BJ US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to promote understanding of the results of operations and financial condition of the Company and is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and related notes thereto included in Item 8. in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in "Item 1A. Risk Factors".

We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to the last day of January. Accordingly, references herein to "fiscal year 2023", "fiscal year 2022" and "fiscal year 2021" relate to the 53-weeks ended February 3, 2024 and to the 52-weeks ended January 28, 2023 and January 29, 2022, respectively.

Overview

BJ’s Wholesale Club is a leading operator of membership warehouse clubs concentrated primarily on the eastern half of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. We provide a curated assortment focused on groceries, continuously refreshed general merchandise, gasoline and other ancillary services, coupon books, and promotions to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities.

Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 244 large-format, high volume warehouse clubs and 175 gas stations spanning 20 states as of the date of this filing. In our core New England market, which has high population density and generates a disproportionate part of U.S. GDP, we operate more than three times the number of clubs compared to the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our BOPIC service, curbside delivery, same-day home delivery or traditional ship-to-home service, as well as through the DoorDash and Instacart marketplaces where members receive the same preferential pricing as in-club shoppers by linking their membership. We also offer Same-Day Select, which offers BJ’s members the ability to pay a one-time fee for either unlimited or twelve same-day grocery deliveries over a one-year period.

Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee. We have over 7 million members paying annual fees to gain access to savings on groceries and general merchandise and services. The annual membership fee for our Club Card membership is generally $55, and the annual membership fee for our Club+ membership, which offers additional value-enhancing features, is generally $110. We believe that members can save over ten times their $55 Club Card membership fee versus what they would otherwise pay at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms® and Berkley Jensen®, represent approximately $4.1 billion in annual sales. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 25 consecutive years of membership fee income growth. Our membership fee income was $420.7 million for fiscal year 2023.

Our business is moderately seasonal in nature. Historically, our business has realized a slightly higher portion of net sales, operating income, and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively. Our quarterly results have been, and will continue to be, affected by the timing of new club openings and their associated pre-opening expenses. As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.

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Factors Affecting Our Business

Overall economic trends

The overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote customer spending in our clubs, while economic weakness, which generally results in a reduction of customer spending, may have a different or more extreme effect on spending at our clubs. Macroeconomic factors that can affect customer spending patterns, and thereby our results of operations, include, among others, employment rates, changes to the Supplemental Nutrition Assistance Program (SNAP), government stimulus programs, tax legislation, business conditions, changes in the housing market, the availability of credit, interest rates and inflation, tax rates and fuel and energy costs. In addition, unemployment rates and benefits may cause us to experience higher labor costs.

Size and loyalty of membership base

The membership model is a critical element of our business. Members drive our results of operations through their membership fee income and their purchases. The majority of members renew within six months following their renewal date. Therefore, our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We have grown our membership fee income each year for over 25 consecutive years and the quality of our membership mix is strong as evidenced by our higher tier penetration growth in fiscal year 2023. Our membership fee income totaled $420.7 million in fiscal year 2023. Our tenured membership renewal rate, a key indicator of membership engagement, satisfaction and loyalty, was 90% at the end of fiscal year 2023.

Effective sourcing and distribution of products and consumer demands

Our net sales and gross profit are affected by our ability to purchase our products in sufficient quantities at competitive prices. Further, our ability to maintain our appeal to existing customers and attract new customers primarily depends on our ability to originate, develop and offer a compelling product assortment responsive to customer preferences. As a result, our level of net sales could be adversely affected due to constraints in our supply chain, including our inability to procure and stock sufficient quantities of some merchandise in a manner that is able to match market demand from our customers.

Infrastructure investment

Our historical operating results reflect the impact of our ongoing investments to support our growth. We have made significant investments in our business that we believe have laid the foundation for continued profitable growth. We believe that expanding our club footprint, bringing substantially all of our end-to-end perishable supply chain in-house, enhancing our information systems, including our distribution center and transportation management systems, and investing in hardware and digitally enabled shopping capabilities for convenience, such as BOPIC, curbside pickup, and same-day home delivery will enable us to replicate our profitable club format and provide a differentiated shopping experience. We expect these infrastructure investments to support our successful operating model across our club operations.

Gasoline prices

The market price of gasoline impacts our net sales and comparable club sales, and large fluctuations in the price of gasoline may produce a short-term impact on our margins. Retail gasoline prices are driven by daily crude oil and wholesale commodity market changes and are volatile, as they are influenced by factors that include changes in demand and supply of oil and refined products, global geopolitical events, regional market conditions, and supply interruptions caused by severe weather conditions. Typically, the change in crude oil prices impacts the purchase price of wholesale petroleum fuel products, which in turn impacts retail gasoline prices at the pump. During times when prices are particularly volatile, differences in pricing and procurement strategies between the Company and its competitors may lead to temporary margin contraction or expansion, depending on whether prices are rising or falling, and this impact could affect our overall results for a fiscal quarter.

In addition, the relative level of gasoline prices from period to period may lead to differences in our net sales between those periods. Further, because we generally attempt to maintain a fairly stable gross profit per gallon, this variance in net sales, which may be substantial, may or may not have a significant impact on our operating income.

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Inflation and deflation trends

Our financial results can be directly impacted by substantial changes in product costs due to commodity cost fluctuations or general inflation, disinflation, or deflation, which could lead to a reduction in our sales, as well as greater margin pressure, as costs may not be able to be passed on to consumers. Changes in commodity prices and changes in inflation rates have impacted several categories of our business in fiscal year 2023 and may continue to do so. Inflationary volatility can be attributed to macro economic factors including supply chain disruptions, government stimulus, interest rates, and other factors. In response to general inflationary volatility, we seek to minimize the impact of such events by sourcing our merchandise from different vendors, changing our product mix or increasing our pricing when necessary.

Results of Operations

Information pertaining to fiscal year 2022 was included in the Company’s Annual Report on Form 10-K for the year ended January 28, 2023 in Part II. "Item 7. Management’s Discussion and Analysis of Financial Position and Results of Operations," which was filed with the SEC on March 16, 2023.

The following tables summarize key components of our results of operations for the periods indicated:

Statement of Operations Data Fiscal Year Ended

Income from continuing operations before income taxes 735,892 690,524

Income (loss) from discontinued operations, net of income taxes 89 (1,085)

Operational Data:

Total clubs at end of period 243 235

Comparable club sales (b) (1.0) % 13.4 %

Merchandise comparable club sales (b) 1.7 % 6.5 %

Membership renewal rate 90 % 90 %

(a) Basic and diluted EPS are calculated using net income.

(b) See "Fiscal Year 2023 Compared to Fiscal Year 2022," "Non-GAAP Financial Measures" and "Liquidity and Capital Resources" within "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" for definitions.

(c) Adjusted EBITDA for the fiscal year ended January 28, 2023 has been recast to exclude adjustments for pre-opening expenses and non-cash rent expense to conform to the current period definition.

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Fiscal Year 2023 Compared to Fiscal Year 2022

Net Sales

Net sales are derived from direct retail sales to our customers, net of merchandise returns and discounts. Fluctuations in net sales are impacted by opening new clubs and comparable club sales.

Net sales for fiscal year 2023 were $19.5 billion, a 3.3% increase from net sales reported for fiscal year 2022 of $18.9 billion. The increase was due primarily to strength in the grocery division and an increase of eight clubs, partially offset by lower gasoline sales.

Comparable Club Sales and Merchandise Comparable Club Sales

We believe net sales is an important driver of our profitability, particularly comparable club sales. Comparable club sales, a key performance indicator, also known as same-store sales in the retail industry, includes all clubs that were open for at least 13 months at the beginning of the period and were in operation during the entirety of both periods being compared, including relocated clubs and expansions. Comparable club sales allow us to evaluate how our club base is performing by measuring the change in period-over-period net sales in clubs that have been open for the applicable period.

Various factors affect comparable club sales, including customer preferences and trends, product sourcing, promotional offerings and pricing, shopping frequency from new and existing members and the amount they spend on each visit, weather and holiday shopping period timing and length. Sales comparisons can be influenced by certain factors that are beyond our control such as changes in the cost of gasoline and macro-economic factors such as inflation. The higher comparable club sales, the more we can leverage certain of our selling, general and administrative ("SG&A") expenses, reducing them as a percentage of sales and enhancing profitability.

Fiscal Year EndedFebruary 3, 2024

Comparable club sales (1.0) %

Less: Impact from gasoline sales (2.7) %

Merchandise comparable club sales 1.7 %

Merchandise comparable club sales increased by 1.7% in fiscal year 2023 driven by an increase in sales of groceries of approximately 3.5%, partially offset by a decrease in sales of general merchandise and services of approximately 8.2%.

Sales of groceries increased during fiscal year 2023 as demand for paper products, beverages, candy, snacks, fresh fruit and vegetables, dairy and bakery categories increased compared to fiscal year 2022, partially offset by a decrease in demand for meat and seafood categories.

General merchandise and service sales decreased during fiscal year 2023 due to decreased demand for home goods and seasonal merchandise, as well as lower ancillary income, compared to fiscal year 2022.

The impact of gasoline sales is a result of lower retail prices during fiscal year 2023 as compared to fiscal year 2022, as total gallons sold grew year-over-year.

Membership fee income

We continue to see growth in the size of our membership base and continued quality.

Membership fee income was $420.7 million in fiscal year 2023, compared to $396.7 million in fiscal year 2022, a 6.0% increase. The increase was primarily driven by membership renewals, new members, and penetration of higher-tier membership levels, evidencing the strength of our membership quality.

