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What changed in BJ's Wholesale Club Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BJ's Wholesale Club Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+285 added−277 removedSource: 10-K (2023-03-16) vs 10-K (2022-03-17)

Top changes in BJ's Wholesale Club Holdings, Inc.'s 2023 10-K

285 paragraphs added · 277 removed · 237 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+7 added−5 removed54 unchanged
Biggest changeHe holds a Juris Doctor from Boston University School of Law and bachelor’s degrees in Political Science and Electrical Engineering from Tufts University. 13 Monica Schwartz 47 Monica Schwartz has served as our Executive Vice President, Chief Digital Officer since October 2021 and is responsible for driving the Company’s vision and strategy for its e-commerce and omnichannel efforts.
Biggest changeMonica Schwartz 48 Monica Schwartz has served as our Executive Vice President, Chief Digital Officer since October 2021 and is responsible for driving the Company’s vision and strategy for its e-commerce and omnichannel efforts. She joined the Company in August 2020 and previously served as our Senior Vice President, Chief Digital Officer from August 2020 to October 2021. Ms.
We take the health and wellness of our team members seriously. We provide our eligible team members with access to a variety of innovative, flexible and convenient health and wellness programs. Additionally, the Company provides resources, such as an onsite chiropractor, a health clinic and a fitness center for team members.
We take the health and wellness of our team members seriously. We provide our eligible team members with access to a variety of innovative, flexible and convenient health and wellness programs. Additionally, the Company provides resources, such as an onsite chiropractor, a health clinic and access to a fitness center for team members.
By operating no-frills, self-service warehouse facilities, warehouse clubs have fixturing and operating costs substantially below those of traditional retailers. Because of their higher sales volumes and rapid inventory turnover, warehouse clubs generate cash from the sale of a large portion of their inventory before they are required to pay merchandise vendors.
By operating no-frills, self-service warehouse facilities, warehouse clubs have fixturing 7 and operating costs substantially below those of traditional retailers. Because of their higher sales volumes and rapid inventory turnover, warehouse clubs generate cash from the sale of a large portion of their inventory before they are required to pay merchandise vendors.
Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products are subject to regulation by various federal agencies, including the Food and Drug Administration (the "FDA"), the Federal Trade Commission (the "FTC"), the U.S. Department of Agriculture (the "USDA"), the Consumer Product Safety Commission and the Environmental Protection Agency.
Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products are subject to regulation by various federal agencies, including the Food and Drug Administration (the 10 "FDA"), the Federal Trade Commission (the "FTC"), the U.S. Department of Agriculture (the "USDA"), the Consumer Product Safety Commission and the Environmental Protection Agency.
We buy most of our merchandise directly from manufacturers and route it to cross-docking consolidation points (distribution centers) or directly to our clubs. Our company-operated and contracted distribution centers receive large shipments from manufacturers and quickly ship these goods to individual clubs, generally within 24 hours.
We buy most of our merchandise directly from manufacturers and route it to cross-docking consolidation points (distribution centers) or directly to our clubs. Our company-operated distribution centers receive large shipments from manufacturers and quickly ship these goods to individual clubs, generally within 24 hours.
We rely on contractual provisions to ensure compliance by our vendors. 9 See "Item 1A. Risk Factors" for a discussion of material risks to us, including, to the extent material, to our competitive position, relating to governmental regulations, and see "Item 7.
We rely on contractual provisions to ensure compliance by our vendors. See "Item 1A. Risk Factors" for a discussion of material risks to us, including, to the extent material, to our competitive position, relating to governmental regulations, and see "Item 7.
Werner was a Director in the Deals practice at PricewaterhouseCoopers LLP, a multinational professional services firm, from 2007 to 2012. He holds a bachelor’s degree with a double major in Mathematics and Accounting from the College of the Holy Cross.
Werner was a Director in the Deals practice at PricewaterhouseCoopers LLP, a multinational professional services firm, from 2007 to 2012. He holds a bachelor’s degree with a double major in Mathematics and Accounting from the College of the Holy Cross. 14
In addition, the SEC maintains an internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).
In addition, the 12 SEC maintains an internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).
These changes continue to delivered results rapidly, evidenced by year-over-year income from continuing operations growth, consecutive quarter comparable club sales growth over the last three years and adjusted EBITDA growth over the last three years. Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee.
These changes continue to delivered results rapidly, evidenced by year-over-year income from continuing operations growth, consecutive quarter comparable club sales growth and adjusted EBITDA growth over the last four years. Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee.
Our two private label brands, Wellsley Farms ® and Berkley Jensen ® , represent over $3.0 billion in annual sales, and are the largest brands we sell in terms of volume. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth.
Our two private label brands, Wellsley Farms ® and Berkley Jensen ® , represent over $3.7 billion in annual sales, and are the largest brands we sell in terms of volume. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth.
Including space for parking, the amount of land required for a BJ’s club generally ranges from eight acres to approximately fourteen acres. Our clubs are located in both free-standing locations and shopping centers. Our ability to achieve profitable operations depends upon high sales volumes and the efficient operation of our warehouse clubs.
Including space for parking, the amount of land required for a BJ’s club generally ranges from ten acres to approximately fourteen acres. Our clubs are located in both free-standing locations and shopping centers. Our ability to achieve profitable operations depends upon high sales volumes and the efficient operation of our warehouse clubs.
Advertising and Public Relations We promote customer awareness of our clubs primarily through social media, direct mail, public relations efforts, radio advertising, community involvement, new club marketing programs and various publications sent to our members periodically throughout the year. These methods result in low marketing expenses compared to typical retailers.
Advertising and Public Relations We promote customer awareness of our clubs primarily through social media, direct mail, public relations efforts, radio advertising, community involvement, new club marketing programs and various publications sent to our members periodically throughout the year. These methods result in lower marketing expenses compared to typical retailers.
The above digital portfolio offers our members convenient ways to shop, including our BOPIC service, curbside delivery, same day home delivery or traditional ship-to-home service. Our app delivers personalized promotions, improved shopping experiences, and an efficient gateway to our fulfillment options.
The above omnichannel portfolio offers our members convenient ways to shop, including our BOPIC service, curbside delivery, same-day home delivery or traditional ship-to-home service. Our app delivers personalized promotions, improved shopping experiences, and an efficient gateway to our fulfillment options.
Scott Kessler 55 Scott Kessler has served as our Executive Vice President, Chief Information Officer since May 2017 and is responsible for information technology, including ensuring that the Company has the technology, systems and people in place to support the Company’s transformation.
Scott Kessler 56 Scott Kessler has served as our Executive Vice President, Chief Information Officer since May 2017 and is responsible for information technology, including ensuring that the Company has the technology, systems and people in place to support the Company’s transformation.
Kessler was Senior Vice President, Products Technology at GSI Commerce, Inc., a technology and services company, from 2004 to 2013. Mr. Kessler holds a Master of Business Administration and a bachelor’s degree from Fairleigh Dickinson University. Graham N. Luce 52 Graham N.
Kessler was Senior Vice President, Products Technology at GSI Commerce, Inc., a technology and services company, from 2004 to 2013. Mr. Kessler holds a Master of Business Administration and a bachelor’s degree from Fairleigh Dickinson University. Graham N. Luce 53 Graham N.
She holds a Master of Accounting and a bachelor’s degree with a double major in Finance and Accounting from Boston College. 12 Paul Cichocki 52 Paul Cichocki has served as our Executive Vice President, Chief Commercial Officer since April 2021 and oversees merchandising, membership, marketing and analytics. From April 2020 to April 2021, Mr.
She holds a Master of Accounting and a bachelor’s degree with a double major in Finance and Accounting from Boston College. Paul Cichocki 53 Paul Cichocki has served as our Executive Vice President, Chief Commercial Officer since April 2021 and oversees merchandising, membership, marketing and analytics. From April 2020 to April 2021, Mr.
Primary members may purchase up to three supplemental memberships for $30 each. A primary business membership costs $55 per year and includes one free supplemental membership. Business members may purchase up to eight additional supplemental business memberships at $30 each.
Primary members may purchase up to three supplemental memberships for $30 each. A primary business membership typically costs 9 $55 per year and includes one free supplemental membership. Business members may purchase up to eight additional supplemental business memberships at $30 each.
Training and development programs for our team members help retain and advance them into future roles with the company. We provide online and on-the-job training through innovative delivery tools which are easy to use and focused on the core skills needed to be successful at BJ’s Wholesale Club.
Training and development programs for our team members help retain and advance them into future roles with the company. We provide online and on-the-job training through innovative delivery tools which are easy to use and focused on the core skills needed to be successful at the Company.
He is also a graduate from the University of Massachusetts, where he received a bachelor’s degree in operations management with high honors. Jeff Desroches 45 Jeff Desroches joined BJ's in 2001 and has served as our Executive Vice President, Chief Operations Officer since April 2018. As Executive Vice President, Chief Operations Officer, Mr.
He is also a graduate from the University of Massachusetts, where he received a bachelor’s degree in operations management with high honors. 13 Jeff Desroches 46 Jeff Desroches joined BJ's in 2001 and has served as our Executive Vice President, Chief Operations Officer since April 2018. As Executive Vice President, Chief Operations Officer, Mr.
We monitor changes in these laws and believe that we are in material compliance with applicable laws. 10 Seasonality Our business is moderately seasonal in nature.
We monitor changes in these laws and believe that we are in material compliance with applicable laws. 11 Seasonality Our business is moderately seasonal in nature.
Item 1. Business General BJ’s Wholesale Club is a leading warehouse club operator concentrated primarily on the east coast of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors.
Item 1. Business General BJ’s Wholesale Club is a leading warehouse club operator concentrated primarily on the eastern half of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors .
We generally maintain our gas prices below the average retail prices in each market as a means of illustrating a favorable price image to existing and prospective members. Omnichannel Offering We have built a robust digital portfolio which consists of BJs.com, BerkleyJensen.com, Wellsleyfarms.com, Delivery.bjs.com as well as the BJ’s mobile app.
We generally maintain our gas prices below the average retail prices in each market as a means of illustrating a favorable price image to existing and prospective members. Omnichannel Offerings We have built a robust omnichannel portfolio which consists of BJs.com, BerkleyJensen.com, Wellsleyfarms.com, as well as the BJ’s mobile app.
In addition to providing a source of revenue which permits us to offer low prices, membership reinforces customer loyalty. We have a large base of more than six million paid memberships as of January 29, 2022. Our target customers care about value, quality and convenience and shop at warehouse clubs for their family needs.
In addition to providing a source of revenue which permits us to offer low prices, membership reinforces customer loyalty. We have a large base of more than six and a half million paid memberships as of January 28, 2023. Our target customers care about value, quality and convenience and shop at warehouse clubs for their family needs.
In our core New England markets, which have high population density and generate a disproportionate part of U.S. gross domestic product ("GDP"), we operate almost three times the number of clubs compared to the next largest warehouse club competitor.
In our New England markets, which have high population density and generate a disproportionate part of U.S. gross domestic product ("GDP"), we operate more than three times the number of clubs compared to the next largest warehouse club competitor.
Werner 44 William C. Werner has served as our Executive Vice President, Strategy and Development since April 2021 and is responsible for building the Company’s market expansion and key strategic initiatives. Previously, Mr.
Werner has served as our Executive Vice President, Strategy and Development since April 2021 and is responsible for building the Company’s market expansion and key strategic initiatives. Previously, Mr.
Specialty services include full-service optical centers; tire installation services; a propane tank filling service; home improvement services; travel services; cell phone kiosks; and product protection plans. As of January 29, 2022, we had 157 gasoline stations in operation at or near our clubs. The gas stations are generally self-service, with some locations accepting cash.
Specialty services include full-service optical centers; tire installation services; a propane tank filling service; home improvement services; travel services; cell phone kiosks; and product protection plans. As of January 28, 2023, we had 164 gasoline stations in operation at or near our clubs. The gas stations are generally self-service, with some locations accepting cash.
We have more than six million members paying annual fees to gain access to savings on groceries and general merchandise and services. The annual membership fee for our Inner Circle ® membership is $55, and the annual membership fee for our BJ’s Perks Rewards ® membership, which offers additional value-enhancing features, is $110.
We have more than six and a half million members paying annual fees to gain access to savings on groceries and general merchandise and services. The annual membership fee for our Inner Circle ® membership is generally $55, and the annual membership fee for our BJ’s Club+ (formerly Perks Rewards ®) membership, which offers additional value-enhancing features, is generally $110.
We group our merchandise offerings into two divisions: grocery and general merchandise and services. • Grocery: consists of our meat, produce, dairy, bakery, deli and frozen products, packaged foods, beverages, detergents, disinfectants, paper products, beauty care, adult and baby care and pet foods, which constituted approximately 83% of our merchandise sales for fiscal year 2021. • General merchandise and services: consist of optical, tires, small appliances, televisions, electronics, seasonal goods, gift cards, and apparel, which constituted approximately 17% of our merchandise sales for fiscal year 2021.
We group our merchandise offerings into two divisions: grocery and general merchandise and services. • Grocery: consists of our meat, produce, dairy, bakery, deli and frozen products, packaged foods, beverages, detergents, disinfectants, paper products, beauty care, adult and baby care and pet foods, which constituted approximately 85% of our merchandise sales for fiscal year 2022. • General merchandise and services: consists of optical, tires, small appliances, televisions, electronics, seasonal goods, gift cards, and apparel, which constituted approximately 15% of our merchandise sales for fiscal year 2022.
We strive to foster a work environment that includes and embraces diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience. As of the end of fiscal year 2021, 45% of our total workforce were women and 48% were minorities.
We strive to foster a work environment that includes and embraces diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience. As of the end of fiscal year 2022, 43% of our total workforce were women and 55% were minorities.
Information About our Executive Officers The following are the executive officers of BJ’s Wholesale Club as of March 17, 2022: Name Age Office and Business Experience Robert W. Eddy 49 Robert W. Eddy has served as President and Chief Executive Officer of the Company and as a member of our Board of Directors since April 2021. Mr.
