas business. Turning to the balance sheet, we ended the quarter with inventory levels up 2% year-over-year on a per-club basis, with in-stock levels approximately flat year-over-year, reflecting the team's continued focus on getting the right product in the right clubs at the right time.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Cash flow remained healthy in the quarter, with adjusted free cash flow of $266 million, well ahead of the $87 million we generated in the second quarter of last year, reflecting the strong operating performance of the business. Our capital allocation strategy remains consistent. We believe the best use of our cash is applying it towards profitably growing the business, including investments in membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.5x, which continues to provide us with meaningful flexibility to invest in long-term growth. In the second quarter, we repurchased $124 million of shares, and we have approximately $422 million remaining under our existing repurchase authorization. We will continue to take a disciplined approach to deploying our capital to maximize shareholder value. Turning to our outlook, we are pleased with our outperformance in the second quarter.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

We are maintaining our full-year guidance of 2%-3% comparable club sales growth, excluding gasoline. For adjusted EPS, we are raising our range and now expect $4.60-$4.80 for the full year, reflecting the strong results we delivered in the second quarter, particularly in our gas business. As always, our outlook reflects our current view of the consumer and the broader operating environment, and we will continue to manage the business with discipline while investing for long-term growth. With that, I'll turn it back to Bob.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thanks, Laura. Before we open it up for questions, I just want to take a step back and reflect on what this quarter represents. We came in ahead of our expectations on nearly every dimension: sales, membership, and the bottom line. This is not a coincidence. It's due to a talented team figuring out new ways to invest in our members. Our members continue to reward us for the value and convenience we provide, and that shows up in the traffic growth, the share gains, and the membership momentum we've sustained. Our strategic priorities are working. The investments we've made in experience, convenience, and our footprint are bearing fruit, and we are as excited as we've ever been about the road ahead. As we wrap up, I want to talk about our purpose. We take care of the families who depend on us. We live this purpose every day.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

In Q3, we launched a chain-wide initiative that will let our members help live our purpose. Members can round up at the registers in club with donations going to the Dana-Farber Cancer Institute, a world-renowned organization at the forefront of cancer care and research. This campaign's a first for us, and we look forward to making a difference in the communities where we live and work. I also want to take a moment to recognize someone who has been a huge part of building what we have here. Paul Cichocki, our Chief Commercial Officer, is retiring after an incredible career and a great run with this company. Paul has been instrumental in so many of the merchandising and commercial advances that have made BJ's a stronger business, including building a great team ready to take over for him.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Paul, you always drove with your heart and it showed in everything you built here. Thank you for everything. With that, let's take some questions.

Operator

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Edward Kelly with Wells Fargo. Your line is open. Please go ahead.

Edward Kelly
Edward Kelly
Analyst at Wells Fargo

Yeah. Hi, good morning. Thank you for taking my question. Bob, I wanted to ask you about investment and you had the tax refund benefit, which you've been talking about putting into the business. Fuel has been strong as well. Can you just talk about how much of this is getting put back into the business and then, what you think the return on that investment is as you think about the sales and the traffic?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Good morning, Ed. Thanks for your question and thanks for everybody's attention this morning. I understand there were some technical difficulties on the beginning of the call. Just know that we are going to post a copy of our prepared remarks on our investor relations website to hopefully clear that up, and the recording should come out clear, but wanted to apologize for that. Certainly, put a little bit of a damper on what I think are fantastic numbers for our company as we report those this morning, with over-performance in sales and margins and gasoline and membership on the bottom line. What was just a wonderful quarter that our team put together. I think, Ed, to get to your question, it is because of the investments we continue to make in our member.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

It is really our job to provide great products, but most particularly, great value on those great products. We will take every opportunity we can to make investments in that idea. Certainly, we need to balance that with all of our other constituencies. But I know the team did a fantastic job this quarter doing so. We obviously had the tariff refunds that you mentioned for the past couple of quarters, and we are just about through those as we sit here today. Then, we had a great quarter from a fuel profit perspective and invested some of those dollars in our membership as well. The idea there is not necessarily short-term payback, it is long-term lifetime value. The idea is that the better people feel about our prices and our products and the value that they get from their membership, the more they come to see us.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We know that the frequency with which they come to see us is the biggest predictor of their ability or their willingness to renew their membership and the biggest contributor to lifetime value. As we continue to invest in our member, it really does become the flywheel of the company, as we are trying to make sure that they enjoy their visits with us and they feel the value every single day while we are doing other things like improving our convenience efforts and our merchandising and our real estate footprint. So, we are not necessarily looking for returns within one particular quarter. Sometimes, those happen, but we are looking for an effort that builds over time that really underpins the value of a BJ's membership.