Costofsales

Cost of sales consists primarily of the direct cost of merchandise and gasoline sold at our clubs, including costs associated with operating our distribution centers, including payroll, payroll benefits, occupancy costs, and depreciation; freight expenses associated with moving merchandise from vendors to our distribution centers and from distribution centers to our clubs; and vendor allowances, rebates, and cash discounts.

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Cost of sales was $16.3 billion, or 83.5% of net sales, in fiscal year 2023, compared to $15.9 billion, or 84.0% of net sales, in fiscal year 2022. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 50 basis points compared to fiscal year 2022. Merchandise margins were positively impacted by our category management process, moderated supply chain costs, and the mix of sales.

Selling,general,and administrative expenses

SG&A consists of various expenses related to supporting and facilitating the sale of merchandise in our clubs, including the following: payroll and payroll benefits for team members; rent, depreciation, and other occupancy costs for retail and corporate locations; share-based compensation, advertising expenses; tender costs, including credit and debit card fees; amortization of intangible assets; and consulting, legal, insurance, acquisition and integration costs, and other professional services expenses.

SG&A includes both fixed and variable components and, therefore, is not directly correlated with net sales. We expect that our SG&A will increase in future periods due to investments to spur comparable club sales growth and our expanding footprint as we open new clubs. In addition, any future increases in wages, stock-based grants or modifications will increase our SG&A.

SG&A increased by 5.8% to $2.8 billion in fiscal year 2023 from $2.7 billion in fiscal year 2022. The year-over-year increase in SG&A was primarily driven by increased labor, occupancy, and depreciation expenses as a result of new club and gas station openings, as well as other continued investments to drive strategic priorities, such as the restructuring of certain corporate functions. Our growth profile this year was weighted toward owned clubs as opposed to leased clubs, elevating our depreciation expense. We expect to continue to invest in member engagement, marketing and digital strategies.

Pre-openingexpenses

Pre-opening expenses include startup costs for new clubs and costs for relocated clubs. Expenses will vary based on the number of club openings, geography of the club, whether the club is owned or leased, and timing of the opening relative to our period end.

Pre-opening expenses were $19.6 million in fiscal year 2023 compared to $24.9 million in fiscal year 2022. Pre-opening expenses decreased due to timing of spend for club openings year-over-year.

Interest expense, net

Interest expense, net was $64.5 million for fiscal year 2023 compared to $47.5 million for fiscal year 2022. The increase was primarily due to rising interest rates year-over-year on outstanding borrowings.

Provision for income taxes

The Company’s effective income tax rate from continuing operations was 28.8% for fiscal year 2023 and 25.5% for fiscal year 2022. The increases in the effective tax rate and income tax expense were driven by lower tax benefits from stock-based compensation as well as an immaterial adjustment to certain deferred tax assets related to prior periods.

Non-GAAP Financial Measures

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles ("GAAP"). In addition to relevant GAAP measures we also provide non-GAAP measures, including adjusted EBITDA, comparable club sales, adjusted free cash flow, adjusted net income, and adjusted net income per diluted share ("adjusted EPS") because management believes these metrics are useful to investors and analysts by excluding items that we do not believe are indicative of our core operating performance. These measures are customary for our industry and commonly used by competitors. These non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, adjusted EBITDA, comparable club sales, adjusted free cash flow, adjusted net income, and adjusted EPS may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

Adjusted Net Income

The adjusted net income and adjusted EPS metrics are important measures used by management to compare the performance of core operating results between periods. We define adjusted net income as net income as reported, adjusted for

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non-recurring, infrequent, or unusual charges, net of the tax impact of such adjustments. We define adjusted EPS as adjusted net income divided by the weighted-average diluted shares outstanding.

We believe adjusted net income and adjusted EPS are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations.

Fiscal Year Ended

(in thousands, except per share amounts) February 3, 2024 January 28, 2023

Adjustments:

Acquisition and integration costs (a) — 12,324

Home office transition costs (b) — 14,706

Loss on termination and impairment of discontinued operations club lease — 662

Restructuring (d) 13,940 —

Other adjustments (e) (786) (165)

Tax impact of adjustments to net income (f) (4,188) (8,718)

(g) Adjusted EPS is measured using weighted-average diluted shares outstanding.

Adjusted EBITDA

Adjusted EBITDA is defined 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; acquisition and integration costs; home office transition costs; restructuring and other adjustments.

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The following is a reconciliation of our income from continuing operations to Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for the periods presented:

Fiscal Year Ended

(In thousands)

Acquisition and integration costs (a) — 12,324

Home office transition costs (b) — 14,706

Restructuring (c) 13,940 —

Adjusted EBITDA as a percentage of net sales 5.5 % 5.3 %

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Liquidity and Capital Resources

Our primary sources of liquidity are cash flows generated from club operations and borrowings from our ABL Revolving Facility. As of February 3, 2024, cash and cash equivalents totaled $36.0 million and we had $802.3 million of unused capacity under our ABL Revolving Facility. Our principal liquidity needs for the next twelve months and beyond are to fund normal recurring operational expenses and anticipated capital expenditures; fund possible acquisitions; fund share repurchases and meet debt service and principal repayment obligations. We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under our ABL Revolving Facility, will be sufficient to finance our operations for at least the next twelve months.

During fiscal year 2023, we repurchased 1,958,218 shares under the 2021 Repurchase Program for a total purchase price of $130.2 million.

We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have, a current or future material effect on our results of operations or financial position. We do, however, enter into letters of credit and purchase obligations in the normal course of our operations.

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Summary of Cash Flows

A summary of our cash flows from operating, investing and financing activities is presented in the following table:

Fiscal Year Ended

(In thousands)

Net cash provided by operating activities $ 718,883 $ 788,165

Net cash used in financing activities (261,984) (52,628)

Net increase (decrease) in cash and cash equivalents $ 2,134 $ (11,521)

Net Operating Cash Flows

Net cash provided by operating activities was $718.9 million for fiscal year 2023, compared to $788.2 million for fiscal year 2022. The $69.3 million decrease was primarily due to $95.3 million related to accounts payable as a result of timing of inventory receipts and payments, as well as commodity and fuel costs; $49.4 million of lease-related activity primarily due to prepaid rent based on the timing of year-end; $28.7 million related to an increase in merchandise inventory due to the increase in club counts and fuel stations; and $18.7 million related to prepaid expenses and other current assets driven by prepaid advertising and IT maintenance contracts due to the timing of year-end. The decrease in net operating cash flows was partially offset by a $71.7 million reduction in accounts receivable due to favorable timing of vendor and customer cash receipts, as well as a $10.6 million increase in net income, inclusive of increases of $26.8 million of depreciation and amortization expense and $27.5 million of deferred income tax expense.

Our net cash from operating activities can fluctuate from period to period due to several factors, including: the timing and mix of sales, which are typically higher in the second and fourth quarters due to seasonality; the timing of inventory purchases as the Company prepares for holiday seasons, lease-related activity, income tax and other payments.

Net Investing Cash Flows

Cash used in investing activities was $454.8 million in fiscal year 2023, compared to $747.1 million in fiscal year 2022. The decrease is primarily due to $376.5 million of cash outflows in the prior year related to the Acquisition, partially offset by an increase in capital spending, net of proceeds from sale-leaseback transactions, of $84.2 million as our growth profile in fiscal year 2023 was weighted toward owned clubs as opposed to leased clubs.

Net Financing Cash Flows

Cash used in financing activities in fiscal year 2023 was $262.0 million, compared to $52.6 million in fiscal year 2022. The increase in cash used in fiscal year 2023 is primarily due to a $491.0 million reduction in net proceeds from our ABL Revolving Facility, partially offset by a net decrease of $253.0 million of principal payments on long-term debt, a decrease of $17.1 million for the acquisition of treasury stock, and an increase of $11.3 million of proceeds from financing obligations compared to the prior year.

Adjusted Free Cash Flow

We present adjusted free cash flow because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity. Adjusted free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We define adjusted free cash flow as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale-leaseback transactions.

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The following is a reconciliation of our net cash provided by operating activities to adjusted free cash flow for the periods presented:

Fiscal Year Ended

(In thousands)

Net cash provided by operating activities $ 718,883 $ 788,165

Less: Additions to property and equipment, net of disposals (467,075) (397,803)

Plus: Proceeds from sale-leaseback transactions 12,310 27,266

Adjusted free cash flow decreased to $264.1 million for fiscal year 2023 compared to $417.6 million for fiscal year 2022. The decrease is primarily the result of lower cash flows from operating activities primarily due to unfavorable fluctuations in working capital, an increase in capital spending as we open new clubs, and lower proceeds from sale-leaseback transactions.

Debt and Borrowing Capacity

Our primary sources of borrowing capacity are the ABL Revolving Facility and the First Lien Term Loan, which are further discussed in "Note 7. Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K.

On July 28, 2022, the Company entered into the ABL Revolving Facility with an aggregate ABL Revolving Commitment of $1.2 billion pursuant to that certain credit agreement with Bank of America, N.A., as administrative agent and collateral agent, and other lenders party thereto. The maturity date of the ABL Revolving Facility is July 28, 2027. As part of this transaction, the Company extinguished the ABL Facility.

On January 5, 2023, the Company amended the First Lien Term Loan to extend the maturity date from February 3, 2024 to February 3, 2027 and transition the interest rate, from LIBOR to SOFR and change the applicable margin from LIBOR plus 200 – 225 basis points per annum to SOFR plus 275 basis points per annum. In connection with the amendment the Company paid approximately $151.9 million of the principal amount.

