Adjusted free cash flow decreased to $264.1 million for fiscal year 2023 compared to $417.6 million for fiscal year 2022. The decrease is primarily the result of lower cash flows from operating activities primarily due to unfavorable fluctuations in working capital, an increase in capital spending as we open new clubs, and lower proceeds from sale-leaseback transactions.
Debt and Borrowing Capacity
Our primary sources of borrowing capacity are the ABL Revolving Facility and the First Lien Term Loan, which are further discussed in "Note 7. Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K. On July 28, 2022, the Company entered into the ABL Revolving Facility with an aggregate ABL Revolving Commitment of $1.2 billion pursuant to that certain credit agreement with Bank of America, N.A., as administrative agent and collateral agent, and 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.
On January 5, 2023, the Company amended the First Lien Term Loan to extend the maturity date from February 3, 2024 to February 3, 2027 and transition the interest rate, from LIBOR to SOFR and change the applicable margin from LIBOR plus 200 – 225 basis points per annum to SOFR plus 275 basis points per annum. In connection with the amendment the Company paid approximately $151.9 million of the principal amount.
On January 28, 2023, there was $405.0 million outstanding in loans under the ABL Revolving Facility and $11.5 million in outstanding letters of credit. The interest rate on the revolving credit facility was 5.63%.
On January 28, 2023, the interest rate for the First Lien Term Loan was 7.11% and there was $450.0 million outstanding.
On October 12, 2023, the Company amended the First Lien Term Loan to extend the maturity date from February 3, 2027 to February 3, 2029 and reduce applicable margin in respect of the interest rate, effective immediately, from SOFR plus 275 basis points per annum to SOFR plus 200 basis points per annum. Prior to the amendment, the Company repaid $50.0 million of the principal amount outstanding under the First Lien Term Loan.
At February 3, 2024, there was $319.0 million outstanding in loans under the ABL Revolving Facility and $18.2 million in outstanding letters of credit. The interest rate on the revolving credit facility was 6.44%, and unused capacity was $802.3 million.
At February 3, 2024, the interest rate for the First Lien Term Loan was 7.33% and there was $400.0 million outstanding.
Material Cash Commitments
Refer to the descriptions of our material cash commitments, financing arrangements, and contractual obligations outlined below within the following notes to our consolidated financial statements.
See “Note 6. Leases” for future operating lease and finance lease commitments. Lease liabilities exclude legally binding minimum lease payments for certain real estate and gas station leases that have not yet commenced. The liabilities do not include variable costs such as increases in rental payments based on an index or a percentage of sales, insurance, real estate taxes, and other operating expenses. See “Note 7. Debt and Credit Arrangements” for future payments on the ABL Revolving Facility and First Lien Term Loan, including outstanding borrowings and applicable interest rates.
See “Note 17. Other Non-current Liabilities” for long-term liabilities for which it is not reasonably possible for us to predict when they may be paid, including insurance reserves and asset retirement obligations, as well as financing obligations arising from sale-leaseback transactions. We also have cancellable and non-cancellable purchase obligations under purchase orders for merchandise, agreements for capital items, gasoline, products and services used in our business, information technology, executive employment, and other agreements.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We review our estimates on an ongoing basis and make judgments about the carrying value of assets and liabilities based on a number of factors. These factors include historical experience and assumptions made by management that are believed to be reasonable under the circumstances. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could vary materially from estimates based on assumptions used in the preparation of our consolidated financial statements. This section summarizes critical accounting policies and the related judgments involved in their application.
Workers’ Compensation and General Liability Self-insurance Reserves
We are primarily self-insured for workers’ compensation and general liability claims. Amounts in excess of certain levels, which range from $0.3 million to $1.0 million per occurrence for workers' compensation and general liability, and up to $2.0 million per occurrence for auto liability, are insured as a risk reduction strategy to mitigate the impact of catastrophic losses on net income. Reported reserves for claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to loss development factors. The inherent uncertainty of future loss projections could cause actual claims to differ from our estimates. When historical losses are not a good measure of future liability, we base our estimates of ultimate liability on our interpretation of current law, claims filed to date and other relevant factors which are subject to change. These accruals, if any, are included as insurance reserves in accrued expenses and other current liabilities and other non-current liabilities in the Company’s consolidated balance sheets.
