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 July 30, 2022

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.)
350 Campus Drive
Marlborough, Massachusetts	01752
(Address of principal executive offices)	(Zip Code)

(774) 512-7400

(Registrant’s telephone number, including area code)

25 Research Drive

Westborough, Massachusetts 01581

(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	☒	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 August 17, 2022, the registrant had 135,068,956 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
	Signature	33

2

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®, ExpressPay® 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 that was terminated on July 28, 2022;

•"ABL Revolving Facility" means the Company's revolving credit facility entered into on July 28, 2022;

•"ABL Revolving Commitment" means the aggregate committed amount of $1.2 billion under the ABL Revolving Facility

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

•    "fiscal year 2021" means the 52 weeks ended January 29, 2022;

•    "fiscal year 2022" means the 52 weeks ending January 28, 2023;  

•    "GAAP" means generally accepted accounting principles in the United States of America;

•    "ESPP" means the Company's Employee Stock Purchase Plan; and

•    "the Acquisition" means the Company's acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC on May 2, 2022.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

(Unaudited)

	July 30, 2022		January 29, 2022		July 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	163,681	$	45,436	$	42,414
Accounts receivable, net	204,495		173,951		169,135
Merchandise inventories	1,376,526		1,242,935		1,033,555
Prepaid expenses and other current assets	57,844		54,734		46,446
Total current assets	1,802,546		1,517,056		1,291,550
Operating lease right-of-use assets, net	2,192,548		2,131,986		2,138,690
Property and equipment, net	1,232,103		942,331		841,521
Goodwill	1,008,816		924,134		924,134
Intangibles, net	120,123		124,640		129,881
Deferred income taxes	4,525		5,507		2,973
Other assets	26,583		23,240		18,850
Total assets	$	6,387,244	$	5,668,894	$	5,347,599
LIABILITIES
Current liabilities:
Short-term debt	$	350,000	$	—	$	—
Current portion of operating lease liabilities	171,568		141,453		134,421
Accounts payable	1,243,286		1,112,783		1,029,726
Accrued expenses and other current liabilities	719,291		748,245		675,049
Total current liabilities	2,484,145		2,002,481		1,839,196
Long-term operating lease liabilities	2,118,467		2,059,760		2,069,148
Long-term debt	699,406		748,568		747,730
Deferred income taxes	64,354		52,850		41,635
Other non-current liabilities	167,281		157,127		161,538
Commitments and contingencies (see Note 5)
STOCKHOLDERS’ EQUITY
Preferred stock; par value $0.01; 5,000 shares authorized, and no shares issued	—		—		—
Common stock, par value $0.01; 300,000 shares authorized, 146,157 shares issued and 135,052 outstanding at July 30, 2022; 145,451 shares issued and 135,506 outstanding at January 29, 2022; and 144,300 shares issued and 136,347 outstanding at July 31, 2021	1,461		1,454		1,443
Additional paid-in capital	928,548		902,704		867,792
Accumulated earnings (deficit)	384,770		131,313		(102,772)
Accumulated other comprehensive income (loss)	2,010		1,305		(6,225)
Treasury stock, at cost, 11,105 shares at July 30, 2022; 9,945 shares at January 29, 2022; and 7,953 shares at July 31, 2021	(463,198)		(388,668)		(271,886)
Total stockholders’ equity	853,591		648,108		488,352
Total liabilities and stockholders’ equity	$	6,387,244	$	5,668,894	$	5,347,599

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

4

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

	Thirteen Weeks Ended
	July 30, 2022		July 31, 2021
Net sales	$	5,005,030	$	4,088,402
Membership fee income	98,786		88,753
Total revenues	5,103,816		4,177,155
Cost of sales	4,243,769		3,413,625
Selling, general and administrative expenses	651,236		598,113
Pre-opening expenses	5,901		1,633
Operating income	202,910		163,784
Interest expense, net	10,874		16,428
Income from continuing operations before income taxes	192,036		147,356
Provision for income taxes	51,022		36,359
Income from continuing operations	141,014		110,997
Loss from discontinued operations, net of income taxes	(7)		(9)
Net income	$	141,007	$	110,988
Income per share attributable to common stockholders—basic:
Income from continuing operations	$	1.05	$	0.82
Loss from discontinued operations	—		—
Net income	$	1.05	$	0.82
Income per share attributable to common stockholders—diluted:
Income from continuing operations	$	1.03	$	0.80
Loss from discontinued operations	—		—
Net income	$	1.03	$	0.80
Weighted average shares of common stock outstanding:
Basic	134,341		135,521
Diluted	136,567		138,197
Other comprehensive income:
Amounts released from other comprehensive income, net of tax	$	—	$	3,511
Unrealized gain on cash flow hedge, net of income tax provision of $1,143, at July 31, 2021	—		2,940
Total other comprehensive income	—		6,451
Total comprehensive income	$	141,007	$	117,439