On January 28, 2023, there was $405.0 million outstanding in loans under the ABL Revolving Facility and $11.5 million in outstanding letters of credit. The interest rate on the revolving credit facility was 5.63%.

On January 28, 2023, the interest rate for the First Lien Term Loan was 7.11% and there was $450.0 million outstanding.

On October 12, 2023, the Company amended the First Lien Term Loan to extend the maturity date from February 3, 2027 to February 3, 2029 and reduce applicable margin in respect of the interest rate, effective immediately, from SOFR plus 275 basis points per annum to SOFR plus 200 basis points per annum. Prior to the amendment, the Company repaid $50.0 million of the principal amount outstanding under the First Lien Term Loan.

At February 3, 2024, there was $319.0 million outstanding in loans under the ABL Revolving Facility and $18.2 million in outstanding letters of credit. The interest rate on the revolving credit facility was 6.44%, and unused capacity was $802.3 million.

At February 3, 2024, the interest rate for the First Lien Term Loan was 7.33% and there was $400.0 million outstanding.

Material Cash Commitments

Refer to the descriptions of our material cash commitments, financing arrangements, and contractual obligations outlined below within the following notes to our consolidated financial statements.

See “Note 6. Leases” for future operating lease and finance lease commitments. Lease liabilities exclude legally binding minimum lease payments for certain real estate and gas station leases that have not yet commenced. The liabilities do not include variable costs such as increases in rental payments based on an index or a percentage of sales, insurance, real estate taxes, and other operating expenses.

See “Note 7. Debt and Credit Arrangements” for future payments on the ABL Revolving Facility and First Lien Term Loan, including outstanding borrowings and applicable interest rates.

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See “Note 17. Other Non-current Liabilities” for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, including insurance reserves and asset retirement obligations, as well as financing obligations arising from sale-leaseback transactions.

We also have cancellable and non-cancellable purchase obligations under purchase orders for merchandise, agreements for capital items, gasoline, products and services used in our business, information technology, executive employment, and other agreements.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We review our estimates on an ongoing basis and make judgments about the carrying value of assets and liabilities based on a number of factors. These factors include historical experience and assumptions made by management that are believed to be reasonable under the circumstances. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could vary materially from estimates based on assumptions used in the preparation of our consolidated financial statements. This section summarizes critical accounting policies and the related judgments involved in their application.

Workers’ Compensation and General Liability Self-insurance Reserves

We are primarily self-insured for workers’ compensation and general liability claims. Amounts in excess of certain levels, which range from $0.3 million to $1.0 million per occurrence for workers' compensation and general liability, and up to $2.0 million per occurrence for auto liability, are insured as a risk reduction strategy to mitigate the impact of catastrophic losses on net income. Reported reserves for claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to loss development factors. The inherent uncertainty of future loss projections could cause actual claims to differ from our estimates. When historical losses are not a good measure of future liability, we base our estimates of ultimate liability on our interpretation of current law, claims filed to date and other relevant factors which are subject to change. These accruals, if any, are included as insurance reserves in accrued expenses and other current liabilities and other non-current liabilities in the Company’s consolidated balance sheets.

Recent Accounting Pronouncements

See "Note 2. Summary of Significant Accounting Policies" of our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding recently issued accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk we are exposed to is interest rate risk and changes in rates will impact our net interest expense and our cash flow from operations. Substantially all of our borrowings carry variable interest rates, and we expect that some of our future outstanding debt will have variable interest rates. Accordingly, we seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs and may use interest rate caps and/or swap agreements in the future to manage our interest rate risks relating to such variable rate debt. Increases in interest rates can result in increased interest expense under our variable rate debt as well as when any of our fixed rate debt matures and needs to be refinanced and an increase in interest rates could have a material impact on our cash flow.

As of February 3, 2024, our total debt outstanding was $719.0 million, which included $319.0 million under our ABL Revolving Facility and $400.0 million under our First Lien Term Loan at interest rates of 6.44% and 7.33%, respectively. See "Note 7. Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K for additional information. A 100 basis point change in prevailing market rates would cause annual interest costs to change by approximately $7.2 million.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 46

Consolidated Balance Sheets as of February 3, 2024 and January 28, 2023 48

Notes to Consolidated Financial Statements 52

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of BJ’s Wholesale Club Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of BJ’s Wholesale Club Holdings, Inc. and its subsidiaries (the “Company”) as of February 3, 2024 and January 28, 2023,and the related consolidated statements of operations and comprehensive income, of stockholders' equity and of cash flows for each of the three years in the period ended February 3, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of itsoperations and itscash flows for each of the three years in the period endedFebruary 3, 2024in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management'sReport on Internal Control Over Financial Reportingappearing underItem 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Workers’ Compensation and General Liability Reserves

As described in Notes 2, 16 and 17 to the consolidated financial statements, the Company is primarily self-insured for workers’ compensation and general liability claims. As of February 3, 2024, workers’ compensation and general liability reserves were a significant portion of insurance reserves of $112.3 million within other non-current liabilities and a significant portion of insurance reserves of $60.1 million within accrued expenses and other current liabilities. The reported reserves for workers’ compensation and general liability claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to the loss development factors.

The principal considerations for our determination that performing procedures relating to workers’ compensation and general liability reserves is a critical audit matter are (i) the significant judgment by management when developing the estimated workers’ compensation and general liability reserves; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence related to the actuarial methods and significant assumptions related to loss development factors; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of workers’ compensation and general liability reserves, including controls over the actuarial methods and significant assumptions related to the loss development factors. These procedures also included, among others (i) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate for the accrual for workers’ compensation and general liability reserves and (ii) comparing the independent estimate to management’s estimate to evaluate the reasonableness of management’s estimate. Developing the independent estimate involved (i) testing the completeness and accuracy of underlying data provided by management and (ii) independently developing the loss development factors and applying actuarial methods.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 18, 2024

We have served as the Company’s auditor since 1996.

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

ASSETS

Current assets:

Prepaid expenses and other current assets 68,366 51,033

LIABILITIES

Current liabilities:

Current portion of operating lease liabilities 153,631 177,233

Accrued expenses and other current liabilities 812,136 767,411

Commitments and contingencies (see Note 10)

STOCKHOLDERS’ EQUITY

Preferred stock; $0.01 par value; 5,000 shares authorized, no shares issued — —

Accumulated other comprehensive income 501 1,550

The accompanying notes are an integral part of the consolidated financial statements.

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

Fiscal Year Ended

Income (loss) from discontinued operations, net of income taxes 89 (1,085) (108)

Income per share attributable to common stockholders—basic:

Income from continuing operations $ 3.94 $ 3.84 $ 3.15

Income (loss) from discontinued operations — (0.01) —

Income per share attributable to common stockholders—diluted:

Income from continuing operations $ 3.88 $ 3.77 $ 3.09

Income (loss) from discontinued operations — (0.01) —

Weighted-average number of shares outstanding:

Other comprehensive (loss) income:

The accompanying notes are an integral part of the consolidated financial statements.

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amount in thousands)

Shares Amount Shares Amount

Other comprehensive income, net of tax — — — — 21,833 — — 21,833

Dividends paid — — (25) — — — — (25)

Common stock issued under stock incentive plans 1,915 19 (19) — — — — —

Stock-based compensation expense — — 53,837 — — — — 53,837

Exercise of stock options — — 18,713 — — — — 18,713

Other comprehensive income, net of tax — — — — 245 — — 245

Dividends paid — — (25) — — — — (25)

Common stock issued under stock incentive plans 806 8 (8) — — — — —

Stock-based compensation expense — — 42,617 — — — — 42,617

Exercise of stock options — — 8,438 — — — — 8,438

Other comprehensive loss, net of tax — — — — (1,049) — — (1,049)

Dividends paid — — (25) — — — — (25)

Common stock issued under stock incentive plans 1,080 11 (11) — — — — —

Stock-based compensation expense — — 39,021 — — — — 39,021

Exercise of stock options — — 2,603 — — — — 2,603

The accompanying notes are an integral part of the consolidated financial statements.

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Fiscal Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Debt extinguishment and refinancing charges 1,830 3,256 657

Changes in operating leases and other non-cash items (21,655) 27,730 9,226

Increase (decrease) in cash due to changes in:

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of long-term debt 305,041 67,610 —

Debt issuance costs paid (1,722) (4,783) —

Net increase (decrease) in cash and cash equivalents 2,134 (11,521) 1,918

Supplemental cash flow information:

Non-cash financing and investing activities:

Treasury stock repurchases included in accrued expenses 3,364 — 1,735

The accompanying notes are an integral part of the consolidated financial statements.

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

BJ’s Wholesale Club Holdings, Inc. and its wholly-owned subsidiaries (the "Company" or "BJ’s") is a leading operator of membership warehouse clubs concentrated primarily in the eastern half of the United States. The Company provides a curated assortment focused on grocery, general merchandise, gasoline and other ancillary services, coupons, and promotions to offer a differentiated shopping experience that is further enhanced by its omnichannel capabilities. As of February 3, 2024, BJ’s operated 243 warehouse clubs and 174 gas stations in 20 states.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Company's business, as is common with the business of retailers generally, is subject to seasonal influences. The Company’s sales and operating income have typically been highest in the fourth quarter holiday season and lowest in the first quarter of each fiscal year.

