BJ's Wholesale (BJ) Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolThu, March 5, 2026 at 3:06 PM UTC

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Thursday, March 5, 2026 at 8:30 a.m. ET

Call participants -

President and Chief Executive Officer — Robert W. Eddy

Executive Vice President, Chief Financial and Administrative Officer — Laura L. Felice

Executive Vice President, Chief Club Officer — William C. Werner

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Takeaways -

Net Sales -- $5.4 billion, a 5.5% increase driven by both new clubs and existing club performance.

Merchandise Comparable Club Sales (Ex-Gasoline) -- Up 2.6%, marking the 13th straight quarter of market share gains and 16th straight quarter of traffic growth.

Perishables, Grocery, and Sundries Comps -- Increased by 2.3%, with notable growth in nonalcoholic beverages, candy, and snacks.

General Merchandise and Services Comps -- Rose 4.3%, primarily driven by consumer electronics and apparel, while home and seasonal categories delivered negative comps due to inventory cuts tied to tariffs.

Membership Fee Income -- Rose 10.9% to approximately $129.8 million, reflecting both healthy member acquisition and a January 2025 membership fee increase.

Total Membership -- Surpassed 8 million, adding more than 500,000 members this year; high-tier memberships reached 42% penetration.

Tenured Renewal Rate -- Held at 90% for the fourth consecutive year, indicating sustained loyalty among members.

Digitally Enabled Sales -- Increased 31%, now representing 16% penetration of total sales, with over 90% of digital orders fulfilled via clubs and milestones set on Black Friday and Cyber Monday.

Gross Merchandise Margin Rate (Ex-Gasoline) -- Declined by approximately 50 basis points year over year, primarily driven by unfavorable mix towards lower-margin general merchandise and investments in value within grocery.

SG&A Expenses -- Reached $818.2 million, representing slight deleverage mainly from accelerated new club openings and elevated investment in key initiatives.

Adjusted EBITDA -- Increased 1% to $266.5 million, supported by ongoing cost discipline.

Adjusted EPS -- $0.96 for the quarter, up 3.2%; full-year adjusted EPS reached $4.40, at the high end of guidance.

Own Brands Penetration -- Accounted for 27% of merchandise sales, with progress toward a 30% long-term target.

Inventory -- Up 3.1% in absolute terms, but down 2% per club, with record in-stock levels up 40 basis points year over year.

New Clubs Opened -- 14 new clubs were opened, the largest annual increase, expanding across eight states; returns on new clubs "well into double digits."

Share Repurchases -- 1.3 million shares bought back in the quarter ($117.7 million), totaling 2.6 million for the year ($252.4 million), with $750 million remaining under authorization.

2026 Guidance -- Projecting comparable sales growth (excluding gas) of 2%-3% and adjusted EPS of $4.40–$4.60; expects slight SG&A deleverage due to new club ramp and continued investment in depreciation and supply chain.

Summary

BJ's Wholesale Club Holdings (NYSE:BJ) reported record member count, with over 500,000 new members added and a tenured renewal rate of 90% sustained for the fourth year. Investments in digital capabilities led to a 31% rise in digitally enabled sales and the highest-ever online sales days on Black Friday and Cyber Monday. Home and seasonal categories saw negative comps due to tariff-related inventory cuts, while general merchandise strength was offset by margin pressure from mix and pricing investments. The company executed its largest club expansion by opening 14 new locations, delivering returns well above expectations and demonstrating accelerated market penetration within new geographies. Management anticipates continued expansion, particularly in Texas, and plans to support this with further real estate and supply chain investments, including a new automated distribution center planned for 2027.

Capital deployment remained disciplined with $1.7 billion invested over three years, including $500 million in owned real estate added to the balance sheet and $300 million in debt repaid, bringing net leverage down to 0.4 times.

Management asserts, "Tariffs may shape the trajectory of inflation and broader consumer demand, and ultimately influence our results this year," indicating external macro and policy factors could affect 2026 outcomes.

Adjusted EBITDA of $3.3 billion and operating cash flow over $2.6 billion were generated over the last three years, supporting ongoing investments for long-term shareholder value creation.

Own brands contributed to margin structure and member loyalty, comprising 27% of merchandise sales, nearing the company's growth target for this portfolio.

The upcoming Texas club launches indicated membership sign-ups ahead of pre-opening plans, with management citing strong local engagement and supply chain strategies to support growth in new regions.

Industry glossary -

Perishables: Product categories such as fresh food, dairy, and produce, requiring temperature control and frequent inventory turnover.

Comps (Comparable Club Sales): Year-over-year sales growth at clubs open for at least one year, excluding the impact of newly opened locations unless otherwise specified.

BOPIC: Buy Online, Pick up In Club — an omnichannel fulfillment feature allowing members to collect purchases at physical club locations.

Express Pay: A digital payment solution enabling expedited checkout through mobile or in-club digital interfaces.

Fresh 2.0: BJ’s enhanced fresh foods initiative focused on upgrading assortment and member experience in perishables.

SG&A: Selling, General, and Administrative expenses, comprising overhead and operating costs not directly tied to goods sold.

