BJ's Wholesale Club Holdings, Inc. ($BJ)

Hello, everyone. Thank you for joining us, and welcome to BJ's Wholesale Club Q1 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Diana Rashkow, Vice President of Investor Relations.

Good morning, and welcome to BJ's First Quarter Fiscal 2026 Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the Risk Factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and the latest investor presentation posted on our Investor Relations website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. And now I'll turn the call over to Bob.

Good morning, everyone. Thank you for joining us. Our first quarter results represent a solid start to the year, enabled by doing what we do best, serving our members with value. Membership remains a key strength driven by strong acquisition and retention and continued momentum in our higher tier memberships. Our gas business continued to be a powerful proof point of our value proposition as families increasingly relied on BJ's for savings at the pump. And our expansion efforts, including our progress in Texas are off to strong starts, reinforcing our confidence in the opportunity ahead. All of this reflects disciplined execution and a business built to take share. With that foundation in mind, let me turn to the details of the quarter and how we deliver for our members. Net sales increased nearly 10% year-over-year, and our merchandise comps improved by 1.5%, and our 2-year stacked merchandise comps remain healthy. In a dynamic environment, our ability to stay focused on what we can control, supported consistent execution and performance this quarter. We continue to see growth from perishables, grocery and sundries during the quarter. Our Fresh 2.0 efforts are showing up where it matters most with strong unit growth in categories like fresh fruit reinforcing our ability to win the weekly shop. In an environment where members are being more deliberate with their spending, our value and assortment continue to resonate. General merchandise and services delivered mid-single-digit comparable growth, led by strength in consumer electronics. While discretionary categories remain uneven, we're encouraged by the progress we're making and the way our teams are managing assortments and inventory in this environment. Gas prices increased dramatically during the quarter, putting additional pressure on member wallets. By the end of Q1, retail gas prices were up nearly 50% compared to the start of the quarter. In that environment, our role was clear, to help take care of our members by delivering value. Our members responded by coming to see us in record numbers with comp gallon growth increasing from about 1% in February to more than 10% during both March and April. Same-store gallons in the broader market were down roughly 4% during the quarter, underscoring the share gains we are delivering. While gas margins were pressured early in the quarter as prices rose quickly, our teams executed extremely well through periods of volatility and profit dollars for the quarter came in largely in line with our plan. Gas prices remain elevated and that pressure is real for families. To put this in further context, in April alone, our members spent $143 million more at our pumps than they did a year ago. That's equivalent to approximately 3.5% in merchandise comp dollars. As consumers adjusted to the higher prices, we did see some modest shifts in behavior with average gallons per fill up slightly lower reflecting the pressure higher prices put on household budgets as well as more members topping off their tanks more frequently. In a tough pricing environment, members leaned into BJ's for value and that showed up clearly in our continued share gains. While the consumer in the broadest sense has been resilient in the face of continuing challenges, we continue to see a more pressured environment for the lower income households. Elevated costs are weighing more heavily on that segment, and we're seeing more value-seeking behavior as a result. This quarter, the vast majority of our comparable sales growth was driven by our higher income members, who remain engaged and continue to shop with us consistently. At the same time, value matters across every income cohort and our focus remains on showing up for all of our members with the right assortment, the right prices and the right level of convenience. We continue to make progress across our strategic priorities and the work our teams have been doing over the past several years is reflected in today's business performance. Membership remains the foundation of our business and one of our greatest strengths. Members continue to show up this quarter with positive traffic year-over-year and continued share gains. Membership fee income increased approximately 10% to $132 million, reaching an all-time high driven by strength in acquisition, retention and higher tier penetration across both new and existing clubs. As we've discussed before, what matters most to us is not just growing the number of members, but continuing to improve the quality of the membership base over time. Higher tier members remain more engaged, shop more frequently and deliver greater lifetime value, and we continue to see meaningful opportunity to build on that momentum. While we expect membership fee income growth to moderate as we move through the year as we lap the prior year fee increase, the underlying health of the membership base gives us confidence in the durability of this engine. Building on that strong membership foundation, we remain focused on continuously improving the experience we deliver to those members. Pricing is central to that experience and our club model is uniquely positioned to deliver compelling value. And in today's environment, value matters more than ever. With that in mind, we invested considerably at value during the quarter by returning tariff refunds to our members through pricing. As a result, we saw roughly 0.5 point of deflation in our retail pricing and our price gaps improved as we lean into delivering meaningful savings for our members. More broadly, delivering a great member experience also means continuing to strengthen the fundamentals of our merchandising organization for the long term. With that in mind, we're excited to have welcomed Stephanie Reibling to the team as Chief Merchandising Officer, and we're confident she will be a strong leader as we continue the merchandising work that's been underway for several years now. She brings deep experience across the club channel and broader retail with a strong track record of driving growth, evolving assortments and building compelling owned brand offerings. Just as importantly, Stephanie understands how to operate merchandising in an omnichannel environment where value relevance and execution matter. Her experience and perspective will be important as we continue to sharpen our assortment, invest in our brands and deliver exciting products at unbeatable value for our members. Alongside member experience, convenience continues to play an increasingly important role in how members engage with us. Digitally enabled comparable sales increased 28% year-over-year, reflecting growing adoption of tools like curbside pickup, same-day delivery and ExpressPay. We're seeing particularly strong adoption in our newer clubs where members are using tools like ExpressPay at higher rates and importantly, are spending more with us. Because most of that digital engagement is fulfilled through our clubs, we're able to deliver those conveniences in a way that saves members, both time and money. We're also continuing to invest in AI capabilities, including [ Buddy ], a new tool designed to support our team members by answering a wide range of operational and training questions, including product availability and item location. These tools help our teams serve members more effectively and efficiently. Collectively, these efforts are making convenience a more integrated part of how members shop at BJ's. Finally, we continue to make disciplined progress expanding our footprint and bringing the BJ's model to more communities. We opened our first club in Texas during the quarter, expanding BJ's to 22 states, followed by three additional Texas club openings in May. We also announced plans to open clubs later this year in Frankfort, Kentucky, Ocala, Lecanto and Port St. Lucie, Florida and Portage, Indiana. Last year, we committed to opening 25 to 30 new clubs over a 2-year period. With 12 openings planned for this year, we expect to deliver 26 clubs against that plan, and we see the opportunity to continue at a similar pace in 2027 and 2028. I want to take a few minutes to talk specifically about our new club openings in Texas, which represent an important milestone for BJ's as we enter a new high-growth market. We're executing our trusted new club playbook in Texas, and the execution from our teams has been outstanding. These openings reflect some of the best work we've done to date from how we build awareness ahead of opening to how we improved and showcase the value BJ is known for, to how we showed up for the community from day one. That consistency reflects the culture we've built around New Club's success with a goal of making each new opening better than the last. We've made it clear from the start that we're there to invest for the long haul, and the response has been terrific. Today, membership in our four Texas clubs is running 33% ahead of plan. And as of today, we have approximately 100,000 members in the Dallas-Fort Worth market. While we're excited about our start in Texas, we're equally encouraged by the performance of our most recent classes of clubs. In the first quarter, clubs opened within the last 5 years, delivered comps of more than 6% and growing at over 4x the chain average. The newer markets we've entered, including Tennessee, Alabama, Indiana and the Pittsburgh market, continue to stand out. With those clubs comping more than 10% during the quarter. We've discussed in the past with the investment community that new club sales generally mature in 5 years, and part of our new club execution is to drive these new clubs towards that maturity ahead of plan when possible. The team's strategy and execution across all areas of New Club operations is delivering on that idea with 2/3 of clubs opened in the last 2 years expected to have first year sales above their year 5 sales projection. These results are a testament to the team members across our clubs, supply chain, membership, property development and support functions who made these openings possible. The execution has been exceptional and it gives us confidence as we continue to expand our footprint. With that, I'll turn it over to Laura to walk through the financial details for the quarter.