Fiscal Year

The Company follows the National Retail Federation's fiscal calendar and reports financial information on a 52- or 53-week year ending on the Saturday closest to January 31. Fiscal year 2023 ("2023") consists of the 53 weeks ended February 3, 2024, fiscal year 2022 ("2022") consists of the 52 weeks ended January 28, 2023, and fiscal year 2021 ("2021") consists of the 52 weeks ended January 29, 2022. Fiscal year 2024 ("2024") will consist of the 52 weeks ended February 1, 2025.

Estimates Included in Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and stockholders’ equity, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates relied upon in preparing these consolidated financial statements, include but are not limited to, estimating workers’ compensation and general liability self-insurance reserves. Actual results could differ from those estimates.

Segment Reporting

The Company’s retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of the consolidated total revenues, and are the only reportable segment. Substantially all of the Company’s identifiable assets are located in the United States. The Company does not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented. Refer to Note4 for a summary of the Company's percentage of net sales disaggregated by category.

Concentration Risk

The Company's clubs are primarily located in the eastern half of the United States. Sales from the New York metropolitan area comprised approximately 23%, 21%, and 23% of net sales in fiscal years 2023, 2022, and 2021, respectively.

Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash held in financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation ("FDIC"). The Company considers the credit risk associated with these financial instruments to be minimal. Cash is held by financial institutions with high credit ratings and the Company has not historically sustained any credit losses associated with its cash balances.

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Cash and Cash Equivalents

Highly liquid investments with a maturity of three months or less at the time of purchase are considered to be cash equivalents. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable.

Accounts Receivable

Accounts receivable consists primarily of credit card receivables and receivables from vendors related to rebates and coupons and is stated net of allowances for credit losses of $2.3 million and $4.4 million at February 3, 2024 and January 28, 2023, respectively. The determination of the allowance for credit losses is based on BJ’s historical experience applied to an aging of accounts and a review of individual accounts with a known potential for write-off.

Merchandise Inventories

Inventories are stated at the lower of cost, determined under the average cost method, or net realizable value. The Company recognizes the write-down of slow-moving or obsolete inventory in cost of sales when such write-downs are probable and estimable. The Company writes down inventory for estimated shrinkage for the period between physical inventories based on historical results of physical inventories, shrinkage trends, or other judgments management believes to be reasonable under the circumstances.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Property and equipment which is not ready for its intended use is recorded as construction in progress. Buildings and improvements are generally depreciated over estimated useful lives of 33 years. Interest and other capitalizable costs related to the development of buildings is capitalized during the construction period. Leasehold costs and improvements are amortized over the shorter of the remaining lease term, which includes renewal periods that are reasonably assured, or the asset’s estimated useful life. Furniture, fixtures and equipment are depreciated over their estimated useful lives, ranging from three to ten years.

Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized. Capitalized software costs are included in furniture, fixtures, and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which is generally three years. Software costs not meeting the criteria for capitalization are expensed as incurred.

Expenditures for betterments and major improvements that significantly enhance the value and increase the estimated useful life of the assets are capitalized and depreciated over the new estimated useful life. Repairs and maintenance costs on all assets are expensed as incurred.

Deferred Issuance Costs

The Company defers costs directly associated with acquiring third-party financing. Debt issuance costs related to the Company's term loan are recorded as a direct deduction of the carrying amount of long-term debt, while debt issuance costs associated with the ABL Revolving Facility are recorded within other assets in the consolidated balance sheets. Debt issuance costs are amortized over the respective terms of the related financing arrangements on a straight-line basis, which is materially consistent with the effective interest method. Amortization of deferred debt issuance costs of $0.9 million, $1.7 million, and $2.2 million in fiscal years 2023, 2022, and 2021, respectively, is included in interest expense, net in the consolidated statements of operations and comprehensive income.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived trade name intangible assets are not subject to amortization. The Company assesses the recoverability of its goodwill and trade name annually in the fourth quarter or whenever events or changes in circumstances indicate they may be impaired. The Company has determined it has one reporting unit for goodwill impairment testing purposes and assessed the recoverability as of December 30, 2023.

The Company may assess its goodwill for impairment initially using a qualitative approach ("step zero") to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts and circumstances that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to

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determine if there is any impairment. The Company may also elect to initially perform a quantitative analysis instead of starting with step zero. The quantitative assessment for goodwill requires comparing the carrying value of a reporting unit, including goodwill, to its fair value. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recorded to write down goodwill to its implied fair value and is recorded as a component of selling, general and administrative expenses ("SG&A") in the consolidated statements of operations and comprehensive income. The Company assessed the recoverability of goodwill in fiscal years 2023, 2022 and 2021 and determined that there was no impairment.

The Company assesses the recoverability of its trade name whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carrying value of the trade name exceeds its estimated fair value, the Company records a charge to write the intangible asset down to its estimated fair value as a component of SG&A. The Company assessed the recoverability of the BJ’s trade name and determined that its estimated fair value exceeded its carrying value and that no impairment was necessary in fiscal years 2023, 2022 or 2021.

Test for Recoverability of Long-Lived Assets

The Company reviews the realizability of long-lived assets periodically and whenever a triggering event occurs that indicates an impairment loss may have been incurred. Current and expected operating results, cash flows and other factors are considered in connection with management’s review. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows of individual clubs and consolidated net cash flows for long-lived assets not identifiable to individual clubs. Impairment losses are measured as the difference between the carrying amount and the estimated fair value of the assets being evaluated. The Company recorded an impairment charge of $1.2 million for a lease asset, which is included in loss from discontinued operations, net of taxes within the consolidated statements of operations and comprehensive income in fiscal year 2022. There were no impairments of lease assets in fiscal years 2023 or 2021.

Asset Retirement Obligations

An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are placed in service, if a reasonable estimate of fair value can be made. The asset retirement obligation is subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized in leasehold improvements and depreciated over their useful lives. The Company’s asset retirement obligations relate to the future removal of gasoline tanks, solar panels, and related assets installed at leased clubs. See Note 15 for further information on the amounts accrued.

Workers’ Compensation and General Liability Self-insurance Reserves

The Company is primarily self-insured for workers’ compensation, general liability claims, and auto liability claims. Amounts in excess of certain levels, which range from $0.3 million to $1.0 million per occurrence for workers' compensation and general liability, and up to $2.0 million per occurrence for auto liability, are insured as a risk reduction strategy to mitigate the financial impact of catastrophic losses. Reported reserves for claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to loss development factors. The inherent uncertainty of future loss projections could cause actual claims to differ from the Company's estimates. When historical losses are not a good measure of future liability, the Company bases its estimates of ultimate liability on its interpretation of current law, claims filed to date, and other relevant factors which are subject to change. Accruals for such claims, if any, are included in accrued expenses and other current liabilities and other non-current liabilities in the consolidated balance sheets.

Revenue Recognition - Performance Obligations

The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue as it satisfies a performance obligation by transferring control of the goods or services to the customer.

Net sales

The Company recognizes net sales at clubs and gas stations when the customer takes possession of the goods and tenders payment. Sales tax is recorded as a liability at the point-of-sale. Revenue is recorded at the point-of-sale based on the

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transaction price, net of any applicable discounts, sales tax and expected refunds. For e-commerce sales, the Company recognizes sales when control of the merchandise is transferred to the customer, which is typically at the time of shipment.

Rewards programs

The Company’s BJ’s Perks Rewards membership program which was in place in fiscal 2022 and the first month of fiscal year 2023, allowed participating members to earn 2% cash back, up to a maximum of $500 per year, on qualified purchases made at BJ’s. The Company also offered a co-branded credit card program, the My BJ’s Perks program, which allowed My BJ’s Perks Mastercard credit card holders to earn up to a 10 cent-per-gallon discount on gasoline, up to 5% cash back on eligible purchases made in BJ’s clubs or online at bjs.com, and up to 2% cash back on purchases made with the card outside of BJ’s. Cash back was in the form of electronic awards issued in $10 increments that could be used online or in-club and expired 6 months from the date issued.

In the first quarter of fiscal year 2023, the Company rebranded the rewards program. The former BJ's Perks Rewards membership program is now the Club+ program, whereby participating members earn 2% cash back, up to a maximum of $500 per year, on qualified purchases made at BJs and a 5 cent-per-gallon discount at BJ's gas locations. Cash back is in the form of electronic awards issued to each member once $10 in rewards have been earned.

The Company's co-branded credit card program is now the BJ's One and BJ's One+ program, which allows cardholders with the opportunity to earn up to 5% cash back on purchases made in BJ's clubs or online at bjs.com and up to a 15 cent-per-gallon discount on gasoline when paying with a BJ's One or BJ's One+ Mastercard at BJ’s gas locations. Cash back is in the form of electronic awards issued to each member monthly on their credit card statement date. Earned rewards under these two programs do not expire.

The Company accounts for these transactions as multiple-element arrangements and allocates the transaction price to separate performance obligations using their relative fair values. The Company includes the fair value of award dollars earned in deferred revenue at the time the award dollars are earned. Earned awards may be redeemed on future purchases made at the Company. The Company recognizes revenue related to earned awards when customers redeem such awards as part of a purchase at one of the Company’s clubs or on the Company’s website or mobile app. The Company recognizes royalty revenue related to the outstanding My BJ's Perks and BJ's One and BJ's One+ credit card programs based upon actual customer activities, such as reward redemptions. Additionally, the Company deferred revenue for funds received related to marketing and other integration costs in connection with the new co-brand credit card program and will recognize these funds into revenue as performance obligations are satisfied.

Membership

The Company charges a membership fee to its customers, which allows customers to shop in the Company’s clubs, shop on the Company’s website, and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months. In addition, members have access to other ancillary services, coupons, and promotions. As the Company has the obligation to provide access to its clubs, website, and gas stations for the duration of the membership term, the Company recognizes membership fees on a straight-line basis over the life of the membership.