Edward Kelly
Edward Kelly
Analyst at Wells Fargo

It is just a follow-up, I guess, maybe for Laura. Can you just parse out operating expense a little bit? You talked about a sale-leaseback gain, but then, the dollar growth in operating expense is higher than it has been in a while. So, I do not know if there was some offset to that, but any color around the magnitude of the sale-leaseback and what the offsets were on that?

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Yeah. Good morning, Ed. Thanks for your question. I think you brought up a good point about the sale-leaseback that we did in the quarter. I would say, before I get to the numbers, that being able to do a transaction like that, I think, speaks to the strength of the company and where we've come from to where we are today. We've spent a lot of time working with the strength of our balance sheet as we've paid down debt, and so, that's offered us the opportunity to be able to buy locations, versus a straight lease like we would have historically done.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

As we've done that, we find opportunities in our portfolio where we're able to create value, and long-term growth that we can put back into the company. The transaction that happened this quarter with our Ohio distribution center is an example of just that. From a numbers perspective, the gain on that was relatively small in the grand scheme of things. It was about $11 million to the P&L, but we're happy with that transaction. Again, I think, where we've come from a company perspective, I think just speaks to how we've been able to add transactions like that that add value and are accretive over the long term.

Edward Kelly
Edward Kelly
Analyst at Wells Fargo

Thank you.

Operator

Your next question comes from the line of Peter Benedict with Baird. Your line is open. Please go ahead.

Peter Benedict
Peter Benedict
Analyst at Baird

Oh, hey, guys. Good morning. Thanks for taking the questions. My first is just on MFI, the membership fee income, grew 10%, kind of sequentially stable there. I am curious, when you gave the member numbers, the sign-ups sound like they are good. I am just curious, with the benefits of the fee increase tailing off, we would have expected that to slow. Is there something happening in the core that is re-accelerating here? I am just curious, maybe, the trends around higher tier membership renewals, that type of thing. That is my first question, then I have a follow-up.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Hi, Pete. Look, I think our membership team continues to do a fantastic job really growing our company. It is the backbone of what we do here. It is the foundation of everything. They had a very, very strong quarter. As you know, we had about 10% growth in the quarter. That pretty much mirrored what we saw in the first quarter. Our plan for the year would have seen that 10% slide down to about 6% at the end of the year. The Q2 performance in particular was very strong. Really, I think it just highlights the value of what we are giving our members and our strength in our new clubs as well. If you think about the building blocks to MFI, it is the number of members. We had a strong acquisition quarter.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

The team continues to innovate and figure out new ways to get in front of prospective members and to come up with offer constructs that make sense to people. We certainly want to renew all those members, and we had a fantastic renewal rate performance during the quarter as well. We now are at another all-time high from an easy renewal perspective in terms of the number of members that participate in that automatic renewal program. If you think about the quality of those members, you mentioned higher tier, we are at an all-time high there as well. About 43% of our membership in higher tier members. That is far and away the best number that we have had, and we continue to grow those folks. You know they spend more, they renew at higher rates. They are active in many categories, all the things that we like to see.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

I think it was a fantastic quarter for the membership team. I still do think you are going to see the benefits of the fee increase wane over the year. We are, again, sort of guiding to finish the year at that 6% exit rate. Hopefully, we can continue to put up good quarters as we go through and explain the value of a BJ's membership to folks and have them join our franchise. It has been a great run for our membership team, and you and I have talked a lot about the big differentiators and where we were five or 10 years ago versus where we are today, and I would tell you that the biggest differentiator I see is our ability to grow membership in comp clubs.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We once were not very good at that, and today, we do it very consistently, and we were up 2%-3% during the quarter. It was a really fantastic result, and congratulations to that team.