Thank you, Bob. Before I get into the details, I want to thank our teams across the clubs, supply chain and support center for their continued focus and execution. Their work was critical to delivering our first quarter results. Starting with sales. Net sales increased nearly 10% year-over-year to $5.5 billion. Total comparable club sales increased 6.3% and excluding gasoline, merchandise comparable sales increased 1.5%. Our 2-year stacked comps remain healthy, reflecting the consistency of the underlying business. Looking at category performance. We continue to see growth across our core consumables business. Grocery, perishable and sundries comps increased 0.7%, with strength in grocery, reflecting the importance of the weekly shop in this environment. General Merchandise and services delivered 7.1% comparable sales growth driven primarily by strength in consumer electronics. While GM performance can be variable quarter-to-quarter, we are pleased with the strength we saw this quarter. Membership fee income increased approximately 10% year-over-year to approximately $132 million, reflecting continued strength in acquisition retention and higher tier penetration. Total members reached an all-time high. And while we expect membership fee income growth to moderate as we move through the year, the underlying health of the membership base remains very strong. Turning to margins. Merchandise gross margin decreased approximately 10 basis points year-over-year primarily driven by investments in price, partially offset by tariff refund benefits recognized in the quarter. Excluding the impact of tariff refund benefits, Merchandise margins were down 60 basis points year-over-year, largely consistent with the prior quarter. We remain committed to maintaining competitive price gaps particularly in this environment, and we will continue to invest in value where it makes sense for the long term. SG&A expense was approximately $806 million and improved as a percentage of net sales year-over-year. The increase in absolute dollars was driven primarily by costs associated with new clubs and gas station openings as well as planned investments in the business. Our gas business continues to be an important way to showcase value. Fuel volumes were strong in the quarter with comparable gallons up nearly 8%, reflecting continued share gains. Fuel profit dollars were largely in line with our expectations. Margins were pressured early in the period as prices moved higher but we were able to capture margin during periods of volatility as the quarter progressed, resulting in an overall outcome consistent with our plan. Adjusted EBITDA increased approximately 4% year-over-year to $298 million. Our effective tax rate for the quarter was 27% and slightly below our statutory rate of roughly 28%. Adjusted earnings per share were $1.10, down year-over-year as we lapped a tax benefit in the prior year quarter related to stock-based compensation. Looking at the balance sheet. Inventory levels increased year-over-year in absolute terms, driven by additional new clubs opened since last year. Inventory per club increased 2.8% and In-stock levels were in line with last year, reflecting continued strong execution by our teams. Turning to cash flow and capital allocation. We continue to invest in the business while maintaining a strong balance sheet. During the quarter, we repurchased approximately $207 million of shares and we ended the quarter with approximately $545 million remaining under our current authorization. Net leverage remains low, providing us with flexibility to continue investing in growth while returning capital to shareholders. Looking ahead, based on what we know today, we are maintaining our full year guidance. We continue to expect comparable club sales, excluding gasoline, to grow in a range of 2% to 3% and adjusted earnings per share in the range of $4.40 to $4.60. As always, the outlook reflects our current view of the consumer inflation and the broader operating environment, and we will continue to manage the business with discipline while investing for long-term growth. With that, I'll turn it back to Bob before we open the call for questions.

