UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 10-Q

_________________

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2020

OR

☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-38559

_________________

BJ’S WHOLESALE CLUB HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_________________

Delaware		45-2936287
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
25 Research Drive
Westborough,	Massachusetts	01581
(Address of principal executive offices)		(Zip Code)

(774) 512-7400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	BJ	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 20, 2020, the registrant had 137,280,410 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	6
Item 1.	Financial Statements (Unaudited)	6
	Consolidated Balance Sheets	6
	Consolidated Statements of Operations and Comprehensive Income	7
	Consolidated Statements of Stockholders’ Equity (Deficit)	9
	Consolidated Statements of Cash Flows	11
	Notes to Unaudited Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	37

3

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q should be considered forward-looking statements, including, without limitation, statements regarding our future results of operations and financial position, business strategy, transformation, strategic priorities and future progress, including expectations regarding deferred revenue, lease commencement dates, impact of infrastructure investments on our operating model and selling, general and administrative expenses, sales of gasoline and gross profit margin rates, and new club and gas station openings, as well as statements that include terms such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "project," "believe," "estimate," "predict," "continue," "forecast," "would," or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to:

•uncertainties in the financial markets and the effect of certain economic conditions or events on consumer and small business spending patterns and debt levels;

•risks related to our dependence on having a large and loyal membership;

•the effects of competition in, and regulation of, the retail industry;

•our dependence on vendors to supply us with quality merchandise at the right time and at the right price;

•risks related to our substantial indebtedness;

•changes in laws related to, or the governments administration of, the Supplemental Nutrition Assistance Program or its electronic benefit transfer systems;

•the risks and uncertainties related to the impact of the novel coronavirus (COVID-19) pandemic, including the duration, scope and severity of the pandemic, federal, state and local government actions or restrictive measures implemented in response to COVID-19, the effectiveness of such measures, as well as the effect of any relaxation or revocation of current restrictions, and the direct and indirect impact of such measures;

•risks related to climate change and natural disasters;

•our ability to identify and respond effectively to consumer trends, including our ability to successfully maintain a relevant omnichannel experience for our members;

•risks related to cybersecurity, which may be heightened due to our e-commerce business, including our ability to protect the privacy of member or business information and the security of payment card information;

•our ability to attract and retain a qualified management team and other team members;

•our ability to implement our growth strategy by opening new clubs and gasoline stations; and

•the other risk factors identified in our filings with the Securities and Exchange Commission, including in particular those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (the "Annual Report on Form 10-K for the fiscal year 2019"), our Quarterly Reports on Form 10-Q for the quarters ended May 2, 2020 and August 1, 2020 and this Quarterly Report on Form 10-Q.

Given these uncertainties, you should not place undue reliance on any forward-looking statements.  Except as required by applicable law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future, and you should not rely upon these forward-looking statements after the date of this Quarterly Report on Form 10-Q.

4

TRADEMARKS

BJ’s Wholesale Club®, BJ’s®, Wellsley Farms®, Berkley Jensen®, My BJ’s Perks®, BJ’s Easy Renewal®, BJ’s Gas®, BJ’s Perks Elite®, BJ’s Perks Plus®, Inner Circle® and BJ’s Perks Rewards® are all registered trademarks of BJ’s Wholesale Club, Inc. Other trademarks, tradenames and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We do not intend our use or display of those other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks.

DEFINED TERMS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:

•"the Company," "BJ’s," "we," "us" and "our" mean BJ’s Wholesale Club Holdings, Inc. and, unless the context otherwise requires, its consolidated subsidiaries;

•"ABL Facility" means the Company's senior secured asset based revolving credit and term facility;

•"First Lien Term Loan" means the Company's senior secured first lien term loan facility;

•"fiscal year 2019" means the 52 weeks ended February 1, 2020; and

•"fiscal year 2020" means the 52 weeks ended January 30, 2021.

•"CVC June 2019 Secondary Offering" means the secondary offering of shares of our common stock by certain selling shareholders completed on June 27, 2019.