Peter Benedict
Peter Benedict
Analyst at Baird

No, that's great color, Bob. Thanks. Good to hear. I guess, maybe, just on the traffic acceleration you talked about during the quarter, I'm curious, how much of that you think was related maybe to the price investments you started to take earlier? How quick is the response mechanism there? And as you think about the 2%-3% merch comp plan for the year, how much of that you think is kind of traffic versus ticket, just at a high level? Thanks so much.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. No worries. Good traffic number during the quarter. About half of the comp was driven by traffic. That was a pretty significant acceleration from what we saw in the first quarter. It's hard to tell whether it's related directly to the investments we made in the first quarter. I would like to say some of it is. That's certainly the idea. We would certainly see traffic before we would see sales dollar benefits, just given the math of lowering prices. That is really the idea of what we're trying to do, invest in our members, put the best products on the shelf for them to see, talk to them in the ways that resonate with them, and they reward us with traffic. I think the team did a nice job on all of those fronts during the quarter.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

As far as the 2%-3% guide, we left that alone. I think we'll be in that bracket, hopefully, towards the high end of that bracket for the full year. We sit comfortably right in the middle of that bracket at this point. As I see it, hopefully, our traffic continues through the back half. We've got some laps to think about, in terms of the three-year stack on the port strikes and the general merchandise build from last year in Q4. But I think if you think about the base of our business, it is how many members we have and how active are those members. We just talked about MFI and the number of members being fantastic, and now, we're seeing great continued traffic growth. Our 18th consecutive quarter, we said in the prepared remarks. Hopefully, we can keep that streak alive.

Peter Benedict
Peter Benedict
Analyst at Baird

Great. Good luck. Thank you.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thanks, Pete.

Operator

Your next question comes from the line of Kate McShane with Goldman Sachs. Your line is open. Please go ahead.

Kate McShane
Kate McShane
Analyst at Goldman Sachs

Good morning. Thanks for taking our question. Our question is just on the sustainability of some of the price investments that you have been able to make over the last two quarters, given that they were driven and financed by tariff refunds. How do you think about these price investments and lapping them when there aren't necessarily tariff refunds to fund them?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Good morning, Kate. Good question. It is our endeavor to match our investments with continuing sources of funding. While the tariff refunds have been funding them in the first half of this year, we have other initiatives that will fund them in the back half of the year. I think the worry that margin rates will decline precipitously when we do not have the tariff funding is misplaced. I do think we have identified other places to source funding and you can think about what those might be. The tariff refunds we have talked about are all first-person tariffs. The things that we paid and gotten refunded, we are now working with our suppliers to get our fair share of their refunds. We are working with our suppliers to figure out the optimal assortments, and in some cases, that may come with margin benefits there.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We have got other sources of margin, like others do with retail media and some other things. Certainly, gas plays in there as well. We would always take some portion of any one quarter's gas beat and invest those as well. We understand our job is to deliver margin dollars globally, not necessarily a particular rate. Within reason, I do not really care about any particular rate. I know my job is to deliver profit dollar growth. That is frankly what our members expect from us, too. They want the right prices, and that means we got to go get the right cost. We will continue to find ways to invest in our membership and take every opportunity we can to do so.