Information About our Executive Officers The following are the executive officers of BJ’s Wholesale Club as of March 16, 2023: Name Age Office and Business Experience Robert W. Eddy 50 Robert W. Eddy has served as President and Chief Executive Officer of the Company and as a member of our Board of Directors since April 2021. Mr.
During fiscal year 2021, 42% of our new hires were women and 47% of our new hires were minorities. We have a zero-tolerance policy on discrimination and harassment and have several systems under which team members can report incidents confidentially or anonymously and without fear of reprisal.
During fiscal year 2022, 41% of our new hires were women and 66% of our new hires were minorities. We have a zero-tolerance policy on discrimination and harassment and have several systems under which team members can report incidents confidentially or anonymously and without fear of reprisal.
Employees and Human Capital Resources As of January 29, 2022, we had approximately 34,000 full-time and part-time employees, whom we refer to as team members. None of our team members are represented by a union. We consider our relations with our team members to be good. Team Member Engagement .
Employees and Human Capital Resources As of January 28, 2023, we had over 34,000 full-time and part-time employees, whom we refer to as team members. None of our team members are represented by a union. We consider our relations with our team members to be good. Team Member Engagement .
BJ’s consumer-focused private label products, sold under Wellsley Farms ® and Berkley Jensen ® brands, comprised approximately 23% of our total merchandise sales in fiscal year 2021. These products are primarily premium quality and generally are priced below the branded competing product.
BJ’s consumer-focused private label products, sold under Wellsley Farms ® and Berkley Jensen ® brands, comprised approximately 24% of our total net sales, excluding gasoline, in fiscal year 2022. These products are primarily premium quality and generally are priced below the branded competing product.
Our leadership team continues to implement significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ’s more convenient.
Our leadership team continues to focus on transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ’s more convenient.
A summary of our club locations by market as of January 29, 2022 is set forth in the table below: Market Club Count New York 46 Florida 34 Massachusetts 25 New Jersey 23 Pennsylvania 18 Connecticut 13 Virginia 13 Maryland 12 North Carolina 9 New Hampshire 7 Ohio 6 Georgia 5 Delaware 4 Michigan 4 Maine 3 Rhode Island 3 South Carolina 1 Segments Our retail operations, which include retail club and other sales procured from our clubs and DC’s, represent substantially all of our consolidated total revenues, are our only reportable segment.
A summary of our club locations by market as of January 28, 2023 is set forth in the table below: Market Club Count New York 47 Florida 35 Massachusetts 25 New Jersey 24 Pennsylvania 19 Virginia 14 Connecticut 13 Maryland 12 North Carolina 9 New Hampshire 7 Ohio 7 Georgia 5 Michigan 5 Delaware 4 Rhode Island 4 Maine 3 South Carolina 1 Indiana 1 Segments Our retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of our consolidated total revenues, are our only reportable segment.
We also offer our co-branded My BJ’s Perks ® Mastercard ® credit cards. These cards provide members with the opportunity to earn up to 5% cash back on purchases made at our clubs or online at bjs.com and a 10-cent per gallon discount on gasoline when paying with a My BJ’s Perks Mastercard ® at our BJ’s Gas locations.
We are also launching our new BJ's One™ and BJ's One+™ Mastercard® credit cards (formerly the My BJ’s Perks® program) These cards provide members with the opportunity to earn up to 5% cash back on purchases made at our clubs or online at bjs.com and up to a 15-cent per gallon discount on gasoline when paying with a BJ's One™ or BJ's One+™ Mastercard® at our BJ’s Gas locations.
Customers at warehouse clubs are generally limited to members who pay an annual fee. 6 Our Clubs As of January 29, 2022, we operated 226 clubs ranging in size from 63,000 square feet to 163,000 square feet. We aim to locate our larger clubs in high density, high traffic locations that are difficult to replicate.
Customers at warehouse clubs are generally limited to members who pay an annual fee. Our Clubs As of January 28, 2023, we operated 235 clubs ranging in size from 44,000 square feet to 177,000 square feet. We aim to locate our larger clubs in high density, high traffic locations that are difficult to replicate.
In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our buy-online-pickup-in-club ("BOPIC") service, curbside delivery, same day home delivery or traditional ship-to-home service.
In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our buy-online-pickup-in-club ("BOPIC") service, curbside delivery, same-day home delivery or traditional ship-to-home service, as well as through the DoorDash and Instacart marketplaces where members receive preferential pricing by linking their membership.
U.S. military personnel—active and veteran—who enroll at a BJ’s club location can do so for a reduced membership fee. 8 BJ’s Perks Rewards ® , our higher tier of membership, offers members the opportunity to earn 2% cash back on most in-club and bjs.com purchases. The annual fee for a BJ’s Perks Rewards membership is $110 per year.
U.S. military personnel—active and veteran—who enroll at a BJ’s club location can do so for a reduced membership fee. We are currently rebranding our higher tier membership from BJ’s Perks Rewards® to Club+, which offers members the opportunity to earn 2% cash back on most in-club and bjs.com purchases and 5-cent per gallon discount on gasoline.
Eddy currently serves as a member of the Board of Directors and Executive Committee of the National Retail Federation. From 2013 to 2017, Mr. Eddy chaired the Financial Executives Council of the National Retail Federation. He is also a member of the College Advisory Board for Babson College. Laura L. Felice 40 Laura L.
Eddy currently serves as a member of the Board of Directors and Executive Committee of the National Retail Federation. From 2013 to 2017, Mr. Eddy chaired the Financial Executives Council of the National Retail Federation.
On July 2, 2018, BJ’s Wholesale Club Holdings, Inc. became a publicly traded entity in connection with its IPO and listing on the New York Stock Exchange ("NYSE") under the ticker symbol "BJ." We make available on our website (http://www.bjs.com), or through a link posted on our website, free of charge, our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC").
We make available on our website (http://www.bjs.com), or through a link posted on our website, free of charge, our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC").
Since fiscal year 2014, we have grown co-branded Mastercard ® holders by over 800%. In fiscal year 2021, BJ’s Perks Rewards members and co-branded Mastercard ® members accounted for 35% of members and 45% of spend, compared to 31% of members and 41% of spend in fiscal year 2020.
Since fiscal year 2014, we have grown co-branded Mastercard® holders by over 900%. In fiscal year 2022, BJ’s Perks Rewards members and co-branded Mastercard® members accounted for 38% of members and 52% of merchandise spend (excludes gas and membership fee income), compared to 35% of members and 45% of spend in fiscal year 2021.
Luce has served as our Senior Vice President, General Counsel and Secretary since April 2015 and provides senior management with strategic advice on Company initiatives, complex business transactions and litigation, as well as counsel on all corporate governance-related matters. He also serves as Secretary of the Company. Prior to joining the Company, Mr.
Luce currently serves as our Executive Vice President, General Counsel and Secretary and provides senior management with strategic advice on Company initiatives, complex business transactions and litigation, as well as counsel on all corporate governance-related matters. He joined the Company in April 2015 as Senior Vice President, General Counsel and Secretary and served in that role until March 2023.
Merchandising We service our existing members and attract new members by providing a broad range of high quality, brand name and private label merchandise at prices that are consistently lower than the prices of traditional retailers, including discount retailers, supermarkets, supercenters and specialty retail operations.
We do not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented . 8 Merchandising We service our existing members and attract new members by providing a broad range of high quality, brand name and private label merchandise at prices that are consistently lower than the prices of traditional retailers, including discount retailers, supermarkets, supercenters and specialty retail operations.
Felice worked at Clarks Americas, Inc., a footwear chain, since 2008 in positions of increasing responsibility, including most recently as Senior Vice President of Finance from November 2015 to November 2016, where she led all aspects of commercial finance for the Americas region distribution channels. Additionally, Ms.
She served most recently as Senior Vice President of Finance from November 2015 to November 2016, where she led all aspects of commercial finance for the Americas region distribution channels. Additionally, Ms. Felice worked at PricewaterhouseCoopers LLP, a multinational professional services firm from 2003 to 2008.
We work closely with manufacturers to develop packaging and sizes that are best suited for selling through the warehouse club format in order to minimize handling costs and ensure value to our members.
By contrast, supermarkets normally carry an average of 40,000 SKUs, and supercenters may stock 100,000 SKUs or more. We work closely with manufacturers to develop packaging and sizes that are best suited for selling through the warehouse club format in order to minimize handling costs and ensure value to our members.
She joined the Company in August 2020 and previously served as our Senior Vice President, Chief Digital Officer from August 2020 to October 2021. Ms. Schwartz most recently served as Vice President, Online Merchandising at The Home Depot, Inc., a home improvement retailer, from December 2017 to September 2019 and was responsible for the e-commerce site and driving innovation.
Schwartz most recently served as Vice President, Online Merchandising at The Home Depot, Inc., a home improvement retailer, from December 2017 to September 2019 and was responsible for the e-commerce site and driving innovation. Prior to that, she served as the Executive Vice President of Digital at Nine West Group, a fashion retailer, from 2015 to 2017.
We limit the items offered in each product line to fast selling styles, sizes and colors, carrying approximately 7,000 core active stock keeping units ("SKUs").
We limit the items offered in each product line to fast selling styles, sizes and colors, carrying approximately 7,000 core active stock keeping units ("SKUs"). We may add additional temporary SKUs from time to time to keep up with demand, such as that created by the COVID-19 pandemic.
From 2005 to 2007, she held positions with Countrywide Financial Corporation, a financial services company, and from 1998 to 2001 she held positions with MediaHippo, an interactive media agency. She holds a Master of Business Administration at the University of California, Los Angeles Anderson School of Management and a bachelor’s degree in Fine Arts from Miami University. William C.
She holds a Master of Business Administration at the University of California, Los Angeles Anderson School of Management and a bachelor’s degree in Fine Arts from Miami University. William C. Werner 45 William C.
We provide several management and leadership programs that develop and educate our leaders so they can provide the best work environment and growth opportunities to all our team members. The COVID-19 pandemic has further reinforced the importance of a safe and healthy workforce.
We provide several management and leadership programs that develop and educate our leaders so they can provide the best work environment and growth opportunities to all our team members. Community Involvement . We have a long and proud history of investing in the communities where we live and work.
BJ’s Wholesale Club Holdings, Inc. changed its name from Beacon Holding Inc. on February 23, 2018.
Corporate Information BJ’s Wholesale Club Holdings Inc. (formerly Beacon Holding, Inc.) was incorporated on February 23, 2018.
Prior to that, she served as the Executive Vice President of Digital at Nine West Group, a fashion retailer, from 2015 to 2017. From 2014 to 2015 Ms. Schwartz served as Chief Global Digital Officer at Stuart Weitzman Holdings, LLC, a women’s footwear and handbag retailer.
From 2014 to 2015 Ms. Schwartz served as Chief Global Digital Officer at Stuart Weitzman Holdings, LLC, a women’s footwear and handbag retailer. From 2012 to 2014, she served as Executive Director, e-commerce at David Yurman Enterprises, LLC, a jewelry design company.
We have a long and proud history of investing in the communities where we live and work. BJ’s Charitable Foundation was established with the mission to enrich every community BJ’s Wholesale Club serves. The Foundation supports nonprofit organizations that primarily benefit the underprivileged in the areas of hunger prevention and education.
BJ’s Charitable Foundation was established with the mission to enrich every community BJ’s Wholesale Club serves. The Foundation supports nonprofit organizations that primarily benefit the underprivileged in the areas of hunger prevention and education. Throughout the year, the Foundation makes multiple direct donations from the Company to support food banks and pantry programs in communities that our clubs serve.
Felice worked at PricewaterhouseCoopers LLP, a multinational professional services firm from 2003 to 2008. She is a Certified Public Accountant and currently serves as a Board member, Vice-Chair and Finance Committee Chair for the Massachusetts Society of CPAs.
She is a Certified Public Accountant and currently serves as a Board member, Vice-Chair and Finance Committee Chair for the Massachusetts Society of CPAs. Ms. Felice also currently serves a a Board member of Broadstone Net Lease, LLC (NYSE: BNL).
We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities. Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 226 large-format, high volume warehouse clubs spanning 17 states.
We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services, coupon books, and promotions to deliver a differentiated shopping experience that is further enhanced by our digital capabilities.
Luce worked at Bain & Company, a management consulting firm, from 2000 to April 2015 and Goodwin Procter LLP, a global law firm, from 1995 to 2000.
Prior to jointing the Company, Mr. Luce worked at Bain & Company, a management consulting firm, from 2000 to April 2015 and Goodwin Procter LLP, a global law firm, from 1995 to 2000. He holds a Juris Doctor from Boston University School of Law and bachelor’s degrees in Political Science and Electrical Engineering from Tufts University.
From 2012 to 2014, she served as Executive Director, e-commerce at David Yurman Enterprises, LLC, a jewelry design company. Prior to that she held positions of increasing responsibility at E-bay, Inc., an e-commerce corporation, from 2007 to 2012.
Prior to that she held positions of increasing responsibility at E-bay, Inc., an e-commerce corporation, from 2007 to 2012. From 2005 to 2007, she held positions with Countrywide Financial Corporation, a financial services company, and from 1998 to 2001 she held positions with MediaHippo, an interactive media agency.
In addition, in the fourth quarter of fiscal year 2021, we launched ExpressPay ® , which allows members to skip checkout lines when they shop in club by paying with their phones. Membership Paid membership is an essential element of the warehouse club concept.
Our members appreciate the convenience of the BJ’s mobile app, as evidenced by millions of downloads since fiscal year 2019, as well as ExpressPay®, which allows members to skip checkout lines when they shop in club by paying with their phones.
Felice has served as our Executive Vice President, Chief Financial Officer since April 2021. Prior to that Ms. Felice served as Senior Vice President, Controller since November 2016 and was responsible for the integrity of our financial records. Prior to joining BJ’s, Ms.
He is also a member of the Board of Trustees of The Boston Children's Hospital and is a member of the College Advisory Board for Babson College. Laura L. Felice 41 Laura L. Felice has served as our Executive Vice President, Chief Financial Officer since April 2021. From November 2016 to April 2021, Ms.
Our membership fee income was $360.9 million for fiscal year 2021. Industry Overview Warehouse clubs offer a relatively narrow assortment of food and general merchandise items within a wide range of product categories.