Thanks, Laura. Before we open up for questions, I want to take a step back and reinforce what this quarter says about our business. We delivered a solid start to the year by doing exactly what we said we would do, executing with discipline in a dynamic environment, while continuing to invest in the long-term strength of the model. We're growing the quality of our membership base, reinforcing the value proposition across the club and at the pump and staying focused on the controllables that drive sustainable performance. At the core of our strategy is membership, and we continue to see strength there. Members are showing up, engaging with our offering and responding to the value and convenience we provide. That engagement supports healthy traffic, share gains and a resilient revenue stream that gives us confidence as we look ahead. We're also continuing to sharpen our value proposition. Across categories, we're focused on delivering compelling value that matters to our members, particularly in an environment where households remain thoughtful about how they spend. Our gas business remains an important part of that equation, reinforcing trust and engagement while supporting overall traffic and share gains. Digital continues to enhance the member experience and improve convenience, and we're seeing that translate into stronger engagement across the business. At the same time, our new club expansion strategy is progressing well. We're executing our playbook consistently, opening clubs in attractive markets and setting them up for long-term success from day 1. Importantly, we're doing all of this while maintaining strong financial discipline. Our balance sheet remains healthy. We're generating solid cash flow, and we're allocating capital in a way that supports both growth and shareholder returns. That discipline was recently recognized by Fitch initiated coverage with an investment-grade rating for BJ's, that combination of investment and discipline is a key differentiator for us. Before I close, I want to recognize our team members across our clubs, supply chain, distribution centers and support functions. Their [ commitment ] to taking care of the families who depend on us is what enables our performance quarter after quarter. especially in a dynamic environment like this one, their dedication, focus and execution make a real difference, and I couldn't be more proud of the work they're doing every day. As we move through the year, our focus doesn't change. We'll continue to control what we can control, invest in value for our members and execute against our long-term priorities. The consistency of our performance reinforces our confidence in the durability of our model and our ability to deliver a sustainable long-term value. With that, we're happy to take your questions.

[Operator Instructions] Your first question comes from the line of Peter Benedict with Baird.