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

5

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
Net sales	$	9,404,840	$	7,870,236
Membership fee income	195,411		175,141
Total revenues	9,600,251		8,045,377
Cost of sales	7,949,043		6,555,122
Selling, general and administrative expenses	1,287,180		1,198,023
Pre-opening expenses	10,801		2,194
Operating income	353,227		290,038
Interest expense, net	18,715		35,713
Income from continuing operations before income taxes	334,512		254,325
Provision for income taxes	81,041		61,742
Income from continuing operations	253,471		192,583
Loss from discontinued operations, net of income taxes	(14)		(16)
Net income	$	253,457	$	192,567
Income per share attributable to common stockholders—basic:
Income from continuing operations	$	1.89	$	1.42
Loss from discontinued operations	—		—
Net income	$	1.89	$	1.42
Income per share attributable to common stockholders—diluted:
Income from continuing operations	$	1.86	$	1.39
Loss from discontinued operations	(0.01)		—
Net income	$	1.85	$	1.39
Weighted average shares of common stock outstanding:
Basic	134,293		135,615
Diluted	136,635		138,430
Other comprehensive income:
Amounts released from other comprehensive income, net of tax	$	117	$	8,176
Unrealized gain on cash flow hedge, net of income tax provision of $229 and $2,383, respectively	588		6,127
Total other comprehensive income	705		14,303
Total comprehensive income	$	254,162	$	206,870

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

6

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive Income		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance, January 29, 2022	145,451	$	1,454	$	902,704	$	131,313	$	1,305	(9,945)	$	(388,668)	$	648,108
Net income	—	—		—		112,450		—		—	—		112,450
Amounts released from other comprehensive income, net of tax	—	—		—		—		117		—	—		117
Unrealized gain on cash flow hedge, net of tax	—	—		—		—		588		—	—		588
Common stock issued under stock incentive plans	490	5		(5)		—		—		—	—		—
Stock-based compensation expense	—	—		9,115		—		—		—	—		9,115
Net cash received from option exercises	—	—		2,306		—		—		—	—		2,306
Treasury stock purchases	—	—		—		—		—		(801)	(51,342)		(51,342)
Balance, April 30, 2022	145,941	1,459		914,120		243,763		2,010		(10,746)	(440,010)		721,342
Net income	—	—		—		141,007		—		—	—		141,007
Common stock issued under stock incentive plans	172	2		(2)		—		—		—	—		—
Common stock issued under ESPP	44	—		2,331		—		—		—	—		2,331
Stock-based compensation expense	—	—		9,387		—		—		—	—		9,387
Net cash received from option exercises	—	—		2,712		—		—		—	—		2,712
Treasury stock purchases	—	—		—		—		—		(359)	(23,188)		(23,188)
Balance, July 30, 2022	146,157	$	1,461	$	928,548	$	384,770	$	2,010	(11,105)	$	(463,198)	$	853,591

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

7

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated (Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance, January 30, 2021	143,428	$	1,434	$	826,377	$	(295,339)	$	(20,528)	(6,236)	$	(192,617)	$	319,327
Net income	—	—		—		81,579		—		—	—		81,579
Amounts released from other comprehensive income, net of tax	—	—		—		—		4,665		—	—		4,665
Unrealized loss on cash flow, net of tax	—	—		—		—		3,187		—	—		3,187
Common stock issued under stock incentive plans	590	6		(6)		—		—		—	—		—
Stock-based compensation expense	—	—		27,300		—		—		—	—		27,300
Net cash received from option exercises	—	—		1,497		—		—		—	—		1,497
Treasury stock purchases	—	—		—		—		—		(542)	(24,031)		(24,031)
Balance, May 1, 2021	144,018	1,440		855,168		(213,760)		(12,676)		(6,778)	(216,648)		413,524
Net income	—	—		—		110,988		—		—	—		110,988
Amounts released from other comprehensive income, net of tax	—	—		—		—		3,511		—	—		3,511
Unrealized loss on cash flow, net of tax	—	—		—		—		2,940		—	—		2,940
Common stock issued under stock incentive plans	223	2		(2)		—		—		—	—		—
Common stock issued under ESPP	59	1		1,876		—		—		—	—		1,877
Stock-based compensation expense	—	—		7,334		—		—		—	—		7,334
Net cash received from option exercises	—	—		3,416		—		—		—	—		3,416
Treasury stock purchases	—	—		—		—		—		(1,175)	(55,238)		(55,238)
Balance, July 31, 2021	144,300	$	1,443	$	867,792	$	(102,772)	$	(6,225)	(7,953)	$	(271,886)	$	488,352