Gift Card Programs

The Company sells BJ’s gift cards that allow customers to redeem the cards for future purchases equal to the amount of the face value of the gift card. Revenue from gift card sales is recognized upon redemption of the gift cards and control of the purchased goods or services is transferred to the customer.

Warranty Programs

The Company passes on any manufacturers’ warranties to members. In addition, BJ’s includes an extended warranty on tires sold at the clubs, under which BJ’s customers receive tire repair services or tire replacement in certain circumstances. This warranty is included in the sale price of the tire and it cannot be declined by the customers. The Company is fully liable for claims under the tire warranty program. As the primary obligor in these arrangements, associated revenue is recognized on the date of sale and an estimated warranty obligation is accrued based on claims experience. The liability for future claims under this program is not material to the financial statements.

Extended warranties are also offered on certain types of products such as electronics and jewelry. These warranties are provided by a third party at fixed prices to BJ’s. No liability is retained to satisfy warranty claims under these arrangements. The Company is not the primary obligor under these warranties, and as such net revenue is recorded on these arrangements at

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the time of sale. Revenue from warranty sales is included in net sales in the consolidated statements of operations and comprehensive income.

Determine the Transaction Price

The transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to include estimated variable consideration, if any, in the determination of the transaction price. The Company may offer sales incentives to customers, including discounts. The Company has significant experience with return patterns and relies on this experience to estimate expected returns when determining the transaction price.

Returns and Refunds

The Company’s products are generally sold with a right of return and may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The Company records an allowance for returns based on current period revenues and historical returns experience. The Company analyzes actual historical returns, current economic trends, changes in sales volume and acceptance of the Company’s products when evaluating the adequacy of the sales returns allowance in any accounting period.

The sales returns reserve, which reduces sales and cost of sales for the estimated impact of returns, was $5.4 million, $6.1 million, and $6.7 million in fiscal years 2023, 2022, and 2021, respectively. Actual sales returns were $220.7 million, $228.9 million, and $215.7 million in fiscal years 2023, 2022 and 2021, respectively.

Customer Discounts

Discounts given to customers are usually in the form of coupons and instant markdowns and are recognized as redeemed and recorded in contra-revenue accounts, as they are part of the transaction price of the merchandise sale. Manufacturer coupons that are available for redemption at all retailers are not reduced from the sale price of merchandise.

Agent Relationships

The Company enters into certain agreements with service providers that offer goods and services to the Company’s members. These service providers sell goods and services including home improvement services and cell phones to the Company’s customers. In exchange, the Company receives payments in the form of commissions and other fees. The Company evaluates the relevant criteria to determine whether they serve as the principal or agent in these contracts with customers, in determining whether it is appropriate in these arrangements to record the gross amount of merchandise sales and related costs, or the net amount earned as commissions. When the Company is considered the principal in a transaction, revenue is recorded gross; otherwise, revenue is recorded on a net basis. Commissions received from these service providers are considered variable consideration and are constrained until the third-party customer makes a purchase from one of the service providers.

Significant Judgments

Standalone Selling Prices

For arrangements that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone selling price basis.

Policy Elections

In addition to those previously disclosed, the Company made the following accounting policy elections and practical expedients:

Portfolio Approach

The Company uses the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition.

Taxes

The Company excludes from the transaction price any taxes collected from customers that are remitted to taxing authorities.

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Shipping and Handling Charges

Charges that are incurred before and after the customer obtains control of goods are deemed to be fulfillment costs.

Time Value of Money

The Company’s payment terms are less than one year from the transfer of goods. Therefore, the Company does not adjust promised amounts of consideration for the effects of the time value of money.

Disclosure of Remaining Performance Obligations

The Company does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations for contracts that are one year or less in term. Additionally, the Company does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations when the transaction price is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a good or service that forms part of a series of distinct goods or services.

Cost of Sales

The Company’s cost of sales includes the direct costs of sold merchandise, which includes customs, taxes, duties and inbound shipping costs, inventory shrinkage and adjustments and reserves for excess, aged and obsolete inventory. Cost of goods sold also includes certain distribution center costs and allocations of certain indirect costs, such as occupancy, depreciation, amortization, labor and benefits.

Presentation of Sales Tax Collected from Customers and Remitted to Governmental Authorities

In the ordinary course of business, sales tax is collected on items purchased by the members that are taxable in the jurisdictions when the purchases occur. These taxes are then remitted to the appropriate taxing authority. These taxes collected are excluded from revenues in the financial statements.

Vendor Rebates and Allowances

The Company receives various types of cash consideration from vendors, principally in the form of rebates, based on purchasing or selling certain volumes of product; time-based rebates or allowances, which may include product placement allowances or exclusivity arrangements covering a predetermined period of time; price protection rebates; allowances for retail price reductions on certain merchandise; and salvage allowances for product that is damaged, defective or becomes out-of-date.

Such vendor rebates and allowances are recognized based on a systematic and rational allocation of the cash consideration offered to the underlying transaction that results in progress by BJ’s toward earning the rebates and allowances, provided the amounts to be earned are probable and reasonably estimable. Otherwise, rebates and allowances are recognized only when predetermined milestones are met. The Company recognizes product placement allowances as a reduction of cost of sales in the period in which the product placement is completed. Time-based rebates or allowances are recognized as a reduction of cost of sales over the performance period on a straight-line basis. All other vendor rebates and allowances are recognized as a reduction of cost of sales when the merchandise is sold or otherwise disposed.

Cash consideration is also received for advertising products in publications sent to BJ’s members. Such cash consideration is recognized as a reduction of SG&A to the extent it represents a reimbursement of specific, incremental and identifiable SG&A costs incurred by BJ’s to sell the vendors’ products. If the cash consideration exceeds the costs being reimbursed, the excess is characterized as a reduction of cost of sales. Cash consideration for advertising vendors’ products is recognized in the period in which the advertising takes place.

Manufacturers’ Incentives Tendered by Consumers

Consideration from manufacturers’ incentives, such as rebates or coupons, is recorded gross in net sales when the incentive is generic and can be tendered by a consumer at any reseller and the Company receives direct reimbursement from the manufacturer, or clearinghouse authorized by the manufacturer, based on the face value of the incentive. If these conditions are not met, such consideration is recorded as a decrease in cost of sales.

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Leases

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either an operating or finance lease at commencement. Leases that are economically similar to the purchase of assets are generally classified as finance leases; otherwise, the leases are classified as operating leases. The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or modification of the contract.

Right-of-use assets (“lease assets”) represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, which reflect options to extend or terminate the lease when it is reasonably certain those options will be exercised. Options to extend have varying rates and terms for each lease. Generally, the Company’s leases do not provide a readily determinable implicit rate, and therefore, the Company uses a collateralized incremental borrowing rate ("IBR") as of the lease commencement date to determine the present value of lease payments. The IBR is based on a yield curve that approximates the Company’s credit rating and market risk profile. The lease asset also reflects any prepaid rent, initial direct costs incurred, and lease incentives received.

Lease liabilities are accounted for using the effective interest method, regardless of classification, while the amortization of lease assets varies depending upon classification. Operating lease classification results in a straight-line expense recognition pattern over the lease term and recognizes lease expense as a single expense component, which results in amortization of a lease asset equal to the difference between lease expense and interest expense. Conversely, finance lease classification results in a front-loaded expense recognition pattern over the lease term, which amortizes a lease asset by recognizing interest expense and straight-line amortization expense as separate components of lease expense.

Certain of the Company’s lease agreements provide for lease payments based on future sales volumes at the leased locations, or include rental payments adjusted periodically based on inflation or an index, which are not measurable at lease commencement. The Company recognizes such variable amounts in the period incurred. For leases with lease payments based on future sales volumes, variable lease expense is recognized when it becomes probable that the specified sales target will be achieved. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments. Such costs are presented as occupancy costs for finance and operating leases included in SG&A in the consolidated statement of operations and comprehensive income.

Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheets and the related lease expense is recognized on a straight-line basis over the lease term.

Pre-opening Expenses

Pre-opening expenses consist of direct incremental costs of opening or relocating a facility and are expensed as incurred.

Advertising Costs

Advertising costs generally consist of efforts to acquire new members and typically include media advertising (some of which is vendor-funded). BJ’s expenses advertising as incurred as a component of SG&A. Advertising expenses were approximately 0.6%, 0.6% and 0.5% of net sales in fiscal years 2023, 2022 and 2021, respectively.

Stock-based Compensation

The fair value of service-based employee awards is recognized as compensation expense on a straight-line basis over the requisite service period of the award, which is typically three years. The fair value of the performance-based awards is recognized as compensation expense ratably over the service period of each performance tranche, which is typically three years. Prior to fiscal year 2021, the Company granted stock-based option awards. The fair value of the stock-based option awards was determined using the Black-Scholes option pricing model. Determining the fair value of options at the grant date required judgment, including estimating the expected term that stock options would be outstanding prior to exercise and the associated volatility.

The Company’s common stock is listed on the NYSE and its value is determined by the market price on the NYSE. See Note 11 for additional description of the accounting for stock-based awards.

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Earnings Per Share

Basic income per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Basic income from continuing operations per share is calculated by dividing income from continuing operations by the weighted-average number of shares of common stock outstanding for the period. Basic income (loss) from discontinued operations per share is calculated by dividing income (loss) from discontinued operations by the weighted-average number of shares of common stock outstanding for the period.