5

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

	October 31, 2020		February 1, 2020		November 2, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	46,116	$	30,204	$	29,968
Accounts receivable, net	188,413		206,353		185,983
Merchandise inventories	1,264,323		1,081,502		1,271,172
Prepaid expenses and other current assets	97,116		41,961		55,285
Total current assets	1,595,968		1,360,020		1,542,408
Operating lease right-of-use assets, net	2,034,742		2,060,059		2,067,626
Property and equipment:
Land and buildings	376,635		375,375		390,085
Leasehold costs and improvements	221,403		214,209		211,824
Furniture, fixtures and equipment	1,258,876		1,135,892		1,130,854
Construction in progress	43,382		51,741		53,244
	1,900,296		1,777,217		1,786,007
Less: accumulated depreciation and amortization	(1,131,038)		(1,017,009)		(1,010,348)
Total property and equipment, net	769,258		760,208		775,659
Goodwill	924,134		924,134		924,134
Intangibles, net	138,088		146,985		150,357
Other assets	20,094		18,374		17,897
Total assets	$	5,482,284	$	5,269,780	$	5,478,081
LIABILITIES
Current liabilities:
Current portion of long-term debt	$	260,000	$	343,377	$	449,377
Current portion of operating lease liabilities	131,025		123,751		121,961
Accounts payable	1,176,104		786,412		973,328
Accrued expenses and other current liabilities	643,309		547,876		507,141
Total current liabilities	2,210,438		1,801,416		2,051,807
Long-term operating lease liabilities	1,961,321		1,986,790		1,980,447
Long-term debt	845,696		1,337,308		1,339,700
Deferred income taxes	47,241		46,200		50,486
Other non-current liabilities	200,210		152,410		160,127
Commitments and Contingencies (see Note 7)
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock; par value $0.01; 5,000 shares authorized, and no shares issued or outstanding	—		—		—
Common stock, par value $0.01; 300,000 shares authorized, 143,199 shares issued and 137,263 outstanding at October 31, 2020; 140,723 shares issued and 137,298 outstanding at February 1, 2020; and 140,642 shares issued and 137,217 outstanding at November 2, 2019	1,432		1,407		1,406
Additional paid-in capital	814,376		773,618		766,050
Accumulated deficit	(391,221)		(716,369)		(758,131)
Accumulated other comprehensive loss	(26,124)		(26,586)		(27,397)
Treasury stock, at cost, 5,936 shares at October 31, 2020; 3,425 shares at February 1, 2020 and November 2, 2019	(181,085)		(86,414)		(86,414)
Total stockholders’ equity (deficit)	217,378		(54,344)		(104,486)
Total liabilities and stockholders’ equity (deficit)	$	5,482,284	$	5,269,780	$	5,478,081

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

6

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

	Thirteen Weeks Ended
	October 31, 2020		November 2, 2019
Net sales	$	3,646,723	$	3,152,887
Membership fee income	84,946		76,517
Total revenues	3,731,669		3,229,404
Cost of sales	2,988,397		2,611,758
Selling, general and administrative expenses	552,307		510,410
Pre-opening expense	610		6,304
Operating income	190,355		100,932
Interest expense, net	25,882		27,702
Income from continuing operations before income taxes	164,473		73,230
Provision for income taxes	41,590		18,034
Income from continuing operations	122,883		55,196
Loss from discontinued operations, net of income taxes	(87)		(104)
Net income	$	122,796	$	55,092
Income per share attributable to common stockholders—basic:
Income from continuing operations	$	0.90	$	0.41
Loss from discontinued operations	—		—
Net income	$	0.90	$	0.41
Income per share attributable to common stockholders—diluted:
Income from continuing operations	$	0.88	$	0.40
Loss from discontinued operations	—		—
Net income	$	0.88	$	0.40
Weighted average number of common shares outstanding:
Basic	136,011		135,521
Diluted	139,060		138,192
Other comprehensive income (loss):
Amounts reclassified from other comprehensive income, net of income tax benefit of $1,427	$	3,670	$	—
Unrealized gain (loss) on cash flow hedge, net of income tax benefit of $2,278 and income tax provision of $305, respectively	5,856		(787)
Total other comprehensive income (loss)	$	9,526	$	(787)
Total comprehensive income	$	132,322	$	54,305