MFI: Membership Fee Income, the recurring revenue stream generated from annual or renewal member fees.

Own Brands: Private-label products owned, sourced, and managed directly by BJ's Wholesale Club Holdings, such as Berkley Jensen and Wellsley Farms.

Tenured Renewal Rate: The percentage of long-term members renewing their memberships after multiple terms, reflecting cohort loyalty.

CMP (Category Management Program): BJ’s current assortment-focused program designed to optimize product mix and shelf allocation.

Full Conference Call Transcript

Robert W. Eddy: Good morning, and thank you all for joining us. We are pleased to share that we closed out fiscal 2025 with strong momentum, delivering solid comparable club sales growth and strong profitability. Throughout the year, we navigated a dynamic environment marked by a more cautious, value‑seeking consumer, tariff‑related and geopolitical uncertainties, and broader macroeconomic volatility. Even with these challenges, our team remained focused and resilient, consistently delivering value, convenience, and quality for our members. We also achieved several meaningful milestones in 2025 that strengthened our business and reinforced the momentum we are carrying into the year ahead.

We grew our membership base by more than 500,000 members, the largest annual increase in recent years, underscoring the relevance of our value proposition and the loyalty of the families who rely on us. We successfully opened 14 new clubs, the most we have ever opened in a single year, expanding our reach into new markets with sales, membership, and profit performance all well above expectations. We also advanced our digital capabilities, with digitally enabled sales penetration reaching 16% as more members embraced the convenience of omnichannel services. All of these are material accomplishments that create a structurally higher lifetime value for both members and shareholders.

Ultimately, these achievements helped drive record full-year earnings per share, reflecting the strength of our model and disciplined execution across the business. As always, our team demonstrated an incredible commitment to our purpose: to take care of the families that depend on us. This purpose guided our decision-making and enabled us to deliver the dependable experience our members count on, no matter the conditions. That was especially evident late in the quarter when winter storm Fern, one of the largest storms in recent years, brought significant snow and ice across much of the U.S., impacting nearly our entire club footprint. We pride ourselves on being open and in stock for our members when they need us most.

In the days leading up to the storm, we set a daily record for gas volume that was 20% higher than our previous daily record, reinforcing that we are a destination in times like these. Our team worked tirelessly to keep our clubs open and ensure that our members had access to the essential supplies they needed, from groceries and household goods to ice melt and emergency items. Their remarkable efforts really showed our purpose of taking care of the families that depend on us. I am incredibly proud of the way that they showed up for our members and communities.

Turning to our fourth quarter sales performance, we delivered merchandise comparable club sales growth of 2.6%, reflecting our 13th consecutive quarter of market share gains and 16th consecutive quarter of traffic growth. Our perishables, grocery, and sundries division grew comps by 2.3%, driven by solid unit growth supported by improvements in assortment and merchandising. Even after lapping the chain‑wide rollout of Fresh 2.0, we are still seeing strong, steady comp performance in perishables, clear proof that this is not a onetime lift but a real, lasting shift in how our members shop with us. These results reinforce the importance of our core consumables franchise, which continues to demonstrate consistency even in a volatile operating environment.

In general merchandise and services, comps increased by 4.3%, which outperformed our expectations for the quarter, driven by changes in merchandise mix. While we are pleased with our progress, it is important to note that general merchandise can be variable quarter to quarter, given the discretionary nature of many of these categories. As such, we would not expect performance at this level every quarter, but we are encouraged by the traction we are seeing as our broader transformation efforts take hold.

Turning to membership, the foundation of our business and one of our greatest strengths, we ended the year with over 8,000,000 members, a new high for our company. In comp clubs, this growth reflects strong acquisition, continued loyalty from our long‑tenured members, and the ongoing relevance of our value proposition. Our growth was also the result of opening our 14 new clubs this year. Growing both the comp and total member bases is incredibly important to our future success. For the fourth consecutive year, we achieved a 90% tenured renewal rate. This level of loyalty is rare in retail and speaks directly to the consistency of the experience we deliver and the relevance of the BJ's Wholesale Club Holdings, Inc. membership model. We also saw continued strength in our higher‑tier memberships. Penetration increased to 42% this year, demonstrating strong adoption of the enhanced benefits in our higher‑tier offerings. These members are among our most engaged and the highest-spending cohorts, and we see meaningful opportunity for continued growth here. What stands out this year is not just the growth of membership, but the quality of that growth. The combination of more members, exceptionally high renewal rates, and deeper engagement among our most loyal tiers reinforces the health of our model. It also gives us tremendous confidence as we look ahead, because strong membership is the engine that powers everything else: traffic, share gains, and long‑term profitable growth.

As our membership base grows in both size and quality, we continue to make it easier for members to shop with us whenever and however they choose. Digital engagement remains a major unlock for convenience, and this quarter, digitally enabled sales grew by 31%, driven by strong adoption of BOPIC, same‑day delivery, and Express Pay. These services have consistently been among the most meaningful drivers of digital growth, with more than 90% of digital orders fulfilled directly from our clubs—an efficient and member‑friendly model that has contributed significantly to our momentum. Our digital business also achieved a milestone this quarter, posting its highest sales day ever on Black Friday, and then surpassing that record again on Cyber Monday.

