BJ’s Wholesale Club Holdings, Inc. (BJ) Q3 2022 Earnings Call Transcript

BJ’s Wholesale Membership Holdings, Inc. (BJ -5.55%)
Q3 2022 Earnings Name
Nov 17, 2022, 8:30 a.m. ET


  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:


Howdy everybody, and welcome to the BJ’s Wholesale Membership Holdings, Inc. third quarter 2022 earnings convention name. My identify is Adam, and I will be coordinating your name right now. After the audio system’ remarks, there shall be a question-and-answer session.

[Operator instructions] I’ll now cross the decision over to your host, Cathy Park. Please go forward once you’re prepared.

Cathy ParkVice President, Investor Relations

Good morning, and thanks for becoming a member of BJ’s Wholesale Membership’s third quarter fiscal 2022 earnings convention name. On the decision right now are Bob Eddy, president and chief govt officer; Laura Felice, chief monetary officer; and Invoice Werner, govt vice chairman, technique and growth. Please do not forget that throughout this name, we could make forward-looking statements throughout the which means of the federal securities legal guidelines. These statements are primarily based on our present expectations and contain dangers and uncertainties that might trigger precise outcomes to vary materially from our expectations described on this name.

Please see the chance elements sections of our most up-to-date Kind 10-Ok and Kind 10-Q filed with the SEC for an outline of these dangers and uncertainties. Lastly, please notice that on right now’s name we are going to confer with sure non-GAAP monetary measures that we consider will present helpful data for traders. The presentation of this data isn’t meant to be thought-about in isolation or as an alternative choice to the monetary data introduced in accordance with GAAP. Please confer with right now’s press launch posted on our investor relations web site for a reconciliation of those non-GAAP monetary measures to probably the most comparable measures ready in accordance with GAAP.

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With that, I will flip the decision over to Bob.

Bob EddyPresident and Chief Government Officer

Good morning. Thanks for becoming a member of us right now. This morning, we reported one other quarter of robust outcomes, demonstrating the facility of our enterprise mannequin. This was probably the most worthwhile third quarter in our historical past.

Our constant give attention to delivering worth to our members, particularly once they want it most, has put us ready of energy. Our member base is rising in each measurement and high quality. We’re enhancing our merchandising to ship unbeatable worth. We’re providing extra comfort for our members by way of an amazing digital expertise.

We’re increasing our footprint into new and present markets and doing it efficiently. We’ve got an amazing staff and a aggressive technique and the investments we proceed to make place us properly for long-term development and sustainable worth creation. Within the third quarter, our comp gross sales have been up 9.7% total and up 5.3%, excluding fuel. Our meals classes proceed to anchor our energy, with comps growing double digits over final 12 months’s efficiency.

Once we entered the 12 months, we anticipated Q3 to be our most difficult quarter from a comp gross sales perspective given the troublesome evaluate. Our enterprise has exceeded our expectations given the continued robust membership and buying behaviors. As we have seen all 12 months, visitors development has been a constructive driver of our comp, and gross sales per member have been higher than final 12 months in every of our revenue cohorts. I might prefer to put Q3 in perspective relative to 2019.

Our third quarter merchandise comp gross sales have been almost 30% on a three-year stack, which is a sequential acceleration from final quarter’s outcomes. The mixture of membership development, increased high quality of membership, and our membership development proceed to focus on our firm as a structural long-term development story. Adjusted EBITDA grew 19% to $272 million and adjusted EPS grew 9% to $0.99 per share. Lastly, one other robust fuel quarter contributed properly to our income.

Fuel is an emotional buy for a lot of of our members, so we set our costs to showcase worth and drive member loyalty. This led to comp gallon development of 11% within the third quarter regardless of the broader market’s decline in fuel consumption. Our 30% two-year stack in fuel gallons highlights an amazing achieve in market share. Along with the expansion in gallons, our enterprise has been extra worthwhile.

Gasoline is structurally extra worthwhile than it was just a few years in the past. And the final a number of years and this 12 months, particularly, have seen elevated ranges of volatility. The ensuing higher-than-normal revenue per gallon has served as a big tailwind to our enterprise this quarter and this 12 months. We’re executing on our strategic priorities, that are rising and retaining members, bringing extra worth to our members by way of higher merchandising, enhancing comfort with digital, and increasing our footprint.

These priorities are key to driving long-term sustainable development in our enterprise. Let me briefly contact on every. The long-term success of our enterprise is grounded within the energy of our membership. Within the third quarter, our membership charge revenue grew 9% 12 months over 12 months to just about $100 million.

I am pleased with the progress we have made in rising and retaining our members over the previous a number of years. We have developed our membership acquisition campaigns to optimize our advertising. We’re using digital capabilities to increase our attain. We have gotten smarter about how we leverage information to stay related with new and present members, yielding higher renewal charges.

And as we enter new markets, we’re working to strategically construct membership properly forward of our grand openings. Our member rely stands at over 6.5 million members, up 6% 12 months over 12 months within the third quarter. Efficient acquisition efforts throughout new and present golf equipment, in addition to rising digital acquisition, have contributed to the rise. Along with total member development, we’re enhancing the standard of our membership.

Our higher-tier membership penetration within the third quarter was 38%, up roughly 4 factors 12 months over 12 months. Our co-branded bank card program has meaningfully contributed to our higher-tier membership base. On this quarter, we formally introduced our transition to Capital One. As we glance again, the choice we made to put money into lifetime worth by creating the most effective card worth proposition within the membership house has paid dividends, with our cardholder base rising over 10 instances since we launched this system in 2014.

As we glance to the following leg of development, I am enthusiastic about our new partnership. Capital One’s market-leading customer support and digital expertise are well known within the card house, and we’re particularly thrilled to supply an enhanced worth proposition to our members as a part of this new program. Our information exhibits that members with our co-branded card have profoundly higher lifetime values pushed by renewal charges properly above the chain common. Because the penetration of those members will increase, so does the standard of our membership.

Making certain a profitable transition with Capital One shall be one in all our highest priorities over the following handful of quarters, and we’re assured that that is the correct subsequent step for the corporate as we proceed to develop with the most effective accomplice within the enterprise. A closing level on membership energy, our first-year and tenured renewal charges are enhancing over final 12 months’s ranges, and I consider we are going to obtain one other all-time excessive at year-end. Persistently excessive ranges of inflation are diminishing client buying energy. Within the U.S., food-at-home CPI has grown within the double-digit territory 12 months over 12 months for many of this 12 months, and households with waning authorities help have been additional constrained.