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

8

BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	253,457	$	192,567
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	97,093		89,834
Amortization of debt issuance costs and accretion of original issue discount	1,663		1,724
Debt extinguishment charges	389		657
Stock-based compensation expense	18,502		34,634
Deferred income tax provision (benefit)	12,212		(6,260)
Changes in operating leases and other non-cash items	32,067		3,187
Increase (decrease) in cash due to changes in:
Accounts receivable	(29,605)		3,584
Merchandise inventories	(45,519)		172,140
Prepaid expenses and other current assets	1,097		(1,665)
Other assets	(1,858)		790
Accounts payable	130,503		41,652
Accrued expenses and other current liabilities	(31,019)		26,049
Other non-current liabilities	4,070		420
Net cash provided by operating activities	443,052		559,313
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment, net of disposals	(191,534)		(147,808)
Proceeds from sale leaseback transactions	2,674		19,080
Acquisitions	(376,521)		—
Net cash used in investing activities	(565,381)		(128,728)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long term debt	(50,000)		—
Payments on First Lien Term Loan	—		(100,000)
Proceeds from revolving lines of credit	905,000		—
Payments on revolving lines of credit	(555,000)		(260,000)
Debt issuance costs paid	(2,701)		—
Net cash received from stock option exercises	5,018		4,913
Net cash received from Employee Stock Purchase Plan (ESPP)	2,331		1,877
Treasury stock purchases	(74,530)		(79,269)
Proceeds from financing obligations	13,083		1,333
Other financing activities	(2,627)		(543)
Net cash provided by (used in) financing activities	240,574		(431,689)
Net increase (decrease) in cash and cash equivalents	118,245		(1,104)
Cash and cash equivalents at beginning of period	45,436		43,518
Cash and cash equivalents at end of period	$	163,681	$	42,414
Supplemental cash flow information:
Interest paid	$	15,689	$	23,348
Income taxes paid	81,512		62,844
Non-cash financing and investing activities:
Lease liabilities arising from obtaining right-of-use assets	181,411		160,452
Property additions included in accrued expenses	19,489		18,044

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

9

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

BJ’s Wholesale Club Holdings, Inc. and its wholly-owned subsidiaries is a leading warehouse club operator concentrated primarily on the east coast of the United States. As of July 30, 2022, the Company operated 229 warehouse clubs and 160 gas stations in 17 states.

The Company follows and reports based on the National Retail Federation’s fiscal calendar. The thirteen week periods ended July 30, 2022 and July 31, 2021 are referred to herein as the "second quarter of fiscal year 2022" and the "second quarter of fiscal year 2021," respectively.

Events and global business conditions such as inflation, the ongoing coronavirus (“COVID-19”) pandemic and the war in Ukraine have resulted in certain impacts to the global economy, including market disruptions and supply chain challenges. During the second quarter of fiscal year 2022 we continued to experience elevated supply chain costs, including increased commodity prices, logistics, and procurement costs. We expect these market disruptions and inflationary pressures to continue throughout 2022.

On May 2, 2022, the Company closed the previously announced acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC. The Company financed the purchase price with a combination of available cash and borrowings under the ABL Facility. See Note 12, "Acquisitions" of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

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 GAAP. 

The condensed consolidated balance sheet as of January 29, 2022 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the second quarter of fiscal year 2022 are not necessarily indicative of future results or results to be expected for fiscal year 2022. 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 condensed 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 2021, as filed with the Securities and Exchange Commission on March 17, 2022.

Recently Adopted Accounting Pronouncements

The accounting policies the Company follows are set forth in its audited financial statements for fiscal year 2021 included in its Annual Report on Form 10-K for the fiscal year 2021. There have been no material changes to these accounting policies and no material pronouncements adopted.

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.