This performance reflects not only high engagement, but the continued maturation of our digital portfolio. We are increasingly seeing members tap into our digital conveniences for different shopping occasions, underscoring how ingrained these capabilities have become. For example, a member stocking up in club ahead of a winter storm may be more inclined to use Express Pay to make that shopping trip faster and easier. We are also continuing to lean into AI to create even more seamless and intuitive experiences for our members. Our AI shopping assistant, Ask Bev, is designed to enhance the member experience through more personalized, intuitive, and efficient product discovery and support. And behind the scenes, AI is enhancing our merchandising enrichment and platform reliability.

Value remains foundational to how we serve our members, and we continue to see that resonate across all income levels, particularly in a period where many consumers are becoming more selective with their spending. A strong pricing position is central to our model. Our advantaged structure allows us to consistently deliver meaningful savings—up to 25% better than traditional grocery. We are relentless about maintaining that edge for members. This commitment to value is one of the reasons we continue to see steady renewal rates, strong traffic, and healthy unit growth in our core businesses. Our own brands are another important way we help members manage their budgets without compromising on quality.

In fiscal 2025, own brands represented 27% of our merchandise sales, and we remain on track toward our long‑term goal of 30%. These products offer significant savings and are an increasingly important part of how families shop our clubs. That loyalty, combined with higher margins, makes this effort powerful for our company. We also create value through compelling discounts and promotions. A recent example is our Big Game event, where members who spent over $150 received a $15 digital bounce‑back coupon, providing members with a high‑impact way to save during a key seasonal moment.

At a time when members are making careful decisions with every dollar, our focus on great prices, quality products, and highly curated assortments ensures we remain a trusted destination for families looking to get more value out of every trip.

We continue to make meaningful progress on expanding our footprint and bringing the BJ's Wholesale Club Holdings, Inc. model to more communities. In the fourth quarter, we opened seven new clubs, a great finish to a year that saw us open 14 new clubs. We are so proud of our 2025 class of club openings, which saw us open clubs in eight different states. These clubs as a whole are delivering sales, membership, and profit that are well above expectations, and we are very excited for our continued accelerated club growth.

The success in our new clubs and new markets is a testament to the team working on new clubs, whose mission is to make the next opening even better than the last. The team is ready for our first‑half‑of‑the‑year openings in the Dallas–Fort Worth area, and I have a tremendous amount of confidence that we will deliver for these new members and communities, as we have proven time and again in our new club program. We remain on track to deliver our commitment of 25 to 30 new clubs over 2025 and 2026, and as we look out at the new club pipeline, we would expect this pace of openings to continue over coming years.

Our sustained expansion reflects our confidence in the relevance of our model, our ability to serve more members across more geographies, and our long‑term commitment to profitable growth.

Before I hand things over, I want to take a moment to recognize our team members across our clubs, our supply chain, and our club support center. Their commitment to taking care of the families who depend on us is what enables our performance quarter after quarter. Their hard work, especially in dynamic environments like this one, continues to inspire me every day. As we look ahead, we remain confident in the strength of our model and our ability to execute on our long‑term priorities.

Our business is built to win in both stable and uncertain environments, and the investments we are making today put us in a strong position to continue delivering value for our members and sustainable growth for our shareholders. With that, I will now turn it over to Laura L. Felice to walk you through the financial results in more detail.

Laura L. Felice: Thank you, Bob. Before I dive into the numbers, I want to acknowledge the exceptional work that our teams across our clubs, distribution centers, and support functions. Their continued focus on serving our members and strengthening our operations played a major role in delivering our fourth quarter results. Now let me walk through the financial highlights for the quarter. Net sales for the fourth quarter were approximately $5,400,000,000, an increase of 5.5% over last year. Total comparable club sales, including gasoline, rose 1.6%, with fuel prices continuing to run down mid‑single digits year over year. Excluding gas, merchandise comparable sales increased 2.6%, and we were pleased to see growth in both traffic and units.

Traffic strengthened as the quarter progressed, helped in part by members stocking up ahead of the late‑January winter storm. Within our grocery, perishables, and sundries business, comps were up 2.3%, supported by strong performance in categories like nonalcoholic beverages, candy, and snacks. Unit growth was approximately 1.5%, and price remained up year over year as we have seen inflation continue to moderate. Our general merchandise and services division comp increased 4.3% in the fourth quarter, driven by strength in consumer electronics and apparel, even as home and seasonal remained a drag on the business.

Membership fee income rose 10.9% to roughly $129,800,000, supported by healthy acquisition and retention trends across the chain as well as an annual fee increase in January 2025. Our membership base remains vibrant, and we continue making progress in improving member mix quality. As we look ahead, we expect membership fee income growth to moderate as we fully lap the fee increase and return to a more normalized run rate. Turning to our gross margins, excluding gasoline, our merchandise margin rate was down about 50 basis points year over year, driven by changes in merchandise mix.