See Note 1 9 , "Acquisitions" of our condensed consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding the Acquisition. Industry Overview Warehouse clubs offer a relatively narrow assortment of food and general merchandise items within a wide range of product categories.
All of our identifiable assets are located in the United States. We do not have significant sales outside the United States, nor does any customer represent more than 10% of total revenues for any period presented.
All of our identifiable assets are located in the United States.
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We may add additional temporary SKUs from time to time to keep up with demand, such as that created by the COVID-19 pandemic. 7 By contrast, supermarkets normally carry an average of 40,000 SKUs, and supercenters may stock 100,000 SKUs or more.
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Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 235 large-format, high volume warehouse clubs and 164 gas stations spanning 18 states as of fiscal year end 2022.
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Our members appreciate the convenience of the BJ’s mobile app, as evidenced by millions of downloads since fiscal year 2019. We have rolled out the ability to use state Electronic Benefit Transfer ("EBT") cards when shopping on BJs.com.
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We also launched Same-Day Select in the first quarter of fiscal year 2022, which offers BJ’s members the ability to pay a one-time fee for either unlimited or twelve same-day grocery deliveries over a one-year period.
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In response to the pandemic, the Company implemented safeguards to protect our essential team members, including increased frequency of cleaning and disinfecting, social distancing practices, face coverings, temperature screening and other measures consistent with specific regulatory requirements and guidance from health authorities.
Added
Our membership fee income ("MFI") was $396.7 million for fiscal year 2022. On May 2, 2022, the Company completed its acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics (the "Acquisition"), which brings substantially all of the end-to-end perishable supply chain in-house.
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We also implemented a vaccine mandate for all team members in the home office and field management and provided vaccine clinics for our team members. Additional safeguards included travel restrictions and remote work for team members who were able to work from home during fiscal year 2021. Community Involvement .
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In the fourth quarter of fiscal year 2022, we announced the launch of our retail media program, BJ’s Media Edge™, using Microsoft PromoteIQ. The program offers brands a comprehensive advertising solution to connect with BJ’s members. Membership Paid membership is an essential element of the warehouse club concept.
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Throughout the year, the Foundation makes multiple direct donations from the Company to support food banks and pantry programs in communities that our clubs serve. 11 Corporate Information Our principal operating subsidiary is BJ’s Wholesale Club, Inc., which was previously an independent publicly traded corporation until its acquisition on September 30, 2011 by a subsidiary of Beacon Holding Inc., a company incorporated on June 24, 2011 by investment funds affiliated with or advised by CVC Capital Partners and Leonard Green & Partners, L.P ("the Sponsors"), for the purpose of the acquisition.
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The annual fee for a Club+ membership is generally $110 per year.
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On July 2, 2018, BJ’s Wholesale Club Holdings, Inc. became a publicly traded entity in connection with its IPO and listing on the New York Stock Exchange ("NYSE") under the ticker symbol "BJ." Our principal operating subsidiary is BJ’s Wholesale Club, Inc., which is a wholly owned subsidiary of BJ's Wholesale Club Holdings.
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Felice served as Senior Vice President, Controller and was responsible for the integrity of our financial records. Before joining BJ’s, Ms. Felice worked at Clarks Americas, Inc., a British shoe manufacturer and retailer, and held positions of increasing responsibility since 2008.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

85 edited+19 added−13 removed163 unchanged
Biggest changeNevertheless, the COVID-19 pandemic, or any future pandemic, epidemic or outbreak of any other highly infection disease, may materially adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in this "Risk Factors" section, including: • a complete or partial closure of, or a decrease in member traffic at, one or more of our clubs, due to government restrictions and limitations intended to promote social distancing and contain the spread of COVID-19, which could adversely affect our net sales and operating results; • any difficulties and delays in obtaining products from our distributors and suppliers, delivering products to our clubs and adequately staffing our clubs and distribution centers, which have resulted in, and could continue to result in, an inability to maintain inventory levels and meet our members’ demands and have caused, and may continue to cause, us to seek alternative and potentially more expensive sources of supply; • a decrease in consumer discretionary spending and confidence or changes in our members’ needs, each of which could adversely affect member demand for the products we sell, result in shifts in demand to lower priced options and change the mix of products we sell, result in slower inventory turnover and greater markdowns of inventory, cause us to lose existing members and/or fail to attract new members, or otherwise materially adversely affect our net sales and operating results; • any inability to continue to provide our team members with appropriate compensation and protective measures, which could cause us to be unable to retain current or attract new team members to perform necessary functions within our clubs and distribution centers; • any spread of COVID-19 among our team members or employees of our distributors or suppliers, within a particular club, distribution center or geographical area, may necessitate that impacted clubs, distribution centers or suppliers operate with reduced staffing or be temporarily closed, which could negatively impact our business and financial condition, as well as our reputation; and • limited access to our management, support staff and professional advisors, which could decrease the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, increase our susceptibility to security breaches, or hamper our ability to comply with regulatory obligations, leading to reputational harm and regulatory issues or fines.
Biggest changeThe COVID-19 pandemic, or any future pandemic, epidemic or outbreak of any other highly infection disease, may materially adversely affect our business, financial condition and results of operations, and may have the effect of heightening many of the risks described in this "Risk Factors" section, including: • a complete or partial closure of, or a decrease in member traffic at, one or more of our clubs, due to government restrictions or the spread of disease among our team members or employees at a specific location; • any difficulties and delays in obtaining products from our distributors and suppliers, delivering products to our clubs and adequately staffing our clubs and distribution centers; • a decrease in consumer discretionary spending and confidence or changes in our members’ needs; and • any inability to continue to provide our team members with appropriate compensation and protective measures and any limited access to our management, support staff and professional advisors.
The credit agreements governing our ABL Facility and First Lien Term Loan contain covenants that restrict our, and our subsidiaries’ ability to take various actions, such as: incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; pay dividends or make other distributions on, or redeem or purchase, any equity interests or make other restricted payments; make certain acquisitions or investments; create or incur liens; transfer or sell assets; incur restrictions on the payments of dividends or other distributions from our restricted subsidiaries; alter the business that we conduct; enter into transactions with affiliates; and consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all of our assets.
The credit agreements governing our ABL Revolving Facility and First Lien Term Loan contain covenants that restrict our, and our subsidiaries’ ability to take various actions, such as: incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; pay dividends or make other distributions on, or redeem or purchase, any equity interests or make other restricted payments; make certain acquisitions or investments; create or incur liens; transfer or sell assets; incur restrictions on the payments of dividends or other distributions from our restricted subsidiaries; alter the business that we conduct; enter into transactions with affiliates; and consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all of our assets.
We have no assurances of continued supply, pricing or access to new products, and, in general, any vendor could at any time change the terms upon which it sells to us or discontinue selling to us. In addition, member demand may lead to insufficient in-stock quantities of our merchandise. Competition may adversely affect our profitability.
We have no assurances of continued supply, 15 pricing or access to new products, and, in general, any vendor could at any time change the terms upon which it sells to us or discontinue selling to us. In addition, member demand may lead to insufficient in-stock quantities of our merchandise. Competition may adversely affect our profitability.
The restrictions in the credit agreements governing our ABL Facility and First Lien Term Loan also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that could be in our interest.
The restrictions in the credit agreements governing our ABL Revolving Facility and First Lien Term Loan also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that could be in our interest.
Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation 23 or regulation affecting energy inputs, which could materially affect our profitability. Climate change could affect our ability to procure needed commodities at costs and in the quantities that we currently experience.
Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs, which could materially affect our profitability. Climate change could affect our ability to procure needed commodities at costs and in the quantities that we currently experience.
Our long-term sales and income growth are dependent, to a certain degree, on our ability to open new clubs and gasoline stations in both existing markets and new markets. Opening new clubs is expensive and involves substantial risks that may prevent us from receiving an appropriate return on that investment.
Our growth strategy to open new clubs involves risks. Our long-term sales and income growth are dependent, to a certain degree, on our ability to open new clubs and gasoline stations in both existing markets and new markets. Opening new clubs is expensive and involves substantial risks that may prevent us from receiving an appropriate return on that investment.
With respect to any third-party intellectual property that we use or wish to use in our business (whether or 20 not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms.
With respect to any third-party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms.
For example, we continue to add private label products to our assortment of product offerings at our clubs, sold under our Wellsley Farms ® and Berkley Jensen ® private labels. We generally price these private label products lower than the manufacturer branded products of comparable quality that we also offer.
For example, we continue to add private label products to our assortment of product offerings at our clubs, sold under our Wellsley Farms ® and Berkley Jensen ® private 18 labels. We generally price these private label products lower than the manufacturer branded products of comparable quality that we also offer.
If a significant amount of our goodwill and identifiable intangible assets was deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected. We are a holding company with no operations of our own, and we depend on our subsidiaries for cash.
If a significant amount of our goodwill and identifiable intangible assets was deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected. 24 We are a holding company with no operations of our own, and we depend on our subsidiaries for cash.
Also, as we continue to add gas stations to our club base and increase our sales of gasoline, our profit margins could be adversely affected. Since gasoline generates lower profit margins than the remainder of our business, we could expect to see our overall gross profit margin rates 18 decline as sales of gasoline increase.
Also, as we continue to add gas stations to our club base and increase our sales of gasoline, our profit margins could be adversely affected. Since gasoline generates lower profit margins than the remainder of our business, we could expect to see our overall gross profit margin rates decline as sales of gasoline increase.
Further, changes in the credit and capital markets, including market disruptions and interest 25 rate fluctuations, may increase the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity.
Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity.
Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets or other intellectual property. Additionally, we cannot be certain that we do not, or will not in the future, infringe on the intellectual property rights of third parties.
Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets or other intellectual property. 20 Additionally, we cannot be certain that we do not, or will not in the future, infringe on the intellectual property rights of third parties.
Accordingly, anything that would harm our 14 relationship with our members and lead to lower membership renewal rates or reduced spending by members in our clubs could materially adversely affect our net sales, membership fee income and results of operations.
Accordingly, anything that would harm our relationship with our members and lead to lower membership renewal rates or reduced spending by members in our clubs could materially adversely affect our net sales, membership fee income and results of operations.
Personal information from our members may also be placed at risk through our use of outside 22 vendors, which may have data security systems that differ from those that we maintain or are more vulnerable to breach.
Personal information from our members may also be placed at risk through our use of outside vendors, which may have data security systems that differ from those that we maintain or are more vulnerable to breach.
Under our ABL Facility and First Lien Term Loan, our operating subsidiaries are significantly restricted in their ability to pay dividends or otherwise transfer assets to us, and we expect these limitations to continue in the future.
Under our ABL Revolving Facility and First Lien Term Loan, our operating subsidiaries are significantly restricted in their ability to pay dividends or otherwise transfer assets to us, and we expect these limitations to continue in the future.
While our policies mandate compliance with these anti-bribery laws, we cannot ensure that we will be successful in preventing our team members or other agents from taking actions in violation of these laws or regulations.
While our policies mandate compliance with these anti-bribery laws, we cannot ensure that we will be successful in preventing our team members or other agents from 23 taking actions in violation of these laws or regulations.
The ABL Facility and First Lien Term Loan impose significant operating and financial restrictions on us and our subsidiaries that may prevent us from pursuing certain business opportunities and restrict our ability to operate our business.
The ABL Revolving Facility and First Lien Term Loan impose significant operating and financial restrictions on us and our subsidiaries that may prevent us from pursuing certain business opportunities and restrict our ability to operate our business.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our shareholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under any provisions of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under any provisions of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine.
The novel coronavirus ("COVID-19"), or any future pandemic, epidemic or outbreak of any other infectious disease, could have an adverse effect on our business, financial condition and results of operations.
The coronavirus ("COVID-19"), or any future pandemic, epidemic or outbreak of any other infectious disease, could have an adverse effect on our business, financial condition and results of operations.
Our leverage could expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under our ABL Facility and senior secured first lien term loan facility ("First Lien Term Loan").
Our leverage could expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under our ABL Revolving Facility and senior secured first lien term loan facility.
The terms of our existing or future debt agreements, including the First Lien Term Loan and the ABL Facility, may also restrict us from affecting any of these alternatives.
The terms of our existing or future debt agreements, including the First Lien Term Loan and the ABL Revolving Facility, may also restrict us from affecting any of these alternatives.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of the Delaware General Corporation Law (the "DGCL"), could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our shareholders, including transactions in which shareholders might otherwise receive a premium for their shares.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of the Delaware General Corporation Law (the "DGCL"), could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares.
We use a combination of insurance and self-insurance plans to provide for potential liability for workers’ compensation, general liability, property, fiduciary liability and employee and retiree health care. Liabilities associated with the risk retained by the Company are estimated based on historical claims experience and other actuarial assumptions believed to be reasonable 28 under the circumstances.
We use a combination of insurance and self-insurance plans to provide for potential liability for workers’ compensation, general liability, property, cyber, trucking liability, fiduciary liability and employee and retiree health care. Liabilities associated with the risk retained by the Company are estimated based on historical claims experience and other actuarial 28 assumptions believed to be reasonable under the circumstances.
Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws. We sourced approximately 4% of our merchandise abroad during fiscal year 2021. The U.S. Foreign Corrupt Practices Act and other similar laws and regulations generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws. We sourced approximately 4% of our merchandise abroad during fiscal year 2022. The U.S. Foreign Corrupt Practices Act and other similar laws and regulations generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
These provisions could also discourage proxy contests and make it more difficult for other shareholders to elect directors of their choosing and cause us to take corporate actions other than those our shareholders desire. 27 We are exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act.
These provisions could also discourage proxy contests and make it more difficult for other stockholders to elect directors of their choosing and cause us to take corporate actions other than those our stockholders desire. 27 We are exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act.
Certain economic conditions or events, such as a contraction in the financial markets; high rates of inflation or deflation; high unemployment levels; decreases in consumer disposable income; unavailability of consumer credit; higher consumer debt levels; higher tax rates and other changes in tax laws; higher interest rates; higher fuel, energy and other commodity costs; weakness in the housing market; higher insurance and health care costs; and product cost increases resulting from an increase in commodity prices, could reduce or shift consumer spending generally, which could cause our customers to spend less or to shift their spending to our competitors.