I guess it relates to price investment tariffs and the merch margin outlook there kind of [ intertwine ]. Just curious how the outlook -- what you're planning in terms of future price investment, talk to us about the potential with tariff refunds, what is in the outlook? And how should we think about the cadence of merch margins over the next few quarters as you guys invest in value?

Thanks for the question, Pete. Maybe I'll start off and Laura can fill in any gaps. So I'm pleased to be with you this morning to discuss our Q1 results. We thought it was a solid start to the year, continued traffic and share gains, great MFI results. And as you said, continued investment in our members in terms of price. Certainly, we had the tariff refunds that you noted, and we use that as a source of investment funds to really bring those dollars back to our members who paid higher prices as a result of the tariffs. And so I won't get into the accounting or any of that, [ Jazz ], laura can do that if we really need to. But our aim there was really to appropriately balance hitting our numbers for the quarter as well as investing in value for our members. Our price gaps improved during the quarter. We're happy with where they are. We will continue to invest in those price gaps as we go forward. Really because consumers are pressured. And the time to play offense is now. We need to keep our value. We will continue to use any source of gain that we can to really bring that value back to our members so that we can build the franchise for the long term. So happy with where we landed, and we'll certainly continue that in the future. As far as the outlook goes, I'll let Laura talk about, but in a short form version, everything we know about today is built into our outlook. So Laura, what did I miss?

Yes. Pete, I think, like we said on the Q4 call, as we look at the margin or merch margin for the year, the labs certainly get easier as we progress through the year. And so we're thinking about that. There's -- as Bob said, we factored everything into our outlook that we know today. We're certainly watching the tariff environment that's continually moving. And the other thing that I think I suspect we'll spend a little bit of time talking about as the call progresses is fuel costs and freight. Bob said it best, we'll continue to invest in price for our members. We think that is the best use of funds and deploying some of the tariff rebates this quarter into that investment, we think was the right thing for our members and for the business for the long term.

Your next question comes from the line of Kate McShane with Goldman Sachs.

Thanks for the detail on what you saw with the Texas openings. We just were curious about what that consumer looks like in terms of who is signing up for membership there? Are you seeing higher care penetration right out of the gate? And can you provide any more insight into trends that you're seeing? And competitive response?

Sure. Let me just start off, and I'll ask Bill to jump in since he's in charge of this whole effort for us. Let me just say that our overall club growth strategy is very successful at this point. Bill and the team have done really tremendous work to identify where to put these buildings to revamp the processes by which we open the buildings and source members and put a great assortment and tremendous value into these buildings. Bill's team is supplemented obviously by a tremendous amount of people in our supply chain and our operations team. They have done tremendous jobs as well to open the buildings as well as we are opening them. So we got one in Texas in the first quarter and three in the second quarter. So we're very early here in our Texas journey. But they would appear to be the best openings that we've had the data, and we talked a little bit about that in the prepared remarks with membership about 33% ahead of our plans. Sales are similarly ahead of our plans. And we went into this market to play to win. We've invested heavily. We will continue to do that to serve our members the right way, the best way that we can and then from an early perspective, it really seems like our strategy of getting into these high-growth low tax markets has been a winner. So let me hand it over to Bill, and he can give you a little bit more context of what's going on in the detail.

Yes, I just want to echo Bob and share my sincere thanks to the entire team that brought the Texas market openings to life. Bob shared in the prepared remarks, but I really think they were the best openings in the company history in terms of how we executed across the board, and it takes functions across just about every discipline of the company to make that happen and it was just a great success from start to finish. In terms of the members and what we're seeing in those communities, it's really the families in and around our clubs across the board. The membership response has been tremendous. Again, Bob shared that we're well ahead of plan on this point in membership. Early results like engagement in our gas business. And in those clubs, we've seen the highest ExpressPay penetration across the chain. So really getting those members off on the right foot in terms of what makes the best of BJ's brings it to life in terms of our value, our convenience and some of our higher-tier offerings. So across the board, we're really pleased with what we've seen. In terms of competitive response, I would say it's -- listen, there are some of the best competitors in the world in the Texas market. And we've, again, brought the best of what BJ's Wholesale Club has to offer to these members. And we're doing a great job, and we're really proud and again, I would let the results speak for themselves in terms of whether it's resonating with the families there. So we feel really good so far.

And just as a quick follow-up to that, just with regards to memberships. How would you describe the membership sign-ups versus other new club openings?