General, vitality prices, together with fuel, have come down a contact since summer season however are nonetheless working increased than final 12 months’s ranges. As sustained price pressures proceed to weigh on customers’ pockets, we’ve remained centered on delivering nice worth to our members. Particularly, we’ve continued to put money into value, leading to important financial savings for our members. Actually, our inside evaluation exhibits that our pricing positions stay stronger in opposition to our opponents within the third quarter in comparison with the identical time final 12 months.

Having the correct worth is very necessary to us throughout the holidays. This 12 months, our members who spent $150 or extra at our golf equipment throughout the first 10 days of November are provided a turkey at no cost. Think about the financial savings from this one transaction alone. Our members can save about 25% or extra once they store with us when in comparison with our grocery store opponents.

That 25% financial savings from our members’ $150 basket, mixed with the free turkey, principally covers a one-year BJ’s membership charge. This supply and the examples highlighted in our final two earnings calls, rotisserie rooster and our deli providing, are supposed to spotlight our excellent worth. We purpose to supply our members as some ways as doable to get a return on their membership charge. We’re leveraging our aggressive benefits to drive market share positive factors within the close to time period whereas investing in initiatives to additional optimize assortment and ship extra worth to our members in the long term.

Our recent enterprise, for instance, is a serious cause why our members store at our golf equipment, and we purpose to supply the freshest assortment at a compelling value. Bringing our perishable provide chain capabilities in-house was the pure first step on this course of. We are actually within the early levels of working by way of every little thing from sourcing to packaging to produce chain lead instances, all the best way to advertising and in-club presentation. Along with our work in recent, we’re leaning into our personal model technique as our members look to maximise their financial savings with high quality merchandise.

Within the third quarter, our personal model’s penetration grew to 24% regardless of a troublesome evaluate. Our third strategic pillar is driving comfort by way of digital, and we’re producing sturdy development on this space led by BOPIC and curbside. Actually, our digitally enabled gross sales are trending towards 9% of our total web gross sales this 12 months, up from 8% final 12 months. Digitally engaged members usually have increased common baskets and store with us extra regularly, which will increase the probability of membership renewal.

With the enlargement of those choices, our member expertise is extra handy than ever, and we are going to proceed to put money into enhancing our digital efforts. Lastly, as , we’ve dramatically accelerated our actual property plans. We have opened seven new golf equipment this 12 months, together with our entry into Indiana in September. Final month, we opened in Greenburgh, New York, and we additionally opened in New Albany, Ohio a few weeks in the past, increasing our presence within the state to the Columbus market.

We’re virtually set to open our doorways in Wayne, New Jersey this weekend, and we’ve just a few extra golf equipment slated to open over the following few months. The golf equipment that we have opened previously a number of years proceed to carry out higher than our preliminary plans, giving us the arrogance to maintain 4% to five% unit development within the foreseeable future. Our dedication and talent to convey worth to our members stay a robust benefit in instances like these. In consequence, we have grown our prime line and market share all year long whereas navigating a pressured margin atmosphere.

Fuel has pushed appreciable upside to our outcomes, granting us the power to additional put money into our members and our staff members. Our grocery enterprise is powerful, and we be ok with how we’re managing our stock by way of the vacation season. There isn’t any doubt that inflation is impacting client choices, and it is wanting probably that inflation will proceed into subsequent 12 months, albeit at a moderating tempo. Regardless of how the macro finally ends up taking part in out, we’ll stay true to being there for our members and delivering unbeatable worth, which I consider will deepen loyalty, reinforce our model, and drive long-term development.

Earlier than I wrap, I might prefer to acknowledge and thank our staff members for his or her dedication in serving our members and the communities during which we function. I am particularly heartened by the unimaginable assist our staff members have supplied to these impacted by Hurricane Ian, our emergency response staff’s work within the days main as much as Ian’s landfall, guaranteeing stock preparedness, asset safety, and the protection of our staff members and members. Our golf equipment have been up and working as long as we deemed that security was not compromised. Our groups labored with our companions to supply necessities comparable to water, snacks, child components, and cleansing provides to native shelters.

As they all the time do, our staff members confirmed up for our members and communities by way of this disaster. To our staff members who’re listening in right now, thanks in your onerous work. Your efforts make an actual distinction in our firm and in our communities. I will now flip it over to Laura to supply extra particulars on our outcomes and outlook for the remainder of the 12 months.

Laura FeliceChief Monetary Officer

Thanks, Bob. Earlier than I start, I might prefer to reiterate Bob’s gratitude for our staff members throughout our golf equipment, membership assist heart, and distribution facilities. We’re navigating a difficult working atmosphere, and our continued energy is the results of our staff members’ onerous work. Now, let’s dig into our outcomes.

Internet gross sales within the third quarter have been $4.7 billion, a 12% enhance over the prior 12 months. Third quarter comp gross sales have been 9.7%. Merchandise comp gross sales, which excludes gross sales of gasoline, elevated by 5.3% and was pushed by about equal elements visitors and basket development. Our two-year stack was up 11%, reflecting a three-year stack of up 29.5%.

The Q3 impact of inflation was barely greater than final quarter as we handed on a portion of rising enter prices whereas sustaining our robust pricing positions by strategically investing in our key worth gadgets. Comps in our grocery, perishables, and sundries division grew by roughly 6% within the third quarter, up 12% on a two-year stack and up 31% on a three-year stack. We grew market share throughout the quarter, and our total market share stays properly above pre-COVID ranges. Our common merchandise and companies division comp grew by 3% within the third quarter.

The expansion was led by optical, residence enchancment, and tires, the place we have made tweaks to our choices to supply higher worth. Comps on this division have been up 7% and up 21% on a two-year and three-year stack, respectively, as discretionary spending continues to normalize towards a brand new increased base from the previous two years. Our digital choices have made the member buying expertise extra handy. Digitally enabled gross sales for the third quarter grew 43% 12 months over 12 months and over 280% on a three-year stack.

Over 80% of our digitally enabled gross sales are fulfilled by our golf equipment with companies like BOPIC and same-day supply. Our curbside supply providing continues to resonate with our members, making up roughly 60% of our BOPIC enterprise. In our fuel enterprise, our comp gallons grew by 11% within the third quarter, which carried out consistent with our expectations of continued market share positive factors. Our fuel margins, then again, trended increased than our expectations and resulted in fuel income that outperformed our inside plans.