Kate McShane
Kate McShane
Analyst at Goldman Sachs

Thank you. Just our follow-up question is on general merchandise. I wondered if you could kind of talk through what we can expect from that category in Q3 and Q4, given what we are lapping last year and just given new leadership within merchandising.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah, sure. I mean, GM has been on a little bit of a run lately, which is great to see. It was once, I would argue, our weakest business, and now, we are starting to make some progress. That progress started in our consumer electronics area, which has probably been our strongest area, and thus, the easiest to impact. But our team has done a nice job improving our assortment at home. We talked a little bit about that in our prepared remarks in some of those categories. Our seasonal business was positive comp during the quarter as well. That is a big business in the second quarter, and it was nice to see that get positive. We have got some room to improve there, for sure, and we have got some room to improve in apparel and the rest of the categories. But, for me, nice to see a continued positive comp trend.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Nice to see the breadth of the comp. Under the covers, you mentioned the changes in merchandising leadership. Stephanie Reibling has done a fantastic job. General merchandise is where the core of her experience lies. She has got her fingerprints on some of these early wins but know that they are early. We will go through this assortment ruthlessly and make sure we are offering the right products at the right value. We have also added some talent beneath Stephanie in this area with a new GMM of general merchandise and a couple new DMMs as well. So, starts with the team, right? We have got a fantastic team, and they are all on the ground and working hard to make sure that the next quarter is better than Q2. I guess I would just, again, say, just keep in mind the big lap we have in Q4 from a GM perspective.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Other than that, we are very pleased with where we landed the quarter.

Kate McShane
Kate McShane
Analyst at Goldman Sachs

Thank you.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thank you.

Operator

Your next question comes from the line of Mike Baker with D.A. Davidson. Your line is open. Please go ahead.

Mike Baker
Mike Baker
Analyst at D.A. Davidson

Thank you. I wanted to focus on Texas a little bit. You said you were 30% ahead of plan. What is the plan relative to company average or typical openings? How big can Texas be? What are you seeing competitively? Are others reacting to you guys moving there? Just a little bit more color on Texas, please.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Maybe I'll just, a couple of words, Mike, and then kick it over to Bill. I just wanted to thank Bill. He's done a fantastic job really creating this whole growth engine within real estate that we have. It's a big effort. His team has done fantastic work, and I couldn't be more proud of him and the team for what we've accomplished. Texas is just one point in that journey, and it's going very well. I just want to thank Bill publicly for all the things he's done. So Bill, tell us about Texas.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

Thanks, Bob. I appreciate that. Hey, Mike, good to talk to you. Yeah, so Texas, as we offered in some of the prepared remarks, we're seeing exactly what we'd hoped we would see. We're seeing outside membership gains. We're seeing the membership engaged throughout the club, across categories, and we shared some data in terms of the gas program down there and what we're seeing in terms of gas gallons. When we look at something like engagement of gas, we know that that is a strong indicator of a likelihood to renew. When we look at something like that early on, we feel really good about the prospects of being really successful down there with the membership base. So, really excited, but more to go do. We'll open up our club in Mesquite later this year.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

We announced our next club in Tyler, which is just outside the D.F.W. metroplex, for early next year. We have a lot more to come that you'll hear about in the future. The thing about Texas, it's just part of the broader real estate story. As I reflect back on, we're probably having the same conversation when we opened up in the Michigan market back in 2019. As we sit here today, those investments that we've made in Michigan have led to an expanding footprint there, and we're the gateway to opening up throughout the adjacent Midwest markets, when I think about Nashville, Indianapolis, Columbus, Pittsburgh. So, this is just a continuation of the long-term story, and we're really proud of what we're seeing down there.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

We're excited for the Q3 clubs to get our Rotterdam club relocated and open for our members, as well as opening up our second Alabama club down in Foley on the Gulf Shores, as well as expansion in Florida, which has been an amazing market for us with our club in Ocala. With both the Q3 new clubs showing, again, great early membership results. Bob talked about the membership engine earlier. It's certainly hitting in comp clubs, but it's certainly working super hard in our new club efforts. So, Texas is really important. We're doing great. We're really proud of the results. It's a continuation of the broader new club story, and all part of this engine that we've built over the last seven or eight years. So, really excited about the future.

Mike Baker
Mike Baker
Analyst at D.A. Davidson

Yeah. Great. Thanks for all that detail. I'll ask, we'll call it a follow-up, but technically, a different topic. Would you guys be willing to talk about the pace of sales throughout the quarter by month?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Mike, it was pretty ratable through the month, so nothing really to call out from a variability perspective.

Mike Baker
Mike Baker
Analyst at D.A. Davidson

Fair enough. Thank you.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thanks, Mike.

Operator

We are currently experiencing technical difficulties. Please hold.