Recent Accounting Pronouncements
See "Note 2. Summary of Significant Accounting Policies" of our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding recently issued accounting pronouncements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The primary market risk we are exposed to is interest rate risk and changes in rates will impact our net interest expense and our cash flow from operations. Substantially all of our borrowings carry variable interest rates, and we expect that some of our future outstanding debt will have variable interest rates. Accordingly, we seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs and may use interest rate caps and/or swap agreements in the future to manage our interest rate risks relating to such variable rate debt. Increases in interest rates can result in increased interest expense under our variable rate debt as well as when any of our fixed rate debt matures and needs to be refinanced and an increase in interest rates could have a material impact on our cash flow.
As of February 3, 2024, our total debt outstanding was $719.0 million, which included $319.0 million under our ABL Revolving Facility and $400.0 million under our First Lien Term Loan at interest rates of 6.44% and 7.33%, respectively. See "Note 7. Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K for additional information. A 100 basis point change in prevailing market rates would cause annual interest costs to change by approximately $7.2 million.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of BJ’s Wholesale Club Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of BJ’s Wholesale Club Holdings, Inc. and its subsidiaries (the “Company”) as of February 3, 2024 and January 28, 2023, and the related consolidated statements of operations and comprehensive income, of stockholders' equity and of cash flows for each of the three years in the period ended February 3, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Workers’ Compensation and General Liability Reserves
As described in Notes 2, 16 and 17 to the consolidated financial statements, the Company is primarily self-insured for workers’ compensation and general liability claims. As of February 3, 2024, workers’ compensation and general liability reserves were a significant portion of insurance reserves of $112.3 million within other non-current liabilities and a significant portion of insurance reserves of $60.1 million within accrued expenses and other current liabilities. The reported reserves for workers’ compensation and general liability claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to the loss development factors.
The principal considerations for our determination that performing procedures relating to workers’ compensation and general liability reserves is a critical audit matter are (i) the significant judgment by management when developing the estimated workers’ compensation and general liability reserves; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence related to the actuarial methods and significant assumptions related to loss development factors; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of workers’ compensation and general liability reserves, including controls over the actuarial methods and significant assumptions related to the loss development factors. These procedures also included, among others (i) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate for the accrual for workers’ compensation and general liability reserves and (ii) comparing the independent estimate to management’s estimate to evaluate the reasonableness of management’s estimate. Developing the independent estimate involved (i) testing the completeness and accuracy of underlying data provided by management and (ii) independently developing the loss development factors and applying actuarial methods.
/s/
March 18, 2024
We have served as the Company’s auditor since 1996.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)
| | | | | | | | | | | |
| February 3, 2024 | | January 28, 2023 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | | | | $ | | |
| Accounts receivable, net | | | | | |
| Merchandise inventories | | | | | |
| Prepaid expenses and other current assets | | | | | |
| Total current assets | | | | | |
| | | |
| Operating lease right-of-use assets, net | | | | | |
| Property and equipment, net | | | | | |
| Goodwill | | | | | |
| Intangibles, net | | | | | |
| Deferred income taxes | | | | | |
| Other assets | | | | | |
| Total assets | $ | | | | $ | | |
| LIABILITIES | | | |
| Current liabilities: | | | |
| Short-term debt | $ | | | | $ | | |
| Current portion of operating lease liabilities | | | | | |
| Accounts payable | | | | | |
| Accrued expenses and other current liabilities | | | | | |
| Total current liabilities | | | | | |
| Long-term operating lease liabilities | | | | | |
| Long-term debt | | | | | |
| Deferred income taxes | | | | | |
| Other non-current liabilities | | | | | |
Commitments and contingencies (see Note 10) | | | |
| STOCKHOLDERS’ EQUITY | | | |
Preferred stock; $ par value; shares authorized, shares issued | | | | | |
Common stock; $ par value; shares authorized, shares issued and shares outstanding at February 3, 2024; shares authorized, shares issued and shares outstanding at January 28, 2023 | | | | | |
| Additional paid-in capital | | | | | |
| Retained earnings | | | | | |
| Accumulated other comprehensive income | | | | | |
Treasury stock, at cost, shares at February 3, 2024 and shares at January 28, 2023 | () | | | () | |
| Total stockholders’ equity | | | | | |
| Total liabilities and stockholders’ equity | $ | | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended |
| February 3, 2024 | | January 28, 2023 | | January 29, 2022 |
| Net sales | $ | | | | $ | | | | $ | | |
| Membership fee income | | | | | | | | |
| Total revenues | | | | | | | | |
| Cost of sales | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | | |
| Pre-opening expenses | | | | | | | | |
| Operating income | | | | | | | | |
| Interest expense, net | | | | | | | | |
| Income from continuing operations before income taxes | | | | | | | | |
| Provision for income taxes | | | | | | | | |
| Income from continuing operations | | | | | | | | |
| Income (loss) from discontinued operations, net of income taxes | | | | () | | | () | |