Diluted income per share is calculated by dividing net income available to common stockholders by the diluted weighted-average number of shares of common stock outstanding for the period. Diluted income from continuing operations per share is calculated by dividing income from continuing operations by the diluted weighted-average number of shares of common stock outstanding for the period. Diluted income (loss) from discontinued operations per share is calculated by dividing income (loss) from discontinued operations by the diluted weighted-average number of shares of common stock outstanding for the period.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases, using enacted tax rates expected to be applicable in the years in which the temporary differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions requires significant judgment. The Company records the benefits of uncertain tax positions in its consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge from tax authorities. The Company periodically reassesses these probabilities and records any changes in the financial statements as appropriate.

Derivative Financial Instruments

All derivatives are recognized as either assets or liabilities in the consolidated balance sheets and measured at fair value. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income in the consolidated balance sheets and are recognized in the consolidated statements of operations when the hedged item affects earnings. Any portion of the change in fair value that is determined to be ineffective is immediately recognized in earnings as SG&A. Derivative gains or losses included in accumulated other comprehensive income are released into earnings at the time the hedged transaction occurs as a component of SG&A.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company uses a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 - Quoted market prices in active markets for identical assets or liabilities.

•Level 2 - Observable inputs other than quoted market prices included in Level 1 such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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Comprehensive Income

Comprehensive income is a measure of net income and all other changes in equity that result from transactions other than with equity holders, and would normally be recorded in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income. Other comprehensive income consists of unrealized gains and losses from derivative instruments designated as cash flow hedges and postretirement medical plan adjustments.

Treasury Stock

The Company accounts for treasury stock under the cost method based on the fair market value of the shares on the dates of repurchase plus any direct costs incurred. Treasury stock is presented as a reduction to stockholders’ equity and is included in authorized and issued shares but excluded from outstanding shares.

Restructuring Charges

Charges for restructuring programs generally include targeted actions involving employee severance, related benefit costs, and other termination charges. Employee severance and related benefit costs for employees with no further service period are accounted for under the Company’s ongoing benefit arrangements. These charges are accrued during the period when management commits to a plan of termination and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated. For employees with a remaining service period, the related costs are accrued over the period if greater than 60 days. Restructuring costs are recorded in SG&A in the consolidated statements of operations.

Recently Issued Accounting Pronouncements and Policies

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 will require public companies to disclose, on an annual basis, a tabular reconciliation, using both percentages and amounts, broken out into specific categories with certain reconciling items at or above 5% of the statutory tax, further broken out by nature and/or jurisdiction. ASU 2023-09 requires all entities to disclose, on an annual basis, the amount of income taxes paid (net of refunds received), disaggregated between federal, state/local and foreign, and amounts paid to an individual jurisdiction when 5% or more of the total income taxes paid. The new standard is effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. The Company is currently evaluating the impact the adoption of this new pronouncement will have on financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands the segment reporting disclosures and requires disclosure of segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, amounts and description of its composition for other segment items, and interim disclosure of a reportable segment’s profit or loss and assets. Additionally, the amendments require the disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and deciding how to allocate resources. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new pronouncement will have on financial statement disclosures.

Recently Adopted Accounting Pronouncements and Policies

The Company has not adopted any new accounting pronouncements or policies that had a material impact on the Company’s consolidated financial statements.

3. Related Party Transactions

One of the Company’s suppliers, Advantage Solutions Inc., was determined to be a related party of the Company through June 17, 2022 in fiscal year 2022, as well as in fiscal year 2021. Advantage Solutions Inc. is a provider of in-club product demonstration and sampling services. Currently, the Company engages them from time to time to provide ancillary support services, including temporary club labor, as needed. The Company incurred approximately $3.1 million, and $2.9 million of costs payable to Advantage Solutions for services rendered during fiscal years 2022 and 2021, respectively. The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.

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4. Revenue Recognition

(a) Performance Obligations

The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. Refer to Note 2 for a description of the Company's performance obligations including net sales, rewards programs, membership and gift card programs.

The following table summarizes the Company’s point-of-sale transactions at clubs and gas stations, excluding sales tax, as a percentage of both net sales and total revenues:

Fiscal Year Ended

(b) Contract Balances

The following tables summarizes the Company's deferred revenue balance related to outstanding performance obligations for contracts with customers:

Current:

Rewards programs:

Co-brand marketing & integration 4,181 6,960

Long-term:

Rewards programs:

Current and long-term deferred revenue balances are included within accrued expenses and other current liabilities and other non-current liabilities, respectively, in the consolidated balance sheets.

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The following tables summarizes the Company's revenue recognized during the period that was included in the opening deferred balance as of January 28, 2023:

Fiscal Year Ended

Rewards programs:

Earned award dollars $ 34,676

Co-brand marketing & integration 8,213

Total rewards programs 60,766

Gift card programs 5,367

E-commerce sales 2,731

(c) Transaction Price Allocated to Remaining Performance Obligations

Performance obligations related to earned award dollars, royalty revenue, and membership fees are typically satisfied over a period of twelve months or less. Funds received related to marketing and other integration costs in connection with our co-brand credit card program are recognized as performance obligations are satisfied. The timing and recognition of gift card redemptions varies depending on consumer behavior and spending patterns.

(d) Disaggregation of Revenue

The Company’s club retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of its consolidated total revenues, and are the Company’s only reportable segment. Substantially all of the Company’s identifiable assets are located in the United States. The Company does not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented.

The following table summarizes the Company’s percentage of net sales disaggregated by category:

Fiscal Year Ended

General Merchandise and Services 11 % 12 % 14 %

Gasoline and Other 19 % 21 % 15 %

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5. Property and Equipment, Net

The following table summarizes the Company's property and equipment as of February 3, 2024 and January 28, 2023 (in thousands):

Fiscal Year Ended

Less: accumulated depreciation and amortization (1,222,180) (1,170,690)

Depreciation expense was $219.8 million, $191.7 million, and $170.1 million in fiscal years 2023, 2022, and 2021, respectively.

6. Leases

The Company has operating and finance leases for certain of the Company's clubs, transportation vehicles, and equipment; and operating leases for certain distribution centers, stand-alone gas stations, and the Club Support Center.

The initial primary term of the Company’s operating leases ranges from 2 to 44 years, with most of these leases having an initial term of 20 years. The initial primary term of the Company’s finance leases ranges from 2 years to 20 years, with most of these leases having an initial term of 7 years.

The following table summarizes the Company’s finance and operating lease assets and lease liabilities as of February 3, 2024 and January 28, 2023 (in thousands):

February 3, 2024 January 28, 2023 Consolidated Balance Sheet Classification

Assets:

Finance lease assets 44,791 33,679 Property and equipment, net

Less: finance lease amortization (9,266) (13,555) Property and equipment, net

Liabilities:

Current:

Long-term:

Finance lease liabilities 27,653 18,832 Other non-current liabilities

In fiscal year 2022, the Company recorded a lease asset impairment charge of $1.2 million included in loss from discontinued operations, net of taxes within the consolidated statements of operations and comprehensive income. There were no impairments of lease assets in fiscal years 2023 or 2021.

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The following table is a summary of the components of net lease costs for fiscal years 2023, 2022, and 2021 (in thousands):

Fiscal Year Ended

Finance lease cost:

(a) Amortization of finance lease assets, operating lease cost, variable lease cost, and sublease income are primarily included in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive income. Variable lease cost primarily consists of increases in rental payments based on an index, and for fiscal year 2022, includes $4.8 million of costs incurred to purchase assets deemed to be owned by the lessor of the Company’s Club Support Center.

(b) Interest recognized on finance lease liabilities is included in interest expense, net in the consolidated statements of operations and comprehensive income.

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of February 3, 2024 and January 28, 2023 were as follows:

Weighted-average remaining lease term (in years) - operating leases 11.6 10.4

Weighted-average remaining lease term (in years) - finance leases 7.5 10.8

Weighted-average discount rate - operating leases 8.0 % 7.8 %

Weighted-average discount rate - finance leases 12.7 % 7.9 %

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Cash paid for amounts included in the measurement of lease liabilities were as follows (in thousands):

Fiscal Year Ended

Supplemental cash flow information related to lease assets and lease liabilities were as follows (in thousands):

Fiscal Year Ended

Future lease commitments to be paid by the Company as of February 3, 2024 were as follows (in thousands):

Fiscal Year Operating Leases Finance Leases

As of February 3, 2024, the Company had certain executed real estate and gas station leases that have not yet commenced and therefore are not reflected in the tables above. These leases are expected to commence primarily in fiscal year 2024 with lease terms ranging from 7 years to 25 years. We estimate future lease commitments for these leases to be approximately $395.1 million.

Sale-leaseback Transactions

During the fiscal year ended February 3, 2024, the Company completed two sale-leaseback transactions for buildings constructed by the Company on land owned by the buyer-lessors. In connection with these transactions, the Company sold assets with a total fair value of $26.2 million and received proceeds of $18.5 million. The difference between the fair value of assets sold and proceeds received was deemed prepaid rent and included in the operating lease asset at lease commencement.

Failed Sale-leaseback Transactions

During the fiscal year ended February 3, 2024, the Company constructed three buildings on land owned by certain of the Company’s lessors. The associated leases were deemed to be financing leases, resulting in the Company accounting for the transactions as failed sale-leasebacks. In connection with these transactions, the Company recorded financing obligations totaling $26.4 million, which represented cash received of $20.6 million and receivables of $5.8 million as of February 3, 2024. The net book value of the associated building assets is included in property and equipment, net in the consolidated balance sheets. The current portion of the financing obligations is included in accrued expenses and other current liabilities, while the long-term portion is included in other non-current liabilities in the consolidated balance sheets.