Operator

Hi, team. Apologies for the technical disconnect. We are going to move now to the next question. Chuck Grom with Gordon Haskett. Your line is open. Please go ahead.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Hey, can you guys hear me?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah, Chuck. Morning.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Hey. Thanks a lot. Great quarter. My question's on CMP or SKU rationalization. I know it's something that the company has done in the past, and it's come and gone over the years. Just, can maybe, Bob, just double-click on the opportunity here, how you see the SKU count in the store. Maybe, give some perspective on when you're opening up these new stores in Texas and elsewhere, how many items you're opening up with relative to the total chain. It's been a longstanding opportunity, in my opinion, so just curious if you could flesh that out for us.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah, I'd be happy to. Again, everybody, sorry for the technical difficulties. CMPs have been a good part of our strategy for the past several years, and candidly, in the last couple of quarters, they've taken on a bit of a different tenor, particularly with Stephanie's arrival. I mentioned earlier, we're using CMPs to source margin, but they really serve a much broader purpose than that, and they get directly at what you're asking about. We find ourselves over-SKUed, as you point out. It has been a longstanding opportunity. We have had efforts to cut SKU count in the past, and I would argue, we didn't prosecute that opportunity in the right way. We just cut SKUs, which cut sales, and then we added some SKUs back.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

So, really, what we are doing now is removing unnecessary choice, so think multiple flavors of body wash, pushing all the volume into the remaining body wash flavors, and then adding new innovative products and white space categories. The addition of those new products, those new need states, that new white space category, that is sourcing sales growth as well and sort of giving us the formula where we can cut SKUs, and see sales go up, and see margin dollars go up. Our goal really is to take about 20% of our SKUs out over the next couple of years, and that will sort of happen ratably. That will largely get the chain down to where we find ourselves in new clubs, maybe a little bit lower than that.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Our average number of SKUs in a legacy club is about 7,500 or so at this point. The new clubs come with a six handle on them. I would like to get it down to about 6,000, 6,500 SKUs, I think is the right place for us over time. We have seen some of the benefits so far. We talked about it in the prepared remarks a bit, if it was not blocked out. Some benefits in beverages and active nutrition, where we are really taking out some unnecessary duplication, adding some new cool stuff. Think about, in traditional soda, we do not carry cans and one liters and two liters of the same product anymore, and we are adding in healthy soda, like poppi and things like that. That is the idea around the building. We have set some categories. In the second quarter, we saw some good results.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We will set some more in September, and then, our next wave will happen around the end of the year. This is an ongoing effort. I think it will be powerful. Stephanie has brought a great member focus to it, where we are trying to be sensitive to what the members' needs are, and that might color what we might cut. It also might color what we might add into the mix as well. The early results are good in this wave, so we will keep it going, and hopefully, we will see some more good results.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

That is great. Thanks, Bob. My follow-up is just on the gas business. 10.5%-gallon growth, I think you cited, which is much better than the industry. I guess, how are you using that as an opportunity to acquire new customers? Obviously, the MFI was much better than expected. The underlying health is really good. But are you using gas to drive new customer growth? Can you just flush that out for us? Thank you.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah, of course. Let me pass that over to Bill, since he runs gas for us.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

Yeah, thanks, Chuck. Absolutely, we are using it to drive membership. We have seen members flock to us with the 10.5% comp. The value of gas that we offer to our members is just as important now as it has ever been. We have definitely tested acquisition offers with gas discounts that our members have responded to in an outsized way. It has been a great partnership with our membership acquisition team as we have tested and quickly learned into offers, and then, expanded them when we have seen great results. Chuck, I want to take a moment just to come back to the gas business because the 10.5% comp that we delivered is certainly a testament to the team that is offering the value to our members every day, but also to the structural investments that we have made.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

We have talked a bunch about this call, about both short-term investments that we are making in price, but also long-term investments that we have made into something like real estate. When we think about the overall gallon growth that we have delivered, that in an environment like this allows us to deliver outsized value for our members and source outsized EPS for our shareholders, that is only because of some of these big structural long-term investments that we have made. As I think about on the real estate side, we have 50% more stations than we did at the IPO. We could not have delivered the gallons that we delivered in Q2 without those continued investments over time.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

Then, I also think about something like our co-branded credit card program where you would say we have over 2 million members that are getting either a 10% or 15% per gallon discount every day at the pumps, right? You do not grow to 2 million over time without working at it every single day, and the team that does that has been extremely successful in growing the credit card base. These big long-term decisions that we have made to invest in the value for our members come home and pay dividends in an environment like Q2. It is just a really cool example of how the company invested in lifetime value can come back to pay back, again, both to our members through an increased outsized value in a quarter like this, as well as to our shareholders.