SG&A expenses totaled $818,200,000, representing slight deleverage as a percentage of sales, primarily due to new club openings and continued investment in our key strategic initiatives. Our gas business outpaced the broader industry. Comparable gallons were up 0.1%, significantly better than the low‑single‑digit declines seen elsewhere. Fuel margins were generally stable during the quarter, resulting in profitability modestly ahead of expectations. Adjusted EBITDA for the quarter increased 1% to $266,500,000, supported by steady cost discipline. Our effective tax rate for the quarter was 25%, slightly below our statutory rate of roughly 28%. Altogether, fourth quarter adjusted EPS of $0.96 increased 3.2% year over year.

For the full fiscal year, we delivered adjusted EPS of $4.40, reaching the high end of our revised guidance range. Looking at the balance sheet, inventory levels increased 3.1% year over year in absolute terms and were down 2% on a per‑club basis, reflecting strong execution by our teams. In‑stock levels improved about 40 basis points versus last year and reached record highs, a testament to better merchandising alignment and operational efficiency. Our capital priorities remain unchanged. We continue to invest in areas that drive long‑term value: membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.4 times, giving us substantial flexibility.

During the quarter, we bought back approximately 1,300,000 shares for $117,700,000, bringing the full‑year repurchases to roughly 2,600,000 shares for $252,400,000. This accelerated pace of repurchases underscores our confidence in the long‑term strength of the business and our ability to generate consistent cash flow. We ended the year with approximately $750,000,000 remaining under our current authorization, and expect to remain thoughtful and opportunistic with future repurchases. Looking ahead to fiscal 2026, we expect comparable sales excluding gas to grow 2% to 3%, and we are guiding to adjusted EPS of $4.40 to $4.60.

Our multiyear focus on building a stronger, more efficient, and high‑quality business is yielding real progress, and we remain confident in our ability to deliver sustainable long‑term growth. We expect slight deleverage in our SG&A driven by accelerated new club openings, particularly with continued outsized growth in depreciation. We will also continue to invest to ensure our new market growth performs at or ahead of our expectations, as well as making sure we deliver unbeatable value to our members every day. We plan to further invest in our supply chain network to support the long‑term growth and are excited to open our automated distribution center in Ohio in 2027.

We are planning for an effective tax rate of approximately 27% for the year, with the lowest rate in the first quarter when we typically experience a windfall from stock compensation. Given the evolving landscape, we are not contemplating the impact of recent tariff news and evolving macro uncertainty on our current assumptions. Tariffs may shape the trajectory of inflation and broader consumer demand, and ultimately influence our results this year. We continue to believe we are well positioned to offer our members the value that they are seeking every day.

Before I hand it back to Bob, I would like to thank our team members for their continued dedication to our company, purpose, and communities, and their contributions to another great year of delivering in a dynamic environment. Bob, back to you.

Robert W. Eddy: Thanks, Laura. Before I wrap up, I just want to take this opportunity to reflect on the incredible progress our team has made on behalf of our shareholders. Looking back over the last three years, we have grown our member count by 1,500,000 members—that is over 20%—and increased our annual MFI run rate by more than $100,000,000, while delivering 90% tenured renewal rates. We have driven digital penetration from 9% to 16%, generated $3,300,000,000 in adjusted EBITDA, and produced more than $2,600,000,000 in operating cash flow, including over $1,000,000,000 this year. We have opened 29 clubs as part of a $1,700,000,000 capital investment into our business, with returns on new clubs well into the double digits.

We have accelerated the pace at which we are expanding and have a pipeline to support this level of growth going forward. As part of this effort, we have also added about $500,000,000 of owned real estate onto our balance sheet. On top of this capital investment, we paid down well over $300,000,000 of debt, bringing our net debt ratio down to 0.4 times, and repurchased well over $500,000,000 worth of shares, retiring about 5% of our share count in the process. The club business is a long‑term share gainer and a great business to be invested in because value wins.

By delivering the assortment, value, convenience, and membership experience our members love, we will be rewarded with growth in the lifetime value of our members. This lifetime value is the foundation of the equity value that accrues to our shareholders. As we look out towards this year and beyond, we are more excited than ever for both the progress we have made and for the opportunity to create even more value for our shareholders by investing for the long term and delivering value to our members in everything we do. We are at a unique moment in time as it relates to the growth of the club channel. Now more than ever, we are here to play to win.

Operator: Thank you, Bob. As a reminder for our audience, please press star followed by the number 1 on your telephone keypads. We will now open for questions. Our lines are now open for questions. We now have Michael Allen Baker from D.A. Davidson. Go ahead, please. Your line is now open.

Michael Allen Baker: Great. I wanted to ask about merchandise margins, down 50 basis points. In the press release, you said mix. I guess I heard strength in consumer electronics and TVs; I suppose that was probably part of it. But what else drove the lower merchandise margin? Can you talk about sort of inflation—cost inflation versus price inflation? I know one of the hallmarks has been trying to give value back to customers. Just how that whole pricing dynamic is playing out, please? And what should we expect for 2026? Thank you. Mike, I will ask one more. You talked about continuing the pace of openings—25 to 30 every two years. You are only in 21 states right now.