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

7

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

	Thirty-Nine Weeks Ended
	October 31, 2020		November 2, 2019
Net sales	$	11,236,403	$	9,493,795
Membership fee income	247,001		224,587
Total revenues	11,483,404		9,718,382
Cost of sales	9,247,042		7,913,820
Selling, general and administrative expenses	1,733,482		1,523,480
Pre-opening expense	5,180		10,727
Operating income	497,700		270,355
Interest expense, net	68,467		82,274
Income from continuing operations before income taxes	429,233		188,081
Provision for income taxes	103,940		42,507
Income from continuing operations	325,293		145,574
Loss from discontinued operations, net of income taxes	(145)		(161)
Net income	$	325,148	$	145,413
Income per share attributable to common stockholders—basic:
Income from continuing operations	$	2.39	$	1.07
Loss from discontinued operations	—		—
Net income	$	2.39	$	1.07
Income per share attributable to common stockholders—diluted:
Income from continuing operations	$	2.34	$	1.04
Loss from discontinued operations	—		—
Net income	$	2.34	$	1.04
Weighted average number of common shares outstanding:
Basic	136,269		136,301
Diluted	139,003		139,390
Other comprehensive income (loss):
Amounts reclassified from other comprehensive income, net of income tax benefit of $1,427	3,670		—
Unrealized loss on cash flow hedge, net of income tax of $1,246 and $6,253, respectively	(3,208)		(16,083)
Total other comprehensive income (loss)	$	462	$	(16,083)
Total comprehensive income	$	325,610	$	129,330

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

8

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Amounts in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Stockholders’ Equity (Deficit)
	Shares	Amount								Shares	Amount
Balance, February 1, 2020	140,723	$	1,407	$	773,618	$	(716,369)	$	(26,586)	(3,425)	$	(86,414)	$	(54,344)
Net income	—	—		—		95,734		—		—	—		95,734
Unrealized loss on cash flow hedge, net of tax	—	—		—		—		(13,942)		—	—		(13,942)
Common stock issued under stock incentive plans	1,626	16		(16)		—		—		—	—		—
Stock compensation expense	—	—		5,514		—		—		—	—		5,514
Net cash received on option exercises	—	—		5,608		—		—		—	—		5,608
Treasury stock purchases	—	—		—		—		—		(258)	(6,073)		(6,073)
Balance, May 2, 2020	142,349	$	1,423	$	784,724	$	(620,635)	$	(40,528)	(3,683)	$	(92,487)	$	32,497
Net income	—	—		—		106,618		—		—	—		106,618
Unrealized gain on cash flow hedge, net of tax	—	—		—		—		4,878		—	—		4,878
Common stock issued under stock incentive plans	246	3		(3)		—		—		—	—		—
Common stock issued under Employee Stock Purchase Plan (ESPP)	58	1		1,106		—		—		—	—		1,107
Stock compensation expense	—	—		9,064		—		—		—	—		9,064
Net cash received on option expenses	—	—		3,397		—		—		—	—		3,397
Treasury stock purchases	—	—		—		—		—		(1,047)	(38,460)		(38,460)
Balance, August 1, 2020	142,653	$	1,427	$	798,288	$	(514,017)	$	(35,650)	(4,730)	$	(130,947)	$	119,101
Net income	—	—		—		122,796		—		—	—		122,796
Amounts reclassified from other comprehensive income, net of tax	—	—		—		—		3,670		—	—		3,670
Unrealized gain on cash flow hedge, net of tax	—	—		—		—		5,856		—	—		5,856
Common stock issued under stock incentive plans	546	5		(5)		—		—		—	—		—
Stock compensation expense	—	—		8,667		—		—		—	—		8,667
Net cash received on option exercises	—	—		7,426		—		—		—	—		7,426
Treasury stock purchases	—	—		—		—		—		(1,206)	(50,138)		(50,138)
Balance, October 31, 2020	143,199	$	1,432	$	814,376	$	(391,221)	$	(26,124)	(5,936)	$	(181,085)	$	217,378