Chuck Grom
Chuck Grom
Analyst at Gordon Haskett

Great. Thank you both.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thanks, Chuck.

Operator

Your next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open. Please go ahead.

Pedro Gil
Pedro Gil
Analyst at Morgan Stanley

Good morning. This is Pedro on for Simeon. Thank you for taking our question. Nice quarter. I meant to ask you about merch margins and price investments. We've seen merch margin rate down 20 basis points this quarter driven by continued price investments, some offset from tariff refund benefits. How should we think about the cadence of merch margin in the back half of the year as some of the tariff refund tailwinds potentially diminish, and how you think about price investments for the rest of the year?

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Hey, good morning, Pedro. I will take that one. Look, I think we have talked a lot on this call already about price investments and how we view them over the long term and important for lifetime value of our members. You know, we do not guide to merch margins. I think what you will see us do as we continue to travel through the year is balance investments with sources of funds, right, so use and source of funds in quarters, and also, look to continue to deliver value to our members. We think it is important to look at some of the milestones and some of the metrics in our business. We think about traffic in our clubs. We have talked about that already, continued positive traffic momentum. That means our members are seeing the value.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

We have talked about market share, and some of our, how we continue to gain market share on both dollars and units. All of those are important as we look out into the back half. You will see us continue to manage, I think, for the short term and also for the long term.

Pedro Gil
Pedro Gil
Analyst at Morgan Stanley

Okay, great. That is helpful. If I could ask you a follow-up about membership fee income and renewal rates. Nice job growing membership fee income this quarter. Could you break down for us the key drivers of that growth? How much is attributable to the fee increase versus member count from new clubs, member count at existing clubs?

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Yeah, maybe, I will take that one too, Pedro. Look, we do not give specific numbers on how much is coming from new clubs, but maybe, I will give you some context, and a little bit more color on the things we talked about. We are really happy with the overall member base growth. We hit a milestone of 8.5 million members. We continue to grow our overall member count, I think, faster than we have ever seen in the history of the company. We are happy with where our members are from a higher tier penetration. Our members that are engaged with the co-branded credit card, Bill just talked a little bit about that. We have over 2 million members in our co-branded credit card product.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

All of that is important to the short-term MFI results, as well as the long-term lifetime value of members and their propensity to renew, which is what we like. You know, we talk about MFI as the leading indicator in our business, and so, we view the results that we put up this quarter as a marker of the continued success that the membership team has made. I'd like to thank them for all their work. We're certainly in a different place than we were even five years ago from a membership perspective and acquiring members and the quality of members. So, we'll look to continue to do that as we continue into the back half of the year.

Pedro Gil
Pedro Gil
Analyst at Morgan Stanley

Okay, great. Thank you, Laura.

Operator

Your next question comes from the line of Steven Zaccone with Citigroup. Your line is open. Please go ahead.

Steven Zaccone
Steven Zaccone
Analyst at Citigroup

Hey, good morning. Thanks very much for taking my question. Stores look great in Texas, by the way. Laura, question for you. How do you break down the EPS guidance rates? How much of it is the fuel exceeding plan? Seems like the sale leaseback is $0.06 if we did the math right. How do we think about the guidance rates? Because it seems like the second half expectations are pretty much unchanged despite you tracking towards the higher end of your same-store sales outlook.