Membership charge revenue, or MFI, grew 9% to $99.5 million within the third quarter and continues to underscore the progress we’ve made in enhancing our enterprise. We’re happy with our membership tendencies, together with increased tier penetration, simple renewal, and first-year and tenured renewal charges. Shifting on to gross margins, excluding the gasoline enterprise, our merchandise gross margin price decreased by 30 foundation factors, primarily as a result of a better provide chain prices and inflation, a pattern that has remained in line with prior quarters this 12 months. Let me contact briefly on stock, the place our groups have made important progress.

We ended the third quarter with $249 million extra stock on our stability sheet than final 12 months. Excluding the affect of stock on our books as a part of the acquisition of our perishable distribution facilities, our stock elevated by $152 million, or 12% 12 months over 12 months, and the expansion made up of inflation and new membership development. SG&A bills for the quarter have been $674 million. The year-over-year enhance was primarily attributable to elevated labor and occupancy prices on account of new membership and fuel station openings, in addition to $6 million in prices related to the transition to our new membership assist heart.

Our third quarter adjusted EBITDA grew by 19% to $272 million, reflecting our gross sales development and outdoors fuel income. Lastly, adjusted web revenue for the third quarter was $136 million, or $0.99 per share, and mirrored a 9% enhance year-over-year development on a per-share foundation. Turning to our capital construction, the present price atmosphere has barely altered our near-term considering round our debt, which is solely floating price right now. In efforts to partially mitigate our curiosity expense threat, we paid down $154 million of debt throughout the quarter, together with $100 million of our first lien time period mortgage.

We ended the third quarter with lower than one flip of web leverage and will additional scale back our debt if charges proceed to rise. We’re producing sturdy free money move with $79 million within the third quarter and $333 million 12 months up to now. As we allocate our capital going ahead, we are going to proceed to be versatile in our strategy, however our precedence stays rising our enterprise. Investments to assist membership, digital, and our actual property development plan shall be funded by these money flows and enabled by our stability sheet, which stays robust.

We proceed to return extra money to shareholders by way of share repurchases, and within the third quarter, we purchased again almost 685,000 shares for about $50 million. Let me now contact on our present outlook for the 12 months. As we famous varied instances in our ready remarks right now, our grocery enterprise stays robust, and we consider we will proceed gaining market share due to our intense give attention to worth. Inflation remains to be impacting many elements of our enterprise.

Though just lately, we’ve seen some reduction in commodities comparable to rooster, milk, and cheese. And as we head into the winter holidays, we are going to stay nimble in sustaining our aggressive benefits to drive visitors into our golf equipment and on-line channels. Beginning on the prime of the P&L, we now count on our fiscal 2022 comparable membership gross sales, excluding fuel, to extend within the 5% to five.5% vary, which continues to suggest about 4% to five% of comp for the fourth quarter. In October, we formally introduced our new co-brand partnership with Capital One, which we consider will convey an enhanced worth proposition to our members and function one other catalyst to develop and strengthen our membership base.

The final word advantages of those modifications are crystal clear to us. On the identical time, we additionally acknowledge that it’s going to take us a number of quarters to finish the transition, which can briefly affect our membership KPIs, together with increased tier penetration. We’ll purpose to be clear as doable by way of this era. For our fuel enterprise, within the fourth quarter, we proceed to imagine fuel gallon comp development within the low-teen vary with barely higher-than-normal revenue per gallon.

Recall that our fuel profitability was the strongest within the fourth quarter final 12 months. Shifting down the P&L, our outlook on margin additionally stays unchanged in that we nonetheless see ongoing however barely easing merchandise margin strain, pushed by investments in value and elevated provide chain prices. As such, we count on the year-over-year change in merchandise margin price to stay adverse within the fourth quarter however higher than the 30-basis-point lower we delivered within the third quarter. Because it pertains to curiosity expense, we count on continued strain within the fourth quarter, and we’ll proceed to observe actions within the price atmosphere.

Taking all of this into consideration, we now count on our full 12 months EPS to be within the $3.70 to $3.80 vary. Earlier than turning it again to Bob, I might prefer to reiterate our confidence within the energy of our enterprise and the transformation we’ve made. On account of the enhancements we have made in membership, footprint enlargement, and digital, additional amplified by our benefits inherent within the warehouse membership mannequin, we consider we’re positioned to ship a stable long-term development profile. With that, I will flip it again over to Bob for closing remarks.

Bob EddyPresident and Chief Government Officer

Thanks, Laura. We have made important progress in strengthening our enterprise, and I consider we’re well-positioned right now to drive long-term development by executing on our strategic initiatives and prioritizing worth in every little thing we do. We’ll proceed to allocate our capital towards investments to maximise shareholder worth. Our warehouse membership mannequin stays a structural benefit, with a rising annuity within the type of membership, decrease operational prices, and a foundational give attention to nice worth.

When the buyer outlook is unsure, our members discover consolation in with the ability to stretch their {dollars} with us. I consider that the reliability and loyalty that we’ve labored onerous to construct with our members through the years will stay key to our success, regardless of the circumstances. With that, I’ll now flip it again over to the operator to take your questions.

Questions & Solutions:


Thanks. [Operator instructions] And our first query right now comes from Mike Baker from D.A. Davidson. Mike, please go forward.

Your line is open.

Mike BakerD.A. Davidson — Analyst

Thanks, guys. Nice quarter. I simply wished to ask you about your total view on the buyer heading into the vacations. I suppose you’ve got given us steerage, in order that helps us.

However, , possibly one method to flesh it out is the tempo of gross sales all through the third quarter. Lots of retailers are a giant drop-off in October. Did you see something like that? And — or possibly one other approach to consider it’s, , are you seeing customers simply actually give attention to promotional exercise or commerce down or something like that that may give, , one other type of opinion on what is going on on with the buyer as we head into the vacations. Thanks.

Bob EddyPresident and Chief Government Officer

Hey, Mike. Good morning. Thanks in your query. I believe it is a good one total.

I believe our client is in a really wholesome form, as we have seen by way of your entire 12 months. As we talked about within the ready remarks, our membership statistics are doing nice. We’re gaining market share for the 12 months. The factor I am most enthusiastic about is as we proceed to achieve journeys as properly, as we present our members unimaginable worth.

, the chorus that we have been speaking about all 12 months is absolutely all through the revenue cohorts that we have a look at, we have seen extra gross sales and extra journeys per member as properly. So, I believe our customers are very wholesome at this level. , as you consider the tempo by way of 3Q, definitely, October was decrease for us than the previous two months. Lots of that I believe, although, is absolutely the evaluate to what we had final 12 months.