Yes. I would say, Kate, that we've seen that type of strength across the board in our new club openings. And I'd point back to, again, one of Bob's prepared remarks in terms of the success we've seen with our clubs that we've opened in the last couple of years exceeding their plans. That all starts with membership and then it moves from there to the engagement of our members. And so across the board, as we looked at the clubs opened in the last year, I think we talked about in Q4 that we felt like the 2025 class of clubs was the best set of openings in the company's history, and the goal is to make '26 better than that. So when you look down across the results over the last handful of years, it starts with membership that's way ahead of plan and then move on from there. So Texas is following that exact same playbook so far.

Your next question comes from the line of Simeon Gutman with Morgan Stanley.

Good morning, everyone. Bob, I wanted to ask two parts. The percentage of incremental trips, I guess, gas trips that are driving club visits, if anything is changing right now. And then as you approach a new merchant, can you talk about some of the priorities, the gating factors either to widen the basket? And is the priority in some of the core categories are broadening out the wallet oil.

The gas business this quarter was kind of something behold, right, tremendous share gains, that obviously comes from value, value is the most important thing that we do, and gas is probably the most visible commodity out there, right? There's a price line on every street quarter. And so people know a great gas price. They know that we have great gas prices. And certainly, the volumes that we saw during the quarter clearly resonated there, right, with comp gallons up over 10% as the work progresses, total gallons up 20 some days with new stores in there, really just things we haven't seen before. Tremendous volatility as well. Cost changes from a day-to-day basis, we're pretty wild swings around our average daily cost change in the last 2 months is about 2.5x what the last 5 years average daily cost change was. So considerable cost changes, which obviously result in retail changes, and I would say tremendous execution to get back to our profit plan during the quarter, typically in an increasing fuel cost market our margins go to or below 0. And certainly, on some days, they did that, but Bill's team did a great job executing through that volatility to: number one, meet our members' needs from a value perspective; but number two, get back towards our plan from a profit perspective to reward our shareholders as well. We did see some behavior changes, as I talked about a little bit in the prepared remarks. Typically, our average fill-up is around 12 gallons and it was down a little bit below that during the quarter. A couple of things there, people managing to a dollar amount as they filled up. And then clearly, more traffic coming in to top off their tanks. To try and almost arbitrage the increasing nature of the fuel cost. It wasn't meaningfully below 12, but certainly, this type of behavior happens in environments like this. We also didn't see a ton of that incremental value get into the club as some of our competitors have talked about they are in our parking lot, some of them that come into our clubs, but we did not see our percentage of gas trips go into the club increased during the quarter as people manage through the pressure on their wallets from the increase in gas costs. Bill, anything I missed on the gas front?

No. I'd add on Simeon, one of the, I think, underappreciated aspects of our gas growth story is our station growth. So as you look back to the IPO, we've grown our gas station count 50% since then. So we have 205 stations today versus about 135 at the IPO. So we're up to about 77% coverage versus 63% of the IPO. And it's all those collective investments that we've made over the last handful of years that have allowed us to capture this volume that drives long-term benefits mostly to our members in terms of delivering value in a situation like this. So it's great to see all those collective investments that we've made over the last handful of years paying off in this type of environment.

And to your other question, Simeon, on the addition to our team, Stephanie [indiscernible], we are thrilled to have her with us. She's got a long and great track record of driving growth and building merchandising teams and driving great own brands and all the things that it will take to really get our company to the next level. I would say her priorities are, first and foremost, to make sure that our team is as good as we can get it. She certainly knows what great looks like, both in broader retail and specifically in club. That's my favorite thing, that were showing already. Certainly, we need to make some cultural changes and be a little bit more aggressive as we go forward. It's a dynamic environment and Stephanie brings that knowledge and that culture to help the merchandising team drive our business forward. And I think lastly, you'll see us make changes in our assortment. Certainly, we want to take our assortment upmarket a little bit in the good, better, best construct. We have too much in the good level and we need more better and best. And so you will see Stephanie and the team drive that way. And you'll also see us continue to drive the simplicity of our assortment where it makes sense to do so. And really make sure that we are making purchasing decisions for our members so that we can offer them the best assortment at the best cost truly in a club format going forward. So that will take a while to really get through, because we want to make sure we do it with precision and discipline and not upset the apple cart, but we definitely want to make sure that we are serving our members with the things that they want. And given the comment that I made in the prepared remarks about most of our comps coming from our most affluent members, we want to make sure that we have the right assortment for the folks that are spending. So again, thrilled to have Stephanie on the team and filling out our tremendously talented merchandising team and looking forward to our leadership in the continuing quarters.