| Net income | $ | | | | $ | | | | $ | | |
| Income per share attributable to common stockholders—basic: | | | | | |
| Income from continuing operations | $ | | | | $ | | | | $ | | |
| Income (loss) from discontinued operations | | | | () | | | | |
| Net income | $ | | | | $ | | | | $ | | |
| Income per share attributable to common stockholders—diluted: | | | | | |
| Income from continuing operations | $ | | | | $ | | | | $ | | |
| Income (loss) from discontinued operations | | | | () | | | | |
| Net income | $ | | | | $ | | | | $ | | |
| Weighted-average number of shares outstanding: | | | | | |
| Basic | | | | | | | | |
| Diluted | | | | | | | | |
| Other comprehensive (loss) income: | | | | | |
Postretirement medical plan adjustment, net of income tax (benefit) expense of $(), $ and $(), respectively | $ | () | | | $ | | | | $ | () | |
| Amounts reclassified from accumulated other comprehensive income, net of tax | () | | | () | | | | |
Unrealized gain on cash flow hedge, net of income tax of $, $ and $, respectively | | | | | | | | |
| Total other comprehensive (loss) income | () | | | | | | | |
| Total comprehensive income | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amount in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional
Paid-in
Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | Total
Stockholders’
Equity |
| | Shares | | Amount | | | | | Shares | | Amount | |
| Balance, January 30, 2021 | | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | () | | | $ | () | | | $ | | |
| Net income | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | | | | — | | | — | | | | |
| Dividends paid | | — | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| Common stock issued under stock incentive plans | | | | | | | | () | | | — | | | — | | | — | | | — | | | | |
| Common stock issued under ESPP | | | | | | | | | | | — | | | — | | | — | | | — | | | | |
| Stock-based compensation expense | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Exercise of stock options | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
| Balance, January 29, 2022 | | | | | $ | | | | $ | | | | $ | | | | $ | | | | () | | | $ | () | | | $ | | |
| Net income | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other comprehensive income, net of tax | | — | | | — | | | — | | | — | | | | | | — | | | — | | | | |
| Dividends paid | | — | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| Common stock issued under stock incentive plans | | | | | | | | () | | | — | | | — | | | — | | | — | | | | |
| Common stock issued under ESPP | | | | | | | | | | | — | | | — | | | — | | | — | | | | |
| Stock-based compensation expense | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Exercise of stock options | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
| Balance, January 28, 2023 | | | | | $ | | | | $ | | | | $ | | | | $ | | | | () | | | $ | () | | | $ | | |
| Net income | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
| Dividends paid | | — | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| Common stock issued under stock incentive plans | | | | | | | | () | | | — | | | — | | | — | | | — | | | | |
| Common stock issued under ESPP | | | | | | | | | | | — | | | — | | | — | | | — | | | | |
| Stock-based compensation expense | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Exercise of stock options | | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
| Balance, February 3, 2024 | | | | | $ | | | | $ | | | | $ | | | | $ | | | | () | | | $ | () | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended |
| February 3, 2024 | | January 28, 2023 | | January 29, 2022 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
| Net income | $ | | | | $ | | | | $ | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | | | | | | | |
| Amortization of debt issuance costs and accretion of original issue discount | | | | | | | | |
| Debt extinguishment and refinancing charges | | | | | | | | |
| Stock-based compensation expense | | | | | | | | |
| Deferred income tax provision (benefit) | | | | () | | | () | |
| Changes in operating leases and other non-cash items | () | | | | | | | |
| Increase (decrease) in cash due to changes in: | | | | | |
| Accounts receivable, net | | | | () | | | () | |
| Merchandise inventories | () | | | () | | | () | |
| Prepaid expenses and other current assets | () | | | | | | () | |
| Other assets | () | | | () | | | () | |
| Accounts payable | () | | | | | | | |
| Accrued expenses and other current liabilities | | | | | | | | |
| Other non-current liabilities | () | | | | | | | |
| Net cash provided by operating activities | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
| Additions to property and equipment, net of disposals | () | | | () | | | () | |
| Proceeds from sale-leaseback transactions | | | | | | | | |
| Acquisitions | | | | () | | | | |
| Net cash used in investing activities | () | | | () | | | () | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
| Proceeds from the issuance of long-term debt | | | | | | | | |
| Payments on long-term debt | () | | | () | | | () | |
| Proceeds from revolving lines of credit | | | | | | | | |
| Payments on revolving lines of credit | () | | | () | | | () | |
| Debt issuance costs paid | () | | | () | | | | |
| Dividends paid | () | | | () | | | () | |
| Net cash received from stock option exercises | | | | | | | | |
| Net cash received from ESPP | | | | | | | | |
| Acquisition of treasury stock | () | | | () | | | () | |
| Proceeds from financing obligations | | | | | | | | |
| Other financing activities | () | | | () | | | () | |
| Net cash used in financing activities | () | | | () | | | () | |
| Net increase (decrease) in cash and cash equivalents | | | | () | | | | |
| Cash and cash equivalents, beginning of period | | | | | | | | |
| Cash and cash equivalents, end of period | $ | | | | $ | | | | $ | | |
| Supplemental cash flow information: | | | | | |
| Interest paid | $ | | | | $ | | | | $ | | |
| Income taxes paid | | | | | | | | |
| Non-cash financing and investing activities: | | | | | |
| Property additions included in accrued expenses | | | | | | | | |
| Treasury stock repurchases included in accrued expenses | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
BJ’S WHOLESALE CLUB HOLDINGS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
warehouse clubs and gas stations in states.2.