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

10

transaction price on the shelf sign, 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 shipping point. The following tables summarize 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:

	Thirteen Weeks Ended
	July 30, 2022	July 31, 2021
Point of sale transactions, excluding sales tax, as a percent of net sales	92%	93%
Point of sale transactions, excluding sales tax, as a percent of total revenues	90%	91%

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
Point of sale transactions, excluding sales tax, as a percent of net sales	92	%	93	%
Point of sale transactions, excluding sales tax, as a percent of total revenues	90	%	91	%

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 is 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 on the Company’s website or app. 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 $40.0 million at July 30, 2022, $30.3 million at January 29, 2022 and $25.8 million at July 31, 2021.

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 $28.5 million, $17.8 million and $18.8 million at July 30, 2022, January 29, 2022 and July 31, 2021, respectively. The timing of revenue recognition is driven by actual customer activities, such as redemptions and expirations. As of July 30, 2022, the Company expects to recognize $26.6 million by the end of fiscal year 2022 and expects the remainder to be recognized in the periods 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 app and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months. As the Company has the obligation to provide access to its clubs, website, app 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 $185.4 million, $174.9 million and $169.3 million at July 30, 2022, January 29, 2022 and July 31, 2021, respectively.

Gift Card Program—The Company sells BJ’s gift cards in both physical and digital format, which allows 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 as 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 $11.9 million, $11.8 million and $9.7 million at July 30, 2022, January 29, 2022 and July 31, 2021, respectively. The Company recognized $12.7 million and $9.6 million of revenue from gift card redemptions in the second quarter of fiscal year 2022 and second quarter of fiscal year 2021, respectively. The Company recognized $23.2 million and $18.4 million of revenue from gift card redemptions in the twenty-six weeks ended July 30, 2022 and July 31, 2021 respectively.

11

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. 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.

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

	Thirteen Weeks Ended
	July 30, 2022		July 31, 2021
Grocery	64	%	70	%
General Merchandise and Services	12	%	15	%
Gasoline and Other	24	%	15	%

	Twenty-Six Weeks Ended
	July 30, 2022		July 31, 2021
Grocery	65	%	71	%
General Merchandise and Services	12	%	15	%
Gasoline and Other	23	%	14	%

4. Debt and Credit Arrangements

The following table summarizes the Company’s debt (in thousands):

	July 30, 2022		January 29, 2022		July 31, 2021
ABL Revolving Facility	$	350,000	$	—	$	—
ABL Facility	—		50,000		50,000
First Lien Term Loan	701,920		701,920		701,920
Unamortized debt discount and debt issuance cost	(2,514)		(3,352)		(4,190)
Less: current portion	(350,000)		—		—
Long-term debt	$	699,406	$	748,568	$	747,730

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. As part of 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 and 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 the Secured Overnight Financing Rate ("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 0.20% 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 upon the Borrower’s, and its restricted 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

12

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.

At July 30, 2022, there were $350.0 million outstanding in loans under the ABL Revolving Facility and $12.9 million in outstanding letters of credit. The interest rate on the revolving credit facility was 3.42% and unused capacity was $576.7 million.

ABL Facility - Former Credit Agreement

The ABL Revolving Facility replaced the ABL Facility, which comprised of $950.0 million revolving credit facility and a $50.0 million term loan.

Interest on the ABL Facility was 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 was 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.

At January 29, 2022, there were $50.0 million outstanding in loans under the ABL Facility and $12.7 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.23%, the interest rate on the term loan was 2.10% and unused capacity was $886.9 million.

At July 31, 2021, there were $50.0 million outstanding in loans under the ABL Facility and $24.1 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.23%, the interest rate of the term loan was 2.10% and unused capacity was $768.2 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 April 30, 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.

There was $701.9 million outstanding on the First Lien Term Loan at July 30, 2022, January 29, 2022 and July 31, 2021. Interest rates for the First Lien Term Loan were 3.96%, 2.11% and 2.10% at July 30, 2022, January 29, 2022 and July 31, 2021, respectively.

5. 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 condensed consolidated financial statements.

6. 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 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.

13

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, the 2011 Plan or the 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 July 30, 2022, there were 5,295,613 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.

The following table summarizes the Company’s stock award activity during the twenty-six weeks ended July 30, 2022 (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, January 29, 2022	2,282	$	19.68	1,053	$	34.36	26	$	46.82	674	$	39.76
Granted	—	—		304	67.39		24	58.61		183	67.54
Forfeited/canceled	(3)	25.07		(20)	39.76		—	—		(4)	44.45
Exercised/vested	(353)	14.36		(530)	30.88		(26)	46.82		—	—
Outstanding, July 30, 2022	1,926	$	20.65	807	$	48.95	24	$	58.61	853	$	45.70

Stock-based compensation expense was $9.4 million and $7.3 million for the thirteen weeks ended July 30, 2022 and July 31, 2021, respectively. Stock-based compensation was $18.5 million and $34.6 million for the twenty-six weeks ended July 30, 2022 and July 31, 2021, respectively. Stock-based compensation expense in the twenty-six weeks ended July 31, 2021 included $17.5 million of stock-based compensation related to the modification of stock awards associated with the passing of a former executive.