Your next question comes from the line of Oliver Chen with Cowen.

The general merchandise number was impressive. And you also called out the potential for volatility there. What are your thoughts in terms of the innovation factors ahead with merchandise? And will you see the consumer electronics continue to be a benefit? And as we think about the grocery and perishables and sundries, you've had the multiyear fresh initiatives. Would love your thoughts on catalyst and engagement there as well. And underscoring this how things are going with the category management program as well as your private label as you unify that across categories.

Listen, let me give you a little category context and maybe Laura, Bill can fill in. So start from a general merchandise perspective, that had a great number this quarter. We talked about that being led by consumer electronics, again, Underneath that category performance was a bit mixed. Home and Seasonal were positive during the quarter. Apparel was slightly negative during the quarter. So outside of the [ CE ] leadership, a little bit of a flip flop from where we were last quarter. And we'll continue to work on those assortments and work on our -- the consistency of our performance as we go forward. I think, again, as I just said, you'll see some changes to the simplicity of our assortments, changes to the good, better, best construct of our assortments, making sure that we bring the right value all the time. And quite honestly, I think that's some of the things we've done well in [ CE ]. We're improving the brands that we bring in there. We're making sure we displayed them effectively during the quarter, and we're making sure that we try and put the right value on there. And that may be a little bit less margin rate, a little -- maybe a little bit of a different type of a product that may be all sorts of different things. But we know for sure that the right mix of products and price and promotion drives that business. And so we'll continue to make incremental improvements as we go forward there. That includes your innovation point. We want to make sure that we have the right cool new products. And if you're walking our clubs recently, you've seen some things from SharkNinja and some other things that are new to us and new in the market, a little bit more buzzy product out in the market, and we'll continue to try and augment our assortment from that perspective. Next Perishables. Perishables was a light comp this quarter, primarily driven by egg deflation. And some of our competitors have talked about that, so I won't belabor that point. You know what that is. Underneath the covers there, perishables continues to be a very healthy business, driven by Fresh 2.0, as you talked about. We highlighted the growth in fresh fruit in the prepared remarks. And now that we have lapped the full chain in the initial rounds of Fresh 2.0 investments, we are very pleased to see that units continue to grow, member interaction in those categories continues to grow. And if not for that egg deflation, we would have seen a fantastic comp number there. Grocery and sundries, I think, are a mix at this point. Grocery was pretty strong during the quarter, sundries needs to get a little bit better. the things that we've done in grocery are again assortment and value, and we need to bring that magic over to the sundry side and get all the cylinders going at the same time. So we're pleased with pieces of our business. We need to continue to improve going forward and really bring those brands, those products and that value that our members love.

Oliver, this is Laura. I think the thing I'd add on to what Bob talked about is maybe I'll tie in our private label. And so we continue to make progress there. We're really happy with how our private labels are resonating with our members. And they are absolutely a great place for our members to seek value. And so the thing that I tie in as Bob's comment about eggs. And so eggs are a big SKU for us from a private label perspective and similar to some commentary from our competitors that's out in the market they did drag down our private label penetration a little bit in the quarter. But everything from that perspective looks great, except for eggs. So really great value there. I'm happy with the progress. And I think having Stephanie on board, as Bob talked about, she will continue to focus on private label innovation and making sure our members are getting great products from us.

One follow-up, Bob. You mentioned the affluent customer and that productivity and that engagement factor. What's happening across the different touch points with the affluent customer in terms of loyalty and/or pricing and/or categories. It does -- it sounds like you have a continued focus on making sure you have the best brands and the good better best matrix is where it can be to optimize to that opportunity?

Yes. Look, I think we've talked about in past quarters, the [ K curve ] is obviously a real thing. Overall, we've seen a resilient consumer. But as you look under the covers, there's considerable pressure on the lower-income consumers and the middle income consumers are trading sideways a bit, and the only growth is from the affluent customers. So we want to make sure that we are aware where the money is and bringing the right products for those folks. So I think I said it earlier, we want to make sure we go up market from a product positioning perspective, but we always want to make sure we have the right value as well. And so we'll continue to feed those folks that are spending and go forward from there.

Your next question comes from the line of Steven Zaccone with Citi.

