BJ’s Wholesale Club (US:BJ)2024-03-18 20:12Membership and Revenue - Membership fee income totaled $420.7 million in fiscal year 2023, with a tenured membership renewal rate of 90%[98] - The company has over 7 million members, generating $420.7 million in membership fee income for fiscal year 2023[112] - Membership fee income increased by 6.0% to $420.7 million in fiscal year 2023 from $396.7 million in fiscal year 2022, reflecting strong membership renewals and new member acquisitions[179] - The annual membership fee for Club Card is generally $55, with members saving over ten times this fee when spending $2,500 or more annually[112] Financial Performance - Net sales for fiscal year 2023 were $19.5 billion, a 3.3% increase from $18.9 billion in fiscal year 2022, driven by strength in the grocery division and an increase of eight clubs[150] - Total revenues increased to $19.97 billion, compared to $19.32 billion in the prior year, marking a growth of 3.4%[248] - Operating income for fiscal year 2023 was $800.4 million, up from $738.0 million in fiscal year 2022, indicating improved operational efficiency[147] - Operating income for the fiscal year was $800.42 million, a 8.46% increase from $737.99 million in the previous year[248] - Net income for the year was $523.74 million, slightly up from $513.18 million, representing a growth of 0.31%[248] - Adjusted net income for fiscal year 2023 was $534.5 million, compared to $535.2 million in fiscal year 2022, with adjusted EPS at $3.96, up from $3.92[189] Expenses and Costs - Cost of sales for fiscal year 2023 was $16.3 billion, representing 83.5% of net sales, a slight improvement from $15.9 billion or 84.0% in fiscal year 2022[181] - SG&A expenses increased by 5.8% to $2.8 billion in fiscal year 2023, driven by higher labor, occupancy, and depreciation costs due to new club openings[183] - Interest expense increased to $64.5 million in fiscal year 2023 from $47.5 million in fiscal year 2022, primarily due to rising interest rates[159] - Interest expense increased to $64.53 million from $47.46 million, indicating a rise of 36% year-over-year[248] Investments and Cash Flow - Net cash provided by operating activities was $718.9 million in fiscal year 2023, down from $788.2 million in fiscal year 2022, largely due to timing of inventory receipts and payments[170] - Adjusted free cash flow decreased to $264.1 million in fiscal year 2023 from $417.6 million in fiscal year 2022, primarily due to unfavorable working capital fluctuations and increased capital spending[197] - Cash used in investing activities decreased to $454.8 million in fiscal year 2023 from $747.1 million in fiscal year 2022, mainly due to reduced acquisition-related cash outflows[171] Strategic Initiatives - The company aims to retain future earnings for business expansion and debt repayment, with no cash dividends expected in the foreseeable future[80] - The company expects to continue investing in member engagement, marketing, and digital strategies to drive growth[183] - The company anticipates ongoing market expansion and strategic investments in new clubs and technologies to enhance its competitive position[183] Operational Footprint - The company operates 244 warehouse clubs and 175 gas stations across 20 states as of the filing date[95] - Total clubs at the end of the period increased to 243 from 235 in the previous year, indicating continued expansion of the company's footprint[147] - The company operated 243 warehouse clubs and 174 gas stations across 20 states as of February 3, 2024[254] Market and Economic Factors - Economic factors such as employment rates and inflation significantly impact customer spending patterns and, consequently, the company's financial results[114] - Inflationary volatility has impacted several business categories in fiscal year 2023, prompting the company to adjust sourcing and pricing strategies[102] - Fluctuations in gasoline prices can lead to significant variances in net sales, impacting operating income[118] - The New York metropolitan area accounted for approximately 23% of net sales in fiscal year 2023[259] Shareholder Returns and Stock Performance - The company has a share repurchase program allowing up to $500 million in stock buybacks, expiring in January 2025[88] - The average price paid per share for stock repurchases in Q4 2023 was $65.21, with a total of 800,052 shares purchased[69] - The company repurchased 1,958,218 shares for a total of $130.2 million under the 2021 Repurchase Program during fiscal year 2023[192] - The company reported a cumulative total return of 243.71 for its common stock from February 2, 2019, to February 3, 2024[68] Risk Factors - The company faces risks related to supply chain constraints that could adversely affect net sales and customer appeal[116] - The market price of the company's common stock may fluctuate significantly, influenced by various external factors[137] - A 100 basis point change in prevailing market rates would cause annual interest costs to change by approximately $7.2 million[237] Tax and Debt - The effective income tax rate from continuing operations rose to 28.8% in fiscal year 2023 from 25.5% in fiscal year 2022, driven by lower tax benefits from stock-based compensation[160] - Long-term debt decreased to $398,432 thousand as of February 3, 2024, down from $447,880 thousand, indicating a decline of approximately 11.0%[220] - The company amended the First Lien Term Loan to extend the maturity date to February 3, 2029, and reduced the applicable margin from SOFR plus 275 basis points to SOFR plus 200 basis points[229]