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

9

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Amounts in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Stockholders’ Equity (Deficit)
	Shares	Amount								Shares	Amount
Balance, February 2, 2019	138,099	$	1,381	$	742,072	$	(915,113)	$	(11,315)	(782)	$	(19,109)	$	(202,084)
Net income	—	—		—		35,798		—		—	—		35,798
Unrealized loss on cash flow, net of tax	—	—		—		—		(3,755)		—	—		(3,755)
Common stock issued under stock incentive plans	1,737	17		(17)		—		—		—	—		—
Stock compensation expense	—	—		3,844		—		—		—	—		3,844
Net cash received on option exercises	—	—		6,319		—		—		—	—		6,319
Cumulative effect of change in accounting principle	—	—		—		11,569		—		—	—		11,569
Balance, May 4, 2019	139,836	$	1,398	$	752,218	$	(867,746)	$	(15,070)	(782)	$	(19,109)	$	(148,309)
Net income	—	—		—		54,523		—		—	—		54,523
Unrealized loss on cash flow hedge, net of tax	—	—		—		—		(11,540)		—	—		(11,540)
Common stock issued under stock incentive plans	312	4		(4)		—		—		—	—		—
Common stock issued under ESPP plan	37	—		726		—		—		—	—		726
Stock compensation expense	—	—		4,952		—		—		—	—		4,952
Net cash received on option exercises	—	—		2,299		—		—		—	—		2,299
Treasury stock purchases	—	—		—		—		—		(2,641)	(67,237)		(67,237)
Balance, August 3, 2019	140,185	$	1,402	$	760,191	$	(813,223)	$	(26,610)	(3,423)	$	(86,346)	$	(164,586)
Net income	—	—		—		55,092		—		—	—		55,092
Unrealized loss on cash flow hedge, net of tax	—	—		—		—		(787)		—	—		(787)
Common stock issued under stock incentive plans	457	4		(4)		—		—		—	—		—
Stock compensation expense	—	—		5,188		—		—		—	—		5,188
Net cash received on option exercises	—	—		675		—		—		—	—		675
Treasury stock purchases	—	—		—		—		—		(2)	(68)		(68)
Balance, November 2, 2019	140,642	$	1,406	$	766,050	$	(758,131)	$	(27,397)	(3,425)	$	(86,414)	$	(104,486)

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

10

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Thirty-Nine Weeks Ended
	October 31, 2020		November 2, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	325,148	$	145,413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	124,331		116,920
Amortization of debt issuance costs and accretion of original issue discount	3,470		3,969
Debt extinguishment charges	4,077		2,032
Other non-cash items, net	5,441		2,539
Stock-based compensation expense	23,245		13,984
Deferred income tax provision	2,289		14,846
Increase (decrease) in cash due to changes in:
Accounts receivable	17,940		8,317
Merchandise inventories	(182,821)		(218,866)
Prepaid expenses and other current assets	(16,964)		14,051
Other assets	(1,959)		(1,400)
Accounts payable	389,692		156,448
Accrued expenses	61,829		(35,004)
Other non-current liabilities	46,254		(1,727)
Net cash provided by operating activities	801,972		221,522
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net of disposals	(152,800)		(144,428)
Proceeds from sale leaseback transactions	25,893		—
Net cash used in investing activities	(126,907)		(144,428)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long term debt	(3,297)		(11,533)
Paydown of First Lien Term Loan	(510,000)		(200,000)
Proceeds from ABL Facility	996,000		1,114,000
Payments on ABL Facility	(1,064,000)		(919,000)
Net cash received from stock option exercises	16,431		9,293
Net cash received from ESPP	1,107		726
Acquisition of treasury stock	(94,671)		(67,305)
Other financing activities	(723)		(453)
Net cash used in financing activities	(659,153)		(74,272)
Net increase in cash and cash equivalents	15,912		2,822
Cash and cash equivalents at beginning of period	30,204		27,146
Cash and cash equivalents at end of period	$	46,116	$	29,968
Supplemental cash flow information:
Interest paid	$	52,306	$	75,354
Income taxes paid	111,105		33,424
Non-cash financing and investing activities:
Lease liabilities arising from obtaining right-of-use assets	90,320		136,243
Property additions included in accrued expenses	10,760		20,255

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

11

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

BJ’s Wholesale Club Holdings, Inc. and its wholly owned subsidiaries is a leading warehouse club operator in the eastern United States. As of October 31, 2020, the Company operated 219 warehouse clubs and 149 gas stations in 17 states.

The Company follows, and reports based on the National Retail Federation’s fiscal calendar. The thirteen week periods ended October 31, 2020 and November 2, 2019 are referred to as the "third quarter of fiscal year 2020" and the "third quarter of fiscal year 2019," respectively.

The novel coronavirus ("COVID-19") pandemic has severely impacted the economies of the U.S. and other countries around the world. In the preparation of these financial statements and related disclosures we have assessed the impact that COVID-19 has had on our estimates, assumptions and accounting policies and made additional disclosures, as necessary.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim financial statements of BJ’s Wholesale Club Holdings, Inc. are unaudited and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair statement of the Company’s financial statements in accordance with generally accepted accounting principles in the United States of America ("GAAP").