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Morning, Steve. I think you're looking at that the way we think about it. We talked a little bit about this. Bill talked a little bit about our gas business and how we view it long term. Certainly, successful in the quarter. As we step back and think about the raise on EPS, that is a result largely of our gas business. We did invest some of that in the quarter, but really, just taking the B and raising on it. We feel great about our guidance range for the back half and where we'll land for the full year. Bob already talked about the top line and why we left the comp guidance alone, but that's the story on the EPS guide.

Steven Zaccone
Steven Zaccone
Analyst at Citigroup

Okay. Then, follow-up just on Texas. How do we think about the timeline for these stores to reach maturity? I know it's a new market for you, but are there learnings from Michigan in the past, from Nashville? How do we think about the timeline to reach maturity?

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

Hey, Steve. It's been pretty consistent across both new and existing markets where we see membership growth throughout the first couple of years, and then, generally, a member grows into their sales potential over the first couple of years. Generally, within three to five years, you're seeing the club mature up towards its regular potential, and then, it would kind of grow with the chain from there. There's no better proof point than that than some of the data we gave in the prepared remarks on the comps of the new clubs where they continue to outperform the chain both individually and as a cohort. As you look at the data point that we gave on something like our 2024 class comping double digits, right, that's the magic of the math coming to life of membership growth combined with spend growth leading to outsized performance of these clubs. We've seen it across the board. It's been widespread.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

It's been consistent. It's a testament to the teams that are working on this every day and to give our members an unbelievable experience and deliver amazing value to these new communities. And we see the results. I have no doubts that we'll see the same thing, whether it's in the Texas clubs or whether it's in Foley or Ocala or any one of our new clubs opening, because we've had a demonstrated history of success now across the board.

Steven Zaccone
Steven Zaccone
Analyst at Citigroup

Okay, great. Thanks for that detail. Best of luck.

Operator

Your next question comes from the line of Oliver Chen with TD Cowen. Your line is open. Please go ahead.

Gabriella Garr
Gabriella Garr
Analyst at TD Cowen

Hi, Bob and Laura, good morning. This is Gabriella Garr on for Oliver. I had two questions. The first one is on the digitally enabled sales. I know you saw a nice 30% growth this quarter. I wanted to ask, as digital becomes a larger part of your business, what are you seeing in terms of member spend, frequency, retention, and other important metrics compared to members who shop primarily in clubs?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Good morning, Gabriella. Certainly, a great quarter from a digital growth perspective on top of a great Q1, a great Q2 last year. I think our two-year stack is over 60%. So, the team's done a nice job of putting things in front of our members that they enjoy, that save them time, in addition to saving them some dollars. We're investing in this. We have been for a while because of the question you're asking. The folks that engage with each of these digital properties become more valuable over time. They interact with us more. They come to see us more physically. They buy more, and they renew at higher rates. And that is a compounding thing. The more digital properties they interact with, the better they are. So, if they clip coupons, they become better.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

If they order something to be shipped to their home, they become better. If they order BOPIC or same-day delivery, they become better. If they use ExpressPay, where you check out in the clubs, they become even better than that. The more ways we can get them to engage with us, whether it be through our desktop website or our app, they really change their behavior for the better over time. I think we're around 19% penetration of our business at this point, and I hope that that continues to grow. It is really one of the great stories within our company at this point, and we'll continue to place investment dollars here. We'll continue to talk to our members and source ideas from them on how we do this.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We've got a concentrated effort right now to grow our ExpressPay penetration, and that's been going well as well. So, good results this quarter and more to come.

Gabriella Garr
Gabriella Garr
Analyst at TD Cowen

Thank you. That's helpful color. Then, just as a follow-up question, as we think about value perception, price gaps, and as well as the merchandising improvements that you guys are making, can you shed some light on how private label is playing a role in all of this, both in success today and then, maybe, categories where you see opportunities to expand penetration of your own brands?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. We haven't talked about own brands in a while, but certainly a big business for us. Several billion dollars of our sales are done in our two own brands. It really comes down to quality and value. We put good quality products in front of our members, and we place a fantastic price on them. That is even more relevant these days in pressured economic circumstances, where we're giving our members a terrific value. Think about our Berkley Jensen paper towels, as for instance. I think we're 35% lower price than the comparable national brand on a fantastic towel. We make a little bit more margin than we would if we were selling the comparable national brand, so, we make up two. We've grown that business to be about 65%-unit share.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

