Laura Felice: Thanks, Bill. I’d like to personally thank everyone that joined us here today, both in person and on the webcast to hear our story. I know that many of our team members are also tuned in and to them, I’d like to reiterate my gratitude for their dedication and hard work, which continues to show in our financial results. I’d like to start with some of the highlights from our fourth quarter earnings, which we reported this morning. We delivered another record quarter with net sales up 13% and year-over-year to $4.8 billion. Fourth quarter comp sales were 9.8% and 8.7%, excluding the impact of gasoline. As we saw in our third quarter, our comp sales were equally driven by the basket and traffic growth. Inflation’s impact on our Q4 comp was flat compared to Q3, as the magnitude of input costs increases began to moderate in the quarter.
Comps in our grocery, perishables and sundry division grew by approximately 12% in the fourth quarter, underscoring our continued relevance with our members, particularly in the grocery and perishables business. On a three-year stack, our fourth quarter comps were 31% in this division and sequentially flat from the third quarter. Our general merchandise and services division comps declined 5% in the fourth quarter as members remain selective in their purchasing behavior. Comps in this division were up 2% on a three-year stack as discretionary spending continues to normalize towards a new higher base over the past two years. In our gas business, our comp gas gallons grew 11% in the fourth quarter compared to overall industry declines. This growth was comparable to the level we experienced in the third quarter.
As our gas margins again tended higher than our expectations and resulted in gas profits that outperformed our internal plans. Membership fee income, or MFI, grew 8% to $101.8 million in the fourth quarter, reaching nearly $400 million on an annualized basis. We are thrilled to report that our first-year renewal rate, tenured renewal rate, easy renewal penetration and higher tier penetration, all reached record levels this year. Moving on to gross margins. Excluding our gasoline business, merchandise gross margin rate improved 30 basis points year-over-year, which was better than our expectation due to improved inventory management throughout the quarter. Our fourth quarter adjusted EBITDA grew by 19% to $271.3 million, reflecting our sales growth and our outsized gas profits.
Finally, adjusted EPS was $1 per share, up 25% year-over-year. As we look back and assess our fiscal 2022 performance, we exceeded our top line expectations driven by our value focused efforts, leading to membership and traffic gains across the business in the height of a heightened inflationary backdrop. Traffic is an important part of our 2022 story, as Bob shared, at the top of the presentation. Our member value proposition has never been stronger. We have grown market share, and we believe there is still room to go. Our strong top line was partially offset by merchandise margin pressures, most notably in the front half of the year as well as rising interest rate environment, offsetting our balance sheet deleveraging efforts. We had a great year in our gas business.
Members visit us at the pumps more often, and this is coupled with elevated profitability led by market volatility. The combination of the strength in both our core merchandising and gas business led to 21% growth in adjusted EPS for fiscal 2022, well above our original expectations. We remain confident that our advantage business model, focus on executing our strategic priorities and commitment to delivering great value to our members will continue to drive strong results in our core business. As we look ahead to fiscal 2023 with the understanding that there is still a significant amount of uncertainty in how the macro environment will take shape this year as well as its influence on the U.S. consumer. Starting at the top of the P&L, we expect our fiscal 2023 comparable club sales, excluding gas, to increase by approximately 4% to 5%.
We expect continued strong traffic at our clubs, as members fulfill their household needs with us at an amazing value. Inflation is still pervasive but the rate of growth is moderating and we expect relief as the year progresses. As such, we expect the comp to be highest in the first quarter with some moderation in the remaining quarters of the year. In our gas business, we are modeling slight growth in comp gallons coupled with normalized yet structurally more profitable gas margins than experienced in prior years. As Bob and Tim discussed earlier, we launched our credit card program last month. We believe this program brings an enhanced value proposition to our members and will serve as another catalyst to grow and strengthen our membership base over time.