On June 14, 2018, the Company’s board of directors adopted, and its stockholders approved, the ESPP, which became effective July 1, 2018. The aggregate number of shares of common stock that were to be reserved for issuance under the ESPP was to 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 Company's board of directors. The offering under the ESPP commenced on January 1, 2019. The amount of expense recognized for the thirteen weeks ended July 30, 2022 and July 31, 2021 was $0.3 million and $0.4 million, respectively. The amount of expense recognized for both the twenty-six weeks ended July 30, 2022 and July 31, 2021 was $0.5 million. As of July 30, 2022, there were 2,084,348 shares available for issuance under the ESPP.

7. Treasury Shares and Share Repurchase Program

Treasury Shares Acquired on Restricted Stock Awards

The Company acquired 5,945 shares to satisfy employees’ tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended July 30, 2022, which were recorded as $0.3 million of treasury stock. The Company

14

acquired 120,421 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the thirteen weeks ended July 31, 2021, which were recorded as $5.6 million of treasury stock.

The Company acquired 235,845 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the twenty-six weeks ended July 30, 2022, which were recorded as $15.9 million of treasury stock. The Company acquired 346,825 shares to satisfy employees' tax withholding obligations upon the vesting of restricted stock awards in the twenty-six weeks ended July 31, 2021, which were recorded as $15.7 million of treasury stock.

Share Repurchase Program

On November 16, 2021, the Company's board of directors approved a share repurchase program (the "2021 Repurchase Program") that allows the Company to repurchase up to $500.0 million of its outstanding common stock from time to time as market conditions warrant. The 2021 Repurchase Program expires in January 2025. The Company initiated 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 shareholder value.

The Company repurchased 353,000 shares for $22.8 million during the thirteen weeks ended July 30, 2022, and 923,506 shares for $58.6 million during the twenty-six weeks ended July 30, 2022. As of July 30, 2022, $412.6 million remained available to purchase under the 2021 Repurchase Program.

8. Income Taxes

The effective income tax rate is based on estimated income from continuing operations for the fiscal year, as well as discrete adjustments, if any, in the applicable quarterly periods. The Company projects the estimated annual effective tax rate for fiscal year 2022 to be 27.4%, excluding the tax effect of discrete events, such as excess tax benefits from stock-based compensation, changes in tax legislation, settlements of tax audits and changes in uncertain tax positions, among others.

The Company’s effective income tax rate from continuing operations was 26.6% and 24.7% for the thirteen weeks ended July 30, 2022 and July 31, 2021, respectively, and 24.2% and 24.3% for the twenty-six weeks ended July 30, 2022 and July 31, 2021, respectively. The increase in the effective tax rate for the thirteen weeks ended July 30, 2022 compared to the thirteen weeks ended July 31, 2021 is due primarily to lower excess tax benefits from stock-based compensation in the current year period. The slight decrease in the effective tax rate for the twenty-six weeks ended July 30, 2022 compared to the twenty-six weeks ended July 31, 2021 is due to higher excess tax benefits from stock-based compensation in the current year period.

The Company is subject to taxation in the U.S. federal and various state taxing jurisdictions. The Company’s tax years from 2017 forward remain open and subject to examination by the Internal Revenue Service and various state taxing authorities.

9. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or "exit price." The inputs used to measure fair value are generally classified into the following hierarchy:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not observable for the asset or liability.

Level 3: Unobservable inputs for the asset or liability.

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.

15

Financial Assets and Liabilities

The gross carrying amount and fair value of the Company’s debt at July 30, 2022 are as follows (in thousands):

	Carrying Amount		Fair Value
First Lien Term Loan	$	701,920	$	700,797
ABL Revolving Facility	350,000		350,000
Total Debt	$	1,051,920	$	1,050,797

The gross carrying amount and fair value of the Company’s debt at January 29, 2022 are as follows (in thousands):

	Carrying Amount		Fair Value
First Lien Term Loan	$	701,920	$	702,053
ABL Facility	50,000		50,000
Total Debt	$	751,920	$	752,053

The gross carrying amount and fair value of the Company’s debt at July 31, 2021 are as follows (in thousands):

	Carrying Amount		Fair Value
First Lien Term Loan	$	701,920	$	700,032
ABL Facility	50,000		50,000
Total Debt	$	751,920	$	750,032

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, and accounts payable, approximates their carrying value due to the short-term maturities of these instruments.