How long can you grow 25 to 30? I guess what I am getting at is have you looked at the art of the possible? Could this be a nationwide concept? How many stores could you have over time?

Robert W. Eddy: Maybe I will take the lead here, and Laura can fill in behind me. We are pretty proud of our quarter. You brought up margins in your question and our pricing stance and a few other things. So let me talk a little bit about it in the broadest sense, and Laura can add in some details if she sees fit. The largest contributor to our margin performance against our expectations during the quarter was the mix of the business, and it is mix towards general merchandise.

You remember that for us, general merchandise is slightly lower margin than some of the other parts of our business, and within general merchandise, consumer electronics tends to be the lowest gross margin within general merchandise. You remember when we talked about how Q4 might roll out for us, we had restricted buys in a lot of our general merchandise categories to try and manage exposure to tariffs and markdowns and things, and that played out exactly the way that we thought it would. So within the four big businesses in general merchandise, we had a good quarter from a CE perspective. Our apparel business continues to grow.

It has been growing for a few years now pretty steadily and had another good quarter there. And then, as expected, we had a tougher quarter in our home and seasonal businesses. Those were more subject to tariffs. That is where much of our inventory cuts happened, and those two businesses had negative comps. So the mix issues associated with that were the predominant cause of the 50 basis point decline in merchandise margins. We also made considerable investments in value during the quarter in our grocery business, and we will continue to do that in the future. As you know, value is the most important thing that we provide our members every day.

We take our pricing gaps very seriously. They improved during Q4 because of these investments that we made, and we will continue to do that as we can to provide our members the best value every day. You know we always try and spend into the beat. We saw that we were having a quarter where we could do that and decided to take that option on our members' behalf. So we are very happy with our quarterly performance and made all the numbers work out on our shareholders' behalf. Yeah. On your question about store growth, let me start out, and then William C. Werner can fill in. He obviously runs our real estate portfolio.

This year was a fantastic year for us from a real estate growth perspective—opening 14 new clubs, a bunch of new states, a bunch of existing markets for us as well. I would tell you that this new class of clubs is the best class of clubs we have opened in any of the years since we have gone public. Just a couple of data points: our membership in these clubs is up over 30% versus what we planned; our on‑time renewal rates in our new clubs are about 900 basis points higher than our chain average at this point; and I talked about in our prepared remarks that our new clubs are well into double‑digit return on capital.

So we are really excited about the performance we have had so far. The team has done a fantastic job getting these clubs open on time this year. We have got another 12 or so to go in this new year and a really robust pipeline. I will hand it over to Bill, and he can address the rest of your question.

William C. Werner: Yeah. Mike, maybe the one simple idea I will give you and the investment community to think about as it relates to our growth is as we continue to take share, the models continue to update the viability that we have to open up in new markets. We have seen that this year with markets like Selma, North Carolina, and Sumter, South Carolina.

They probably would not have been on our radar a handful of years ago, and in pretty short order, not only were they on our radar, but we were able to go there, execute, and those clubs are both off to amazing starts, which gives us a lot of confidence in terms of going into new and different markets into the future. I would tell you that we enter the Dallas–Fort Worth market later next month. Our team is confident, but certainly not complacent, as we go into these in terms of how we execute with the success that we have seen.

If anything, the early engagement and the hustle of the team on the ground there in the Dallas market has been pretty awesome. I was down there last week and spent some time with the team and with some community leaders, and we heard feedback across the board that the way that we have engaged with the community down there is something that they have never seen before. We are really excited to get those clubs open. It will be a nice milestone for the company as we show the success that we will have down there, and that success creates opportunity for the future.

As we sit today, we are really excited, we are really confident, and more to come.

Michael Allen Baker: Thank you.

Robert W. Eddy: Thanks, Mike.

Operator: Thank you, Michael, for that question. Next up, we have Peter Sloan Benedict from Baird. Go ahead, please. Your line is now open.

Peter Sloan Benedict: Hey, good morning, guys. Thanks for taking the questions. First, just around the merchandise comps, any way to quantify maybe how impactful Fern was—maybe some of the stock‑up activity that happened at the end of the quarter in 4Q? And then, as you are thinking about the year ahead here, any cadence we should think about? I know there is a lot of puts and takes. Maybe your view on SNAP and the changes there. Just anything that you are contemplating that we should be aware of in terms of the cadence of comp in 2026? That is my first question. And, again, my follow‑up is just maybe a little longer‑term picture.

You know, the return to kind of the algo that you guys have. This year there is obviously a lot of puts and takes. You have the investments that are going on. I am just curious, as you get a bunch of these new clubs up and running, when do you start to kind of maybe return the business model to the algo? Is that something that could occur in 2027? Is it 2028? Just conceptually, how does that work in your mind? Thank you.