Certain economic conditions or events, such as a contraction in the financial markets; high rates of inflation or deflation; high unemployment levels; decreases in consumer disposable income; unavailability of consumer credit; higher consumer debt levels; higher tax rates and other changes in tax laws; higher interest rates; higher fuel, energy and other commodity costs; weakness in the housing market; higher insurance and health care costs; and product cost increases resulting from an increase in commodity prices or supply chain issues, could reduce or shift consumer spending generally, which could cause our customers to spend less or to shift their spending to our competitors.
Declines in financial performance of our operations in the New York metropolitan area could arise from, among other things, slower growth or declines in our comparable club sales; negative trends in operating expenses, including increased labor, healthcare and energy costs; failing to meet targets for club openings; cannibalization of existing locations by new clubs; shifts in sales mix toward lower gross margin products; changes or uncertainties in economic conditions in this market, including higher levels of unemployment, depressed home values and natural disasters; regional economic problems; changes in local regulations; terrorist attacks; and failure to consistently provide a high quality and well-assorted mix of products to retain our existing member base and attract new members. 19 Our growth strategy to open new clubs involves risks.
Declines in financial performance of our operations in the New York metropolitan area could arise from, among other things, slower growth or declines in our comparable club sales; 19 negative trends in operating expenses, including increased labor, healthcare and energy costs; failing to meet targets for club openings; cannibalization of existing locations by new clubs; shifts in sales mix toward lower gross margin products; changes or uncertainties in economic conditions in this market, including higher levels of unemployment, depressed home values and natural disasters; regional economic problems; changes in local regulations; terrorist attacks; and failure to consistently provide a high quality and well-assorted mix of products to retain our existing member base and attract new members.
It also includes north and central New Jersey, three counties in western Connecticut and five counties in northeastern Pennsylvania. We consider 43 of our clubs to be located in the New York metropolitan area. Any substantial slowing or sustained decline in these operations could materially adversely affect our business and financial results.
It also includes north and central New Jersey, three counties in western Connecticut and five counties in northeastern Pennsylvania. We consider 44 of our clubs to be located in the New York metropolitan area. Any substantial slowing or sustained decline in these operations could materially adversely affect our business and financial results.
We cannot assure our shareholders that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect.
We cannot assure our stockholders that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect.
Accordingly, these broad market fluctuations, as well as general economic, political and market conditions, such as recessions or interest rate changes, may significantly reduce the market price of the common stock, regardless of our operating performance. In the past, following periods of market volatility, shareholders have instituted securities class action litigation.
Accordingly, these broad market fluctuations, as well as general economic, political and market conditions, such as recessions or interest rate changes, may significantly reduce the market price of the common stock, regardless of our operating performance. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our shareholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
Although our share repurchase program is intended to enhance long-term shareholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the effectiveness of the program. Our share repurchase program may be suspended or terminated at any time without notice.
Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the effectiveness of the program. Our share repurchase program may be suspended or terminated at any time without notice.
This forum selection provision will not apply to any causes of action arising under the Securities Act of 1933, as amended, or the Exchange Act. As a shareholder in our Company, you are deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum.
This forum selection provision will not apply to any causes of action arising under the Securities Act of 1933, as amended, or the Exchange Act. As a stockholder in our Company, you are deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum.
Risks associated with our e-commerce business include, but are not limited to: uncertainties associated with our website, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches; disruptions in telecommunications service or power outages; reliance on third parties for computer hardware and software and delivery of merchandise to our customers; rapid changes in technology; credit or debit card fraud and other payment processing related issues; changes in applicable federal and state regulations; liability for online content; cybersecurity and consumer privacy concerns and regulation.
Risks associated with our e-commerce business include, but are not limited to: uncertainties associated with our website, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches; 22 disruptions in telecommunications service or power outages; reliance on third parties for computer hardware and software and delivery of merchandise to our customers; rapid changes in technology; credit or debit card fraud and other payment processing related issues; changes in applicable federal and state regulations; liability for online content; cybersecurity and consumer privacy concerns and regulation; and reliance on third parties for same-day home delivery.
Our business could be severely impacted by natural disasters, such as hurricanes, typhoons or earthquakes, or other incidents beyond our control, such as terrorism, riots, acts of violence and other crimes, particularly in locations where our centralized operating systems and administrative personnel are located.
Our business could be severely impacted by natural disasters, such as hurricanes, typhoons or earthquakes, or other incidents beyond our control, such as terrorism, war/conflict, riots, acts of violence and other crimes, particularly in locations where our centralized operating systems and administrative personnel are located.
Research analysts and shareholders may recognize and react to the foregoing changes to our key performance indicators and believe that they indicate a decline in our performance, and this could occur regardless of whether or not the underlying cause has an adverse impact on our profitability.
Research analysts and stockholders may recognize and react to the foregoing changes to our key performance indicators and believe that they indicate a decline in our performance, and this could occur regardless of whether or not the underlying cause has an adverse impact on our profitability.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance. Provisions for losses related to self-insured risks are generally based upon independent actuarially determined estimates.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance. Provisions for losses related to self-insured risks are generally based upon independent actuarial determined estimates.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders, and may prevent attempts by our shareholders to replace or remove our current management.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
We depend on vendors to supply us with quality merchandise at the right time and at the right price. We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices. We source our merchandise from a wide variety of domestic and international vendors.
We depend on vendors to supply us with quality merchandise at the right time and at the right price. We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices and in a timely fashion. We source our merchandise from a wide variety of domestic and international vendors.
We imported approximately 4% of our merchandise directly from foreign countries such as China, Vietnam, Bangladesh and India during fiscal year 2021. In addition, many of our domestic vendors purchase a portion of their products from foreign sources.
We imported approximately 4% of our merchandise directly from foreign countries such as China, Vietnam, Bangladesh and India during fiscal year 2022. In addition, many of our domestic vendors purchase a portion of their products from foreign sources.
If we issue new debt securities, the debt holders would have rights senior to common shareholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term shareholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.
We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term stockholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.
The extent to which the COVID-19 pandemic, or the future pandemic, epidemic or outbreak of any other highly infectious disease, affects our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the emergence of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
The extent to which the COVID-19 pandemic, or the future pandemic, epidemic or outbreak of any other highly infectious disease, affects our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
There can be no assurance that any share repurchases will enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock.
There can be no assurance that any share repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock.
If we issue additional equity securities, existing shareholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.
If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.
The COVID-19 pandemic, including the emergence of new variants, has caused, and could continue to cause, significant disruptions to the United States, regional and global economies and has contributed, and may continue to contribute, to 15 significant volatility and negative pressure in financial markets.
The COVID-19 pandemic, including the emergence of different variants, has caused, and could continue to cause, significant disruptions to the United States, regional and global economies and has contributed, and may continue to contribute, to significant volatility and negative pressure in financial markets.
The market price of our common stock depends on various factors that may be unrelated to our operating performance or prospects. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.
Risks Relating to Ownership of our Common Stock The market price of our common stock may fluctuate significantly. The market price of our common stock depends on various factors that may be unrelated to our operating performance or prospects. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.
These provisions include: establishing a classified board of directors such that not all members of the board are elected at one time; allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board of directors the sole power to fill any vacancy on the board; limiting the ability of shareholders to remove directors without cause; authorizing the issuance of "blank check" preferred stock by our board of directors, without further shareholder approval, to thwart a takeover attempt; prohibiting shareholder action by written consent (and, thus, requiring that all shareholder actions be taken at a meeting of our shareholders); eliminating the ability of shareholders to call a special meeting of shareholders; establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual shareholder meetings; requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our certificate of incorporation or bylaws; and electing not to be governed by Section 203 of the DGCL.
These provisions include: allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board of directors the sole power to fill any vacancy on the board; limiting the ability of stockholders to remove directors without cause; authorizing the issuance of "blank check" preferred stock by our board of directors, without further stockholder approval, to thwart a takeover attempt; prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders); eliminating the ability of stockholders to call a special meeting of stockholders; establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual stockholder meetings; requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our certificate of incorporation or bylaws; and electing not to be governed by Section 203 of the DGCL.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our financial and operational performance is dependent on our operations in the New York metropolitan area, which accounted for 23% of net sales in fiscal year 2021. The New York metropolitan area is the city and suburbs of New York City, which includes Long Island and the Mid- and Lower Hudson Valley in the state of New York.
Our financial and operational performance is dependent on our operations in the New York metropolitan area, which accounted for 21% of net sales in fiscal year 2022. The New York metropolitan area is the city and suburbs of New York City, which includes Long Island and the Mid- and Lower Hudson Valley in the state of New York.
Our comparable club sales may be adversely affected for many reasons, including new club openings by our competitors, the opening of our own new clubs that may cannibalize existing club sales, cycling against strong sales in the prior year, by new clubs entering our comparable club base and by price reductions in response to competition.
Our comparable club sales may be adversely affected for many reasons, including new club openings by our competitors, the opening of our own new clubs that may cannibalize existing club sales, cycling against strong sales in the prior year, by new clubs entering our comparable club base, by price reductions in response to competition, and by high rates of inflation or deflation.
Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, cash flows and results of operations. Factors associated with climate change could adversely affect our business. We use natural gas, diesel fuel, gasoline and electricity in our distribution and sale operations.
Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, cash flows and results of operations. Factors associated with climate change could adversely affect our business. We use natural gas, propane, diesel oil, refrigerants and electricity in our distribution and sale operations.
We cannot assure our shareholders that the cash flow and earnings of our operating subsidiaries will be adequate 24 for our subsidiaries to service their debt obligations.
We cannot assure our stockholders that the cash flow and earnings of our operating subsidiaries will be adequate for our subsidiaries to service their debt obligations.
Goodwill and identifiable intangible assets represent a significant portion of our total assets, and any impairment of these assets could adversely affect our results of operations. Our goodwill and indefinite-lived intangible assets, which consist of goodwill and our trade name, represented a significant portion of our total assets as of January 29, 2022.
Goodwill and identifiable intangible assets represent a significant portion of our total assets, and any impairment of these assets could adversely affect our results of operations. Our goodwill and indefinite-lived intangible assets, which consist of goodwill and our trade name, represented a significant portion of our total assets as of January 28, 2023.
Typically, a large portion of a club’s operating expense is the cost associated with leasing the location. We are typically responsible for taxes, utilities, insurance, repairs and maintenance for our leased retail properties. Our net lease cost for fiscal years 2021, 2020 and 2019 totaled $340.3 million, $331.8 million and $326.1 million, respectively.
Typically, a large portion of a club’s operating expense is the cost associated with leasing the location. We are typically responsible for taxes, utilities, insurance, repairs and maintenance for our leased retail properties. Our net lease cost for fiscal years 2022, 2021 and 2020 totaled $368.0 million, $340.3 million and $331.8 million, respectively.
For example, our operations are concentrated primarily on the east coast of the United States, and any adverse weather event or natural disaster, such as a hurricane or heavy snow storm, could have a material adverse effect on a substantial portion of our operations.
For example, our operations are concentrated primarily on the eastern half of the United States, and any adverse weather event or natural disaster, such as a hurricane or 16 heavy snow storm, could have a material adverse effect on a substantial portion of our operations.
Shareholders seeking cash dividends in the foreseeable future should not purchase our common stock.
Stockholders seeking cash dividends in the foreseeable future should not purchase our common stock.
Additionally, changes in the enacted tax rates, adverse outcomes in tax audits, including potential future transfer pricing disputes, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
Additionally, changes in the enacted tax rates, adverse outcomes in tax audits, including potential future transfer pricing disputes, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations.
Additionally, although SOFR is the AARC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacements that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us.
Additionally, though SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us.
We are subject to risks associated with leasing substantial amounts of space. We lease most of our retail properties, each of our three company-operated distribution centers and our home office.
We are subject to risks associated with leasing substantial amounts of space. We lease most of our retail properties, five of our eight company-operated distribution centers and our home office.
Furthermore, we and our subsidiaries may incur substantial additional indebtedness in the future that may severely restrict or prohibit our subsidiaries from making distributions, paying dividends, if any, or making loans to us. Risks Relating to Our Indebtedness We face risks related to our indebtedness. As of January 29, 2022, our total outstanding long-term debt was $748.6 million.
Furthermore, we and our subsidiaries may incur substantial additional indebtedness in the future that may severely restrict or prohibit our subsidiaries from making distributions, paying dividends, if any, or making loans to us. Risks Relating to Our Indebtedness We face risks related to our indebtedness. As of January 28, 2023, our total outstanding long-term debt was $447.9 million.
Such natural disasters or other incidents could result in, among other things, physical damage to one or more of our properties; the temporary closure of one or more of our clubs, Company-operated or contracted distribution centers or our home office facility; the temporary lack of an adequate work force in a market; a temporary or long-term disruption in merchandise distribution, including issues with the transport of goods to or from overseas; the temporary reduction in the availability of products in our clubs and on-line or a reduction in demand for certain of our products, each of which could have a negative adverse effect on our business, financial condition, cash flows and results of operations. 16 Disruptions in our merchandise distribution, including disruption through a third-party perishables consolidator, could adversely affect sales and member satisfaction.
Such natural disasters or other incidents could result in, among other things, physical damage to one or more of our properties; the temporary closure of one or more of our clubs, Company-operated or contracted distribution centers or our home office facility; the temporary lack of an adequate work force in a market; a temporary or long-term disruption in merchandise distribution, including issues with the transport of goods to or from overseas; the temporary reduction in the availability of products in our clubs and online or a reduction in demand for certain of our products, each of which could have a negative adverse effect on our business, financial condition, cash flows and results of operations.
Further, our net sales are directly affected by the number of our members, the number of BJ’s Perks Rewards ® members and holders of our My BJ’s Perks ® Mastercard ® credit cards, the frequency with which our members shop at our clubs and the amount they spend on those trips, which means the loyalty and enthusiasm of our members directly impacts our net sales and operating income.
