BJ's Wholesale Club Holdings, Inc. · NYSE:BJ
BJ's Wholesale Club — Investor Presentation (September 2018)
43 slides from BJ's Wholesale Club's investor presentation, September 2018
Slide 1: Investor Presentation September 2018
Investor Presentation September 2018
Slide 2: Disclaimer: Forward-Looking Statements
Disclaimer Forward-Looking Statements This presentation contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this presentation are forward-looking statem
Slide 3: Disclaimer: Industry Information and Non-GAAP Measures
Disclaimer Industry Information Market data and industry information used throughout this presentation are based on management’s knowledge of the industry and the good faith estimates of management. We also relied, to the extent available, upon management’s review of independent industry surveys and
Slide 4: Today's Agenda and Presenters
Today’s Agenda and Presenters Agenda Today’s presenters I Introduction Chris Baldwin Chairman, President and Chief Executive Officer II Investment Highlights Bob Eddy III Growth Strategies Executive Vice President Chief Financial and Administrative Officer IV Financial Highlights Bill Werner Senior
Slide 5: Introduction
Section Introduction I
Slide 6: BJ's Wholesale Club at a Glance
BJ’s Wholesale Club at a Glance $12.8 billion 5+ million FY17 Total Revenue Memberships $534 million 86% Membership FY17 Adj. EBITDA Renewal Rates ~50% 10x EBITDA from Membership Annual Savings on 215 Clubs Fee Income Membership Fee Across 16 States 3
Slide 7: Before We Look Ahead, Let's Take a Look Back
Before We Look Ahead, Let’s Take a Look Back BJ’s core has substantial advantages: New team first focused on addressing: Value Low profit margins compared ✓ Prices in line with club competitors to peers ✓ 25% lower prices than grocery Real Estate Pockets of unprofitable sales ✓ Leading positions in
Slide 8: We Started by Improving Discipline and Investing in Durability and Growth
We Started by Improving Discipline and Investing in Durability and Growth Fuel for growth Strategic growth investments Re-Created +$300mm1 Invested $230mm2 Procurement Savings from Category in Systems Process Profitability Improvement “CPI” ✓ Optimize club labor ✓ Control indirect / home Omni-channe
Slide 9: As a Result, Our Performance Has Improved On All Dimensions
As a Result, Our Performance Has Improved On All Dimensions Accelerating comp growth1 Increasing renewal rates BJ’s growth initiatives 2.0% 2.0% 86% Acquire and Retain 1.2% Members 0.4% 85% 84% Deliver Value to Get (0.9%) Them Shopping Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 FY15 FY16 FY17 Adj. EBITDA2 ($mm)
Slide 10: Investment Highlights
Section Investment Highlights II
Slide 11: Investment Highlights
Investment Highlights I Favorable Warehouse Club Industry Dynamics II Differentiated Shopping Experience III Large and Loyal Membership Base IV Well-Positioned and Highly Profitable Club Base V Attractive Business Model with Strong Profitability and Free Cash Flow VI New Generation Leadership Team 7
Slide 12: Value to Consumers Driving Warehouse Club Channel Growth
I II III IV V Value to Consumers Driving Warehouse Industry & Model Club Channel Growth U.S. Warehouse Club market size The club business model ($ in billions) Clear Value in Transparent Pricing Environment $167 vs. Other Channels $157 $153 $154 $148 $141 $132 Treasure Hunt $121 $113 $113 $108 Membe
Slide 13: BJ's Has Significant Price Advantages Against Its Competitors
I II III IV V BJ’s Has Significant Price Advantages Against Its Shopping Experience Competitors vs. Other club vs. Grocery ✓ Wider selection of SKUs, especially in ✓ Drives “treasure hunt” experience with fresh general merchandise ✓ Smaller pack sizes ✓ Ancillary services and fuel ✓ Accepts manufact
Slide 14: BJ's Value Proposition Flywheel
I II III IV V Shopping Experience BJ’s Value Proposition Flywheel ✓ Price in line with club competitors ✓ 10x return on annual membership fee ✓ Compelling credit card rewards Constantly reinvest into membership value ✓ Fuel & ancillary services (tires, optical, etc.) Operate efficiently Earn loyalty
Slide 15: Emphasis on Fresh Drives Higher Trip Frequency
I II III IV V Shopping Experience Emphasis on Fresh Drives Higher Trip Frequency Wide selection of SKUs, especially in fresh Drives trips # of SKUs Avg. annual trips per member 7,200 950 4,500 Fresh SKUs 22 6,250 Other SKUs Other warehouse club average Convenient pack size Fresh deli 2 lbs. 4 ct. 5