At the same time, we also acknowledge that it’s the early days post launch, and it will take us multiple quarters to complete the transition, which may temporarily impact our membership KPIs, including higher tier penetration. That being said, we expect MFI to grow 5% to 6% this year as we will benefit from strong renewal rates and membership acquisition from our 9 to 10 new club openings in addition to the two we just opened in February. On our merchandising gross margins, recall that last year, we worked through unforeseen supply chain challenges, particularly in diesel costs, which negatively impacted our merchandise margins. We also adapted to a dynamic operating environment caused by excess inventory levels industry-wide, which further pressured our margins.
We expect last year’s headwinds to become tailwinds this year. And as a result, expect about 40 basis points of year-over-year merchandise gross margin rate improvement from — in fiscal 2023 with the first half improvement outpacing the second half. Our focus on growing our own brands will also contribute to this improvement. On the SG&A line, we expect pressure as we will continue to expand our footprint and reinvest in our strategic priorities. Unit expansion is important to note as new clubs leverage as they mature and provide a drag to SG&A as they ramp to full potential. The growth profile weighted to own clubs, also elevates depreciation levels. Given the current rate environment, we also expect our quarterly interest expense to run at levels closer to our fourth quarter exit rate.
Despite the significant year-over-year headwind from the outsized gas profit levels last year, we believe we can deliver EPS of about flat year-over-year. This includes a 53rd week benefit of low teens range per share. Finally, we expect net CapEx in fiscal 2023 to be approximately $450 million, about half of which is slated for new club openings. As Bill mentioned earlier, we expect the mix of new openings this year will be skewed more heavily towards owned versus leased driving the higher number year-over-year. We are a stronger company today on all measures of the business. My colleagues spent the better part of the morning, talking through the strategic priorities. Each of these pieces discussed are individually important, but in the aggregate, drive a powerful model for long-term growth in our business.
The execution of our strategic priorities reinforces our long-term average annual growth targets, which are as follows: low to mid-single-digit growth in our comparable club store sales growth, excluding gas, mid-single-digit total revenue growth and high single to low double-digit EPS growth. The building blocks to deliver mid-single-digit total revenue growth are comp sales, new club growth, a gas business that is stable and steadily grows over time and continued strength in our membership base. Tim discussed our efforts driving loyalty, including personalized marketing and compelling offers such as our co-brand credit card. Rachel provided a glimpse into our merchandising efforts and how we’re focused on talent, assortment, innovation and our own brands to deliver great value and the best shopping experience.
Monica talked about our progress in digital growth. Collectively, all of these efforts are expected to drive growth in annual comp sales in the low to mid-single-digit range, excluding gas. Bill discussed our footprint expansion strategy and how each cohort of 10 new clubs per year ultimately contribute $500 million to $600 million of annual sales at maturity. As we discussed in the past, it’s nearly impossible for us to predict the gas business with even the slightest level of precision. And so we have assumed slight growth, primarily driven by new openings and sustained market share volumes with stable profits per gallon earning profile. We expect to maintain MFI growth at about the mid-single-digit growth rate driven by continued member growth and sustained strength of member quality and renewal rates.
As we work down the P&L, we expect the largest contributor of EPS growth to be driven by top line opportunities. We are confident in our ability to incrementally improve merchandise gross margins over time as we continually work to create efficiencies in our supply chain as well as tackle margin accretive strategies such as growing own brands penetration, which Rachel touched on earlier. Finally, we expect to continue to lean into our share repurchase program. As we pursue footprint expansion, we expect SG&A to delever slightly. But to be partially offset this, we will continue to maximize operating leverage through scale and by leaning into the structural efficiencies inherent to our business. As we look for opportunities to automate and make our business more efficient, we will continue to invest in our team members.
As a result, we expect our EPS to grow in the high single to low double-digit range on an average over the longer term. Over the past five years, we have generated nearly $4 billion of deployable cash. That is the combination of our operating cash flow and the net proceeds from our IPO. We spent about half of that to reduce our debt. And as a result, we have significantly strengthened our balance sheet from about five turns pre-IPO to less than one turn as of the fourth quarter. This has provided us with crucial flexibility today to reinvest in our business. We expect to maintain this strength by keeping our net leverage in the sub onetime range. We spent most of the balance reinvesting in our business, including about $1.2 billion of maintenance and growth CapEx as well as the acquisition of our perishable supply chain last year.