I wanted to follow up just on the price deflation commentary. Obviously, you chose to reinvest some of the tariff refund. So how do we think that plays out over the course of the year? Has your view on pricing inflation, deflation change. Obviously, there's been some headlines with some other retailers talking about making some price investments. Curious for your assessment.

Yes. Steve, thanks for your question. So yes, we flipped from inflation last quarter to deflation this quarter. Some of that was the deflation in eggs and the rest of it was the investments in price that we made. We made the investments in price not really in response to any particular competitor, but really just to use the opportunity we had from the tariff refund to invest in our membership for the long term. So I would imagine that we will continue to do that, as I said earlier, any source of game that we can come up with. We will always try and give it back to our members so that they reward us in the future. There's certainly some potential for that as we go forward. As for instance, if the gas market were to retreat, we could make some extra dollars as we typically do in a down market, and we would likely give that back to our members. There's also some potential for greater inflation as we go forward, right? I don't think exert deflating as much today as they were during the quarter, so that will mute that a little bit. And as Laura mentioned earlier, the impact of fuel costs being so high, rippling through the economy, I think will provide some inflationary momentum as we go through the back half from a cost perspective and from a pricing perspective, not just in our business, but I think in everybody's business. And the potential for that is greater. The longer this disruption in gas and diesel prices goes. We certainly did not have $6 diesel in our plan at the beginning of the year. I doubt the consumer did either and I doubt many of our manufacturers did. And so as that all plays out, I would assume that as a general inflationary source. So we'll balance going forward. We're trying to do the right thing for the member, trying to do that first before we reward the shareholder, because we're trying to play offense. So that's what we're trying to do with these price changes that we made in the end of Q4 and into Q1. We were spending into the beat with this tariff refund opportunity that we had, and we decided to play offense rather than defense. And we will continue to try and do that for the betterment of our members and the long-term betterment of our shareholders.

Okay. Great. That's helpful. That's helpful detail. The follow-up I had is just it's a bit nuanced, but the monthly cadence in the quarter, was there any differences? Obviously, gas prices were very volatile, right? But did you notice any change in customer behavior from a traffic perspective or spending behavior, that's worth calling out?

Well, look, I guess what I would say, we previously talked to you about February being very light from a comp and a traffic perspective as we experienced the weather events at the end of the fourth quarter last year and the giant pull-forward we saw into Q4. It came out of February. February was the was a pretty terrible comp result and traffic results. Certainly, March and April were better. You had the Easter shift in there. So it's very odd to look at. But if you look at the 2 months of March and April together against February, those 2 months were much better from a comp perspective than February. And as we look at May today, today May has improved a little bit versus that March and April trend, it's obviously early in the quarter, so I don't want to get over our [ SKUs ] at all, but certainly, traffic, the traffic trend is better Q2 to date than it was in the first quarter as well.

Your next question comes from the line of Edward Kelly with Wells Fargo.

Bob, I wanted to ask you, maybe just taking a step back, investments been a theme at BJ's for a while now. And clearly, you've been leaning in here. But can you talk a little bit about the return on the investment that you are seeing from a customer perspective? And then as we think about moving forward, is there any additional tariff benefit that you potentially may see from a refund perspective, I'm not sure if you just booked all of that in Q1. And I think you said also if gas prices begin to fall off, you could see some headwind there. I think you did see that in [ '25 ] books. So I'm just curious as if you have other buckets of investment, but I'm just curious as to how you're thinking about all that?

Yes, for sure. You're right, we've been investing in this business for a while. Certainly, that started before we were public in 2018. We have reaped I think, tremendous benefit from that investment given just looking at one metric, our stock price on the day we started and where it is today. I think our members quite honestly, have benefited more than that as we try to give them value almost across the board. There are tons of different things you could look at maybe the most easy thing to think about is our co-brand credit card program where we went from a relatively small program that didn't give a ton of value back to our members to a pretty giant program that rewards our members with a couple of hundred million dollars of rewards every year. That is emblematic of what we're trying to do with this business is pass value back to the members so that they reward us with lifetime value over time. And certainly, that's what we're trying to do with price investments any quarter, but this quarter is no different. I should also highlight the investment in our growth in terms of the number of stores. We've talked about 25 to 30 in the past couple of years, we're spending somewhere in the neighborhood of $700 million to $800 million in capital every year now. And the returns on those stores for our shareholders has been pretty fantastic high-teens ROIs, better returns on capital than the S&P 500. And we're only getting better from that perspective. So I think you can expect us to use sources of value to invest in our membership. I think you can expect to use our cash flow first, to continue to invest in our business through opening new stores, opening new gas stations, remodeling the fleet as we go through the next couple of years to really make sure we're showing our comp members, the same experience that our new members get. And then rewarding our shareholders with buybacks after we use funds for growth. So listen, we're playing the long game here a little bit, too. And so the momentum builds over time, but we want to make sure we are playing offense and building the franchise for the long term rather than responding to any competitive influence or any short-term economic disruption or opportunity that may happen. And so we're proud of where we've come from, and we need to continue to get better over time.