Slide 16: Consistent and Predictable Membership Fee Income Growth
I II III IV V Membership Base Consistent and Predictable Membership Fee Income Growth $269 Membership Fee Income $259 $255 $247 ($ in millions) $242 $243 $229 $210 $191 $180 $173 $175 $159 $150 $139 $124 $118 $106 $90 $79 $66 $56 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Slide 17: While We Target Smart Saving Families, We Also Appeal to a Wide Range of Customers
I II III IV V While We Target “Smart Saving Families”, Membership Base We Also Appeal to a Wide Range of Customers Different customer vs. other club competitors ✓ Average household income: ~$75,000 ✓ More affluent customer demographic or focus on small businesses ✓ Dual income families Other club ✓
Slide 18: Compelling Value and a Meaningful Return on Membership Fee
I II III IV V We Provide Compelling Value to Our Customers and a Membership Base Meaningful Return on Their Membership Fee How do people save at BJ’s? Illustrative member savings Lower grocery prices ~10x return on investment High quality meat, produce and deli $ 55 General merchandise treasure hunt
Slide 19: Leading Real Estate Footprint and Market Share in Our Core Markets
I II III IV V Leading Real Estate Footprint and Market Share in Real Estate Our Core Markets Club base overview Core Northeast markets1 Store count Headquarters Distribution Center BJ’s Location 98 Uxbridge, MA (Distribution center) Rocky Hill, CT (Perishable distribution center) 33 3x vs. Next larg
Slide 20: Lean Cost Structure and Membership Fee Income Drives Stable Profitability
I II III IV V Lean Cost Structure and Membership Fee Income Drives Profitability Stable Profitability Adjusted EBITDA SG&A as % of COGS1 32% 28% 29% 26% ~50% 18% Membership fee income ~50% Merchandise sales Structural advantages vs. Grocery and Mass Non-union labor and less labor required to opera
Slide 21: Growth Strategies
Section Growth Strategies III
Slide 22: Growth Strategies
Growth Strategies I Acquire and Retain Members II Deliver Value to Get Them Shopping III Make Everything More Convenient IV Expand Our Strategic Footprint 17
Slide 23: Opportunities to Grow Membership Base at Every Stage of the Member Lifecycle
I II III IV We Are Pursuing Opportunities to Grow Membership Base Acquire & Retain Members at Every Stage of the Member Lifecycle “Always on” Upgrade membership personalized to higher tiers acquisition New member Higher tier prospecting penetration Membership Grow Easy desk Renewal execution Improve
Slide 24: Proactive Approach to Acquire Members
I II III IV Acquire & Retain Members Proactive Approach to Acquire Members LTV approach to member Spend more to acquire acquisition new members Membership desk execution Member life time value vs. acquisition cost Direct mail flyers Move best people to membership desk Facebook and Additional lab
Slide 25: Value-Added Membership Provides Better Retention and Additional Income
I II III IV Value-Added Membership Provides Better Retention and Acquire & Retain Members Additional Income for Membership Value Investment Base Value-added membership Value-added membership programs gaining momentum Value-added membership penetration BJ’s Perks Elite® Inner Circle® BJ’s Perks Plus®
Slide 26: Our Investments Have Made Our Company More Durable
I II III IV Get Them Shopping Our Investments Have Made Our Company More Durable Enabler: SAP Promo. Mgmt. System Promotions Enabler: SAP Assortment Enabler: Multiple Systems Consumer Experience Enabler: Revionics Pricing Comprehensive Customer Data 21
Slide 27: Examples to Drive Trips and Basket
I II III IV Get Them Shopping Examples to Drive Trips and Basket Flexible assortment to Private label offerings – quality at Personalized digital promotions drive treasure hunt a better value Facebook Off-price, seasonal and branded apparel ✓ ~94% members bought a private label item last year ✓ Grow
Slide 28: Three Pillars of Omni-Channel Strategy to Drive Comps
I II III IV Make it More Convenient Three Pillars of Omni-Channel Strategy to Drive Comps Convenience Showroom eCommerce Bring our products to customers Engage customers with our products Showcase fresh and curated offerings (Same day delivery) Integrate online / offline experience Bring the treasur
Slide 29: We Are Investing to Make the Shopping Experience Easier