Further, our net sales are directly affected by the number of our members, the number of members and holders of our co-branded credit cards, the frequency with which our members shop at our clubs and the amount they spend on those trips, which means the loyalty and enthusiasm of our members directly impacts our net sales and operating income.
Accordingly, significant changes in gasoline prices may substantially affect our net sales notwithstanding that the profit margin and unit sales for gasoline are largely unchanged, and this effect may increase as gasoline sales make up a larger portion of our revenue.
Accordingly, significant changes in gasoline prices may substantially affect our net sales notwithstanding that the profit margin and unit sales for gasoline are largely unchanged, and this effect may increase as gasoline sales make up a larger portion of our revenue. Furthermore, our gasoline sales are influenced by the overall market demand for gasoline products.
Failure or disruption of our primary and back-up systems could adversely affect our businesses. Given the very high volume of transactions we process each year, it is important that we maintain uninterrupted operation of our business-critical computer systems.
We rely extensively on information technology to process transactions, compile results and manage our businesses. Failure or disruption of our primary and back-up systems could adversely affect our businesses. Given the very high volume of transactions we process each year, it is important that we maintain uninterrupted operation of our business-critical computer systems.
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including contracts governing our variable rate debt and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available.
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or hedging transactions, but as our contracts indexed to LIBOR are converted to Secured Overnight Financing Rate (“SOFR”), the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest or hedging costs that are higher than if LIBOR remained available.
In addition, repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. The existence of our share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
The existence of our share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our senior secured asset based revolving credit and term facility (the "ABL Facility") or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business.
If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our senior secured asset based revolving credit and term facility (the "ABL Revolving Facility") or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business. 21 The operating leases for our retail properties, distribution centers and corporate office expire at various dates through fiscal year 2043.
The successful operation of our e-commerce business, and our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depend on efficient and uninterrupted operation of our order-taking and fulfillment operations.
As our e-commerce business grows, we increasingly encounter the risks and difficulties that internet-based businesses face. The successful operation of our e-commerce business, and our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depend on efficient and uninterrupted operation of our order-taking and fulfillment operations.
The operating leases for our retail properties, distribution centers and corporate office expire at various dates through fiscal year 2042. Several leases have renewal options for various periods of time at our discretion. When leases for our clubs with ongoing operations expire, we may be unable to negotiate renewals, either on commercially acceptable terms, or at all.
Several leases have renewal options for various periods of time at our discretion. When leases for our clubs with ongoing operations expire, we may be unable to negotiate renewals, either on commercially acceptable terms, or at all.
The timing and amount of repurchases of shares of our common stock, if any, will depend upon several factors, including market and business conditions, the trading price of our common stock, our cost of capital and the nature of other investment opportunities. Our share repurchase program may be limited, suspended or discontinued at any time without prior notice.
The timing and amount of repurchases of shares of our common stock, if any, will depend upon several factors, including market and business conditions, the trading price of our common stock, our cost of capital and the nature of other investment opportunities.
There can be no assurance that substantial costs and liabilities for an investigation and remediation of contamination will not be incurred. Our e-commerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. As our e-commerce business grows, we increasingly encounter the risks and difficulties that internet-based businesses face.
There can be no assurance that substantial costs and liabilities for an investigation and remediation of contamination will not be incurred. Our e-commerce business faces distinct risks, such as website disruptions, security breaches, delivery delays and hardware and software failures, and our failure to successfully manage it could have a negative impact on our profitability.
Our future minimum rental commitments for all operating leases in existence as of January 29, 2022 was $337.5 million for fiscal year 2022 and a total of $3.1 billion in aggregate for fiscal years 2023 through 2042.
Our future minimum rental commitments for all operating leases in existence as of January 28, 2023 was $346.7 million for fiscal year 2023 and a total of $2.9 billion in aggregate for fiscal years 2024 through 2043.
In addition, increases in distribution costs (including, but not limited to, trucking and freight costs) could adversely affect our expenses, which could adversely affect our operating profit and results of operations. One third-party distributor currently consolidates a substantial majority of our perishables for shipment to our clubs.
In addition, increases in distribution costs (including, but not limited to, trucking and freight costs) could adversely affect our expenses, which could adversely affect our operating profit and results of operations.
In addition, if our third-party processor systems are breached or compromised, we may be subject to substantial fines, remediation costs, litigation and higher transaction fees and lose our ability to accept credit or debit card payments from our members, and our reputation, business and operating results could also be materially adversely affected. 17 Our security measures have been breached in the past and may be undermined in the future due to the actions of outside parties, including nation-state sponsored actors, team member error, internal or external malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our data systems and misappropriate, alter, or destroy business and personal information, including payment card information.
Our security measures have been breached in the past and may be undermined in the future due to the actions of outside parties, including nation-state sponsored actors, team member error, internal or external malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our data systems and misappropriate, alter, or destroy business and personal information, including payment card information.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could have a material adverse effect on our business, financial condition and results of operations.
Any negative impact on the elements of our borrowing base, such as accounts receivable and inventory could reduce our borrowing capacity under the ABL Revolving Facility. 25 We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which could have a material adverse effect on our business, financial condition and results of operations.
Any of these factors could cause us to close clubs in desirable locations, which could have an adverse impact on our results of operations. 21 Over time, current club locations may not continue to be desirable because of changes in demographics within the surrounding area or a decline in shopping traffic, including traffic generated by other nearby clubs.
Over time, current club locations may not continue to be desirable because of changes in demographics within the surrounding area or a decline in shopping traffic, including traffic generated by other nearby clubs or a general shift away from in-store to digital shopping.
For example, in March 2018, our travel vendor informed us that the personal data of several hundred of our members had been compromised because of a data breach at Orbitz, which that vendor used as a platform for making online travel bookings.
Such information may also be placed at risk through our use of outside vendors, which may have data security systems that differ from those that we maintain or which are more vulnerable to breach. 17 For example, in March 2018, our travel vendor informed us that the personal data of several hundred of our members had been compromised because of a data breach at Orbitz, which that vendor used as a platform for making online travel bookings.
Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and harm to our relationship with our members, any of which could have an adverse effect on our business. We rely extensively on information technology to process transactions, compile results and manage our businesses.
Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and harm to our relationship with our members, any of which could have an adverse effect on our business. Our co-brand credit card program may be affected by economic and regulatory conditions.
Our ABL Facility is scheduled to mature on August 17, 2023 and our First Lien Facility is scheduled to mature on February 3, 2024.
Our ABL Revolving Facility is scheduled to mature on July 28, 2027 and our First Lien Term Loan Facility is scheduled to mature on February 3, 2027.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe operate three cross-dock distribution centers for non-perishable items and also have four perishable item distribution centers operated by a third party, which are expected to be purchased from Burris Logistics in fiscal year 2022. Our cross-dock distribution centers are leased under lease agreements expiring between 2031 and 2033, and range between 480,000 and 630,000 square feet in size.
Biggest changeOur cross-dock distribution centers for non-perishable items are leased under lease agreements expiring between 2031 and 2033, and range between 480,000 and 630,000 square feet in size. One of the perishable distribution centers is leased under an lease agreement expiring October 31, 2028 and the remaining three facilities are owned.
Business." The Company’s leases require long-term rental payments subject to various adjustments. Generally, the Company is required to pay insurance, real estate taxes and other operating expenses and, in some cases, additional rentals based on a percentage of sales in excess of certain thresholds, or other factors. Many of the leases require escalating payments during the lease term.
Business." 29 The Company’s leases require long-term rental payments subject to various adjustments. Generally, the Company is required to pay insurance, real estate taxes and other operating expenses and, in some cases, additional rentals based on a percentage of sales in excess of certain thresholds, or other factors. Many of the leases require escalating payments during the lease term.
Rent expense for such leases is recognized on a straight-line basis over the lease term. The initial primary term of the Company’s operating leases ranges from 5 to 44 years, with most of these leases having an initial term of approximately 20 years. The initial primary term of the Company’s three finance leases is 20 years.
Rent expense for such leases is recognized on a straight-line basis over the lease term. The initial primary term of the Company’s operating leases for properties ranges from 2 to 44 years, with most of these leases having an initial term of approximately 20 years. The initial primary term of the Company’s finance leases for properties is 20 years.
The third-party perishable distribution centers range between 114,000 and 264,000 square feet in size. We operate another cross-dock distribution center for Business-to-Business ("B2B") transactions, which occupies a total of 100,000 square feet. Our lease agreement for this center expires in 2029.
The perishable distribution centers range between 114,000 and 290,000 square feet in size. We operate another cross-dock distribution center primarily for Business-to-Business transactions, which occupies a total of 100,000 square feet. Our lease agreement for this center expires in 2029.
Item 2. Properties We operated 226 warehouse club locations as of January 29, 2022, of which 192 are leased under long-term leases and 14 are owned. We own the buildings at the remaining 20 locations, which are subject to long-term ground leases. A listing of the number of Company locations in each state is shown under Part I. "Item 1.
Item 2. Properties We operated 235 warehouse club locations as of January 28, 2023, of which 200 are leased under long-term leases and 15 are owned. We own the buildings at the remaining 20 locations, which are subject to long-term ground leases. A listing of the number of Company locations in each state is shown under Part I. "Item 1.
Our home office in Westborough, Massachusetts occupies a total of 282,000 square feet. Our lease expires on January 31, 2026. We will be transitioning to a new home office in Marlborough, Massachusetts in fiscal year 2022.
We transitioned to a new home office in Marlborough, Massachusetts in fiscal year 2022. The home office, which is referred to as our "Club Support Center" occupies a total of 188,000 square feet. The lease expires on August 31, 2042. We terminated the lease on our prior home office in Westborough, Massachusetts in January of fiscal year 2022.
Added
We incurred costs in connection with the termination of the lease, including a termination charge of $7.5 million. We operate three cross-dock distribution centers for non-perishable items and also have four perishable item distribution centers which were acquired from Burris Logistics in the second quarter of fiscal year 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the outcome of these actions cannot be predicted with certainty, management does not believe that any will have a material adverse impact on our business. Item 4. Mine Safety Disclosures Not applicable. 29 PART II
Biggest changeWhile the outcome of these actions cannot be predicted with certainty, management does not believe that any will have a material adverse impact on our business. Item 4. Mine Safety Disclosures Not applicable. 30 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares (or Units) Purchased (3) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Be Purchased Under the Plans of Programs (1) (2) October 31, 2021 - November 27, 2021 251,160 (3) $ 61.44 249,625 $ 500,000,000 November 28, 2021 - January 1, 2022 230,000 65.75 230,000 484,878,539 January 2, 2022 - January 29, 2022 221,342 61.88 221,342 471,181,442 Total 702,502 $ 62.99 700,967 $ 471,181,442 (1) On December 19, 2019, the Company’s board of directors authorized the repurchase of up to $250.0 million of the Company’s outstanding common stock from time to time as market conditions warrant.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth information on our common stock repurchase activity for the fourth quarter of 2023: Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Be Purchased Under the Plans of Programs (1) October 30, 2022 - November 26, 2022 118,437 (2) $ 75.93 115,000 $ 353,755,435 November 27, 2022 - December 31, 2022 486,383 68.65 486,383 320,367,469 January 1, 2023 - January 28, 2023 25,000 66.67 25,000 318,700,744 Total 629,820 $ 69.94 626,383 $ 318,700,744 (1) On November 16, 2021, the Company’s board of directors approved a new share repurchase program (the "2021 Repurchase Program"), effective immediately, that allows the Company to repurchase up to $500.0 million of its outstanding common stock.
The graph assumes an investment of $100 in our common 30 stock and in each index at market close on June 28, 2018 and the reinvestment of all dividends. The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock.
The graph assumes an investment of $100 in our common 31 stock and in each index at market close on June 28, 2018 and the reinvestment of all dividends. The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock.
Performance Graph The following graph illustrates a comparison of the total cumulative return on our common stock with the total cumulative return for (i) the S&P 500 Index and (ii) the S&P 500 Retail Index for the period from June 28, 2018 (the date our common stock commenced trading on the NYSE) through January 29, 2022.
Performance Graph The following graph illustrates a comparison of the total cumulative return on our common stock with the total cumulative return for (i) the S&P 500 Index and (ii) the S&P 500 Retail Index for the period from June 28, 2018 (the date our common stock commenced trading on the NYSE) through January 28, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of January 29, 2022, regarding our common stock that may be issued under the BJ’s Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the "2018 Incentive Award Plan"), the Fourth Amended and Restated 2011 Stock Option Plan of BJ’s Wholesale Club Holdings, Inc.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of January 28, 2023, regarding our common stock that may be issued under the BJ’s Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the "2018 Incentive Award Plan"), the Fourth Amended and Restated 2011 Stock Option Plan of BJ’s Wholesale Club Holdings, Inc.
Holders As of March 10, 2022, there were approximately seven record holders of our common stock. This number does not include beneficial owners whose shares were held in street name. Dividends We do not currently expect to pay any cash dividends on our common stock for the foreseeable future.
Holders As of March 8, 2023, there were approximately five record holders of our common stock. This number does not include beneficial owners whose shares were held in street name. Dividends We do not currently expect to pay any cash dividends on our common stock for the foreseeable future.
June 28, 2018 (1) February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 BJ’s Wholesale Club, Inc. $ 100.00 $ 120.32 $ 93.27 $ 191.23 $ 263.32 S&P 500 100.00 99.64 118.75 136.74 163.16 S&P 500 Retail 100.00 95.22 113.80 159.89 168.32 (1) The Company commenced trading on June 28, 2018 and is presented as the starting point above.
June 28, 2018 (1) February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 BJ’s Wholesale Club, Inc. $ 100.00 $ 120.32 $ 93.27 $ 191.23 $ 263.32 $ 316.82 S&P 500 100.00 99.64 118.75 136.74 163.16 149.86 S&P 500 Retail 100.00 95.22 113.80 159.89 168.32 138.20 (1) The Company commenced trading on June 28, 2018 and such date is presented as the starting point above.
(4) Does not include purchase rights accruing under the ESPP because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period. 32 (5) The aggregate number of shares of common stock reserved for issuance under our ESPP is equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares as determined by the board of directors.