Refer to Note 4 for a summary of the Company's percentage of net sales disaggregated by category. %, %, and % of net sales in fiscal years 2023, 2022, and 2021, respectively.Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash held in financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation ("FDIC"). The Company considers the credit risk associated with these financial instruments to be minimal. Cash is held by financial institutions with high credit ratings and the Company has not historically sustained any credit losses associated with its cash balances.
million and $ million at February 3, 2024 and January 28, 2023, respectively. The determination of the allowance for credit losses is based on BJ’s historical experience applied to an aging of accounts and a review of individual accounts with a known potential for write-off. years. Interest and other capitalizable costs related to the development of buildings is capitalized during the construction period. Leasehold costs and improvements are amortized over the shorter of the remaining lease term, which includes renewal periods that are reasonably assured, or the asset’s estimated useful life. Furniture, fixtures and equipment are depreciated over their estimated useful lives, ranging from three to .Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized. Capitalized software costs are included in furniture, fixtures, and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which is generally . Software costs not meeting the criteria for capitalization are expensed as incurred.
Expenditures for betterments and major improvements that significantly enhance the value and increase the estimated useful life of the assets are capitalized and depreciated over the new estimated useful life. Repairs and maintenance costs on all assets are expensed as incurred.
million, $ million, and $ million in fiscal years 2023, 2022, and 2021, respectively, is included in interest expense, net in the consolidated statements of operations and comprehensive income. reporting unit for goodwill impairment testing purposes and assessed the recoverability as of December 30, 2023.The Company may assess its goodwill for impairment initially using a qualitative approach ("step zero") to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts and circumstances that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to
impairment.The Company assesses the recoverability of its trade name whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carrying value of the trade name exceeds its estimated fair value, the Company records a charge to write the intangible asset down to its estimated fair value as a component of SG&A. The Company assessed the recoverability of the BJ’s trade name and determined that its estimated fair value exceeded its carrying value and that impairment was necessary in fiscal years 2023, 2022 or 2021.
The Company recorded an impairment charge of $ million for a lease asset, which is included in loss from discontinued operations, net of taxes within the consolidated statements of operations and comprehensive income in fiscal year 2022. There were impairments of lease assets in fiscal years 2023 or 2021.
million to $ million per occurrence for workers' compensation and general liability, and up to $ million per occurrence for auto liability, are insured as a risk reduction strategy to mitigate the financial impact of catastrophic losses. Reported reserves for claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims. The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to loss development factors. The inherent uncertainty of future loss projections could cause actual claims to differ from the Company's estimates. When historical losses are not a good measure of future liability, the Company bases its estimates of ultimate liability on its interpretation of current law, claims filed to date, and other relevant factors which are subject to change. Accruals for such claims, if any, are included in accrued expenses and other current liabilities and other non-current liabilities in the consolidated balance sheets.
% cash back, up to a maximum of $ per year, on qualified purchases made at BJ’s. The Company also offered a co-branded credit card program, the My BJ’s Perks program, which allowed My BJ’s Perks Mastercard credit card holders to earn up to a cent-per-gallon discount on gasoline, up to % cash back on eligible purchases made in BJ’s clubs or online at bjs.com, and up to % cash back on purchases made with the card outside of BJ’s. Cash back was in the form of electronic awards issued in $ increments that could be used online or in-club and expired months from the date issued.In the first quarter of fiscal year 2023, the Company rebranded the rewards program. The former BJ's Perks Rewards membership program is now the Club+ program, whereby participating members earn % cash back, up to a maximum of $ per year, on qualified purchases made at BJs and a cent-per-gallon discount at BJ's gas locations. Cash back is in the form of electronic awards issued to each member once $ in rewards have been earned.