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7. Debt and Credit Arrangements

Debt consisted of the following at February 3, 2024 and January 28, 2023 (in thousands):

Unamortized original issue discount and debt issuance costs (1,568) (2,120)

ABL Revolving Facility

On July 28, 2022, the Company entered into the ABL Revolving Facility with an ABL Revolving Commitment of $1.2 billion pursuant to that certain credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent and collateral agent, and the other lenders party thereto. The maturity date of the ABL Revolving Facility is July 28, 2027. In connection with this transaction, the Company extinguished the ABL Facility.

Revolving loans under the ABL Revolving Facility are available in an aggregate amount equal to the lesser of the aggregate ABL Revolving Commitment or a borrowing base based on the value of certain inventory, accounts and credit card receivables, subject to specified advance rebates and reserves as set forth in the Credit Agreement. Indebtedness under the ABL Revolving Facility is secured by substantially all of the assets (other than real estate) of the Company and its subsidiaries, subject to customary exceptions. As amended, interest on the ABL Revolving Facility is calculated either at SOFR plus a range of 100 to 125 basis points or a base rate plus 0 to 25 basis points, based on excess availability. The Company will also pay an unused commitment fee of 20 basis points per annum on the unused ABL Revolving Commitment. Each borrowing is for a period of one, three, or six months, as selected by the Company, or for such other period that is twelve months or less requested by the Company and consented to by the lenders and administrative agent.

The ABL Revolving Facility places certain restrictions (i.e., covenants) upon the Borrower’s, and its subsidiaries’, ability to, among other things, incur additional indebtedness, pay dividends and make certain loans, investments and divestitures. The ABL Revolving Facility contains customary events of default (including payment defaults, cross-defaults to certain of our other indebtedness, breach of representations and covenants and change of control). The occurrence of an event of default under the ABL Revolving Facility would permit the lenders to accelerate the indebtedness and terminate the ABL Revolving Facility.

As of January 28, 2023, there was $405.0 million outstanding in loans under the ABL Revolving Facility and $11.5 million in outstanding letters of credit. The interest rate on the revolving credit facility was 5.63%.

As of February 3, 2024, there was $319.0 million outstanding in loans under the ABL Revolving Facility and $18.2 million in outstanding letters of credit. The interest rate on the revolving credit facility was 6.44%, and unused capacity was $802.3 million.

First Lien Term Loan

On October 12, 2023, the Company entered into an amendment (the "Fourth Amendment") to the First Lien Term Loan Credit Agreement, with Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent and the lenders party thereto. Deutsche Bank Securities Inc. acted as the left lead arranger and bookrunner, and Nomura Securities International, Inc., BofA Securities, Inc. and Wells Fargo Securities LLC acted as joint lead arrangers and joint bookrunners of the Fourth Amendment.

The Fourth Amendment, among other things, extended the maturity date with respect to the term loans outstanding under the First Lien Term Loan Credit Agreement from February 3, 2027 to February 3, 2029. In addition, the Fourth Amendment reduced applicable margin in respect of the interest rate from SOFR plus 275 basis points per annum to SOFR plus 200 basis points per annum.

Voluntary prepayments are permitted. Principal payments must be made on the First Lien Term Loan pursuant to an annual excess cash flow calculation when the net leverage ratio exceeds 3.50 to 1.00. As of February 3, 2024, the Company's net leverage ratio did not exceed 3.50 to 1.00, and therefore, no incremental principal payments were required. The First Lien Term Loan is subject to certain affirmative and negative covenants but no financial covenants. It is secured on a senior basis by certain "fixed assets" of the Company and on a junior basis by certain "liquid" assets of the Company.

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During fiscal year 2021, the Company used $100.0 million of cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan. In connection with the payment, the Company expensed $0.7 million of previously capitalized debt issuance costs and original issue discount.

During fiscal year 2022, total fees incurred in connection with the Third Amendment were approximately $3.2 million. The Company expensed $0.6 million of previously capitalized debt issuance costs and original issue discount and expensed $2.0 million of new third-party fees. The Company deferred $1.2 million of new debt issuance costs and original issue discount.

As of January 28, 2023, there was $450.0 million outstanding on the First Lien Term Loan, which reflected the Company’s repayment of approximately $151.9 million of the principal amount outstanding under the First Lien Term Loan Credit Agreement during the fourth quarter of fiscal year 2022 prior to the Third Amendment. The interest rate was 7.11%.

During fiscal year 2023, total fees incurred in connection with the Fourth Amendment were approximately $1.7 million. The Company expensed $1.4 million of previously capitalized debt issuance costs and original issue discount and expensed $0.4 million of new third-party fees. The Company deferred $1.3 million of new debt issuance costs.

As of February 3, 2024, there was $400.0 million outstanding under the First Lien Term Loan, which reflects the Company’s previous repayment of $50.0 million of the principal amount outstanding under the First Lien Term Loan Credit Agreement during the third quarter of fiscal year 2023 prior to the Fourth Amendment. The interest rate was 7.33% as of fiscal year end.

Future minimum payments

Scheduled future minimum principal payments on debt as of February 3, 2024 are as follows (in thousands):

Fiscal Year: Principal Payments

Thereafter —

8. Interest Expense, Net

The following details the components of interest expense for the periods presented (in thousands):

Fiscal Year Ended

Debt extinguishment and refinancing charges 1,830 3,256 657

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9. Goodwill and Intangible Assets

The carrying value of goodwill and the change in the balance for the fiscal years ended February 3, 2024 and January 28, 2023 is as follows (in thousands):

Fiscal Year Ended

Intangible assets consist of the following (in thousands):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Intangible Assets Not Subject to Amortization:

Intangible Assets Subject to Amortization:

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Intangible Assets Not Subject to Amortization:

Intangible Assets Subject to Amortization:

The Company records amortization expense of intangible assets as a component of SG&A. Member relationships are amortized over 15.3 years and private label brands were amortized over 12 years. Member relationships will primarily be amortized through fiscal year 2026.

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The Company recorded amortization expense of $7.9 million, $9.2 million and $10.5 million as a component of SG&A for fiscal years 2023, 2022, and 2021, respectively. The Company estimates that amortization expense related to intangible assets will be as follows in each of the next five fiscal years (in thousands):

Fiscal Year Amortization Expense

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10. Commitments and Contingencies

The Company is involved in various legal proceedings that are typical of a retail business. In accordance with applicable accounting guidance, an accrual will be established for legal proceedings if and when those matters present loss contingencies that are both probable and estimable. The Company does not believe the resolution of any current proceedings will result in a material impact to the consolidated financial statements.

11. Stock Incentive Plans

On June 13, 2018, the Company’s board of directors adopted, and its stockholders approved, the BJ’s Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the "2018 Plan"). The 2018 Plan provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, other incentive awards, stock appreciation rights, and cash awards. Prior to the adoption of the 2018 Plan, the Company granted stock-based compensation to employees and non-employee directors, respectively, under the Fourth Amended and Restated 2011 Stock Option Plan of BJ’s Wholesale Club Holdings, Inc., as amended (the "2011 Plan"), and the 2012 Director Stock Option Plan of BJ’s Wholesale Club Holdings, Inc., as amended (the "2012 Director Plan"). No further grants will be made under 2011 Plan or the 2012 Director Plan.

The 2018 Plan authorizes the issuance of 13,148,058 shares, including 985,369 shares that were reserved but not issued under the 2011 Plan and the 2012 Director Plan. If an award under the 2018 Plan, 2011 Plan, or 2012 Director Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the 2018 Plan. Additionally, shares tendered or withheld to satisfy grant or exercise price, or tax withholding obligations associated with an award under the 2018 Plan, the 2011 Plan, or the 2012 Director Plan will be added to the shares authorized for grant under the 2018 Plan. The following shares may not be used again for grant under the 2018 Plan: (1) shares subject to a stock appreciation right ("SAR"), that are not issued in connection with the stock settlement of the SAR on its exercise and (2) shares purchased on the open market with the cash proceeds from the exercise of options under the 2018 Plan, 2011 Plan, or 2012 Director Plan. As of February 3, 2024, there were 4,925,874 shares available for future issuance under the 2018 Plan.

On April 16, 2021, the Compensation Committee approved a modification to the equity awards agreements under the 2011 Plan, 2012 Director Plan, and 2018 Plan. In the event that an employee is terminated due to death or disability, the modified equity award agreements provide for: (i) full vesting of all time-based awards, including restricted stock awards and stock options, (ii) pro-rata vesting of all performance-based awards, including performance share units, based on actual performance as of the end of the applicable performance period, pro-rated based on the period of employment during the applicable performance period, and (iii) the extension of the post-termination exercise window for vested stock options. In fiscal 2021, the Company recognized $17.5 million of stock-based compensation expense due to the accelerated vesting of equity awards, related to the passing of a former executive. There was no accelerated vesting of awards in fiscal year 2023 or 2022.

The Company recognized $39.0 million, $42.6 million, and $53.8 million of total stock-based compensation for fiscal years 2023, 2022, and 2021, respectively, inclusive of expense related to the ESPP. As of February 3, 2024, there was approximately $42.5 million of unrecognized compensation cost, most of which is expected to be recognized over the next three years.

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Stock option awards were generally granted with a vesting period of three years. All options have a contractual term of ten years. No options were granted during fiscal years 2023, 2022, or 2021. The fair value of options granted prior to fiscal year 2021 was estimated using the Black-Scholes option pricing model.