We're putting a great product in front of people at a fantastic value, and they come back to get it from us. We need to do more of that. We need to continue to improve our own brands. As we think about the overall value that we provide our members, we understand that that is our job. We're supposed to provide them terrific value, and own brands is a great way to do that. You mentioned our price gaps. We haven't talked about that. Our price gaps got better during the quarter, so our investments are paying off. It's a tough market out there from a cost increase perspective, and some of our competitors are having to raise prices faster than we might, and we've been making investments there.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

All of that comes back to that central theme of offering the right value, and we'll continue to do that day in and day out for our members. That is our job. That's what they pay us to do, and we love to do that. We are always pleased to make investments in our members because we know it pays off in the long term.

Gabriella Garr
Gabriella Garr
Analyst at TD Cowen

Great. Thank you. Best wishes.

Operator

Your next question comes from the line of Greg Melich with Evercore ISI. Your line is open. Please go ahead.

Greg Melich
Greg Melich
Analyst at Evercore ISI

Hi, thanks. Sorry if I missed it in the opening comments, but Laura, could you help us with the ticket expansion, which I guess was around 1.5 points. How much of that was unit growth items in basket versus inflation, which, if I remember correctly, was slightly negative in 1Q?

Laura Felice
Laura Felice
CFO at BJ's Wholesale Club

Yep. Good morning, Greg, and thanks for the question. We talked a little bit about inflation in the prepared remarks. It was close to 1% in the quarter, and so, certainly, a step move up from where we were in the first quarter. I think as we step back and think about our comps that we delivered for the quarter, we are really pleased with the 3.1%, equally balanced roughly between traffic and basket. We like that our members are certainly seeing the value in what we are offering them every day.

Greg Melich
Greg Melich
Analyst at Evercore ISI

Thanks. That is super helpful. Bob, I would love to follow up on the openings. Given the success in Texas, just update us on how many clubs you are opening this year and next year. Do you think there is an opportunity to accelerate that going forward?

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Yeah. Thanks for the question, Greg. I'll kick it off, and Bill can talk about the specifics. As you point out, our real estate growth has been fantastic. We've gone from not opening clubs a few years ago to opening at a sort of a 12-15 club at this point. We've committed to maintaining that 25-30 every couple of years cadence. We've challenged ourselves to think about going faster as well, and that will take a couple of years to sort of make its way into the pipeline, but the more good clubs we can open, the better for us. So, we're pleased with where we are, and we'd love to go faster. Let me hand it over to Bill.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

Yeah, I think, Greg, that's exactly right. At this point, as we look out on the horizon, the pipeline for plus or minus the next two years is pretty baked, and we're working on projects for 2028, 2029, and 2030 right now. The great news is that the success that we've seen in the market is paying off in terms of our opportunities. As we're out in the market having conversations with developers and other parties within the real estate world, we've seen more opportunities come to us. We've seen the cap rates come down on our buildings, which improve the overall economics that are available and improve our returns. Again, I come back to we've made a series of long-term investments over the last few years that are paying off.

Bill Werner
Bill Werner
EVP of Strategy and Development at BJ's Wholesale Club

The investments that we make today in a market like Texas, we're going to look back five years from now and be really happy that we made them. As we look forward to the clubs in the pipeline, again, as we look a decade out from now, we're going to be really proud of the footprint that we've built. So, more to come in terms of the acceleration of the growth, but we feel like we're in a really great spot to continue to deliver value to the members and the communities that depend on us.

Greg Melich
Greg Melich
Analyst at Evercore ISI

Great. Thanks, and good luck.

Bob Eddy
Bob Eddy
Chairman and CEO at BJ's Wholesale Club

Thanks, Greg.

Operator

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Executives
    • Diana Rashkow
      Diana Rashkow
      VP of Investor Relations
    • Bob Eddy
      Bob Eddy
      Chairman and CEO
    • Laura Felice
      Laura Felice
      CFO
    • Bill Werner
      Bill Werner
      EVP of Strategy and Development
Analysts
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