Robert W. Eddy: Thanks. Good question. Obviously, winter storm Fern was a big deal, particularly in our footprint along the East Coast. I would start out with our feeling that largely storms are a net push. You get the buildup on the front side of it—and that can be a little buildup or a big buildup depending on the size of the storm and how well forecasted it is—and then you obviously suffer the downside of storm effects: closing stores, power losses, people not driving, and deloading the pantry that they just loaded up. So on the whole, storms are generally a push.

Fern was very big and impacted most of our footprint, and it was certainly very well forecasted—a week out, everybody was saying we were going to get a big storm. We did have a pretty large buildup in front of the storm, and, obviously, it was big and impactful, and so we had a pretty large fall‑off after the storm. The thing to think about is the net impact, and I would say it was a slight positive to the quarter.

The downside of the pantry deloading and the travel effects and such, and the supply chain effects, actually crossed the fiscal year a little bit, and so we saw some of the downside leak into February, and I think this is a normal effect. We have seen some weather in the Northeast in February as well, and so February's comps were a little lower than our plan, but all of that is normal weather stuff. Our team did a great job serving our members. Certainly, we proved our destination status—that stat that we put in the prepared remarks of beating our daily fuel volume record by 20% was pretty insane to do that.

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Our supply chain team really was pretty heroic, beating records of how many cases we moved day after day as the buildup happened, and our club teams did a wonderful job staying open when we could and keeping everybody safe and serving our members. Overall, a very slight impact to the quarter, and I would say a slight impact to Q1 on the negative side as well. From a guidance perspective, there is certainly a lot to balance in the stacks and what is going on, so I will give that question to Laura. Laura, what do you say about guidance?

Laura L. Felice: Yeah. Hey. Good morning, Pete. From a comp perspective, we put out a range of 2% to 3% for the full year. What we did not talk about in the prepared remarks is the cadence of the two‑year stacks, and those accelerated slightly in Q4, as they did in Q3. When we look at the year coming up, I would point towards the two‑year stacks as a starting position. Remember that the first quarter of last year was the high watermark from a comp perspective, and so we have built the plan on that, which would imply the lowest comps in the beginning of the year and growth as we progress through the year.

Robert W. Eddy: Thanks, Pete. We are really taking a very long‑term approach to what we are doing here. We talked a lot about our real estate growth. That impacts our depreciation and our EPS performance, but with all that said, I thought this is a pretty good year. We are very proud of our progress—the growth of our entire franchise last year: growing total merchandise sales by more than 6%, membership by 7%, MFI by 9.5%, adjusted EBITDA by 6%, EPS by 9%. Those are all fantastic results. And then, in the prepared remarks, all the three‑year stats, I think, are even more impressive.

While we are not satisfied and still want to grow faster, we have a lot to be proud of. We think our shareholders should be happy with our performance, and we will continue to make long‑term investments like in real estate and in value to really get our franchise flywheel moving faster for the future.

Operator: Thanks, Peter. Just another reminder for our audience: If you would like to send your questions in, you may do so by pressing star followed by the number 1 on your telephone keypad. In the interest of time, we ask that we limit our questions to just one question per participant. Thank you. Let us move on to Edward Kelly from Wells Fargo. Go ahead, please. Your line is now open.

John Park: Hey, good morning. This is John Park on for Ed. Thanks for taking my questions. I guess, can you talk a little bit more about the underlying membership trends? How much of the MFI increase was from the fee increase? And any changes in discounting lately that you guys are doing?

Robert W. Eddy: Good morning, John. Thanks for your question. There is certainly a lot to be proud of in our membership growth. We talked about a little bit of that in our prepared remarks, but 500,000 member growth this year; 1,500,000 over the past three years; 10% MFI growth for the year, a little bit more than that for the quarter; another year of 90% renewal rates; improvements in our higher tier—really just sustained, fantastic performance in our membership base. This continued growth in member count will continue, including with as many as 12 new clubs next year, and, obviously, some of that MFI growth was the fee increase, as you pointed out.

We are quite optimistic on our ability to continue to grow our membership franchise, and as we do, we will continue to optimize for the best mix of acquisition and retention and rate, and MFI dollar growth. As you might imagine, those things somewhat compete with one another, and so we are trying to optimize the best result for our overall business. When you think about the concept of discounting, I would take you all the way back to many years ago when our chief acquisition model was a free trial model, and we moved away from that towards a discounted membership model tied to easy renewal.

Folks that get a discount have to sign up for automatic renewal, and they pay full fee in the second year and beyond. Most membership models use a discounting model at this point, including our two club competitors. The team has done a really nice job optimizing those three things—member count, the rate that the members pay, and the renewal rate.

The team also does a nice job varying and trying to optimize in the channels in which we offer these discounted offers, and they obviously change offer constructs and things as we go—really trying to figure out what the best value is for each segment of membership and, again, trying to optimize the business for us and for our shareholders. As we move forward, we will do a lot of the same—trying to optimize what we offer, when we offer it, and who we offer it to—and I expect we will see continued great growth in total membership, MFI dollars, and renewal rates.