The consolidated balance sheet as of February 1, 2020 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the third quarter of fiscal year 2020 are not necessarily indicative of future results or results to be expected for fiscal year 2020. The Company’s business, in 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.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year 2019, as filed with the Securities and Exchange Commission on March 19, 2020.

Reclassification

We adjusted the statement of cash flows for the first nine months of fiscal year 2019 to reclassify the change in book overdraft amounts into the accounts payable and accrued expenses line items, all within net cash provided by operating activities.    

Recently Adopted Accounting Pronouncements

The accounting policies the Company follows are set forth in its audited financial statements for fiscal year 2019. There have been no material changes to these accounting policies, except as noted below for new accounting pronouncements adopted at the beginning of fiscal year 2020.

Fair Value Measurement (ASU 2018-13)

In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2018-13 Changes to the Disclosure Requirements for Fair Value Measurement which updates the guidance to Fair Value Measurement (Topic 820). The updated guidance modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 at the beginning of fiscal year 2020 on a prospective basis and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Intangibles-Goodwill and Other-Internal-Use Software (ASU 2018-15)

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). The update related to accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The update allows entities who are customers in hosting arrangements that are service contracts to apply the existing internal-use software guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The update specifies classification for capitalizing implementation costs and related amortization expense within the financial statements and requires additional disclosures. The updated guidance is effective for fiscal reporting periods, including interim reporting within those periods, beginning after December 15, 2019. The Company adopted this standard at the beginning of fiscal year 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Goodwill Impairment (ASU 2017-04)

In January 2017, the FASB issued ASU 2017-04, which provides amendments to Accounting Standards Codification 350, Intangibles - Goodwill and Other, to eliminate Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The Company adopted ASU 2017-04 at the beginning of fiscal year 2020 on a prospective basis and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Credit Losses (ASU 2016-13)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This new guidance changes how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 replaces the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, an entity recognizes a loss (or allowance) upon initial recognition of the asset that reflects all future events that will lead to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The Company adopted ASU 2016-13 at the beginning of fiscal year 2020 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform (ASU 2020-04)

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to the current guidance on contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating the impact of the new guidance on the Company's consolidated financial statements.

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3. 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.

Merchandise sales—The Company recognizes sales of merchandise at clubs and gas stations when the customer takes possession of the goods and tenders payment. Sales of merchandise at the Company’s clubs and gas stations, excluding sales taxes, represented approximately 96% of the Company’s net sales and approximately 94% of the Company’s total revenues for the thirty-nine weeks ended October 31, 2020. Sales taxes are recorded as a liability at the point of sale. Revenue is recorded at the point of sale based on the transaction price on the shelf sign, net of any applicable discounts, sales taxes 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 shipping point.

BJ’s Perks Rewards and My BJ's Perks programs—The Company’s BJ’s Perks Rewards® membership program allows 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 offers a co-branded credit card program, the My BJ’s Perks® program, which allows My BJ's Perks® Mastercard credit card holders to earn up to 5% cash back on eligible purchases made at BJ’s and up to 2% cash back on purchases made with the card outside of BJ’s. Cash back has been in the form of electronic awards issued in $10 increments that may be used online or in-club at the register and expire six months from the date issued.

Earned awards may be redeemed on future purchases made at the Company. The Company recognizes revenue for earned awards when customers redeem such awards as part of a purchase at one of the Company’s clubs or the Company’s website. 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. This liability was $24.6 million at October 31, 2020, $26.7 million at February 1, 2020 and $27.8 million at November 2, 2019.

Royalty revenue received in connection with the My BJ's Perks co-brand credit card program is variable consideration and is considered deferred until the card holder makes a purchase. The Company’s total deferred royalty revenue related to the outstanding My BJ’s Perks Rewards was $13.5 million, $14.8 million and $14.0 million at October 31, 2020, February 1, 2020 and November 2, 2019, respectively. The timing of revenue recognition of these awards dollars is driven by actual customer activities, such as redemptions and expirations. As of October 31, 2020, the Company expects to recognize $12.0 million of the deferred revenue in fiscal year 2020, and expects the remainder will be recognized in the years thereafter.

