管理層發言
Hello, everyone. Thank you for joining us, and welcome to BJ's Wholesale Club's Quarter 2 2026 Earnings Conference Call. I will now hand the conference over to Diana Rashkow, VP of Investor Relations. Diana, please go ahead.
Good morning, and welcome to BJ's Second Quarter Fiscal 2026 Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the Risk Factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our Investor Relations website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. And now I'll turn the call over to Bob.
Good morning, everyone. Thank you for joining us today. I'm very pleased to share that we delivered a strong second quarter, one that came in ahead of our expectations and reflects the continued momentum in our business. Net sales were up nearly 16% year-over-year and merchandise comps grew 3.1% with traffic accelerating during the quarter. This marks our 18th consecutive quarter of traffic growth and our 15th consecutive quarter of market share gains. On a 2-year stack basis, merchandise comps were 5.4%, in line with where we were last quarter, which speaks to the durability of our momentum. The comp was driven by a healthy balance of traffic and ticket, and we delivered for our members when it mattered most, including during events like the World Cup and America250. Simply put, our value proposition continued to resonate, and I want to thank our teams for their commitment to executing at a high level across our company. Our perishables, grocery and sundries division delivered solid comp growth of 2.8% in the quarter, led by grocery. We saw particular strength in beverages and Active Nutrition, where assortment updates through our category management process have been resonating well with members, and we're pleased with the momentum we're building in this part of the business. Our General Merchandise and Services division sustained comp growth of 5.3% in the quarter, and I'm pleased with the breadth of performance across the division. Consumer electronics continued to lead the way and Home was a strong contributor. The results reflect the work our teams have been doing to put the right products at the right value in front of our members. Gas prices remained elevated during the quarter, and our members continue to seek us out for the value we offer at the pump. Comp gallons were up double digits, accelerating from the strong results we saw in Q1 and a clear signal of the share we continue to take. Gas prices are about as visible as it gets for consumers. There's a price on every street corner, and our members know that we offer great value. Strong volume growth, combined with favorable pullback from peak gas prices drove fuel profit dollars ahead of plan, which was a meaningful contributor to our overall results. Taking a step back to assess the consumer environment, the K-shaped economy persists, though we did see some sequential improvement during the quarter. We drove comp growth across all income cohorts, which is encouraging, and our value proposition continues to resonate broadly. That said, the vast majority of our growth continues to be driven by our higher income members, which is consistent with what we've seen for some time now. In an environment where consumers remain discerning with their dollars, we know our job is to make sure we're putting the right products at the right value in front of every member who walks through our doors. All told, it was a strong quarter across the board. Sales, membership, margin dollars and the bottom line all came in ahead of our expectations. Adjusted EPS was $1.36, up 19% year-over-year. And to put that in perspective, we earned more in this single quarter than we did in the entire year we went public back in 2018. That's a remarkable statement about how far this business has come. With that as a backdrop, let me turn to the progress we're making on our strategic priorities. Let me start where I always do with membership, which remains the foundation of everything we do. We reached a new milestone of 8.5 million members this quarter, and that's worth pausing on. Over the last 25 years, we've grown our membership fee income at an 8% CAGR. Since our IPO, we've added more than 3 million members. And in just the past 2 years, we've added over 1 million members. That kind of compounding growth is earned by consistently delivering the value and convenience our members expect from us. The current quarter was no exception. Membership fee income grew nearly 10% year-over-year. And what matters most to us isn't just the number, it's the quality of the membership base we're building. One of the best measures of that quality is MFI per member, which has grown consistently year-over-year, reflecting the strength of our acquisition, retention and higher tier penetration across both new and existing clubs. On experience, our price gaps continue to improve and the market dynamics are working in our favor. Traditional grocers have been raising prices, creating an even more favorable backdrop for our value proposition. We continue to gain share as our price gaps improve, unit share has become an even clearer