We had an extremely robust October final 12 months. And so, in case you have a look at it on a two-year stack, the months have been very equal for us. So, I do not see that October efficiency this 12 months type of working into November or 4Q. So, we’re more than happy with the place our client is.

They’re actually reacting to the worth that we put on the market, and hopefully, that continues.

Mike BakerD.A. Davidson — Analyst

Nice. Thanks. Another fast follow-up. Simply questioning how that turkey supply went.

Did it really drive new membership development?

Bob EddyPresident and Chief Government Officer

So, it is definitely, , had a superb response. We’re nonetheless within the interval the place persons are redeeming the supply. So, you did not get the free turkey on the day that you simply spent $150. You must come again.

It is type of a bounce-back free turkey supply. And so, we’re nonetheless within the redemption interval. We have got somewhat methods to go to see the way it really works out. However — so the variety of those that took benefit of the supply, I believe, is wanting increased than our expectations.

And it definitely drove some visitors into our buildings, too.

Mike BakerD.A. Davidson — Analyst

Yeah. Thanks. It is an amazing thought and an amazing supply for customers. Thanks for the time.

Bob EddyPresident and Chief Government Officer

You guess. Thanks.


The following query comes from Edward Kelly from Wells Fargo. Edward, please go forward. Your line is open.

Edward KellyWells Fargo Securities — Analyst

Hello. Good morning, everybody. A pleasant quarter as soon as once more. Bob, you’ve got been, I believe, very optimistic across the new co-branded bank card and what that might imply for you over time.

May you possibly simply give us somewhat bit extra coloration on how we must always take into consideration that, , each type of just like the upfront profit that you may see, which I’d think about there are some higher economics right here, but additionally, , what it does to the member? After which, Laura, you talked about, , the potential affect of member KPIs. May you simply possibly give somewhat bit extra coloration there when it comes to how you might be mitigating that threat?

Bob EddyPresident and Chief Government Officer

Edward, good morning. Thanks in your query. Perhaps I will kick it off and Invoice and Laura can fill in. , I have a look at our present co-brand program and see it as an amazing success.

As we have talked about, it is grown over tenfold within the years since we launched it. It’s a nice supply of member worth. And we expect it is the most effective worth prop within the wholesale membership house at this level. And it’ll solely get higher as we go ahead.

As we speak about it as a staff, we expect will probably be tremendously useful to our members given we are going to enhance the worth prop. And, , the query turns into one in all lifetime worth, proper? We’re within the worth enterprise. We will use this as a automobile to supply extra worth to our members. That has proven to return again to us in higher buying habits and better renewal charges.

So, that is the sport that we’re taking part in. We’ll proceed to play it. I believe it could possibly be one of many extra useful issues we do within the subsequent set of years and looking out ahead to the transition to our new accomplice. And possibly I will hand it over to Invoice.

He is the architect of this program and working the transition, so he may give you just a few feedback as properly.

Invoice WernerGovernment Vice President, Technique and Improvement

Thanks, Bob. Ed, good to talk with you. Now, I will simply echo what Bob mentioned. We made — yeah, as we take into consideration the co-brand program, we have talked about this with the Road somewhat bit.

We made that strategic choice again after we launched the present model of this system to speculate all of the economics again into the members with the purpose of driving lifetime worth. And we’re actually happy with how that is carried out over the past a number of years. Yeah, as we take into consideration the transition to Cap One, we’re not going to return away from that viewpoint in technique when it comes to funding. It is an unbelievable approach for us to present worth again to our members.

And we’ll take among the enhanced economics and roll them again by way of the worth prop so we will ship it again to the members. So, we’re actually enthusiastic about Cap One. The staff throughout the board at Cap One is unimaginable in every little thing that they do. And as we expect how that performs by way of to the expansion of the following program, yeah, we expect that there is a substantial like increased from right here when it comes to the expansion with the membership base.

So, there will be somewhat bit — when it comes to the KPI, there will be somewhat little bit of a slowdown right here — not decelerate, however a pause as we shut off acquisition within the coming days on the present program as we work by way of the transition. So, you may probably see a pause within the higher-tier membership penetration as we report This fall. After which as we get this system launched within the first half of subsequent 12 months, you may see then reaccelerate from then as we begin acquisition of the brand new program.

Edward KellyWells Fargo Securities — Analyst

OK, nice. Only a fast follow-up, if I’ll. , Bob, as we take into consideration, , 2023, and I do know it is nonetheless early and the backdrop is unsure, however, , the consensus to me appears to be like somewhat excessive, particularly provided that, , you will have the gas margin evaluate. May you simply possibly, , assist us with some places and takes that we ought to be occupied with for the out 12 months?

Bob EddyPresident and Chief Government Officer

Yeah, certain. Actually, after we take into consideration subsequent 12 months and the long-term positioning of our firm, we’re very excited. As we speak about lots, our membership is rising, that the efficiency and the standard of our membership is a lot better than it has been and continues to enhance. And what we simply talked about with co-brand is only one extra lever on that — on proving that rely and high quality.

We’re on the lookout for continued market share positive factors and the move by way of from these elevated journeys that we’re seeing right here and to renewal charges. And we cannot take our eye off the ball from a price perspective both. So, as we undergo no matter occurs subsequent 12 months from a macroenvironment, I really feel like we’re properly positioned. , you level out that we have had an unimaginable tailwind from a gasoline revenue perspective.

That’s completely true. We have additionally had headwinds everywhere in the enterprise, most notably in margins this 12 months. Provide chain prices and common merchandise markdowns actually impacted our margins all year long. And so, I do suppose will probably be robust to lap the fuel revenue that we have seen this 12 months.

It has been, by far, probably the most worthwhile gasoline 12 months we have ever seen. We’re persevering with to see unimaginable volatility in fuel, which may present extra alternatives to get extra revenue subsequent 12 months. However I’ve way back stopped making an attempt to foretell what would occur within the gasoline market. So, we have some work to do to determine whether or not we will lap the fuel revenue.

I do suppose it’s going to be robust. I do suppose among the margin headwinds that we have seen this 12 months could fall away as properly. And so, hopefully, we have some avenue to get again towards flat from an EPS perspective. I do not know that I’d undertaking to get flat with this 12 months at this level.

Edward KellyWells Fargo Securities — Analyst


Bob EddyPresident and Chief Government Officer

You guess.


The following query comes from Robbie Ohmes from Financial institution of America. Robbie, your line is open. Please go forward.