Do you have an additional tariff refund coming?

Yes, that's -- let me pass that over to Laura. She can talk a little bit about the tariffs.

You're right. I think there will be a little bit of additional tariff dollars that flow into Q2, certainly that we have line of sight to. I would expect the tariff environment, as I talked about a little bit earlier, continues to move. And so we'll monitor that and make sure we're getting all the dollars back that were owed whether they're kind of -- whether we paid them directly or working with our suppliers on cost going forward or dollars that we paid to them. So I would expect that will be one pool of dollars that we look to in the future. In addition, Bob already talked a little bit about gas and the potential on that as we progress through the year, the year depending on how the markets move. So the playbook is still intact. The investment theme is intact, with the goal of giving that value back to our members for the long-term lifetime value that we see in them.

Your next question comes from the line of Chuck Grom with Gordon Haskett.

Just three quick ones for me. One, can you guys quantify traffic and ticket in the first quarter. Second, I think last time we talked, you guys thought 2Q to 4Q comps should be in the 2% to 3% range for the core business. I just wanted to confirm that's still a good setup. And then three, I think back of the envelope, it looks like tariffs are about a $30 million tailwind in the first quarter. Just want to see if that math pencils out.

I think they're quite honestly, more for Laura, but let me start. Certainly, our -- this is our -- I think, our 17th consecutive quarter of traffic growth, but the quarter was led by ticket. We don't break all that out, but it was certainly more of a ticket-driven quarter than anything. You heard the guidance on the range I don't think we've really changed that. I think certainly, as we've talked about a little bit today, we could do a little bit better if inflation were to perk up a little bit, we would always look to invest as well, and that could drive it down like it did in the first quarter. And tariffs was a little shy of the $30 million. Let me Laura comment on that.

Chuck, I think the only thing I'd add on your second question on the 2% to 3% range for the full year is we see Q2 through Q4 in that range. And we were -- I think when we started out the year, we said that the first quarter would be outside. And so that we delivered what we said we were going to deliver. And so the answer is yes to your question. And then the tariff was 50 bos on the quarter for merch margin, which was a little bit less than the $30 million you quoted, it's somewhere closer to $20 million.

Your next question comes from the line of Chris Nardone with Bank of America.

So it sounds like the Texas openings are off to an encouraging start. Just for our modeling purposes, can you remind us how we should think about the shape of preopening expense through this year and into next year? And then bigger picture more structurally, are there any other cost increases that we should be aware of on expanding into these new markets? And just remind us how you incorporated higher freight into your outlook?

We talked a little bit about when we gave our guidance for the full year in Q4 about the shape of preopening for the year. And that -- the starting point is it's higher and the big -- there's a big piece of that, that is our Texas investment. And so we've talked a lot about our success in Texas and how our membership, our sales, everything is off to a great start. We continue to view $1 invested in preopening as a great return from an investment perspective. And so we did invest more dollars into Texas to make sure that it was a success. We have all of our Texas stores open now. Well, we have four open, three opened in Q2. So I would expect that there are some Texas preopening dollars in Q2. And then as we thought about Texas and opening those clubs, we certainly factored into our initial estimates and returns when we were looking at our capital deployment. Cost of freight and incremental things for that market. We talked a little bit about how delivering our fresh offering with a third party, with a [ 3PL ] to make sure that we have our best product on the shelves for our members. We think that's important. And so all of that's factored into our estimates. We are ahead, as we talked about in the prepared remarks. And so happy with the progress we've made there. Bill, I don't know if you'd add anything else on -- from a Texas perspective.

No, Chris, I would maybe just on cadence of openings for the year. So we had the one Texan [indiscernible] in the first quarter, we had three open now here in the second quarter. We'll have three openings in the third quarter, including the relocation of our Rotterdam, New York Club and then finish the year with five openings in the fourth quarter. So that will help you sequence preopening in your model as well.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.