signal of member preference. Based on industry data in the markets where we operate, the rest of the market saw unit sales decline while we saw unit gains with units growing more than 300 basis points faster than the market in the quarter. And that's not just a Q2 story. We've outpaced the market on units over the past year as well. That's an important distinction. Our model is built to grow both sales and units by delivering value, and that's exactly what we're doing. Delivering great value isn't just about price, though. It's about making sure that we have the right products on the shelf at the right price. Part of delivering great value is knowing when to lean into a moment, and our merchants did just that this quarter. America turned 250 this year, and our team found a great way to celebrate with our members. We brought in truckloads of watermelons at $3.99, while many other retailers were charging $5.99 and about one in five of our members had one in their basket during this promotion. It's a simple example of what we do well, finding the right product at the right price and delivering real value to our members. We're building that capability systematically across our entire assortment through our category management process. CMP is about going deep on what our members want from us, category by category, making sure we have the right assortment at the right cost. And we're already seeing it show up in our results. The strength we saw in beverages and Active Nutrition this quarter is a direct reflection of that work. And in Home, we've seen strong member response to renovated assortments across several categories, including housewares, textiles and refrigeration, where we've made meaningful changes to our assortment and value positioning. We'll keep going systematically. And over time, this will become embedded in how our merchandising team goes to work every day. Turning to convenience. The investments we've been making here continue to pay off. Digitally enabled comp sales grew 30% in the quarter, reflecting 2-year stacked comp growth of 64%, and our members are telling us loud and clear, they love what we're doing. What we're really focused on is saving our members' time in addition to saving them money, and that combination is powerful. Our members are engaging with us digitally in many ways from buy online, pick up in club and same-day delivery to ExpressPay in the club and growth is strong across all of them. ExpressPay penetration, in particular, continues to grow and members who engage with our digital conveniences spend significantly more with us and are more loyal over time. Bev, our AI-powered shopping assistant, is live and gaining momentum. She's now had over 100,000 conversations with members, helping them find products, check club hours and get more out of their membership. It's a great example of how we're using technology to take care of our members in new ways. And finally, our footprint. New clubs are a key engine of long-term growth for our business, and our team is delivering. We're making excellent progress on our footprint expansion. In the second quarter, we opened three new clubs in Texas, Waxahachie, Fort Worth and Grand Prairie, bringing our total in the state to four. We also added a new gas station in Edison, New Jersey. We have 7 additional club openings and one relocation planned for the remainder of the year, and we remain committed to our pace of 25 to 30 new clubs every 2 years. We also announced a new club coming to Tyler, Texas, further expanding our presence in the Greater Dallas market. The performance of our new club portfolio remains very strong and is a key piece of our long-term strategy. For Texas specifically, we're very pleased with what we're seeing. Membership continues to track more than 30% ahead of plan. Member behavior is consistent with what we see in the other new clubs, strong engagement across the box with higher GM penetration, and our gas volumes have been outstanding. To put a finer point on the value of gas to our members in Texas, all 4 gas stations are in the top 30% of our chain for gallons with 2 of the stations cracking the top 10%. This performance in Texas should not be a surprise as it follows the track record of success we've built with expansion in both new and existing markets. Last quarter, 22 of the 23 clubs we opened across 2022 to 2024 comped above the chain average with the 2024 class of 7 clubs comping double digits last quarter. The consistency of our performance is a testament to the teams who show up with the goal to make the next opening the best one yet, and I'm proud to say our teams are delivering on that promise. Before I turn it over to Laura, I just wanted to say that this was a quarter we can all be proud of, and it doesn't happen without an incredible team. Our team members across the clubs, distribution centers, supply chain and club support center show up every single day to take care of the families who depend on us. And results like these are a reflection of their hard work and dedication. I'm proud of what we've accomplished together. I'll now turn it over to Laura.