Robbie OhmesFinancial institution of America Merrill Lynch — Analyst

Hey, good morning. Thanks for taking my query. Truly, two questions. One was simply on the membership charge revenue, , decelerated sequentially.

Are you able to remind us, , what can be driving this sequential development deceleration and the way we ought to be occupied with that for the fourth quarter? 

Bob EddyPresident and Chief Government Officer

Robbie, thanks in your query. Actually, you are proper. It did decel somewhat bit. I suppose I’d inform you we’re not anxious about it.

We — after we began the 12 months, we have been occupied with a mid-single digit enhance in MFI, and we’re up over 10 for the 12 months. So, as we take into consideration that, we’re — we have a look at it and suppose we’re doing properly. Lots of it has to do with the timing from quarter to quarter, when the brand new golf equipment come into play, and simply common membership flows as properly. So, once more, nothing to be involved about there.

I believe it is had nice efficiency all 12 months and sort of proper the place we would like it.

Robbie OhmesFinancial institution of America Merrill Lynch — Analyst

After which the opposite query I will ask was simply common merchandise. I believe you guys mentioned the comps have been up 7%. Is that proper?

Bob EddyPresident and Chief Government Officer

Normal merchandise and companies.

Laura FeliceChief Monetary Officer

And companies.

Bob EddyPresident and Chief Government Officer

Yup. Yup.

Robbie OhmesFinancial institution of America Merrill Lynch — Analyst

So, the — that is a very good, , quantity in opposition to — , it wasn’t a simple comparability final 12 months. Are you able to speak somewhat extra in regards to the discretionary facet of the enterprise? I do know it is, , comparatively small for you guys, however it sounds such as you may be outperforming what different retailers are seeing in discretionary, possibly, , what are you seeing in attire and a few of these areas?

Bob EddyPresident and Chief Government Officer

Yeah, I believe, , largely, we have seen what others have seen, Robbie. So, we noticed a really robust efficiency in our companies division. If you consider optical and residential enchancment and tires and a few of these companies, which exhibits a wholesome client, proper? These aren’t small greenback quantity purchases. However we’ve seen our members be somewhat bit extra picky about what they’re spending on.

And, , among the themes that our opponents have talked about with decrease attire gross sales and the extra discretionary gadgets, we positively noticed that within the third quarter. I believe a few of that’s climate associated. I all the time hate to speak about that. However, , it is by no means 75 in Boston in November and it was just about your entire entrance a part of the month.

So, definitely, that is had some a part of it as properly. And also you’re seeing some significant deflation in some key common merchandise classes like televisions. And eventually, the very last thing I’d say is the vacation season looks like it’ll run somewhat bit late to us. , final 12 months, customers have been right here and shopping for in September and October as a result of they will not be there in November and December.

And that appeared like they’re again on a traditional buying sample this 12 months, not less than in our enterprise. And a few our opponents have famous that approach, too. So, , we thought GM did OK within the quarter. We’re wanting ahead to a superb efficiency within the fourth quarter.

However, , we have a whole lot of room to go within the final a part of the quarter right here to convey it residence.

Laura FeliceChief Monetary Officer

Hey, Robbie, it is Laura. I simply clear up one level on that’s that the 7% that I discussed within the ready remarks was the two-year stack on GM and companies. So, on the quarter, it was 3%, however nonetheless constructive.

Robbie OhmesFinancial institution of America Merrill Lynch — Analyst

Bought it. That is all tremendous useful. Thanks a lot.

Bob EddyPresident and Chief Government Officer

Thanks, Robbie.


The following query comes from Peter Benedict from Baird. Peter, your line is open. Please go forward.

Peter BenedictRobert W. Baird and Firm — Analyst

Hey, good morning, guys. Thanks for taking the query. Perhaps I might like to speak somewhat bit in regards to the membership development alternative that you simply guys see. I do know, your 4% or 5% unit development.

Perhaps speak somewhat extra about sort of the brand new membership economics, how they appear right now possibly in comparison with the place they have been traditionally? I am curious in your mixture of sort of new versus present market openings. After which long term, the place’s the distribution infrastructure? How a lot can the present — what number of shops can that present infrastructure assist? At what level would you guys must begin to make investments extra in that? That is my first query.

Bob EddyPresident and Chief Government Officer

Yeah. Hey, Peter. Good morning. Thanks for the query.

I will simply take it off and Invoice can fill in. We have had an amazing 12 months this 12 months from a brand new membership perspective. I’ve obtained seven within the again already. We open hopefully tomorrow in Wayne, New Jersey.

We talked about that on the ready part of the decision. And we have just a few extra earlier than the top of the 12 months to satisfy our goal. Our pipeline may be very wholesome at this level. We really feel like we’re getting in the correct path.

And all of the golf equipment we have opened in the previous few years have outperformed what we thought they might do. So, that offers us a ton of confidence to proceed to maintain our foot on the fuel from an actual property perspective or we have invested behind the aptitude to maneuver this rapidly. As , we did not do that previously. However that has borne some nice openings of late and constructing a staff that’s devoted to creating certain these new buildings open on time and in nice situation and looking out ahead to persevering with unit development.

And I will let Invoice speak about economics and among the different factors that you simply requested about.

Invoice WernerGovernment Vice President, Technique and Improvement

Yeah. Hey, Peter, it is Invoice. Yeah, the — when it comes to the brand new versus present markets, proper, as you have a look at our development this 12 months, you’ve got seen continued enlargement within the Midwest with the construct out of Pittsburgh, of Detroit, the push down in Ohio into Columbus, the entry into Indiana for the primary time with our membership in Noblesville, which is off to an incredible begin. So, the stability this 12 months is about 50-50.

As we have a look at subsequent 12 months, it’s going to be comparable when it comes to new and present markets. By way of the efficiency within the present markets, it has been extraordinarily robust. As we glance again on the openings in golf equipment like Commack on Lengthy Island, Lengthy Island Metropolis, and Newburgh, New York, the place we have added density, the place we’ve a powerful membership base to start with, we see actually nice member habits in these golf equipment, the place not solely are they buying within the new golf equipment, however the legacy members that have been in these commerce areas, they’re additionally buying on the legacy golf equipment, in addition to the brand new golf equipment. So, we have seen actually robust incrementality in that efficiency within the present markets at ranges that we have not seen previously.

And that is actually constructive as we take into consideration constructing out our present networks into the long run. , when it comes to the investments, it is definitely one thing that we’re . We expanded our perishable distribution services final 12 months with a gap of a facility in Kentucky. We’re wanting ahead on the build-out of the dry community as we go ahead.