The Company's co-branded credit card program is now the BJ's One and BJ's One+ program, which allows cardholders with the opportunity to earn up to % cash back on purchases made in BJ's clubs or online at bjs.com and up to a cent-per-gallon discount on gasoline when paying with a BJ's One or BJ's One+ Mastercard at BJ’s gas locations. Cash back is in the form of electronic awards issued to each member monthly on their credit card statement date. Earned rewards under these two programs do not expire.
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. Earned awards may be redeemed on future purchases made at the Company. The Company recognizes revenue related to 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 mobile app. The Company recognizes royalty revenue related to the outstanding My BJ's Perks and BJ's One and BJ's One+ credit card programs based upon actual customer activities, such as reward redemptions. Additionally, the Company deferred revenue for funds received related to marketing and other integration costs in connection with the new co-brand credit card program and will recognize these funds into revenue as performance obligations are satisfied.
Membership
The Company charges a membership fee to its customers, which allows customers to shop in the Company’s clubs, shop on the Company’s website, and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally months. In addition, members have access to other ancillary services, coupons, and promotions. As the Company has the obligation to provide access to its clubs, website, 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.
Gift Card Programs
The Company sells BJ’s gift cards that allow customers to redeem the cards for future purchases equal to the amount of the face value of the gift card. Revenue from gift card sales is recognized upon redemption of the gift cards and control of the purchased goods or services is transferred to the customer.
Warranty Programs
The Company passes on any manufacturers’ warranties to members. In addition, BJ’s includes an extended warranty on tires sold at the clubs, under which BJ’s customers receive tire repair services or tire replacement in certain circumstances. This warranty is included in the sale price of the tire and it cannot be declined by the customers. The Company is fully liable for claims under the tire warranty program. As the primary obligor in these arrangements, associated revenue is recognized on the date of sale and an estimated warranty obligation is accrued based on claims experience. The liability for future claims under this program is not material to the financial statements.
Extended warranties are also offered on certain types of products such as electronics and jewelry. These warranties are provided by a third party at fixed prices to BJ’s. No liability is retained to satisfy warranty claims under these arrangements. The Company is not the primary obligor under these warranties, and as such net revenue is recorded on these arrangements at
million, $ million, and $ million in fiscal years 2023, 2022, and 2021, respectively. Actual sales returns were $ million, $ million, and $ million in fiscal years 2023, 2022 and 2021, respectively.Customer Discounts
Discounts given to customers are usually in the form of coupons and instant markdowns and are recognized as redeemed and recorded in contra-revenue accounts, as they are part of the transaction price of the merchandise sale. Manufacturer coupons that are available for redemption at all retailers are not reduced from the sale price of merchandise.
Agent Relationships
The Company enters into certain agreements with service providers that offer goods and services to the Company’s members. These service providers sell goods and services including home improvement services and cell phones to the Company’s customers. In exchange, the Company receives payments in the form of commissions and other fees. The Company evaluates the relevant criteria to determine whether they serve as the principal or agent in these contracts with customers, in determining whether it is appropriate in these arrangements to record the gross amount of merchandise sales and related costs, or the net amount earned as commissions. When the Company is considered the principal in a transaction, revenue is recorded gross; otherwise, revenue is recorded on a net basis. Commissions received from these service providers are considered variable consideration and are constrained until the third-party customer makes a purchase from one of the service providers.
Significant Judgments
Standalone Selling Prices
For arrangements that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone selling price basis.
Policy Elections
In addition to those previously disclosed, the Company made the following accounting policy elections and practical expedients:
Portfolio Approach
The Company uses the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition.
Taxes
The Company excludes from the transaction price any taxes collected from customers that are remitted to taxing authorities.
%, % and % of net sales in fiscal years 2023, 2022 and 2021, respectively.. The fair value of the performance-based awards is recognized as compensation expense ratably over the service period of each performance tranche, which is typically . Prior to fiscal year 2021, the Company granted stock-based option awards. The fair value of the stock-based option awards was determined using the Black-Scholes option pricing model. Determining the fair value of options at the grant date required judgment, including estimating the expected term that stock options would be outstanding prior to exercise and the associated volatility. See Note 11 for additional description of the accounting for stock-based awards.
3.
million, and $ million of costs payable to Advantage Solutions for services rendered during fiscal years 2022 and 2021, respectively. The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.
4.
% | | | % | | | % |
Open main menu