BJ’s Wholesale Club Holdings, Inc. — Form 10-K Summary
Period clarification: The request identifies “2021 Q4,” but this filing is the annual report for fiscal 2022, the 52 weeks ended January 28, 2023, compared primarily with fiscal 2021, ended January 29, 2022. It is not a 2021 fourth-quarter filing.
Business context and reporting period
BJ’s operates warehouse clubs and gasoline stations, primarily in the eastern United States, with membership fees, merchandise, gasoline and digital shopping services as key parts of its model. At fiscal year-end it operated 235 clubs and 164 gas stations in 18 states. Grocery represented approximately 85% of merchandise sales; private-label brands represented approximately 24% of net sales excluding gasoline.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $18.918 billion | $16.306 billion |
| Membership fee income | $396.7 million | $360.9 million |
| Total revenues | $19.315 billion | $16.667 billion |
| Operating income | $738.0 million | $617.3 million |
| Net income | $513.2 million | $426.7 million |
| Diluted EPS | $3.76 | $3.09 |
| Adjusted EBITDA | $1.038 billion; 5.5% of net sales | $879.6 million; 5.4% of net sales |
| Operating cash flow | $788.2 million | $831.7 million |
| Free cash flow | $417.6 million | $527.1 million |
Net sales rose 16.0%, primarily from 13.4% comparable club sales growth and new clubs. Comparable merchandise sales grew 6.5%; gasoline contributed 6.9 percentage points to comparable club sales. Grocery comparable sales increased 8.6%, while general merchandise and services declined approximately 3.8%. Membership renewal was 90%, up from 89%.
Cost of sales was 84.0% of net sales, versus 83.3%; merchandise gross margin declined about 20 basis points. Management attributed pressure to higher supply-chain costs, inflation-related value investments and general-merchandise markdowns, with gasoline’s larger sales share also weighing on the overall rate. SG&A fell to 14.1% of net sales from 15.0%, despite higher labor, occupancy, growth and transition costs.
Cash and cash equivalents were $33.9 million at year-end. Gross borrowings were $855.0 million: $405.0 million under the revolving facility, classified as short-term debt, and $450.0 million under the First Lien Term Loan. Revolver availability was $535.2 million. Total assets were $6.350 billion and current liabilities were $2.545 billion. Operating cash flow decreased year over year, while investing outflow increased to $747.1 million, including the acquisition and capital spending.
Material changes versus the prior comparable period
- Net income increased to $513.2 million from $426.7 million; diluted EPS rose to $3.76 from $3.09.
- Comparable club sales growth accelerated to 13.4% from 6.5%, although merchandise comparable growth was 6.5% after a prior-year decline of 0.5%.
- Free cash flow declined to $417.6 million from $527.1 million, reflecting working-capital timing and higher capital spending. The company opened nine clubs in FY2022 versus five in FY2021.
- The May 2022 Burris Logistics acquisition brought four perishable distribution centers and a private transportation fleet in-house. Consideration was approximately $375.6 million; it added $66.8 million of revenue during the reported year.
- Debt facilities were refinanced or amended: the new $1.2 billion ABL Revolving Facility matures July 2027; the First Lien Term Loan maturity was extended to February 2027. The term-loan rate transitioned to SOFR plus 275 basis points; year-end rates were 5.63% on the revolver and 7.11% on the term loan.
Outlook, commentary, risks and unusual items
The filing gives no specific revenue or earnings guidance. Management expects inflationary pressures and elevated supply-chain costs to continue into fiscal 2023, and says infrastructure, club expansion, in-house perishable distribution and digital investments are intended to support growth. Fiscal 2023 is a 53-week year ending February 3, 2024. Management believes available cash, operating cash flow and revolver capacity will fund operations for at least the next twelve months.
Key risks include inflation and consumer-spending shifts, sourcing and supply-chain disruption, competition and price pressure, dependence on membership loyalty, gasoline-price volatility, labor costs, cybersecurity and payment-data exposure, climate and severe-weather events, and execution of new-club and omnichannel growth. Substantially all borrowings have variable rates, and debt covenants and the borrowing-base limit may constrain financing flexibility. The company also has substantial lease and purchase commitments: reported total material cash commitments were $6.562 billion, including $3.261 billion of operating leases and $2.334 billion of purchase obligations.
Unusual or notable items include $12.3 million of acquisition and integration costs, $14.7 million of home-office transition costs and $3.3 million of debt refinancing charges. The company incurred a $7.5 million charge to terminate its former home-office lease and recorded a $1.2 million lease-asset impairment within discontinued operations. Management says current legal proceedings are routine and does not expect any to have a material adverse impact. The auditor issued an unqualified opinion on the financial statements and internal controls; however, the acquired distribution centers and fleet were excluded from the controls assessment and audit.
The company repurchased $152.5 million of shares during FY2022; $318.7 million remained under its $500 million repurchase authorization at year-end. It does not expect to pay cash dividends in the foreseeable future.
Important facts for investors to verify
- Confirm the intended period: the supplied filing covers FY2022, not “2021 Q4.”
- Assess whether merchandise margins and free cash flow can recover as inflation, supply-chain costs, gasoline mix and investment spending evolve.
- Review the acquisition’s integration, realized operating benefits and purchase-accounting assumptions, including $84.7 million of goodwill.
- Track variable-rate debt costs, revolver availability and compliance with borrowing-base and debt-agreement restrictions.
- Evaluate the scale of lease commitments and planned capital expenditures against cash generation and share repurchases.
- Note that internal-control assurance excluded the acquired Burris operations, which represented 6.2% of year-end assets and 0.4% of FY2022 net sales.