For those who bear in mind, after we went public, we had talked in regards to the potential for the — our distribution community to assist about 100 incremental golf equipment. And lo and behold, as we have carried out, , 30 inventory comp over the past three years, we have used a whole lot of that capability fairly rapidly, which is a superb drawback to have. So, the dry facet is definitely one thing that we’re wanting about going ahead. And yeah, I might be reluctant to not point out the insourcing of our Burris acquisition this 12 months.

The perishable services convey them in-house, provides us nice capabilities as we proceed to develop our community right here ahead. So, we be ok with the pipeline for subsequent 12 months. We’re working now actively on calendar years ’24 and ’25, and we be ok with the outcomes of what we’re seeing.

Peter BenedictRobert W. Baird and Firm — Analyst

Now, that is tremendous useful. Thanks. After which only a fast follow-up. I — simply on the overall merchandise enterprise, you guys have made some investments in there in personnel.

Only a fast replace on what the plan is when it comes to making an attempt to drive improved execution in that space over the following couple of years. Thanks.

Bob EddyPresident and Chief Government Officer

Yeah. So, possibly I will take that one, Peter. As , enhancing our common merchandise enterprise is one in all our key priorities. To me, your entire sport, it doesn’t matter what you are speaking about, however most notably right here, it begins with expertise.

And we have made large upgrades in our merchandising staff, each with new expertise and enhancing the capabilities of our excellent expertise that was already right here to permit us to, over time, enhance our common merchandise enterprise. So, whether or not it is hiring our new chief service provider, Rachael Vegas, not so new anymore, it is a few 12 months at this level; our new head of common merchandise, Dion Evans; and their groups have simply carried out excellent work to essentially, , begin that technique of enhancing our common merchandise enterprise. As , a whole lot of these classes are lengthy lead time classes, and so you actually will not see the fruits of their efforts till subsequent 12 months. Most likely within the second quarter, you may see some profit.

In Q3 and This fall, you may actually begin to see among the advantages of their decision-making. I can inform you, we might — as one instance, we might not have labored by way of the overall merchandise stock we had over the summer season this 12 months with out their assist. The standard of the conversations and the execution that we’re seeing from the staff, in addition to the brand new planning and allocation people that we introduced in, has actually simply modified the sport for us. So, I am very bullish on our GM prospects over the long run with our staff and looking out ahead to moving into subsequent 12 months so we will see how the members react to what we’re doing.


The following query comes from Chuck Grom from Gordon Haskett. Chuck, your line is open. Please go forward.

Chuck GromGordon Haskett Analysis Advisors — Analyst

Good morning. Bob, are you able to speak in regards to the stability between flowing by way of the surplus fuel income that you’ve got generated 12 months up to now to the underside line versus taking a few of that cash and investing in value to showcase worth to your buyer?

Bob EddyPresident and Chief Government Officer

Yeah. Thanks, Chuck. It is an amazing query. So, as , we value our gasoline every single day to be the most effective available in the market.

And, , typically, that’s on par with our membership opponents and higher than all people else. We’ve got a fairly subtle pricing mannequin the place, , we’ll have a look at information on who’s in the marketplace each single day, generally a number of instances a day, and make it possible for our costs are the most effective. We do this as a result of it modifications member habits, proper? Fuel stations with — golf equipment with a fuel station carry out higher than these with out. They’ve extra journeys, extra renewal price.

And that the definition of extra modifications with the worth of fuel. So, over the summer season, it was much more visitors and extra membership profit. So, we are going to type of add fuel stations wherever we will at that time. However this 12 months has been an fascinating one, to the core of your query, proper, the place we have made a lot cash in gasoline.

We have used that to spend into the beat, if you’ll. So, we’ve, , made our fuel costs somewhat bit even decrease than regular to showcase much more worth. After which we have taken that fuel revenue and invested it somewhere else within the enterprise. So, take into consideration serving to our members by way of these inflationary instances.

Contained in the enterprise, we have used fuel income to fund investments in value contained in the constructing. We have carried out an amazing quantity of incremental advertising this 12 months that we have by no means carried out earlier than, each making an attempt to incent buying habits, but additionally buying new members as we go. And it is allowed us an amazing quantity of freedom to check issues that we have by no means carried out earlier than with out type of financial penalties, if you’ll. And that is been the purpose, , for years, proper? You have heard of each of my predecessors speak about spending into the beat, and it is one thing we’ll proceed to do, whether or not we’re beating contained in the field or in fuel or wherever we do.

It is type of a core a part of our technique and dovetails properly with once you’re making an attempt to indicate worth to the members every single day.

Chuck GromGordon Haskett Analysis Advisors — Analyst

Yeah, very good. My follow-up query is simply on the comp, and I am simply questioning in case you may possibly unpack the acceleration on a three-year foundation from the second quarter to the third quarter, which it appears to be like prefer it’s about 300 foundation factors? After which wanting forward, in case you do, say, a 4.5% comp within the fourth quarter, that suggests an actual massive drop sequentially relative to the third quarter, near about 1,000 foundation factors. So, simply curious like the choice elements behind that comp assumption for 4Q.

Bob EddyPresident and Chief Government Officer

Yeah, it is a good query. Perhaps I will begin, and Laura can pile on. , we had an amazing quarter, in our view, within the third quarter, far exceeding what we have — what we thought. There was somewhat little bit of inflation.

So, inflation positively ticked up 3Q over 2Q. Not an amazing quantity, however definitely was there, and it was continued acceleration in our members’ buying behaviors. , after we began this 12 months, we thought 3Q can be adverse comp given what occurred final 12 months. And I imply that in type of the EBT funding sense, the sort of authorities stimulus sense, and the habits change we noticed in 3Q final 12 months was a dramatic pull ahead of primarily our sundries enterprise, however a few of our — the remainder of our grocery enterprise as properly.

As we have gone by way of the 12 months, probably the greatest issues that we have seen is the will increase in buying habits in all of our revenue cohorts, as I talked about earlier, however most notably on the backside of the home. , in our previous information, we have seen an amazing linkage between will increase and reduces in federal EBT budgets and what these people really did. So, in instances the place budgets contracted, their buying behaviors contracted. We’ve got not seen that this 12 months.

