Business Wire | Aug 20, 2020 06:45AM EDT

BJ's Wholesale Club Holdings, Inc. Announces Record Second Quarter Fiscal 2020 Results

Aug. 20, 2020

WESTBOROUGH, Mass.--(BUSINESS WIRE)--Aug. 20, 2020--BJ's Wholesale Club Holdings, Inc. (NYSE: BJ) (the "Company") today announced its financial results for the thirteen and twenty-six weeks ended August 1, 2020.

"We continue to be extremely grateful for the dedication of our team members, who have exemplified our core values and continue to serve our members and communities during these difficult times" said Lee Delaney, President and Chief Executive Officer, BJ's Wholesale Club. "We delivered another remarkable quarter with strong comp growth and record profitability. Our business has been transformed and strengthened in the last six months by every measure. We are extremely well positioned to continue to win as we invest in digital capabilities, membership, assortment, marketing and geographic expansion to further accelerate this transformation."

Key Measures for the Thirteen Weeks Ended August 1, 2020 (Second Quarter of Fiscal 2020) and for the Twenty-Six Weeks Ended August 1, 2020 (First Half of Fiscal 2020):

BJ'S WHOLESALE CLUB HOLDINGS, INC.

(Amounts in thousands, except per share amounts)



13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended

August 1, August 3, % August 1, August 3, % 2020 2019 Growth 2020 2019 Growth

Net sales $ 3,871,640 $ 3,271,145 18.4 % $ 7,589,680 $ 6,340,908 19.7 %

Membership 82,490 74,697 10.4 % 162,055 148,070 9.4 %fee income

Total 3,954,130 3,345,842 18.2 % 7,751,735 6,488,978 19.5 %revenues



Operating 163,595 98,741 65.7 % 307,345 169,423 81.4 %income

Income fromcontinuing 106,668 54,293 96.5 % 202,410 90,378 124.0 %operations

Adjusted 216,850 153,187 41.6 % 410,765 277,263 48.1 %EBITDA ^(a)

Net income 106,618 54,523 95.5 % 202,352 90,321 124.0 %

EPS ^(b) 0.76 0.39 94.9 % 1.46 0.65 124.6 %

Adjustednet income^ 107,542 55,050 95.4 % 203,276 91,728 121.6 %(a)

Adjusted 0.77 0.39 97.4 % 1.46 0.66 121.2 %EPS ^(a)

Basicweighted )average 136,706 136,571 0.1 % 136,398 136,690 (0.2 %sharesoutstanding

Dilutedweighted )average 139,522 139,516 - % 138,975 139,989 (0.7 %sharesoutstanding

* See "Note Regarding Non-GAAP Financial Information" * EPS represents earnings per diluted share Additional Highlights:

* Comparable club sales for the second quarter of fiscal 2020 increased 17.2%, compared to the second quarter of fiscal 2019. Comparable club sales, excluding the impact of gasoline sales, for the second quarter of fiscal 2020 increased 24.2% compared to the second quarter of fiscal 2019. Comparable club sales for the first half of fiscal 2020 increased 18.5%, compared to the first half of fiscal 2019. Comparable club sales, excluding the impact of gasoline sales, for the first half of fiscal 2020 increased 25.6% compared to the first half of fiscal 2019.

* Gross profit increased to $756.4 million in the second quarter of fiscal 2020 from $612.8 million in the second quarter of fiscal 2019. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, remained flat over the second quarter of fiscal 2019. Continued execution of our category profitability improvement and improved sales performance in our general merchandise business was offset by cost inflation of certain commodities, most notably beef and distribution costs associated with the coronavirus pandemic. Gross profit increased to $1,493.1 million in the first half of fiscal 2020 from $1,186.9 million in the first half of fiscal 2019. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, decreased by approximately 20 basis points over the first half of fiscal 2019. While merchandise margins benefited from strong sales performance and continued execution of our category profitability improvement initiatives, these drivers were offset by distribution costs associated with the coronavirus pandemic, the decline in our higher-margin apparel business and temporary shut-down of our higher-margin services business in the first quarter of fiscal 2020.