Membership—The Company charges a membership fee to its customers. That fee 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. Because 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. The Company’s deferred revenue related to membership fees was $151.2 million, $144.0 million and $135.8 million at October 31, 2020, February 1, 2020 and November 2, 2019, respectively.

Gift Card Program—The Company sells BJ’s gift cards in both physical and digital format, which allow customers to redeem the card for future purchases equal to the amount of the original purchase price of the gift card. Revenue from gift card sales is recognized in proportion to its rate of gift card redemptions because the Company’s performance obligation to redeem the gift card for merchandise is satisfied when the gift card is redeemed. The Company also recognizes breakage in proportion to its rate of gift card redemptions. Deferred revenue related to gift cards was $9.0 million, $10.3 million and $9.1 million at October 31, 2020, February 1, 2020 and November 2, 2019, respectively. The Company recognized $9.2 million and $10.5 million of revenue from gift card redemptions in the third quarter of fiscal year 2020 and third quarter of fiscal year 2019, respectively. The Company recognized $28.7 million and $33.0 million of revenue from gift card redemptions in the thirty-nine weeks ended October 31, 2020 and November 2, 2019, respectively.

Disaggregation of Revenue

The Company’s club retail operations, which represent substantially all of its consolidated total revenues, are the Company’s only reportable segment. All the Company’s identifiable assets are 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.

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The following tables summarize the Company's percentage of net sales disaggregated by category:

	Thirteen Weeks Ended
	October 31, 2020	November 2, 2019
Grocery (1)	77%	74%
General Merchandise & Services	13%	13%
Gasoline and Other	10%	13%

	Thirty-Nine Weeks Ended
	October 31, 2020	November 2, 2019
Grocery (1)	78%	73%
General Merchandise & Services	13%	13%
Gasoline and Other	9%	14%

(1)Grocery division includes the legacy perishables, edible grocery and non-edible grocery division.

4. Related Party Transactions

One of the Company’s suppliers, Advantage Solutions Inc., is controlled by a related party of the Company. Advantage Solutions Inc. was 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 $1.3 million and $10.2 million of costs payable to Advantage Solutions Inc. for services rendered during the thirteen weeks ended October 31, 2020 and November 2, 2019, respectively. The Company incurred approximately $13.5 million and $32.6 million of costs payable to Advantage Solutions Inc. for services rendered during the thirty-nine weeks ended October 31, 2020 and November 2, 2019, respectively. The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.

The Company believes the terms obtained or consideration paid or received, as applicable, in connection with the transactions were comparable to terms available or amounts that would be paid or received, as applicable, in arms’-length transactions with unrelated parties.

5. Debt and Credit Arrangements

Debt consisted of the following (in thousands):

	October 31, 2020		February 1, 2020		November 2, 2019
ABL Facility	$	310,000	$	378,000	$	484,000
First Lien Term Loan	801,920		1,315,216		1,318,512
Unamortized debt discount and debt issuance cost	(6,224)		(12,531)		(13,435)
Less: current portion	(260,000)		(343,377)		(449,377)
Long-term debt	$	845,696	$	1,337,308	$	1,339,700

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ABL Facility

The ABL Facility is comprised of a $950.0 million revolving credit facility and a $50.0 million term loan. The ABL Facility is secured on a senior basis by certain "liquid assets" of the Company and secured on a junior basis by certain "fixed assets" of the Company. The $50.0 million term loan payment terms are restricted in that the term loan cannot be repaid unless all loans outstanding under the revolving credit facility are repaid, and once repaid, cannot be re-borrowed. The availability under the $950.0 million revolving credit facility is restricted based on eligible monthly merchandise inventories and receivables, as defined in the agreement governing the ABL Facility (the "ABL Facility Agreement"). As amended, interest on the revolving credit facility is calculated either at LIBOR plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points; and interest on the term loan is calculated at LIBOR plus a range of 200 to 250 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability. The applicable spread of LIBOR and base rate loans at all levels of excess availability steps down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00. The ABL Facility also provides a sub-facility for issuances of letters of credit subject to certain fees defined in the ABL Facility Agreement. The ABL Facility is subject to various commitment fees during the term of the facility based on utilization of the revolving credit facility, which is scheduled to mature on August 17, 2023.