(5) The aggregate number of shares of common stock reserved for issuance under our ESPP is equal to the sum of (i) 973,014 shares and (ii) an annual increase on the first day of each calendar year beginning in 2019 and ending in 2028 equal to the lesser of (A) 486,507 shares, (B) 0.5% of the shares outstanding (on an as converted basis) on the last day 33 of the immediately preceding fiscal year and (C) such smaller number of shares as determined by the board of directors.
(3) Includes 1,535 shares of common stock surrendered to the Company by team members between October 31, 2021 and November 27, 2021 to satisfy their tax withholding obligations in connection with the vesting of restricted stock awards. See Note 9 "Stock Incentive Plans" in the Notes to Audited Consolidated Financial Statements included in this Annual Report on Form 10-K.
The 2021 Repurchase Program expires in January 2025. 32 (2) Includes 3,437 shares of common stock surrendered to the Company by team members to satisfy their tax withholding obligations in connection with the vesting of restricted stock awards. See Note 9 "Stock Incentive Plans" in the Notes to Audited Consolidated Financial Statements included in this Annual Report on Form 10-K.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began trading on the NYSE under the symbol "BJ" on June 28, 2018. As of the end of business on March 10, 2022, the trading price of our common stock closed at $60.23 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NYSE under the symbol "BJ". As of the end of business on March 8, 2023, the trading price of our common stock closed at $74.31 per share.
Plan category: Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by shareholders 2018 Incentive Award Plan (1) 2,754,417 (2) $ 15.80 (3) 5,544,648 2011 Stock Option Plan 179,141 6.87 — 2012 Director Stock Option Plan 46,817 3.10 — ESPP (4) — 1,641,858 (5) Total equity compensation plans approved by shareholders 2,980,375 7,186,506 Equity compensation plans not approved by shareholders — — Total equity compensation plans approved and not approved by shareholders 2,980,375 7,186,506 (1) In connection with our IPO, we adopted the 2018 Incentive Award Plan and will not make future grants or awards under the 2011 Stock Option Plan or the 2012 Director Stock Option Plan.
Plan category: Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by stockholders 2018 Incentive Award Plan (1) 2,593,352 (2) $ 13.85 (3) 5,317,455 2011 Stock Option Plan 60,141 6.70 — 2012 Director Stock Option Plan 11,813 7.00 — ESPP (4) — 2,038,158 (5) Total equity compensation plans approved by stockholders 2,665,306 7,355,613 Equity compensation plans not approved by stockholders — — Total equity compensation plans approved and not approved by stockholders 2,665,306 7,355,613 (1) In connection with our IPO, we adopted the 2018 Incentive Award Plan and will not make future grants or awards under the 2011 Stock Option Plan or the 2012 Director Stock Option Plan.
(2) Includes (i) 25,624 shares of common stock issuable pursuant to restricted stock units outstanding, (ii) 2,055,613 shares of common stock issuable upon the exercise of outstanding options, and (iii) 673,180 shares of common stock issuable pursuant to performance stock units as of January 29, 2022.
(2) Includes (i) 23,884 shares of common stock issuable pursuant to restricted stock units outstanding, (ii) 1,716,065 shares of common stock issuable upon the exercise of outstanding options, and (iii) 853,403 shares of common stock issuable pursuant to performance stock units as of January 28, 2023.
Removed
The share repurchase program was fully exhausted on November 17, 2021. 31 (2) On November 16, 2021, the Company’s board of directors approved a new share repurchase program (the "2021 Repurchase Program"), effective immediately, that allows the Company to repurchase up to $500.0 million of its outstanding common stock. The 2021 Repurchase Program expires in January 2025.
Added
(4) Does not include purchase rights accruing under the ESPP because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+20 added−13 removed29 unchanged
Biggest changeWe believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations. 52 Weeks Ended January 29, 2022 52 Weeks Ended January 30, 2021 52 Weeks Ended February 1, 2020 Net income as reported $ 426,652 $ 421,030 $ 187,176 Adjustments: Stock-based compensation related to acceleration of stock awards (1) 17,494 — — Acquisition and integration costs (2) 3,504 — — Incremental home office expense (3) 552 — — Loss on cash flow hedge (4) 6,340 6,926 — Charges related to debt payments (5) 657 4,077 3,820 Severance charges (6) 2,300 — 3,994 Offering costs (7) — — 1,928 Gains on sale leaseback transactions (8) — — (2,585) Club closing and impairment charges (9) — — 15,383 Tax impact of adjustments to net income (10) (8,641) (3,081) (6,311) Adjusted net income $ 448,859 $ 428,952 $ 203,405 Weighted-average diluted shares outstanding 138,045 138,876 139,109 Adjusted net income per diluted share (11) $ 3.25 $ 3.09 $ 1.46 36 (1) Represents accelerated vesting of equity awards, which were related to the passing of a former executive.
Biggest changeFiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net income as reported $ 513,177 $ 426,652 $ 421,030 Adjustments: Stock-based compensation related to acceleration of stock awards (1) — 17,494 — Acquisition and integration costs (2) 12,324 3,504 — Home office transition costs (3) 14,706 552 — Loss on termination and impairment on discontinued operations club lease 662 — — (Gain) loss on cash flow hedge (4) (165) 6,340 6,926 Charges related to debt (5) 3,256 657 4,077 Severance (6) — 2,300 — Tax impact of adjustments to net income (7) (8,718) (8,640) (3,081) Adjusted net income $ 535,242 $ 448,859 $ 428,952 Weighted-average diluted shares outstanding 136,473 138,045 138,876 Adjusted net income per diluted share (8) $ 3.92 $ 3.25 $ 3.09 (1) Represents accelerated vesting of equity awards, which were related to the passing of a former executive.
Various factors affect comparable club sales, including consumer preferences and trends, product sourcing, promotional offerings and pricing, customer experience and purchase amounts, weather and holiday shopping period timing and length. 35 Merchandise comparable club sales represents comparable club sales from all merchandise other than our gasoline operations for the applicable period.
Various factors affect comparable club sales, including consumer preferences and trends, product sourcing, promotional offerings and pricing, customer experience and purchase amounts, weather and holiday shopping period timing and length. Merchandise comparable club sales represents comparable club sales from all merchandise other than our gasoline operations for the applicable period.
On April 30, 2021, the Company used $100.0 million of cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan. In connection with the payment, the Company expensed $0.7 million of previously capitalized debt issuance costs and original issue discount.
On April 30, 2021, the Company used $100.0 million of its cash and cash equivalents to pay $100.0 million of the principal amount outstanding on the First Lien Term Loan. In connection with the payment, the Company expensed $0.7 million of previously capitalized debt issuance costs and original issue discount.
We expect these infrastructure investments to support our successful operating model across our club operations. 37 Gasoline prices The market price of gasoline impacts our net sales and comparable club sales, and large fluctuations in the price of gasoline may produce a short-term impact on our margins.
We expect these infrastructure investments to support our successful operating model across our club operations. Gasoline prices The market price of gasoline impacts our net sales and comparable club sales, and large fluctuations in the price of gasoline may produce a short-term impact on our margins.
For a further description of the ABL Facility and First Lien Term Loan, see Note 5, "Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K.
For a further description of the ABL Revolving Facility and First Lien Term Loan, see Note 5 , "Debt and Credit Arrangements" of our consolidated financial statements included in this Annual Report on Form 10-K.
These changes continue to deliver results rapidly, evidenced by year-over-year income from continuing operations growth, consecutive quarter comparable club sales growth over the last three years and adjusted EBITDA growth over the last three years. Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee.
These changes continue to deliver results rapidly, evidenced by year-over-year income from continuing operations growth, consecutive quarter comparable club sales growth and adjusted EBITDA growth over the last four years. Our goal is to offer our members significant value and a meaningful return in savings on their annual membership fee.
Our two private label brands, Wellsley Farms® and Berkley Jensen®, represent over $3.0 billion in annual sales, and are the largest brands we sell in terms of volume. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth.
Our two private label brands, Wellsley Farms® and Berkley Jensen®, represent over $3.7 billion in annual sales, and are the largest brands we sell in terms of volume. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth.
At January 29, 2022, there was $50.0 million outstanding in loans under the ABL Facility and $12.7 million in outstanding letters of credit. The interest rate on the revolving credit facility was 1.23%, the interest rate on the term loan was 2.10% and unused capacity was $886.9 million.
On January 29, 2022, there was $50.0 million outstanding loans under the ABL Facility and $12.7 million outstanding letters of credit. The interest rate on the revolving credit facility was 1.23%, the interest rate on the term loan was 2.10% and unused capacity was $886.9 million.
We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under our ABL Facility, will be sufficient to finance our operations for at least the next twelve months.
We believe that our current resources, together with anticipated cash 40 flows from operations and borrowing capacity under our ABL Revolving Facility, will be sufficient to finance our operations for at least the next twelve months.
Our quarterly results have been, and will continue to be, 33 affected by the timing of new club openings and their associated pre-opening expenses.
Our quarterly results have been, and will continue to be, 34 affected by the timing of new club openings and their associated pre-opening expenses.
These accruals, if any, are included 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. 42
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.
Overview BJ’s Wholesale Club is a leading warehouse club operator concentrated primarily on the east coast of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors.
Overview BJ’s Wholesale Club is a leading warehouse club operator concentrated primarily on the eastern half of the United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors.
We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would otherwise pay at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries.
We believe that members can save over ten times their $55 Club Card membership fee versus what they would otherwise pay at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries.
The increase was due primarily to a 6.5% increase in comparable club sales and incremental sales from new clubs opened over the past two years. Comparable Club Sales and Merchandise Comparable Club Sales We believe net sales is an important driver of our profitability, particularly comparable club sales.
The increase was due primarily to a 13.4% increase in comparable club sales and incremental sales from new clubs opened over the past two years. Comparable Club Sales and Merchandise Comparable Club Sales We believe net sales is an important driver of our profitability, particularly comparable club sales.
Our membership renewal rate, a key indicator of membership engagement, satisfaction and loyalty, was 89% at the end of fiscal year 2021. Effective sourcing and distribution of products and consumer demands Our net sales and gross profit are affected by our ability to purchase our products in sufficient quantities at competitive prices.
Our tenured membership renewal rate, a key indicator of membership engagement, satisfaction and loyalty, was 90% at the end of fiscal year 2022. Effective sourcing and distribution of products and consumer demands Our net sales and gross profit are affected by our ability to purchase our products in sufficient quantities at competitive prices.
Our membership fee income was $360.9 million for fiscal year 2021. Our business is moderately seasonal in nature. Historically, our business has generally realized a slightly higher portion of net sales, operating income and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively.
Our membership fee income was $396.7 million for fiscal year 2022. Our business is moderately seasonal in nature. Historically, our business has generally realized a slightly higher portion of net sales, operating income and cash flows from operations in the second and fourth fiscal quarters, attributable primarily to the impact of the summer and year-end holiday season, respectively.
Results of Operations Information pertaining to fiscal year 2019 was included in the Company’s Annual Report on Form 10-K for the year ended January 30, 2021 in Part II, Item 7, "Management’s Discussion and Analysis of Financial Position and Results of Operations," which was filed with the SEC on March 19, 2021.
Results of Operations Information pertaining to fiscal year 2021 was included in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022 in Part II, Item 7, "Management’s Discussion and Analysis of Financial Position and Results of Operations," which was filed with the SEC on March 17, 2022.
In addition, adjusted EBITDA, comparable club sales, free cash flow, adjusted net income and adjusted net income per diluted share may not be comparable to similarly titled measures used by other companies in our industry or across different industries. 34 Adjusted EBITDA Adjusted EBITDA is defined as income from continuing operations before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense; pre-opening expenses; non-cash rent; strategic consulting; offering costs; club closing and impairment charges; reduction in force severance; acquisition and integration costs; and other adjustments.
In addition, adjusted EBITDA, comparable club sales, free cash flow, adjusted net income and adjusted net income per diluted share may not be comparable to similarly titled measures used by other companies in our industry or across different industries. 38 Adjusted EBITDA Adjusted EBITDA is defined as income from continuing operations before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense; pre-opening expenses; non-cash rent; acquisition and integration costs; home office transition costs; reduction-in-force severance, and other adjustments, net.
Therefore, our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We have grown our membership fee income each year for the past two decades. Our membership fee income totaled $360.9 million in fiscal year 2021.
Therefore, our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We have grown our membership fee income each year for the past two decades. Our membership fee income totaled $396.7 million in fiscal year 2022.
The decline year-over-year is a result of the timing of net working capital investments and capital spend in fiscal year 2021 as we opened five new clubs and seven new gas stations.
The decline year-over-year is a result of the timing of net working capital investments and capital spend as we opened nine new clubs and seven new gas stations as compared to five new clubs and seven new gas stations in fiscal year 2022 and fiscal year 2021, respectively.
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, are insured as a risk reduction strategy to mitigate the impact of catastrophic losses on net income.
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.
Our leadership team continues to implement significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ’s more convenient.
Our leadership team continues to focus on transforming how we use data to improve member experience, instilling a culture of cost and capital discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ’s more convenient.
Our principal liquidity needs for the next twelve months and beyond are to fund normal recurring operational expenses and anticipated capital expenditures; fund pending and possible acquisitions, including the anticipated acquisition of assets from Burris Logistics; fund share repurchases and meet debt service and principal repayment obligations.
Our principal liquidity needs for the next twelve months and beyond are to fund normal recurring operational expenses and anticipated capital expenditures; fund possible acquisitions; fund share repurchases and meet debt service and principal repayment obligations.
We continue to experience inflation across most categories and have invested in certain categories to preserve our member value proposition. Cost of sales was $13.6 billion, or 83.3% of net sales, in fiscal year 2021, compared to $12.5 billion, or 82.5% of net sales, in fiscal year 2020.
We continue to experience inflation across most categories and have invested in certain categories to preserve our member value proposition. Cost of sales was $15.9 billion, or 84.0% of net sales, in fiscal year 2022, compared to $13.6 billion, or 83.3% of net sales, in fiscal year 2021.