* Selling, general and administrative expenses ("SG&A") increased to $590.8 million in the second quarter of fiscal 2020, compared to $511.9 million in the second quarter of fiscal 2019. SG&A in the second quarter of fiscal 2019 included charges related to offering costs of $0.7 million. The year-over-year increase in SG&A expense was primarily driven by costs associated with the coronavirus pandemic, including wage increases, bonuses, safety and protective equipment and other operational costs, such as security. SG&A increased to $1,181.2 million in the first half of fiscal 2020, compared to $1,013.1 million in the first half of fiscal 2019. SG&A in the first half of fiscal 2019 included charges related to our initial public offering and the registered offerings by selling stockholders of $1.9 million.

* Operating income increased to $163.6 million, or 4.1% of total revenues in the second quarter of fiscal 2020, compared to $98.7 million, or 3.0% of total revenues in the second quarter of fiscal 2019. Operating income in the second quarter of fiscal 2019 included offering costs of $0.7 million. Operating income increased to $307.3 million, or 4.0% of total revenues in the first half of fiscal 2020, compared to $169.4 million, or 2.6% of total revenues in the first half of fiscal 2019. Operating income in the first half of fiscal 2019 included charges related to offering costs of $1.9 million.

* Interest expense, net, decreased to $20.7 million in the second quarter of fiscal 2020, compared to $26.8 million in the second quarter of fiscal 2019. Interest expense in the second quarter of fiscal 2020 included $1.3 million write-off of deferred fees and the original issue discount associated with the July 2020 partial payoff of our first lien term loan facility (the "First Lien Term Loan"). Interest expense, net, decreased to $42.6 million in the first half of fiscal 2020, compared to $54.6 million in the first half of fiscal 2019. The decrease in interest expense was driven by continued de-levering.

* Income tax expense was $36.2 million in the second quarter of fiscal 2020, compared to income tax expense of $17.7 million in the second quarter of fiscal 2019. The second quarter of fiscal 2020 included a benefit of $2.6 million from excess tax benefits related to stock-based compensation compared to $1.7 million in the second quarter of fiscal 2019. Income tax expense was $62.4 million in the first half of fiscal 2020, compared to income tax expense of $24.5 million in the first half of fiscal 2019.

* Under our share repurchase program, we repurchased 924,282 shares of common stock, totaling $34.1 million in the second quarter of fiscal 2020. In the first half of fiscal 2020, we repurchased 1,099,282 shares of common stock, totaling $38.1 million, under such program.

Conference Call Details

A conference call to discuss the second quarter fiscal 2020 financial results is scheduled for today, August 20, 2020, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-274-0290 (international callers please dial 647-689-5405) approximately 10 minutes prior to the start of the call and reference conference ID 9769849. A live audio webcast of the conference call will be available online at https://investors.bjs.com.

A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online at https://investors.bjs.com and by dialing 416-621-4642 and entering the access code 9769849. The recorded replay will be available until August 27, 2020 and an online archive of the webcast will be available for one year.

About BJ's Wholesale Club Holdings, Inc.

Headquartered in Westborough, Massachusetts, BJ's Wholesale Club Holdings, Inc. is a leading operator of membership warehouse clubs in the Eastern United States. The company currently operates 219 clubs and 148 BJ's Gas(r) locations in 17 states.

Non-GAAP Financial Measures

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

BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)

13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended

August 1, August 3, August 1, August 3, 2020 2019 2020 2019

Net sales $ 3,871,640 $ 3,271,145 $ 7,589,680 $ 6,340,908

Membership fee 82,490 74,697 162,055 148,070 income

Total revenues 3,954,130 3,345,842 7,751,735 6,488,978

Cost of sales 3,197,752 2,733,085 6,258,645 5,302,062

Selling,general and 590,814 511,889 1,181,175 1,013,070 administrativeexpenses

Pre-opening 1,969 2,127 4,570 4,423 expense

Operating 163,595 98,741 307,345 169,423 income

Interest 20,741 26,783 42,585 54,572 expense, net

Income fromcontinuingoperations 142,854 71,958 264,760 114,851 before incometaxes

Provision for 36,186 17,665 62,350 24,473 income taxes

Income fromcontinuing 106,668 54,293 202,410 90,378 operations

Income (loss)fromdiscontinued (50 ) 230 (58 ) (57 )operations, netof income taxes

Net income $ 106,618 $ 54,523 $ 202,352 $ 90,321

Income pershareattributable to commonstockholders -basic:

Income fromcontinuing $ 0.78 $ 0.40 $ 1.48 $ 0.66 operations

Loss fromdiscontinued - - - - operations

Net income $ 0.78 $ 0.40 $ 1.48 $ 0.66

Income pershareattributable to commonstockholders -diluted:

Income fromcontinuing $ 0.76 $ 0.39 $ 1.46 $ 0.65 operations

Loss fromdiscontinued - - - - operations

Net income $ 0.76 $ 0.39 $ 1.46 $ 0.65

Weightedaverage number of sharesoutstanding:

Basic 136,706 136,571 136,398 136,690

Diluted 139,522 139,516 138,975 139,989



BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)



August 1, August 3, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 168,811 $ 29,092

Accounts receivable, net 170,595 162,278

Merchandise inventories 1,005,274 1,026,541

Prepaid expense and other current assets 64,074 47,353

Total current assets 1,408,754 1,265,264



Operating lease right-of-use assets, net 2,043,713 2,040,834

Property and equipment, net 755,678 750,716

Goodwill 924,134 924,134

Intangibles, net 141,054 153,730

Other assets 20,687 17,409

Total assets $ 5,294,020 $ 5,152,087



LIABILITIES

Current liabilities:

Current portion of long-term debt $ - $ 195,377

Current portion of operating lease liabilities 128,010 118,035

Accounts payable 1,004,725 798,504

Accrued expenses and other current liabilities 631,500 499,149

Total current liabilities 1,764,235 1,611,065



Long-term lease liabilities 1,971,634 1,957,934

Long-term debt 1,202,209 1,540,602

Deferred income taxes 43,111 46,508

Other noncurrent liabilities 193,730 160,564



STOCKHOLDERS' EQUITY (DEFICIT) 119,101 (164,586 )

Total liabilities and stockholders' equity $ 5,294,020 $ 5,152,087 (deficit)



BJ'S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

26 Weeks 26 Weeks Ended Ended August 1, August 3, 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 202,352 $ 90,321

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 82,171 77,671

Amortization of debt issuance costs and accretion of 2,363 2,646 original issue discount

Debt extinguishment charges 1,283 -

Stock-based compensation expense 14,578 8,796

Deferred income tax provision 438 10,563

Other non cash items, net 4,175 2,733

Increase (decrease) in cash due to changes in:

Accounts receivable 35,758 32,022

Merchandise inventories 76,228 25,765

Accounts payable 218,313 (18,376 )

Accrued expenses 70,971 (37,618 )

Other operating assets and liabilities, net 25,062 20,601

Net cash provided by operating activities 733,692 215,124

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property and equipment, net of disposals (82,962 ) (88,298 )

Proceeds from sale leaseback transaction 4,061 -

Net cash used in investing activities (78,901 ) (88,298 )



CASH FLOWS FROM FINANCING ACTIVITIES

Payments on long term debt (3,297 ) (7,689 )

Paydown of First Lien Term Loan (150,000 ) -

Net Payments on ABL Facility (328,000 ) (59,000 )

Net cash received from stock option exercises 9,005 8,618

Net cash received from Employee Stock Purchase 1,107 726 Program (ESPP)

Acquisition of treasury stock (44,533 ) (67,237 )

Other financing activities (466 ) (298 )

Net cash used in financing activities (516,184 ) (124,880 )

Net increase in cash and cash equivalents 138,607 1,946

Cash and cash equivalents at beginning of period 30,204 27,146

Cash and cash equivalents at end of period $ 168,811 $ 29,092

Note Regarding Non-GAAP Financial Information

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

We define adjusted net income as net income attributable to common stockholders adjusted for: stock-based compensation related to the IPO; offering costs; management fees; club closing and impairment charges; reduction in force severance; gain on sale leaseback transactions; charges related to debt restructurings and retirements; and the tax impact of the foregoing adjustments on net income.

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

We define adjusted EBITDA as income from continuing operations before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including: stock-based compensation expense; pre-opening expenses; non-cash rent; strategic consulting; offering costs; and other adjustments.

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

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

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

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

Management believes that adjusted net income, adjusted net income per diluted share and adjusted EBITDA are helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We use adjusted net income, adjusted net income per diluted share and adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures. We also use adjusted EBITDA in connection with establishing discretionary annual incentive compensation.