We also returned capital to shareholders with nearly $500 million of share repurchases over a five-year period, including $152 million worth of repurchases in fiscal ’22. That’s about 5% of our market cap today. We have approximately $319 million remaining on our authorization. As we look to the future, while our capital allocation priorities have not changed. Given the progress we’ve already made on our balance sheet, we expect to focus our capital allocation efforts towards, first, reinvesting in the business and second, returning excess cash to our shareholders in that order. In closing, here are the five reasons why we believe BJ’s makes for a compelling investment opportunity. One, we have structural advantage inherent in our business in the form of membership, operational efficiency, and we operate in a industry that continues to take share across the retail landscape.
Two, we have a loyal membership base that continues to grow in size and quality. Three, we have a differentiated shopping experience in the club space, focused on fresh, value and convenience. Four, we are profitably expanding our footprint. And finally, five, we remain committed to a prudent capital allocation strategy focused on maximizing shareholder value. We are extremely excited about our future and remain confident in our ability to drive value to our members and our shareholders. Our member value proposition has never been stronger. We will now take a quick 15-minute break and reconvening here for Q&A. During this time, we’ll show here in the room, some elements of our observedly simple savings that Tim talked about earlier and we’ll showcase some of our digital offerings that Monica discussed.
Cathy Park: Okay. Let’s get started with Q&A. So just, okay, everyone. I was trying to be natural. Clearly, it didn’t come across naturally. So just a few housekeeping rules. Yes, first question.
Q – Robert Ohmes: Robby Ohmes from BofA Global Research. My first question is general merchandise. Can you talk about general merchandise, same-store sales expectations for 2023? But also, you gave a great long-term outlook, how should we think about general merchandise comp expectations longer term versus food and consumables and grocery? The presentation, you mentioned some really interesting things about the general merchandise side, but I feel like, in the past, there was a little more thought on how we can catch up to other players, and general merchandise has seemed a little more leaning on the food and fresh side of BJ. So I was hoping you guys could address that.
Bob Eddy: Yes. Maybe I’ll start off, and Rachael and Laura can fill in. So general merchandise, first, thanks for your question, Robby. Thanks, everybody, for being here. I hope you enjoyed the presentation. As Rachael said in her prepared remarks, fresh right now drives the trip, and it’s an incredibly important part of our business, but general merchandise can and will be better and bigger over time. It’s an incredibly important part of the wholesale club theater, it’s an incredibly important part of the treasure hunt that you see in the wholesale club industry, where you come in to buy your paper towels or laundry detergent and you walk out with a television or a set of tires or a mattress. It is something that we, frankly, have not been as successful at in the past.
And that is very key to the next future period of our growth in our company. So we do think it will grow as a percentage of our sales over time, and we haven’t set a formal goal of any kind, but we are incredibly excited about what the new general merchandise team has under wraps, and you’ll start to see that at varying points during the year. We definitely expect comps in GM to grow as we go forward through the year — as we go forward through the year. So Q4 should be better than Q1 as, for instance. And we’re excited to show that stuff to remember. It’s very meaningful. Those members — our best members not only shop our food and grocery businesses, but they participate in our GM assortment as well. And so this is a big strategic initiative for us for the next several years.
And I’m thrilled to see — I know more than you do, obviously. I get to see a little bit. They don’t show me everything, but I get to see a little bit, and it’s really a lot of fun to see what they have. Our merchants style out for some holiday gifting stuff for this coming Q4 last week and I’m probably not the best judge of anything in there, but I was really sick, there were things that I own and want and great value and all that. So big expectations for the team, but they’ve really started to do some great things, and why don’t I hand it over to Rachael talk and Laura talk about more.