Pre-opening expenses Pre-opening expenses include startup costs for new clubs. Expenses will vary based on the number of new club openings, geography of the club, whether the club is owned or leased, and timing of the opening relative to our fiscal year end. Pre-opening expenses were $14.9 million in fiscal year 2021, compared to $9.8 million in fiscal year 2020.
Pre-opening expenses Pre-opening expenses include startup costs for new clubs. Expenses will vary based on the number of new club openings, geography of the club, and whether the club is owned or leased, and timing of the opening relative to our fiscal year end.
During times when prices are particularly volatile, differences in pricing and procurement strategies between the Company and its competitors may lead to temporary margin contraction or expansion, depending on whether prices are rising or falling, and this impact could affect our overall results for a fiscal quarter.
During times when prices are particularly volatile, differences in pricing and procurement strategies between the Company and its competitors may lead to temporary margin contraction or expansion, depending on whether prices are rising or falling, and this impact could affect our overall results for a fiscal quarter. 35 In addition, the relative level of gasoline prices from period to period may lead to differences in our net sales between those periods.
The 0.9% increase as a percentage of net sales was driven by higher penetration of gas sales. Merchandise gross margin rate increased approximately 20 basis points over fiscal year 2020.
The approximate 0.6% increase as a percentage of net sales was primarily driven by higher penetration of gas sales. Merchandise gross margin rate decreased approximately 20 basis points over fiscal year 2021.
The decrease in operating cash flow was due to timing of investments in net working capital. Net Cash from Investing Activities Cash used in investing activities was $304.5 million in fiscal year 2021, compared to $192.4 million in fiscal year 2020.
The decrease in operating cash flow was due to timing of investments in net working capital. Net Investing Cash Flows Cash used in investing activities was $747.1 million in fiscal year 2022, compared to $304.5 million in fiscal year 2021.
We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have, a current or future material effect on our results of operations or financial position.
We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have, a current or future material effect on our results of operations or financial position. We do, however, enter into letters of credit and purchase obligations in the normal course of our operations.
(2) Includes our material unconditional cash commitments. For cancellable agreements, any penalty due upon cancellation is included. These commitments do not exceed our projected requirements and are in the normal course of business. Examples include firm commitments for merchandise purchase orders, capital expenditures, gasoline and information technology.
(2) Includes our material unconditional cash commitments. For cancellable agreements, any penalty due upon cancellation is included. These commitments do not exceed our projected requirements and are in the normal course of business.
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.
Examples include firm commitments for merchandise purchase orders, capital expenditures, gasoline and information technology. 42 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.
Interest expense, net for fiscal year 2020 included interest expense of $65.3 million related to debt service on outstanding borrowings and $4.1 million of fees and write-offs of deferred financing costs and original issue discounts associated with the partial prepayments of our First Lien Term Loan in October and July of fiscal year 2020.
Interest expense, net for fiscal year 2022 included interest expense of $37.5 million related to debt service on outstanding borrowings and $3.3 million of fees and write-offs of deferred financing costs and original issue discounts associated with the partial prepayment and amendment of our First Lien Term Loan.
The following is a reconciliation of our net cash provided by operating activities to free cash flow for the periods presented: Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 (In thousands) Net cash provided by operating activities $ 831,655 $ 868,546 $ 355,143 Less: Additions to property and equipment, net of disposals 323,591 218,333 196,901 Plus: Proceeds from sale leaseback transactions 19,080 25,893 21,606 Free cash flow $ 527,144 $ 676,106 $ 179,848 Free cash flow continues to be healthy.
The following is a reconciliation of our net cash provided by operating activities to free cash flow for the periods presented: Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 (In thousands) Net cash provided by operating activities $ 788,165 $ 831,655 $ 868,546 Less: Additions to property and equipment, net of disposals 397,803 323,591 218,333 Plus: Proceeds from sale leaseback transactions 27,266 19,080 25,893 Free cash flow $ 417,628 $ 527,144 $ 676,106 41 Free cash flow continues to be healthy.
We define adjusted net income as net income as reported adjusted for: stock-based compensation related to acceleration of stock awards; acquisition and integration costs; incremental home office expenses; loss on cash flow hedge; expenses related to debt payments; severance charges; offering costs; gains on sale leaseback transactions; club closing and impairment charges; and the tax impact of the foregoing adjustments on net income.
We define adjusted net income as net income as reported adjusted for: stock-based compensation related to acceleration of stock awards; acquisition and integration costs; home office transition costs; loss on termination and impairment on discontinued operations club lease; gain/loss on cash flow hedge; charges related to debt payments; severance charges; and the tax impact of the foregoing adjustments on net income.
In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our BOPIC service, curbside delivery, same day home delivery or traditional ship-to-home service.
In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our BOPIC service, curbside delivery, same-day home delivery or traditional ship-to-home service, as well as through the DoorDash and Instacart marketplaces where members receive preferential pricing by linking their membership.
Liquidity and Capital Resources Our primary sources of liquidity are cash flows generated from club operations and borrowings from our ABL Facility. As of January 29, 2022, cash and cash equivalents totaled $45.4 million and we had $886.9 million of unused capacity under our ABL Facility.
Liquidity and Capital Resources Our primary sources of liquidity are cash flows generated from club operations and borrowings from our ABL Revolving Facility. As of January 28, 2023, cash and cash equivalents totaled $33.9 million and we had $535.2 million of unused capacity under our ABL Revolving Facility.
Additionally, interest expense included $4.4 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings, $6.9 million of reclassified unrealized losses on interest rate swap agreements and $3.7 million of other interest charges.
Additionally, interest expense included $2.8 million of amortization expense on deferred financing costs and original issue discounts on our outstanding borrowings, $0.2 million of reclassified unrealized gains on interest rate swap agreements and $4.1 million of other interest charges.
In addition, the relative level of gasoline prices from period to period may lead to differences in our net sales between those periods. Further, because we generally attempt to maintain a fairly stable gross profit per gallon, this variance in net sales, which may be substantial, may or may not have a significant impact on our operating income.
Further, because we generally attempt to maintain a fairly stable gross profit per gallon, this variance in net sales, which may be substantial, may or may not have a significant impact on our operating income.
Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We define free cash flow as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale leaseback transactions.
We define free cash flow as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale leaseback transactions.
Adjusted Net Income The adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of core operating results between periods.
Refer to "Results of Operations" above for further discussion of comparable club sales and merchandise comparable club sales. 39 Adjusted Net Income The adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of core operating results between periods.
Growth in net sales is impacted by opening new clubs and increases in comparable club sales. Net sales for fiscal year 2021 were $16.3 billion, an 8.0% increase from net sales reported for fiscal year 2020 of $15.1 billion.
Growth in net sales is impacted by opening new clubs and increases in comparable club sales, which may be impacted by inflation. Net sales for fiscal year 2022 were $18.9 billion, a 16.0% increase from net sales reported for fiscal year 2021 of $16.3 billion.
(2) Consists of an adjustment to remove the non-cash portion of rent expense, inclusive of incremental rent expense as the Company transitions from the current home office to a new home office building in fiscal year 2022. (3) Represents costs related to the anticipated acquisition of assets of Burris Logistics, including due diligence, legal, and other consulting expenses.
(2) Represents an adjustment to remove the non-cash portion of rent expense. (3) Represents costs related to the Acquisition and integration of assets of Burris Logistics, including due diligence, legal, and other consulting expenses. (4) Represents incremental rent expense, termination fee, other non-recurring lease costs and write-off of impaired assets as the Company transitions home office locations in fiscal 2022.
The following is a reconciliation of our income from continuing operations to Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for the periods presented: Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 (In thousands) Income from continuing operations $ 426,760 $ 421,182 $ 187,757 Interest expense, net 59,444 84,385 108,230 Provision for income taxes 131,119 136,825 56,212 Depreciation and amortization 180,547 167,454 157,000 Stock-based compensation expense 53,837 32,150 18,796 Pre-opening expenses (1) 14,902 9,809 15,152 Non-cash rent (2) 6,146 4,942 8,374 Acquisition and integration costs (3) 3,504 — — Reduction-in-force severance (4) 2,300 — 3,994 Offering costs (5) — — 1,928 Club closing and impairment charges (6) — — 15,383 Strategic consulting (7) — — 11,349 Other adjustments, net (8) 991 745 (2,551) Adjusted EBITDA $ 879,550 $ 857,492 $ 581,624 Adjusted EBITDA as a percentage of net sales 5.4 % 5.7 % 4.5 % __________ (1) Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.
The following is a reconciliation of our income from continuing operations to Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for the periods presented: Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 (In thousands) Income from continuing operations $ 514,262 $ 426,760 $ 421,182 Interest expense, net 47,462 59,444 84,385 Provision for income taxes 176,262 131,119 136,825 Depreciation and amortization 200,934 180,547 167,454 Stock-based compensation expense 42,617 53,837 32,150 Pre-opening expenses (1) 24,933 14,902 9,809 Non-cash rent (2) 3,991 5,594 4,942 Acquisition and integration costs (3) 12,324 3,504 — Home office transition costs (4) 14,706 552 — Reduction-in-force severance (5) — 2,300 — Other adjustments, net (6) 642 991 745 Adjusted EBITDA $ 1,038,133 $ 879,550 $ 857,492 Adjusted EBITDA as a percentage of net sales 5.5 % 5.4 % 5.7 % __________ (1) Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.
As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.
As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year. On May 2, 2022, we completed the Acquisition, which brought substantially all of our end-to-end perishable supply chain in-house.
We believe that strengthening our management team and enhancing our information systems, including our distribution center management and point-of-sale systems, and investing in hardware and digitally enabled shopping capabilities for convenience, such as BOPIC and curbside pickup, will enable us to replicate our profitable club format and provide a differentiated shopping experience.
We believe that expanding our club footprint, bringing substantially all of our end-to-end perishable supply chain in-house with the Acquisition, and enhancing our information systems, including our distribution center and transportation management system, and investing in hardware and digitally enabled shopping capabilities for convenience, such as BOPIC, curbside pickup, and same-day home delivery will enable us to replicate our profitable club format and provide a differentiated shopping experience.
Debt and Borrowing Capacity Our primary sources of borrowing capacity are the ABL Facility, which is comprised of a $950.0 million revolving credit facility and a $50.0 million term loan, and is scheduled to mature on August 17, 2023, and the First Lien Term Loan, a senior secured first lien term loan that matures on February 3, 2024.
Debt and Borrowing Capacity Our primary sources of borrowing capacity are the ABL Revolving Facility, which is comprised of a $1.2 billion revolving credit facility and the First Lien Term Loan, that matures on February 3, 2027.
(2) Represents costs related to the anticipated acquisition of assets of Burris Logistics, including due diligence, legal, and other consulting expenses. (3) Represents incremental rent expense as the Company transitions from the current home office to a new home office building in fiscal year 2022.
(2) Represents costs related to the Acquisition and integration of assets of Burris Logistics, including due diligence, legal, and other consulting expenses. (3) Represents incremental rent expense, termination fee, other non-recurring lease costs and write-off of impaired assets as the Company transitioned home office locations in fiscal 2022.
Selling, general and administrative expenses SG&A consists of various expenses related to supporting and facilitating the sale of merchandise in our clubs, including the following: payroll and payroll benefits for team members; rent, depreciation and other occupancy costs for retail and corporate locations; advertising expenses; tender costs, including credit and debit card fees; amortization of intangible assets; and consulting, legal, insurance, acquisition and integration costs, and other professional services expenses. 39 SG&A includes both fixed and variable components and, therefore, is not directly correlated with net sales.
While merchandise margins benefited from strong sales performance, margins were impacted by increased supply chain costs as well as investments in inflationary categories and markdowns in general merchandise inventory. 37 Selling, general, and administrative expenses SG&A consists of various expenses related to supporting and facilitating the sale of merchandise in our clubs, including the following: payroll and payroll benefits for team members; rent, depreciation and other occupancy costs for retail and corporate locations; advertising expenses; tender costs, including credit and debit card fees; amortization of intangible assets; and consulting, legal, insurance, acquisition and integration costs, and other professional services expenses.
Provision for income taxes The Company’s effective income tax rate from continuing operations was 23.5% for fiscal year 2021 and 24.5% for fiscal year 2020. The decrease in the effective tax rate is primarily due to a higher excess tax benefit from exercises of stock-based awards in fiscal year 2021.
Provision for income taxes The Company’s effective income tax rate from continuing operations was 25.5% for fiscal year 2022 and 23.5% for fiscal year 2021. The increase in the effective tax rate is primarily due to higher pre-tax book income and lower excess tax benefits on stock-based compensation in fiscal 2022 compared to fiscal 2021.
The following tables summarize key components of our results of operations for the periods indicated: Statement of Operations Data (dollars in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 Net sales $ 16,306,365 $ 15,096,913 Membership fee income 360,937 333,104 Total revenues 16,667,302 15,430,017 Cost of sales 13,588,612 12,451,061 Selling, general and administrative expenses 2,446,465 2,326,755 Pre-opening expenses 14,902 9,809 Operating income 617,323 642,392 Interest expense, net 59,444 84,385 Income from continuing operations before income taxes 557,879 558,007 Provision for income taxes 131,119 136,825 Income from continuing operations 426,760 421,182 Income (loss) from discontinued operations, net of income taxes (108) (152) Net income $ 426,652 $ 421,030 Operational Data: Total clubs at end of period 226 221 Comparable club sales 6.5 % 15.9 % Merchandise comparable club sales (0.5) % 21.3 % Adjusted EBITDA $ 879,550 $ 857,492 Free cash flow 527,144 676,106 Membership renewal rate 89 % 88 % 38 Fiscal Year 2021 Compared to Fiscal Year 2020 Net Sales Net sales are derived from direct retail sales to customers in our clubs and online, net of merchandise returns and discounts.