At October 31, 2020, there was $310.0 million outstanding in loans under the ABL Facility and $21.2 million in outstanding letters of credit. As of October 31, 2020, the interest rate on the revolving credit facility was 1.27%, and unused capacity was $670.8 million.

At February 1, 2020, there was $378.0 million outstanding in loans under the ABL Facility and $17.5 million in outstanding letters of credit. As of February 1, 2020, the interest rate on the revolving credit facility was 2.78%, and unused capacity was $496.3 million.

At November 2, 2019, there was $484.0 million outstanding in loans under the ABL Facility and $27.3 million in outstanding letters of credit. As of November 2, 2019, the interest rate on the revolving credit facility was 2.91%, and unused capacity was $488.7 million.

First Lien Term Loan

The Company's First Lien Term Loan matures on February 3, 2024. 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. 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.

On November 1, 2019, the Company borrowed $200.0 million from the ABL Facility. The proceeds from the Company's borrowing were used to pay a portion of the principal amount due on the First Lien Term Loan. In connection with the payment, the Company expensed $2.0 million of previously capitalized deferred debt issuance costs and original issue discount.

On January 29, 2020, the Company amended its First Lien Term Loan to reduce the applicable interest rates. As amended, the First Lien Term Loan had an initial principal amount of $1,315.2 million and interest is calculated either at LIBOR plus 225 basis points or a base rate plus 125 basis points, and provided for a 25 basis point step down in the interest rate upon the achievement of certain debt ratings upgrades, which were achieved in July, 2020. Total fees associated with the refinancing were approximately $1.7 million. The Company wrote-off $0.1 million of previously capitalized debt issuance costs and original issue discount and expensed $1.7 million of new third-party fees.

On July 13, 2020, the Company paid $150.0 million of the principal amount due on the First Lien Term Loan. In connection with the payment, the Company expensed $1.3 million of previously capitalized deferred debt issuance costs and original issue discount. Due to the decrease in the principal amount due on the First Lien Term Loan, interest is now calculated at LIBOR plus 200 basis points.

On October 30, 2020, the Company borrowed $260.0 million from the ABL Facility. The proceeds from the Company's borrowing as well as $100.0 million of the Company's cash and cash equivalents were used to pay $360.0 million of the principal amount due on the First Lien Term Loan. In connection with the payment, the Company expensed $2.8 million of previously capitalized deferred debt issuance costs and original issue discount.

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At October 31, 2020, there was $801.9 million outstanding on the First Lien Term Loan. At February 1, 2020, there was $1,315.2 million outstanding on the First Lien Term Loan. At November 2, 2019, there was $1,318.5 million outstanding on the First Lien Term Loan. At October 31, 2020, the interest rate for the First Lien Term Loan was 2.15%. At February 1, 2020, the interest rate for the First Lien Term Loan was 3.90%. At November 2, 2019, the interest rate for the First Lien Term Loan was 4.67%.

6. Interest Expense, net

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

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Interest on debt	$	15,915	$	23,741	$	52,860	$	74,439
Interest on capital lease and financing obligations	972		624		2,971		1,883
Debt issuance costs amortization	629		696		1,934		2,087
Original issue discount amortization	477		627		1,535		1,882
Loss on debt extinguishment	2,794		2,032		4,077		2,032
Loss on cash flow hedge	5,097		—		5,097		—
Capitalized interest	(2)		(18)		(7)		(49)
Interest expense, net	$	25,882	$	27,702	$	68,467	$	82,274

7. 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 loss to the consolidated financial statements.

8. 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, Inc. (f/k/a Beacon Holding Inc.), as amended (the "2011 Plan"), and the 2012 Director Stock Option Plan of BJ’s Wholesale Club Holdings, Inc. (f/k/a Beacon Holding, Inc.), as amended (the "2012 Director Plan"). No further grants will be made under the 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 upon 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 October 31, 2020, there were 5,893,480 shares available for future issuance under the 2018 Plan.

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The following table summarizes the Company’s stock award activity during the thirteen weeks ended October 31, 2020 (shares in thousands):

	Stock Options			Restricted Stock			Restricted Stock Units			Performance Stock
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Outstanding, February 1, 2020	5,213	$	14.00	1,445	$	25.22	30	$	25.83	—	$	—
Granted	441	25.07		711	25.65		31	33.38		527	23.96
Forfeited/canceled	(91)	21.78