Laura L. Felice: The one thing I might add on to that is Bob talked about the new club growth and members we are acquiring in the new club. As we step back and look under the numbers—we have talked about this in prior quarters—we are also really proud of the membership growth in comp clubs which, as you know, is really important to the long term of our business. Think about 2% to 3% comp club member growth, which is a fantastic set that we are proud of as we move forward.

John Park: Awesome. Best of luck, guys.

Operator: Thank you, John. Moving on, we now have Katharine Amanda McShane from Goldman Sachs. Go ahead, please. Your line is now open.

Katharine Amanda McShane: Good morning. We had a longer‑term question as well. Just with the success that you are seeing with your digital growth, do you think your stores are able to keep up with this level of fulfillment, and are there any investments that need to be made going forward to further support this growth, either in the tech stack or with assets?

Robert W. Eddy: Hi, Kate. It is a good question. We have had sustained, fantastic growth in our digital business. I think it was 31% this quarter, and somewhere near 60% on the two‑year stack—obviously bigger going backwards—and it has really been the engine of convenience that our members love, whether it is buy online, pick up in club, same‑day delivery, or Express Pay. Getting that penetration up to 16% of our business has been a big win, and I expect it to go even further as we go because our members, quite frankly, love all these options. As you know, about 90% of our entire digital business is fulfilled by our clubs, and so you are right to ask the question.

I would tell you that we are relatively unconstrained from this perspective. We can pump a lot more volume through our average boxes. In certain very high‑volume clubs, we have constraints. We are working around those constraints by investing capital, by investing in labor, by moving volume around the chain, by using different providers to help us do it. I do not really see a ceiling on our digital growth going forward, and we will work hard to make sure we do not have a ceiling there. We continue to invest in all of our digital properties.

Our digital team is fantastic at really improving the experience every day on a relatively inexpensive basis, and they do it day in and day out, and when they say something is going to be done, it gets done. We have come to very much value that as we talk to our members and offer new things to our members, and, obviously, our members are reacting well to that. I do not really see that changing in the future. We are happy to take all the digital growth that comes to us.

Katharine Amanda McShane: Thank you.

Operator: Thank you, Kate. Moving on, we now have Steven Emanuel Zaccone from Citi. Go ahead, please. Your line is now open.

Steven Emanuel Zaccone: I wanted to follow up on the earnings guidance for the year. Laura, you mentioned some SG&A investments—can you help us understand how big they are? And then on the merchandise margin outlook, I want to follow up there. How should we think about that for 2026? Obviously, mix was a factor in the fourth quarter, but you did reference earlier last year making some price investments, or investments in general, to provide value for consumers. How do you see that playing out in 2026?

Laura L. Felice: Thanks. Good morning, Steve. Maybe I will start on your SG&A question. We spoke a little bit about that in the prepared remarks—so, slight deleverage. We are continuing to invest in the new club growth and ramp that growth. Going into Texas at the end of the first quarter, as Bill talked about, and into the second quarter, we are certainly investing to win there. We know we are off to a strong start, as Bill already talked about as well, but we want to make sure we set ourselves up for success. So some deleverage largely as we look on the new club ramp, and it is largely D&A.

From a merchandise margin perspective, we do not guide to merchandise margins on an annual basis. I would say the fourth quarter was certainly the low mark on a year‑over‑year basis as we went backwards a little bit. Remember that for the full year, we rounded it out flat. What we are after this year is continuing to manage the business—making sure we are making price investments where they make sense—all after going towards our long‑term lifetime value of membership and the guidance we have set forth.

Steven Emanuel Zaccone: Okay. That is helpful. Thanks very much.

Operator: Thank you, Steven. Moving on, we now have Mark David Carden from UBS. Go ahead, please. Your line is now open.

Mark David Carden: Good morning. Thanks so much for taking the question. I want to ask a bit about the Texas ramp. I know the stores are yet to open, but you have been doing some initial promos. How has interest been just relative to what you have seen in other markets? And then how have you handled any supply chain challenges, just given distance from current DCs? Is there a set number of clubs you need to open before it makes sense to add a new DC to that region? Thank you.

Robert W. Eddy: Hi, Mark. Why do I not ask Bill to take over that question?

William C. Werner: Yeah. Hey, Mark. Listen, I will start with the engagement down in the Texas market and then come back to some of the infrastructure. The engagement has been amazing out of the gate. I mentioned earlier I was down there with the team last week. We have had the team on the ground for many, many months already, engaging with the community, and we have a ton of data given the acceleration of all the recent openings in terms of what we expect from engagement and membership from the clubs that we opened so far.

As we sit here and look eight to ten weeks out from the openings, we are seeing exactly what we thought we would see in terms of overall engagement and membership sign‑up, so all signs are positive so far in terms of the entry. I am really excited. The team has done such an amazing job. I am really proud of everything that they have done, and I am really excited to see the results of all their hard work. In terms of the infrastructure, we have been planning for this investment for a while now.

We will serve the market with a combination of distribution from our existing distribution infrastructure as well as some hyper‑local support on the ground, and then we will continue to scale as we have done all along. As I think about how we have moved over the last handful of years to some of the adjacent western markets from where we are today—Columbus, Indianapolis, Nashville, and Detroit—that certainly has created a new distribution footprint for us, and we have served that along the way. We will continue to amplify how we serve that with the new distribution center that we are building out in Columbus as we speak.