The following tables summarize key components of our results of operations for the periods indicated: Statement of Operations Data (dollars in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 Net sales $ 18,918,435 $ 16,306,365 Membership fee income 396,730 360,937 Total revenues 19,315,165 16,667,302 Cost of sales 15,883,677 13,588,612 Selling, general and administrative expenses 2,668,569 2,446,465 Pre-opening expenses 24,933 14,902 Operating income 737,986 617,323 Interest expense, net 47,462 59,444 Income from continuing operations before income taxes 690,524 557,879 Provision for income taxes 176,262 131,119 Income from continuing operations 514,262 426,760 Loss from discontinued operations, net of income taxes (1,085) (108) Net income $ 513,177 $ 426,652 Operational Data: Total clubs at end of period 235 226 Comparable club sales 13.4 % 6.5 % Merchandise comparable club sales 6.5 % (0.5) % Adjusted EBITDA $ 1,038,133 $ 879,550 Free cash flow 417,628 527,144 Membership renewal rate 90 % 89 % 36 Fiscal Year 2022 Compared to Fiscal Year 2021 Net Sales Net sales are derived from direct retail sales to customers in our clubs and online, net of merchandise returns and discounts.
Factors Affecting Our Business Overall economic trends The overall economic environment and related changes in consumer behavior have a significant impact on our business.
The Company financed the purchase price with a combination of available cash and borrowings under the Company’s revolving credit facility. Factors Affecting Our Business Overall economic trends The overall economic environment and related changes in consumer behavior have a significant impact on our business.
Membership fee income was $360.9 million in fiscal year 2021, compared to $333.1 million in fiscal year 2020, an 8.4% increase. The growth in membership fee income was due to successful member acquisition efforts, improving our renewal rate to 89%, increasing higher tier membership penetration and improving the quality of memberships.
The growth in membership fee income was due to successful member acquisition efforts as well as tenured member renewals, improving our renewal rate to 90%, increasing higher tier membership penetration and improving the quality of memberships.
We do, however, enter into letters of credit and purchase obligations in the normal course of our operations. 40 Summary of Cash Flows A summary of our cash flows from operating, investing and financing activities is presented in the following table: Fiscal Year Ended January 29, 2022 January 30, 2021 (In thousands) Net cash provided by operating activities $ 831,655 $ 868,546 Net cash used in investing activities (304,511) (192,440) Net cash used in financing activities (525,226) (662,792) Net increase in cash and cash equivalents $ 1,918 $ 13,314 Net Cash from Operating Activities Net cash provided by operating activities was $831.7 million in fiscal year 2021, compared to $868.5 million in fiscal year 2020.
Summary of Cash Flows A summary of our cash flows from operating, investing and financing activities is presented in the following table: Fiscal Year Ended January 28, 2023 January 29, 2022 (In thousands) Net cash provided by operating activities $ 788,165 $ 831,655 Net cash used in investing activities (747,058) (304,511) Net cash used in financing activities (52,628) (525,226) Net (decrease) increase in cash and cash equivalents $ (11,521) $ 1,918 Net Operating Cash Flows Net cash provided by operating activities was $788.2 million in fiscal year 2022, compared to $831.7 million in fiscal year 2021.
Membership fee income Our membership structure is pinnacle to our business and we continue to see growth in the size and quality of our membership base, primarily driven by renewals and favorable membership mix. Higher-tier membership penetration has increased year-over-year. This group consists of our most loyal members with the highest lifetime value.
In general merchandise and services, sales decreased primarily in electronics and were strongest in paper, food storage, and self-care sundries. Membership fee income Our membership structure is key to our business and we continue to see growth in the size and quality of our membership base, primarily driven by renewals and favorable membership mix. Higher-tier membership penetration has increased year-over-year.
We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience that is further enhanced by our omnichannel capabilities. Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 226 large-format, high volume warehouse clubs spanning 17 states.
We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services, coupons, and promotions to deliver a differentiated shopping experience that is further enhanced by our digital capabilities.
At January 29, 2022, there was $701.9 million outstanding under the First Lien Term Loan and the interest rate, before the effect of the interest rate swaps, was 2.11%. 41 Material Cash Commitments The following table summarizes our material cash commitments as of January 29, 2022: (Dollars in thousands) Total Outstanding borrowings and interest (1) $ 783,117 Operating leases 3,440,341 Financing leases including interest 30,648 Purchase obligations (2) 1,859,767 Total $ 6,113,873 (1) Total interest payments associated with these borrowings are included within this amount and are estimated to be $31.2 million based on the interest rate of 2.11% on the First Lien Term Loan and 2.10% on the ABL term loan, which were the rates in effect as of January 29, 2022.
Material Cash Commitments The following table summarizes our material cash commitments as of January 28, 2023: (Dollars in thousands) Total Outstanding borrowings and interest (1) $ 909,797 Operating leases 3,261,155 Financing leases including interest 37,587 Financing obligations arising from failed sale-leasebacks 19,789 Purchase obligations (2) 2,333,687 Total $ 6,562,015 (1) Total interest payments associated with these borrowings are included within this amount and are estimated to be $54.8 million based on the interest rate of 7.11% on the First Lien Term Loan and 5.63% on the ABL Revolving Facility, which were the rates in effect as of January 28, 2023.
Refer to "Results of Operations" below for further discussion of comparable club sales and merchandise comparable club sales. Free Cash Flow We present free cash flow because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity.
Free Cash Flow We present free cash flow because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure.
We expect that our SG&A will increase in future periods due to investments to spur comparable club sales growth and our expanding footprint as we open new clubs. In addition, any future increases in wages, stock options or other stock-based grants or modifications will increase our SG&A expenses.
SG&A includes both fixed and variable components and, therefore, is not directly correlated with net sales. We expect that our SG&A will increase in future periods due to investments to spur comparable club sales growth and our expanding footprint as we open new clubs.
(9) Represents primarily closing costs associated with our clubs in Charlotte, N.C. and Geneva, N.Y., which closed in the fourth quarter of fiscal year 2019. (10) Represents the tax effect of the above adjustments at a statutory tax rate of approximately 28%. (11) Adjusted net income per diluted share is measured using weighted average diluted shares outstanding.
(6) Represents severance charges associated with labor reductions from the realignment of our field operations in fiscal year 2021. (7) Represents the tax effect of the above adjustments at a statutory tax rate of approximately 28%. (8) Adjusted net income per diluted share is measured using weighted-average diluted shares outstanding.
We have more than six million members paying annual fees to gain access to savings on groceries and general merchandise and services. The annual membership fee for our Inner Circle® membership is $55, and the annual membership fee for our BJ’s Perks Rewards® membership, which offers additional value-enhancing features, is $110.
The annual membership fee for our Club Card (formerly Inner Circle®) membership is generally $55, and the annual membership fee for our BJ’s Club+ (formerly Perks Rewards®) membership, which offers additional value-enhancing features, is generally $110.
SG&A expenses were $2.4 billion, or 15.0% of net sales, in fiscal year 2021, compared to $2.3 billion, or 15.4% of net sales, in fiscal year 2020.
In addition, any future increases in wages, stock options or other stock-based grants or modifications will increase our SG&A expenses. SG&A expenses were $2.7 billion, or 14.1% of net sales, in fiscal year 2022, compared to $2.4 billion, or 15.0% of net sales, in fiscal year 2021.
(8) Other non-cash items, including gains from sale leaseback transactions, non-cash accretion on asset retirement obligations and obligations associated with our post-retirement medical plan.
(5) Represents severance charges associated with labor reductions from the realignment of our field operations in fiscal year 2021. (6) Other non-cash items, including non-cash accretion on asset retirement obligations and obligations associated with our post-retirement medical plan.
(4) Represents the reclassification into earnings of accumulated other comprehensive income associated with the de-designation of hedge accounting on one of our swap agreements due to the payment of debt. (5) Represents the expensing of fees and deferred fees and original issue discount associated with the partial prepayment of debt.
(4) Represents the reclassification into earnings of accumulated other comprehensive income/loss associated with the de-designation of hedge accounting.
Changes in commodity prices and general inflation have impacted several categories of our business. This inflationary pressure is due primarily to supply chain disruptions complicated by the COVID-19 pandemic.
Changes in commodity prices and general inflation have impacted several categories of our business. Recent inflationary pressures can be attributed a several macro economic factors including supply chain disruptions, government stimulus, interest rates, and other factors which were further complicated by the COVD-19 pandemic and the ongoing conflict in Ukraine.
In our core New England markets, which have high population density and generate a disproportionate part of U.S. GDP, we operate almost three times the number of clubs compared to the next largest warehouse club competitor.
Since pioneering the warehouse club model in New England in 1984, and as of the date of this filing, we have grown our footprint to 237 large-format, high volume warehouse clubs and 165 gas stations spanning 18 states. In our New England markets, which have high population density and generate a disproportionate part of U.S.
Fiscal Year Ended January 29, 2022 Comparable club sales 6.5 % Less: Contribution from gasoline sales 7.0 % Merchandise comparable club sales (0.5) % Merchandise comparable club sales decreased (0.5)% in fiscal year 2021. The decrease was driven by a decrease in sales of groceries of 1.7% and growth in sales of general merchandise and services of approximately 5.7%.
Fiscal Year Ended January 29, 2022 Comparable club sales 13.4 % Less: Contribution from gasoline sales 6.9 % Merchandise comparable club sales 6.5 % Merchandise comparable club sales increased 6.5% in fiscal year 2022.
The decrease in fiscal year 2021 is due mainly to lower levels of repayment of outstanding borrowings on our First Lien Term Loan and ABL Facility, offset by higher share repurchases in fiscal year 2021 of $179.2 million.
The decrease in fiscal year 2022 is due mainly to the draw down of debt on the ABL Facility and ABL Revolving Facility and the amendment of the First Lien Term Loan. The majority of the year-over-year change is driven by net borrowings to fund the Acquisition.
The year-over-year increase in SG&A was primarily driven by $43.1 million in investments in club team member wages, $19.3 million in occupancy costs, $17.5 million of accelerated stock-based compensation expense related to a former executive, increased depreciation and amortization expense, and other operating costs related to volume and continued investments to drive strategic priorities.
The year-over-year increase in SG&A was primarily driven by increased labor and occupancy costs as a result of new club and gas station openings, as well as incremental costs related to the transition of the Company’s new club support center and other variable costs related to company growth and continued investments to drive strategic priorities.
Pre-opening expenses for fiscal year 2021 included charges for new clubs and gas stations that opened in fiscal year 2021 and new club openings that are expected for fiscal year 2022. Interest expense, net Interest expense, net was $59.4 million for fiscal year 2021, compared to $84.4 million for fiscal year 2020.
Interest expense, net Interest expense, net was $47.5 million for fiscal year 2022, compared to $59.4 million for fiscal year 2021.
The increase was due to continued investments in new clubs, new gas stations and digital capabilities compared to the prior year. Net Cash from Financing Activities Cash used in financing activities in fiscal year 2021 was $525.2 million, compared to $662.8 million in fiscal year 2020.
The increase was due to the Acquisition, as well as timing, volume, and cost of property, plant, and equipment additions as we continue to expand our footprint. Net Financing Cash Flows Cash used in financing activities in fiscal year 2022 was $52.6 million, compared to $525.2 million in fiscal year 2021.
Removed
On January 25, 2022, the Company entered into an agreement to acquire the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, which is expected to bring end-to-end perishable supply chain in-house.
Added
GDP, we operate more than three times the number of clubs compared to the next largest warehouse club competitor.
Removed
The transaction is expected to close in the second quarter of fiscal year 2022 and the Company expects to finance the purchase price with a combination of available cash and borrowings under the Company’s revolving credit facility.
Added
We also launched Same-Day Select in the first quarter of fiscal year 2022, which offers BJ’s members the ability to pay a one-time fee for either unlimited or twelve same-day grocery deliveries over a one-year period.
Removed
However, there is no assurance that the transaction will be completed on the time frame or the terms that we expect or that, following the closing of the transaction, we will not experience disruption in our logistics processes that could materially impact sales and profitability for the near term while we integrated the assets into our operations.
Added
We have more than six and a half million members paying annual fees to gain access to savings on groceries and general merchandise and services.
Removed
Impact of the COVID-19 Pandemic Despite the ongoing impact and evolution of the COVID-19 pandemic, we have continued to experience strong sales, growth in membership rates, and acceleration in traffic and ticket. During fiscal year 2021, our grocery division continued to drive higher sales performance as consumer trends continued with greater at-home food consumption.
Added
The increase was driven by an increase in sales of groceries of 8.6%, which comprises approximately 85% of merchandise comparable club sales; offset by a decrease in sales of general merchandise and services of approximately 3.8%. In grocery, sales increased in the beverages, snack, dairy and fresh poultry.
Removed
However, we have continued to face several operational challenges directly or indirectly related to the pandemic, including supply chain constraints, inflation, and wage inflation. Refer to "Item 1A. Risk Factors" for additional information. Effective September 1, 2021, we increased wages for hourly club and warehouse team members.
Added
This group consists of our most loyal members with the highest lifetime value. Membership fee income was $396.7 million in fiscal year 2022, compared to $360.9 million in fiscal year 2021, a 9.9% increase.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−8 removed1 unchanged
Biggest changeAs a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate, including our ABL Facility and First Lien Term Loan. Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur.
Biggest changeAs of January 28, 2023, we have no LIBOR-based borrowings or contracts that extend beyond such date that will need to be converted to a replacement rate. 44
Additionally, although SOFR is the AARC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us.
Additionally, although SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us.
It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR. 43
It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing 43 costs given the remaining uncertainty about which rates will replace LIBOR. As of January 28, 2023, each of the agreements governing our variable rate debt have been transitioned to SOFR.
Removed
In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
Removed
In March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease publication of certain LIBOR settings after 2021, while continuing to publish overnight and one-, three-, six-, and twelve-month U.S. dollar LIBOR rates through June 30, 2023.
Removed
While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021.
Removed
In the U.S., the Alternative Reference Rates Committee ("AARC"), which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended that the Secured Overnight Financing Rate ("SOFR") plus a recommended spread adjustment as its preferred alternative to USD-LIBOR.
Removed
There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.
Removed
The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted. However, for some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty.
Removed
If a contract is not transitioned to an alternative variable rate and LIBOR is discontinued, the impact is likely to vary by contract.
Removed
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including certain contracts governing our variable rate debt, including our ABL Facility and First Lien Term Loan, and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available.

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