I II III IV Make it More Convenient We Are Investing to Make the Shopping Experience Easier Add-to-Card Shop BJ’s.com – Pick-up in Club ✓ Select and load digital coupons to membership card ✓ Purchase online and pick up in club within 2 hours ✓ Over 54 million coupons clipped ✓ Available in all clubs
Slide 30: New Club Opening Process Has Yielded Much Better Performance
I II III IV BJ’s New Club Opening Process Has Yielded Much Better Expand Footprint Performance BJ's has reinvented its club opening model New clubs are posting compelling results ✓ Improved club targeting analytics FY15 new club Kearny, NJ and Summerville, SC cohort average (Aug. 2016 & June 2017) I
Slide 31: 15-20 Club Openings Over the Next 5 Years
I II III IV Expand Footprint 15-20 Club Openings Over the Next 5 Years New club model target numbers Revenue ramp up target ($ in millions) 2 ~$58 ~$50mm In mature sales ~$50 $35 - $40 $4mm Build-out cost $1mm In working capital 1 Year 1 target Maturity target FY17 Chain average 1 Represents $4mm in
Slide 32: Financial Performance and Outlook
Section Financial Performance and Outlook IV
Slide 33: Key Metrics are Growing Again
Key Metrics are Growing Again Total revenues Adjusted EBITDA ($ in billions) ($ in millions) $534 $12.7 $12.8 $12.6 $12.5 $12.4 $457 $412 $414 $406 $247 $255 $259 $242 $243 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Membership fee income Clubs 201 213 215 Margin1 3.3% 3.3% 4.3% Renewal 83% 84
Slide 34: We Built a Strong Foundation for Continued Comps Expansion
We Built a Strong Foundation for Continued Comps Expansion Factors affecting historical comparable club sales Took full advantage of being private to reset revenue basis Comparable club sales excluding gasoline ✓ Exited certain low-margin categories 2.0% 2.0% ✓ Replaced BJ’s Café with more profitabl
Slide 35: We Continue to Make Progress Across Our Divisions
We Continue to Make Progress Across Our Divisions FY17 FY18 Q1 Q2 Q3 Q4 Full year Q1 Q2 Company Comp Sales (4.5%) (0.9%) 0.4% 1.2% (0.9%) 2.0% 2.0% Comp Sales by Division Edible grocery (5.0%) (3.0%) (2.0%) 1.0% (2.0%) 2.0% 2.0% Perishables (6.0%) (3.0%) 1.0% 2.0% (2.0%) 3.0% 1.0% Non-edible grocery
Slide 36: Drivers of Target Long-Term Comparable Club Sales
Drivers of Target Long-Term Comparable Club Sales Driver Impact New member acquisition Growth in tenured members Merchandising and marketing initiatives Omni-channel and B2B initiatives Increasing private label penetration Impact of Sam’s Club closures Weather, fee increase, discontinued businesses
Slide 37: Culture of Discipline Driving Investment and Profitability
Culture of Discipline Driving Investment and Profitability ~$10bn COGS pool, much of which not yet +$300mm1 fully addressed Negotiated savings to date 100% 75% Category Profitability Repositioned as growth Improvement story with suppliers 50% (CPI) Utilize data to educate and 25% negotiate with
Slide 38: Q2'18 Update
Q2’18 Update ✓ Net sales up 4.3% due to 5.0% increase in ($ in millions) Q2'17 Q2'18 Delta comparable club sales Net sales $3,103 $3,237 4.3% ✓ Merchandise comparable club sales continued to expand: Membership fee income 64 70 9.7% ✓ Fourth consecutive quarter of merchandise Total revenues $3,168 $3
Slide 39: Current Capital Structure and Free Cash Flow
Current Capital Structure and Free Cash Flow ✓ Strong balance sheet Pro-forma Capitalization as of August 4, 20184 ✓ Attractive free cash flow Cash $31 ✓ Modest capex plans ABL Facility 418 ✓ Limited working capital needs First Lien Term Loan 1,538 ✓ Intend to use free cash flow to de-lever Total De
Slide 40: Significant Long-term Upside
Significant Long-term Upside Substantial Proven formula to generate advantage growth Acquire and Retain Value Members Deliver Value to Get Them Shopping Real Estate Make Everything More Membership Convenient Expand Our Strategic Fresh Footprint 34
Slide 41: Appendix
Appendix
Slide 42: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Annual YTD ($ in millions) FY13 FY14 FY15 FY16 FY17 1HFY17 1HFY18 Income (loss) from continuing operations ($10) $19 $25 $45 $52 ($39) $9 Interest expense, net $168 $154 $150 $143 $197 $108 $105 Provision (benefit) for income taxes ($10) $10 $12 $28 ($28) ($22) ($10)
Slide 43: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (Amounts in thousands) (Amounts in thousands) As of August 4, 2018 FY15 FY16 FY17 Total debt $ 1,956,321 Net cash from operating activities $ 159,361 $ 297,428 $ 210,085 Less: Capital expenditures 112,363 114,756 137,466 Less: cash and cash equivalents 31,305 Free ca
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