That is a major investment for us, and it will yield significant operational efficiencies for us as well as savings as we get it open. The opportunities that we have to invest in the expansion have been driven by the success of the new clubs, and it is a great challenge to work through, and we are excited for everything that we are doing.

Robert W. Eddy: We are really bullish, as Bill said, about our ability to be successful in Texas. I will offer you one statistic we heard this week: there are more homes being built in the Dallas–Fort Worth market than in the entire state of California. It is certainly a place with very, very high growth. Our team has been doing fantastic work on the ground. The initial membership sign‑ups are well ahead of our pre‑opening plan. Obviously, the numbers are small until the boxes actually open, but the engagement we have seen with the folks in these communities that we will enter has been very strong.

We are obviously respectful of this challenge—it has certainly got great competition in the neighborhood—and we want to make sure we offer Texans products and an experience that they like. I think we are off to a pretty good start so far, and we will invest heavily in this market to try and get it right, and we will give it our best shot every day.

Mark David Carden: Thanks so much. Good luck, guys.

Operator: Thank you. Moving on to the next participant, we have Oliver Chen from TD Cowen. Go ahead, please. Your line is now open.

Oliver Chen: Thanks a lot. Hi, Bob and Laura. Regarding general merchandise and the variability that you are seeing, what should we expect in terms of guidance with home and seasonal? And related to that, the category management program as well as fresh in the year ahead—any major catalyst there or changes or more innovation that you are doing there that will underpin some of the comp guidance? Thank you.

Robert W. Eddy: Hi, Oliver. Thanks for your question. Maybe I will start, and Laura can fill in whatever I missed. If you look at the complexion of our business in the fourth quarter, you saw quite a mix. Our grocery business performed very well—certainly, perishables is the most important part of that business. We lapped the full chain rollout of Fresh 2.0 during the quarter, and we continue to see steady gains in our perishables business. That has been impacted by some food deflation in that category, but even without that, we had a good quarter.

We saw some improvement in our grocery business, and hopefully, that translates into our sundries business as well, as we start to pull some of the same levers there. In general merchandise, we had a good quarter from a CE perspective, where we could chase some inventory and sell it. The prospects for our home and seasonal businesses are kind of varied at this point in time. We need to continue to improve our merchandise mix and our assortment and our value in those categories. Our merchandising team has made strides, and they continue to get better.

We obviously are still working on our merchandising team at this point, and we hope to have some news to announce in the next couple of weeks from that standpoint. I would look at home and seasonal as a longer‑term growth initiative. We will continue to grow CE. We will continue to grow apparel. We know what to do in those categories. In the future, we hope to build on that growth in home and apparel. With respect to CMPs, that program is still going on. It has been a successful program for us.

Versus our older program we called CPI, which was much more margin‑focused, this has been much more assortment‑focused, and I think what you will see from us in the future is a better mix of those two thoughts. We are trying to put the right thing on the shelf, but also trying to get some more margin performance so that we can make further investments in value—making sure that we are offering the right everyday price, the right promo, the right product—and, obviously, paying the right cost for that product is a fundamental part of the retail equation and making sure we can run the business in the best way for our members and our shareholders.

Lots of good stuff to be proud of in the merchandising world and lots of work to come in the future.

Oliver Chen: Thanks a lot. Best regards.

Operator: Thank you, Oliver. Next up, we have Rupesh Dhinoj Parikh from Oppenheimer. Go ahead, please. Your line is now open.

Rupesh Dhinoj Parikh: Just going back to inventory, I know last year your team planned conservatively on the discretionary front, just given some of the tariff headwinds and uncertainty out there. Just curious how you are thinking about inventory over this year. Do you feel like you have sufficient inventory on the discretionary side? So just high‑level thoughts there. Thank you.

Robert W. Eddy: Hi, Rupesh. Our inventory is in great shape. Let me first congratulate our supply chain team and our merchandising team for another great performance this quarter, where although total inventory was up 3%, on a per‑club basis it was down, and our in‑stocks improved by 40 basis points. The team continues to do a great job getting better and more efficient for our members. We need continued gains on that front, and our team has great plans to keep pushing in that regard. With respect to total inventory levels in the business going forward, there is nothing really to think about from a grocery business perspective—that is just about optimizing what we are doing there.

From a general merchandise perspective, we have ramped up our inventory in the coming year. We have made bigger buys to support both the new clubs that we are bringing on and, hopefully, comp growth in our general merchandise business as well. Where we were very conservative last year from an inventory buy perspective, we are being slightly more aggressive this year—nothing crazy—but we do have plans to buy more inventory, and, hopefully, we have picked the right items and our members love the assortment and the value that we offer.

Rupesh Dhinoj Parikh: Great. Thank you. Best of luck.

Operator: Thank you, Rupesh. That is it for the questions queue. With that, it concludes today’s call. Thank you all for joining. We appreciate your time. You may now disconnect your lines, and have a great day.

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