10. Earnings Per Share

The table below reconciles basic weighted-average shares of common stock outstanding to diluted weighted-average shares of common stock outstanding for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021:

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Weighted-average shares of common stock outstanding, used for basic computation	134,341,280	135,521,353	134,292,751	135,615,068
Plus: Incremental shares of potentially dilutive securities	2,226,186	2,675,814	2,341,962	2,814,498
Weighted-average shares of common stock and dilutive potential shares of common stock outstanding	136,567,466	138,197,167	136,634,713	138,429,566

The table below summarizes restricted shares, restricted stock units, and ESPP shares that were excluded from the computation of diluted earnings for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021, as their inclusion would have been anti-dilutive:

16

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Restricted shares	193,412	12,757	144,519	62,758
Restricted stock units	11,811	—	5,905	—
ESPP	510	—	255	—

11. Derivative Financial Instruments

Interest Rate Swaps

On November 13, 2018, the Company entered into three forward starting interest rate swaps (the "interest rate swaps"), which became effective on February 13, 2019. The Company fixed the LIBOR component of $1.2 billion of its floating rate debt at a rate of approximately 3.0% from February 13, 2019 to February 13, 2022. The Company elected hedge accounting for the interest rate swap agreements, and as such, the effective portion of the gains or losses were recorded as a component of other comprehensive income and the ineffective portion of gains or losses were recorded as interest expense.

On April 30, 2021, the Company used $150.0 million of its cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan and $50.0 million of the outstanding amounts on the ABL Facility. The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and released $4.7 million recorded in other comprehensive income to interest expense, net of tax.

On July 30, 2021, the Company used $210.0 million of its cash and cash equivalents to pay $210.0 million of the principal amount outstanding on the ABL Facility. The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and released $3.5 million recorded in other comprehensive income to interest expense, net of tax.

The interest rate swaps expired in February 2022. There was no liability recorded as of July 30, 2022 and $2.2 million and $14.5 million recorded at January 29, 2022 and July 31, 2021, respectively. The net of tax amount for the effective and ineffective interest rate swaps were recorded in other comprehensive income and interest expense, respectively.

There were no gains or losses recorded for the thirteen weeks ended July 30, 2022 and $4.1 million gain recorded in other comprehensive income for the thirteen weeks ended July 31, 2021. There were gains of $0.8 million and $8.5 million recorded in other comprehensive income for the twenty-six weeks ended July 30, 2022 and July 31, 2021, respectively. There were no ineffective portion of gains in the thirteen weeks ended July 30, 2022 and $0.3 million recorded in interest expense for the twenty-six weeks ended July 30, 2022. The ineffective portion of gains in the thirteen and twenty-six weeks ended July 31, 2021 of $1.6 million and $3.4 million, respectively, were recorded in interest expense.

The fair values of derivative instruments included on the condensed consolidated balance sheets are as follows (in thousands):

						Fair Value at
Accounting for Cash Flow Hedges	Notional Amount		Fixed Rate		Balance Sheet Classification	July 30, 2022		January 29, 2022		July 31, 2021
Interest rate swap	$	600,000	3.00	%	Other current liabilities	$	—	$	(1,540)	$	(10,374)
Interest rate swap	360,000		3.00	%	Other current liabilities	—		—		—
Interest rate swap	240,000		3.00	%	Other current liabilities	—		(616)		(4,146)
Net carrying amount	$	1,200,000			Total liabilities	$	—	$	(2,156)	$	(14,520)

12. Acquisitions

On May 2, 2022, the Company completed the Acquisition to bring its perishable end-to-end perishable supply chain in-house.

The total consideration paid by the Company in connection with the Acquisition was approximately $375.6 million, excluding transaction costs. The Company recorded transaction costs related to the Acquisition of $3.6 million and

17

$11.5 million during the thirteen and twenty-six weeks ended July 30, 2022, respectively. These costs are included in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed (in thousands) in connection with the Acquisition:

	Fair value as of May 2, 2022
Assets:
Property and equipment, net	$	203,400
Merchandise inventories	88,072
Goodwill	84,683
Operating lease right-of-use assets, net	15,994
Prepaid expenses and other current assets	433
Intangibles, net