And, , as I mentioned earlier, the gross sales per member and journeys per member in every of our cohorts has gone up. I believe that is an amazing story about worth. I believe we’ve satisfied that lower-end client of our proposition, and they’re utilizing completely different {dollars} right now than what they get from the federal government as a result of they consider our price story. They consider that we’re saving them cash.

And we’re. So, that, I believe, is absolutely the actual story behind the third quarter efficiency. It was over our expectations, for certain. I do not know that that slows down in 4Q.

However, as our opponents have famous and I talked about earlier, our GM efficiency was somewhat bit comfortable within the third quarter, and you have got a tricky market on the market, and GM turns into an even bigger piece of our enterprise within the fourth quarter. So, you are completely right. The steerage that we have on the market, , comps within the 4 to 5 vary for 4Q would suggest a good decel. I hope that does not occur.

We’ll see what we find yourself with. We’re definitely working onerous to do what we will from our common merchandise enterprise, and we are going to capitalize on the nice well being of our grocery enterprise. That enterprise we’ve no points. And it is comping fairly properly.

And, , our efficiency has been good right here within the opening weeks of 4Q as properly. , a whole lot of that’s market share, proper? We have been gaining market share all 12 months lengthy, each in fuel and in our grocery enterprise. And I do not see that, , slowing down in any respect. The opposite level I’d throw on the market which factored into our considering was we’ll begin lapping among the inflation we noticed final 12 months.

So, you are going to have somewhat little bit of a base impact approaching in 4Q. However we’re very bullish on our prospects in 4Q. I believe we’ll do properly and hopefully do properly within the subsequent 12 months as properly.

Chuck GromGordon Haskett Analysis Advisors — Analyst

Nice. Thanks lots. Glad Thanksgiving.

Bob EddyPresident and Chief Government Officer

You, too.


The following query comes from Mark Carden from UBS. Mark, your line is open. Please go forward.

Mark CardenUBS — Analyst

Good morning. Thanks lots for taking my questions. So, to begin, simply given the present inflationary atmosphere and what your two largest warehouse opponents have carried out up to now, has there been any modifications to the way you’re occupied with the pacing in your subsequent membership charge enhance? Thanks.

Bob EddyPresident and Chief Government Officer

Hello, I am Mark. Thanks for being on the decision right now and thanks for the query. , we have not given an amazing quantity of thought to a charge enhance at this level for 2 causes. One, our largest competitor hasn’t carried out it but, and we might not do it until they do it.

And two, we talked in regards to the co-brand transition. That’s an important factor we are going to do subsequent 12 months, is get that proper. And I do not wish to mess that up with a charge enhance. And so, I believe, at a minimal, we’re ready till each of these two issues occur.

And, , as soon as they do and the type of the smoke clears, we’ll determine what we are going to do. , the one factor we have not talked about up to now is the {dollars} per member we’re seeing. Already, over the previous few years, we have already seen the impact of a charge enhance, proper? The common {dollars} per member is properly over 60 bucks at this level. It is up about $5 in the previous few years.

So, we have blended our enterprise as much as actually appear like it has had a charge enhance after we have not modified the sticker value to our members. So, it is type of an unappreciated factor that we have been in a position to do over the previous few years. And our membership staff has carried out a implausible job doing that.

Mark CardenUBS — Analyst

That is sensible. And possibly a little bit of a follow-up to that. How are you occupied with premium penetration within the present atmosphere? Right this moment, it looks like you will have a whole lot of momentum there. However would you count on buyers to improve much less regularly if a few of these present financial pressures proceed with simply getting thicker shock, if the market upgrades any extra aggressively? Simply how are you occupied with that?

Bob EddyPresident and Chief Government Officer

I believe that comes again to worth, and we glance to supply excellent worth every single day. It additionally involves one of many core causes we’re doing the co-brand transition, proper? That’s — that has been the fastest-growing a part of our premium-tier memberships through the years. And with the brand new worth prop that we’ll announce in January, we solely count on that to get higher. So, as Invoice talked about, we’ll in all probability pause on the expansion in This fall given the federal legal guidelines round what we’ve to do round a card transition, we’ve to cease buying and type of must put down our pencils for somewhat bit.

However as soon as we get the conversion carried out, I count on that the thrill round this program will actually assist us develop premium-tier memberships fairly properly sooner or later.

Mark CardenUBS — Analyst

Nice. Thanks a lot and good luck.

Bob EddyPresident and Chief Government Officer

Thanks, Mark.


The following query comes from Rupesh Parikh from Oppenheimer. Rupesh, your line is open. Please go forward.

Rupesh ParikhOppenheimer and Firm — Analyst

Good morning. Thanks for taking my query and in addition congrats on a pleasant quarter. So, simply on the meals inflation entrance, as you guys look out for the stability of the 12 months and into subsequent 12 months, it sounds such as you count on moderation. Any sense, whether or not it moderates to, , I suppose, low-single-digit-type ranges or simply any ideas when it comes to the way you see it taking part in out at this level?

Bob EddyPresident and Chief Government Officer

Yeah. Thanks, Rupesh. It is a good query. I am unsure I’ve an ideal reply.

We have definitely seen a ton of inflation this 12 months, as all people is aware of. And we’ve seen somewhat little bit of moderation within the third quarter, as Laura talked about within the ready remarks. It is actually coming in pockets, however I’d inform you, on a common foundation, we’re seeing much less inflation right now than we have been seeing three months in the past, for certain. I do not know what occurs from right here.

, as we speak to our provider companions, they proceed to point their want to lift costs, significantly these with very robust model names or market shares. And, , among the commodities are nonetheless above the place they have been final 12 months. And I do not know that people have handed by way of all of that enhance. So, I believe, , we have a wait-and-see strategy on it.

We’re working proactively with our provider companions to keep away from any additional value will increase. And I believe it is — as , it is unhealthy for that for everyone. So, we would prefer to forestall that, however I am unsure we’ll achieve success. And we are going to proceed to do what we have carried out all 12 months and put money into value, be sure we’ve the correct worth.

And, , we cannot let something stand in the best way of that. And I might be remiss if I did not thank our merchandising staff for what they’ve carried out this 12 months. I believe they’ve carried out an impressive job managing double-digit inflation in an atmosphere that many people have not actually lived by way of within the enterprise sense previously. So, our staff has carried out properly.

We’ll proceed to do these issues properly going ahead. And, , whether or not we see, , 10 factors extra inflation or two factors extra inflation, I believe the corporate is very well set as much as develop.