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

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

Reconciliation of GAAP to Non-GAAP Financial Information

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation of net income to adjusted net income and adjusted net income perdiluted share

(Amounts in thousands, except per share amounts)

(Unaudited)

13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended

August 1, August 3, August 1, August 3, 2020 2019 2020 2019

Net income as reported $ 106,618 $ 54,523 $ 202,352 $ 90,321

Adjustments:

Offering costs ^(a) - 706 - 1,928

Charges and write-offs 1,283 - 1,283 - related to debt paydown ^(b)

Tax impact of adjustments to (359 ) (179 ) (359 ) (521 )net income ^(c)

Adjusted net income $ 107,542 $ 55,050 $ 203,276 $ 91,728



Weighted average diluted 139,522 139,516 138,975 138,989 shares outstanding

Adjusted net income per $ 0.77 $ 0.39 $ 1.46 $ 0.66 diluted share ^(d)

* Represents costs related to registered offerings by selling stockholders. * Represents the write-off of deferred fees and original issue discount associated with the partial paydown of our First Lien Term Loan. * Represents the tax effect of the above adjustments at a statutory tax rate of approximately 28%. * Adjusted net income per diluted share is measured using weighted average diluted shares outstanding.

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation to Adjusted EBITDA

(Amounts in thousands)

(Unaudited)

13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended

August 1, August 3, August 1, August 3, 2020 2019 2020 2019

Income from continuing $ 106,668 $ 54,293 $ 202,410 $ 90,378 operations

Interest expense, net 20,741 26,783 42,585 54,572

Provision for income 36,186 17,665 62,350 24,473 taxes

Depreciation and 41,332 39,001 82,171 77,671 amortization

Stock-based compensation 9,064 4,952 14,578 8,796 expense (a)

Pre-opening expenses (b) 1,969 2,127 4,570 4,423

Non-cash rent (c) 511 3,019 2,015 3,773

Strategic consulting (d) - 4,610 - 11,349

Offering costs (e) - 706 - 1,928

Other adjustments (f) 379 31 86 (100 )

Adjusted EBITDA $ 216,850 $ 153,187 $ 410,765 $ 277,263

* Represents total stock-based compensation expense. * Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. * Consists of an adjustment to remove the non-cash portion of rent expense. * Represents fees paid to external consultants for strategic initiatives of limited duration. * Represents costs related to registered offerings by selling stockholders. * Other non-cash items, including non-cash accretion on asset retirement obligations and obligations associated with our post-retirement medical plan.

BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation to Free Cash Flow

(Amounts in thousands)

(Unaudited)

13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended

August 1, August 3, August 1, August 3, 2020 2019 2020 2019

Net cash provided by $ 263,790 $ 170,188 $ 733,692 $ 215,124 operating activities

Less: Additions toproperty and equipment, 47,750 51,764 82,962 88,298 net of disposals

Plus: Proceeds fromsale leaseback 4,061 - 4,061 - transaction

Free cash flow $ 220,101 $ 118,424 $ 654,791 $ 126,826



BJ'S WHOLESALE CLUB HOLDINGS, INC.

Reconciliation of Net Debt and Net Debt to LTM adjusted EBITDA

(Amounts in thousands)

(Unaudited)

August 1, 2020

Total debt $ 1,202,209

Less: Cash and cash equivalents 168,811

Net Debt $ 1,033,398



Income from continuing operations 299,789

Interest expense, net 96,243

Provision for income taxes 94,089

Depreciation and amortization 161,500

Stock-based compensation expense (a) 24,578

Pre-opening expenses (b) 15,299

Non-cash rent (c) 6,616

Reduction in force severance (d) 3,994

Club closings and impairment charges (e) 15,383

Other adjustments (f) (2,365 )

Adjusted EBITDA $ 715,126



Net debt to LTM adjusted EBITDA 1.4 x

* Represents total stock-based compensation expense. * Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred. * Consists of an adjustment to remove the non-cash portion of rent expense. * Represents severance charges associated with a reduction in workforce announced in January 2020. * Represents primarily closing costs associated with our clubs in Charlotte, N.C. and Geneva, N.Y., which closed in the fourth quarter of fiscal 2019 and other impairment charges. * Other non-cash items, including a gain from the sale leaseback of one of our new Michigan locations, non-cash accretion on asset retirement obligations, termination costs to former executives and obligations associated with our post-retirement medical plan. View source version on businesswire.com: https://www.businesswire.com/news/home/20200820005142/en/

CONTACT: Investor Contact: Faten Freiha, BJ's Wholesale Club (774) 512-6320 ffreiha@bjs.com Media Contact: Kristy Houston, BJ's Wholesale Club (774) 512-5086 khouston@bjs.com