BJ's Wholesale Club Holdings, Inc. · NYSE:BJ
BJ's Wholesale Club — Investor Presentation (March 2019)
39 slides from BJ's Wholesale Club's investor presentation, March 2019
Slide 1: Investor Presentation March 2019
Investor Presentation March 2019
Slide 2: Disclaimer: Forward-Looking Statements
Disclaimer Forward-Looking Statements This presentation contains forward-looking statements that are subject to risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act
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: Agenda
Agenda I Introduction II Investment Highlights III Growth Strategies IV Financial Highlights V Q&A 2
Slide 5: Introduction
Section Introduction I
Slide 6: BJ's Wholesale Club at a Glance
BJ’s Wholesale Club at a Glance $13.0 billion 5.5 million FY18 Total Revenue Memberships $578 million 87% Membership FY18 Adj. EBITDA Renewal Rates ~50% ~10x EBITDA from Membership Annual Savings on 216 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 $280mm2 Procurement Savings from Category in Systems Process Profitability Improvement “CPI” ✓ Optimize club labor ✓ Control indirect / home Omni-channe
Slide 9: Performance Continues to Improve On All Dimensions
Performance Continues to Improve On All Dimensions Accelerating comp growth1 Increasing renewal rates BJ’s growth initiatives 1.9% 2.9% Acquire and Retain 2.0% 2.0% 87% 1.2% Members 86% 85% 84% Deliver Value to Get Them Shopping Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 FY15 FY16 FY17 FY18 Comp% 2Yr Stacked Com
Slide 10: Investment Highlights
Section Investment Highlights II
Slide 11: Investment Highlights
Investment Highlights I Favorable Warehouse Club Industry Dynamics II Differentiated Shopping Experience III Large and Loyal Membership Base IV Well-Positioned and Highly Profitable Club Base V Attractive Business Model with Strong Profitability and Free Cash Flow VI New Generation Leadership Team 7
Slide 12: Value to Consumers Driving Warehouse Club Channel Growth
I II III IV V Value to Consumers Driving Warehouse Industry & Model Club Channel Growth U.S. Warehouse Club market size The club business model ($ 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 loyalt
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 $283 Membership Fee Income $255 $259 ($ in millions) $243 $247 $242 $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 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 Headquarters Distribution Center BJ’s Location Uxbridge, MA (Distribution center) Core New England markets1 Rocky Hill, CT (Perishable distribution center) Store count Burlington, NJ (Dist
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 34% 31% 32% 25% ~50% 19% 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 SAME DAY BUY ONLINE MOBILE APP ADD-TO-CARD EXPRESS PAY DELIVERY PICKUP IN CLUB +1.5M +130M COUPONS SCAN BAR CODES OFFERED AT SHOP BJS.COM, DOWNLOADS CLIPPED WITH OUR APP ALL CLUBS PICK UP IN 2 HOURS 24
Slide 30: BJ's 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 illustrative target numbers Revenue ramp up target ($ in millions) ~$58 ~$50mm In mature sales ~$50 $35 - $40 $4mm Build-out cost $1mm In working capital 1 Year 1 target Maturity target FY18 Chain average 1 Represents $4
Slide 32: Financial Performance
Section Financial Performance IV
Slide 33: Key Metrics are Growing Again
Key Metrics are Growing Again Total revenues Adjusted EBITDA ($ in billions) ($ in millions) $578 $13.0 $534 $12.7 $12.8 $12.6 $12.5 $12.4 $457 $412 $414 $406 $283 $247 $255 $259 $242 $243 FY13 FY14 FY15 FY16 FY17 FY18 FY13 FY14 FY15 FY16 FY17 FY18 Adjusted Membership fee income EBITDA Clubs 201 213
Slide 34: We Built a Strong Foundation for Continued Comps Expansion
We Built a Strong Foundation for Continued Comps Expansion Factors affecting historical comparable club sales Took full advantage of being private to reset revenue basis Comparable club sales excluding gasoline ✓ Exited certain low-margin categories 2.9% ✓ Replaced BJ’s Café with more profitable 2.0
Slide 35: We Continue to Make Progress Across Our Divisions
We Continue to Make Progress Across Our Divisions FY17 FY18 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Company Comp Sales (4.5%) (0.9%) 0.4% 1.2% (0.9%) 2.0% 2.0% 1.9% 2.9% 2.2% Comp Sales by Division Edible grocery (5%) (3%) (2%) 1% (2%) 2% 2% 1% 3% 2% Perishables (6%) (3%) 1% 2% (2%) 3% 1% 0% 2%
Slide 36: Appendix
Appendix
Slide 37: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Annual ($ in millions) FY13 FY14 FY15 FY16 FY17 FY18 Income (loss) from continuing operations ($10) $19 $25 $45 $52 $127 Interest expense, net $168 $154 $150 $143 $197 $165 Provision (benefit) for income taxes ($10) $10 $12 $28 ($28) $12 Depreciation and amortization
Slide 38: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (Amounts in thousands) (Unaudited) As of February 2, 2019 Total debt $ 1,800,848 Less: Cash and cash equivalents 27,146 Net Debt 1,773,702 Income (loss) from continuning operations $ 127,092 Interest expense, net 164,535 Provision (benefit) for income taxes 11,826 De
Slide 39: GAAP to Non-GAAP Reconciliations: Free Cash Flow
GAAP to Non-GAAP Reconciliations Free Cash Flow (Amounts in thousands) (Unaudited) FY15 FY16 FY17 FY18 Net cash from operating activities $ 159,361 $ 297,428 $ 210,085 $ 427,103 Less: Capital expenditures 112,363 114,756 137,466 145,913 Free cash flow $ 46,998 $ 182,672 $ 72,619 $ 281,190 37
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