Rupesh ParikhOppenheimer and Firm — Analyst

Nice. After which possibly only one follow-up query, with reference to subsequent 12 months, , I do know you guys have the large headwind associated to gas. Was your commentary earlier that you simply hope with among the margin headwinds that you will be lapping subsequent 12 months that possibly — between the headwinds and, , that will change into tailwinds that might assist to make, , gas impartial from an EPS perspective? Is that what you have been making an attempt to convey earlier?

Bob EddyPresident and Chief Government Officer

Rupesh, I do not suppose we will get again to flat, proper? We have got an amazing fuel tailwind this 12 months. We have got different headwinds this 12 months that we have talked about. And a few of them are virtually the identical factor, proper? I take into consideration the price of diesel gas working by way of our provide chain. , we have each headwinds and tailwinds on this 12 months, however the fuel revenue headwind has been greater than every other tailwinds, proper? So, as we take into consideration subsequent 12 months, it appears to be like onerous to create that very same degree of gasoline revenue subsequent 12 months.

That does not imply we cannot have a few of these headwinds flipped to tailwinds, proper? If diesel goes down, we can have an amazing tailwind subsequent 12 months from a margin perspective. There are different issues underneath the covers as properly that ought to assist. However at this level, as we’re modeling subsequent 12 months, we don’t see us getting again to our full 12 months EPS that we’ll put up this 12 months. I do not suppose we’ll be too far-off from it both.

However I do not see us getting flat at this level.

Rupesh ParikhOppenheimer and Firm — Analyst

OK, nice. Thanks for all the colour.

Bob EddyPresident and Chief Government Officer

You guess.


The following query comes from Paul Lejuez from Citi. Paul, your line is open. Please go forward.

Brandon CheathamCiti — Analyst

Hey, everybody, that is Brandon Cheatham on for Paul. I might like to return to the commentary in regards to the, , revenue cohorts. It feels like your low-income client was significantly robust in 3Q. And I believe that is a change from the second quarter.

, I believe you all mentioned the higher-income client was actually the intense spot. So, I am simply questioning, , did you see sort of an inflection within the lower-income client cohort habits? , are you gaining extra share of pockets? That is sort of what it feels like. However any class or something that you simply all are doing or speaking that sort of actually drove that inflection.

Bob EddyPresident and Chief Government Officer

Yeah. Good morning, Brandon. Thanks for that query. , we have seen development in all of our [Audio gap] this 12 months, as we have talked about.

, the start of the 12 months, we have been seeing a ton of higher-income people come into the enterprise or purchase extra. We’re nonetheless seeing that. We’re additionally seeing good buying habits out of our lower-income cohorts. And that is been the actual story for us, proper? In each different down market, we have seen the higher-income cohorts are available in and try to seek for worth.

And as I talked about earlier, we’re seeing lower-income cohorts type of commerce out or commerce down as EBT budgets dried up. That definitely has not occurred this 12 months. They’ve carried out very, very properly and proceed to. And I believe they’ll proceed to.

So, we’re very pleased with how we see our buying behaviors going. Each higher- and lower-income cohorts are displaying us very wholesome behaviors, and we’re wanting ahead to that persevering with. I believe the rationale why they’re scratching after is worth, proper? We’re displaying the most effective pricing that we have ever proven to people. We’re displaying higher costs than a few of our opponents.

And persons are believing it. We have got some credibility with our members as we proceed to prioritize worth in every little thing we do. So, we’ll proceed to do this, and hopefully, they proceed to reward us.

Brandon CheathamCiti — Analyst

Bought it. And one observe up, if I’ll, on digital gross sales, , looks like a significant driver of comp today. Something completely different about how the buyer engages with you? , what share of your members are buying with you digitally? And is there something to name out on the margin facet from, , the digital gross sales enterprise? Thanks.

Bob EddyPresident and Chief Government Officer

Yeah. Thanks for bringing that up. We’ve not talked about digital all day. It has been a rising a part of our enterprise through the years.

For those who bear in mind the longer-term story, , 4 years in the past or so, we did not actually have a digital enterprise to talk of, and we have spent a bunch of time constructing the infrastructure. And lo and behold, now, we’re properly over $1 billion and type of [Inaudible] of our enterprise. , our members are actually reacting to that, most significantly within the BOPIC and curbside elements of our enterprise, the place we’re actually saving them time, proper? Our purpose is to avoid wasting individuals — so to avoid wasting individuals cash. , we preserve going again to worth.

Nevertheless it’s additionally to avoid wasting our members time. If I can, , have them not spend time strolling round our golf equipment, throwing issues of their basket for his or her routine retailers, that is nice. We nonetheless wish to get them within the golf equipment for his or her opportunistic retailers. However we have not seen that habits fall off both.

We’ve got, , carried out issues like our specific pay merchandise, the place you possibly can skip the traces. In case you are in our golf equipment, you take a look at in your cellphone. That saves you 10 minutes. It has been fairly standard.

We have additionally modified the best way that we market and promote from a digital perspective. So, an enormous quantity of our member acquisition is now coming digital, whereas three or 4 years in the past, I’d inform you that was a zero or near it. And, , 5 years in the past, we have been anxious about the truth that our major promotional product was paper coupons and, , no person loves paper coupons. So, now, properly over two-thirds — I believe possibly three-quarters of our promotion is completed digitally.

You click on your coupons on our app or on-line versus clipping the paper. So, we have made large strides each in product promotion and comfort as we have invested in digital. And we’ll proceed to do this. The members that have interaction with us digitally are our greatest members.

They store with us most frequently. They purchase extra once they achieve this. And so they — , they are surely beginning to show the case to us on the mixture of saving individuals money and time. And, , each of these are necessary elements of the worth equation for our members.

So, we’ll proceed to make investments in our digital properties. And I consider that our members will reward us for doing that as properly.

Brandon CheathamCiti — Analyst

Admire it. Good luck with all that.

Thanks, Brandon.


[Operator signoff]

Period: 0 minutes

Name contributors:

Cathy ParkVice President, Investor Relations

Bob EddyPresident and Chief Government Officer

Laura FeliceChief Monetary Officer

Mike BakerD.A. Davidson — Analyst

Edward KellyWells Fargo Securities — Analyst

Invoice WernerGovernment Vice President, Technique and Improvement

Robbie OhmesFinancial institution of America Merrill Lynch — Analyst

Peter BenedictRobert W. Baird and Firm — Analyst

Chuck GromGordon Haskett Analysis Advisors — Analyst

Mark CardenUBS — Analyst

Rupesh ParikhOppenheimer and Firm — Analyst

Brandon CheathamCiti — Analyst

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