Presented below is a summary of the stock option activity and weighted-average exercise prices for the fiscal year ended February 3, 2024:

Outstanding, beginning of period 1,788 $ 20.35

Outstanding, vested, and exercisable, end of period 1,655 20.53 4.8

The total intrinsic value of options exercised in fiscal years 2023, 2022 and 2021 was $7.2 million, $25.1 million, and $55.2 million, respectively. The Company received a tax benefit related to these option exercises of approximately $2.0 million, $7.0 million, and $15.5 million in fiscal years 2023, 2022, and 2021, respectively. As of February 3, 2024, the total intrinsic value of options vested was $72.8 million.

Presented below is a summary of our non-vested restricted shares, restricted stock units and performance stock and weighted-average grant-date fair values for the fiscal year ended February 3, 2024:

Restricted Stock Restricted Stock Units Performance Stock

(a) Shares presented reflect a 100% payout, however, the actual payout for the fiscal year 2021 grants, which primarily vest in the first quarter of fiscal year 2024, is expected to be 200%. Actual payout for performance stock awards granted in fiscal years 2022 and 2023, which primarily vest in fiscal year 2025 and 2026, respectively, could be below 100% or up to 200%.

(b) Includes 320 incremental Performance Stock awards granted in fiscal year 2020 with a weighted-average grant date fair value of $33.59, that vested in the first quarter of fiscal year 2023 at greater than 100% of target based on performance.

The fair value as of the vesting date was $31.4 million, $1.2 million and $48.6 million for restricted stock, restricted stock units, and performance stock, respectively.

2018 Employee Stock Purchase Plan

On June 14, 2018, the Company’s board of directors adopted and and its stockholders approved the BJ's Wholesale Club Holdings, Inc. 2018 ESPP, which became effective the day prior to the first day of public trading of the Company's equity securities. The aggregate number of shares of common stock that was be reserved for issuance under our ESPP was be equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares as determined by the board of directors. The offering under the ESPP commenced on January 1, 2019. The amount of expense recognized in the fiscal years 2023, 2022, and 2021, was $1.4 million, $1.1 million and $0.8 million, respectively. As of February 3, 2024, there were 2,407,504 shares available for issuance under the ESPP.

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12. Treasury Shares and Share Repurchase Programs

Treasury Shares Acquired on Restricted Stock Awards and Performance Stock Awards

Shares reacquired to satisfy tax withholding obligations upon the vesting of restricted stock awards and performance stock awards in fiscal year 2023, 2022, and 2021 were 373,875 shares, 264,167 shares, and 376,758 shares, respectively. These reacquired shares were recorded as $28.3 million, $18.0 million, and $16.8 million of treasury stock in fiscal years 2023, 2022, and 2021, respectively.

Share Repurchase Programs

On December 19, 2019, the Company’s board of directors authorized the repurchase of up to $250.0 million of the Company’s outstanding common stock from time to time as market conditions warrant (the "2019 Repurchase Program"). The 2019 Repurchase Program was fully exhausted on November 17, 2021.

On November 16, 2021, the Company’s board of directors approved a share repurchase program (the "2021 Repurchase Program"), effective immediately, that allows the Company to repurchase up to $500.0 million of its outstanding common stock. The 2021 Repurchase Program expires in January 2025. The Company initiated the 2019 Repurchase Program and the 2021 Repurchase Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing stockholder value.

As of February 3, 2024, $189.3 million remained available to purchase under the 2021 Repurchase Program. The Company repurchased 1,958,218, 2,234,708, and 3,331,956 shares of common stock totaling $130.2 million, $152.5 million and $179.2 million in fiscal years 2023, 2022, and 2021, respectively.

13. Income Taxes

The provision for income taxes from continuing operations includes the following (in thousands):

Fiscal Year Ended

Federal:

State:

A reconciliation of the statutory federal income tax rate with the Company’s effective income tax rate is as follows:

Fiscal Year Ended

Statutory federal income tax rates 21.0 % 21.0 % 21.0 %

State income taxes, net of federal tax benefit 7.2 6.5 5.8

Work opportunity and solar energy tax credit (0.5) (0.7) (0.8)

Charitable contributions (0.2) (0.2) (0.3)

Prior year adjustments 1.2 — —

Excess tax benefit related to stock-based compensation (0.6) (1.3) (2.4)

Effective income tax rate 28.8 % 25.5 % 23.5 %

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Significant components of the Company’s deferred tax assets and liabilities as of February 3, 2024 and January 28, 2023 are as follows (in thousands):

Deferred tax assets:

Deferred tax liabilities:

The ultimate realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient taxable income during the periods in which the temporary differences become deductible. The Company has determined that it is more likely than not that the results of future operations and the reversals of existing taxable temporary differences will generate sufficient taxable income to realize the deferred tax assets. Therefore, no valuation allowance has been recorded. In making this determination, the Company considered historical levels of income as well as projections for future periods.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Fiscal Year Ended

Balance, beginning of period $ 1,411 $ 2,263

Additions for tax positions taken during the current year 1,546 109

Lapses in statute of limitations (90) (961)

The total amount of unrecognized tax benefits, reflective of federal tax benefits at both February 3, 2024 and January 28, 2023 that, if recognized, would favorably affect the effective tax rate was $2.3 million and $1.2 million, respectively.

As of February 3, 2024, management has determined it is reasonably possible that the total amount of unrecognized tax benefits could decrease within the next twelve months by $0.3 million, due to the expiration of statute of limitations and expected resolution of state tax audits. The Company’s tax years from 2019 forward remain open and are subject to examination by the Internal Revenue Service or various state taxing jurisdictions.

The Company classifies interest expense and any penalties related to income tax uncertainties as a component of income tax expense. The Company recognized $0.1 million of expense for fiscal years 2023 and 2022, and no interest income or expense for fiscal year 2021. As of February 3, 2024 and January 28, 2023, the Company had $0.2 million and $0.1 million, respectively, of accrued interest related to income tax uncertainties.

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14. Retirement Plans

Under the Company's 401(k) savings plans, participating employees may make pretax contributions up to 50% of covered compensation subject to federal limits. The Company matches employee contributions at 50% of the first six percent of covered compensation. The Company’s expense under these plans was $15.2 million, $13.7 million and $11.1 million for fiscal years 2023, 2022, and 2021, respectively.

The Company had a non-contributory defined contribution retirement plan for certain key employees, which was terminated in fiscal year 2023. Under this plan, the Company funded annual retirement contributions for the designated participants on an after-tax basis. The Company’s contributions equaled 5% of the participants’ base salary. Historically, participants became fully vested in their contribution accounts at the end of the fiscal year in which they completed four full fiscal years of service. Upon termination of the plan, all remaining contributions became fully vested. Expense under this plan was $0.5 million, $3.7 million and $1.8 million in fiscal years 2023, 2022, and 2021, respectively. As of February 3, 2024, the remaining $2.2 million due to participants was included in accrued expenses and other current liabilities in the consolidated balance sheets.

Effective January 1, 2024, the Company offers certain qualifying individuals the ability to participate in the NQDC Plan. The NQDC Plan allows employees to defer up to 50% of the participant's annual base salary as well as up to 100% of any annual bonus award. The Company may also elect to provide a discretionary contribution to the NQDC Plan to certain executives, which will become 100% vested on the third anniversary of a participant's date of hire. A participant will be 100% vested at all times in their elective deferral account within the NQDC Plan. The Company credits the amounts deferred with earnings and holds investments to offset the Company's liabilities under the NQDC Plan. As of February 3, 2024, all investments were held in mutual funds. The NQDC Plan liability and total investments are included in other non-current liabilities and other assets, respectively, in the consolidated balance sheets and were not material as of February 3, 2024. Additionally, expense under this plan was not material for fiscal year 2023.

15. Asset Retirement Obligations

The following is a summary of activity relating to the liability for asset retirement obligations, which the Company will incur primarily in connection with the expected future removal of gasoline tanks, solar panels and the related infrastructure. The following is included in other non-current liabilities on the consolidated balance sheets (in thousands):

Fiscal Year Ended

Liabilities incurred during the year 782 461 630

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16. Accrued Expenses and Other Current Liabilities

The major components of accrued expenses and other current liabilities are as follows (in thousands):

Fixed asset accruals and property-related costs 58,930 61,992

Rewards programs and related deferred revenues 57,909 59,513

Professional services and advertising 21,764 18,220

Legal, sales, and membership fee reserves 17,165 17,518

Total accrued expenses and other current liabilities $ 812,136 $ 767,411

The following table summarizes membership fee income activity for each of the last two fiscal years (in thousands):

Fiscal Year Ended

Deferred membership fee income, beginning of period $ 183,692 $ 174,916

Deferred membership fee income, end of period $ 231,440 $ 183,692

17. Other Non-current Liabilities

The major components of other non-current liabilities are as follows (in thousands):

18. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair values of the Company’s derivative instruments were based on quotes received from third-party banks and represent the estimated amount the Company would pay to terminate the agreements taking into consideration current interest rates as well as the creditworthiness of the counterparties. These inputs were considered to be Level 2. All derivative instruments expired in the first quarter of fiscal year 2022.

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Financial Assets and Liabilities

The fair value of the Company's long-term debt is estimated based on current market rates for our specific debt instrument. Judgment is required to develop these estimates. As such, the estimated fair value of long-term debt is classified within Level 2, as defined under U.S. GAAP.

The gross carrying amount and fair value of the Company’s debt at February 3, 2024 are as follows (in thousands):

Carrying Amount Fair Value