Thank you, Bob. I'd like to echo Bob's gratitude for our team members across our clubs, supply chain and club support center whose dedication to our members and our purpose made this quarter possible. Let's dig into the results. Net sales in the second quarter were $6.1 billion, increasing 15.9% year-over-year. Total comparable club sales increased 11.9% and excluding the impact of gasoline sales, merchandise comparable sales increased 3.1%, driven by a balance of traffic and ticket. Inflation was just under 1 point in the quarter. Our perishable, grocery and sundries division comped up 2.8%, led by grocery. General merchandise and services grew 5.3%, driven by strength in consumer electronics and Home. Membership fee income grew 9.9% to $136 million, reaching a new milestone of 8.5 million members. Please note that we continue to expect MFI growth to moderate throughout the year as the impact of last year's fee increase normalizes. Gross profit increased 10.3% to $1.11 billion in the quarter. Merchandise gross margin rate decreased approximately 20 basis points year-over-year, reflecting the balance of our continued investments in value for our members and our commitment to delivering for our shareholders. Fuel profit exceeded plan, supported by strong execution and favorable market conditions during the quarter. Comp gallons increased 10.5%, and we continue to take share as industry data indicates overall comp fuel gallons declined by approximately 5% during the period. SG&A was $851 million and improved as a percentage of net sales year-over-year. The increase in absolute dollars was largely driven by the costs that come with opening new clubs and gas stations, including labor, occupancy and depreciation as we continue to grow our owned club base. This was partially offset by a gain from a sale-leaseback transaction on our new ambient distribution center in Ohio. Adjusted EBITDA increased 14.3% to $347 million and adjusted EPS was $1.36, up 19.3% and ahead of our expectations, largely driven by the outperformance in our gas business. Turning to the balance sheet. We ended the quarter with inventory levels up 2% year-over-year on a per club basis with in-stock levels approximately flat year-over-year, reflecting the team's continued focus on getting the right product in the right clubs at the right time. Cash flow remained healthy in the quarter with adjusted free cash flow of $266 million, well ahead of the $87 million we generated in the second quarter of last year, reflecting the strong operating performance of the business. Our capital allocation strategy remains consistent. We believe the best use of our cash is applying it towards profitably growing the business, including investments in membership, merchandising, digital capabilities and real estate. We ended the quarter with net leverage of 0.5 turns, which continues to provide us with meaningful flexibility to invest in long-term growth. In the second quarter, we repurchased $124 million of shares, and we have approximately $422 million remaining under our existing repurchase authorization. We will continue to take a disciplined approach to deploying our capital to maximize shareholder value. Turning to our outlook. We are pleased with our outperformance in the second quarter. We are maintaining our full year guidance of 2% to 3% comparable club sales growth, excluding gasoline. For adjusted EPS, we are raising our range and now expect $4.60 to $4.80 for the full year, reflecting the strong results we delivered in the second quarter, particularly in our gas business. As always, our outlook reflects our current view of the consumer and the broader operating environment, and we will continue to manage the business with discipline while investing for long-term growth. With that, I'll turn it back to Bob.
Thanks, Laura. Before we open it up for questions, I just want to take a step back and reflect on what this quarter represents. We came in ahead of our expectations on nearly every dimension, sales, membership and the bottom line. This is not a coincidence. It's due to a talented team figuring out new ways to invest in our members. Our members continue to reward us for the value and convenience we provide, and that shows up in the traffic growth, the share gains and the membership momentum we've sustained. Our strategic priorities are working. The investments we've made in experience, convenience and our footprint are bearing fruit, and we are as excited as we've ever been about the road ahead. As we wrap up, I want to talk about our purpose. We take care of the families who depend on us. We live this purpose every day. In Q3, we launched a chain-wide initiative that will let our members help live our purpose. Members can round up at the registers and club with donations going to the Dana-Farber Cancer Institute, a world-renowned organization at the forefront of cancer care and research. This campaign is a first for us, and we look forward to making a difference in the communities where we live and work. I also want to take a moment to recognize someone who has been a huge part of building what we have here. Paul Cichocki, our Chief Commercial Officer, is retiring after an incredible career and a great run with this company. Paul has been instrumental in so many of the merchandising and commercial advances that have made BJ's a stronger business, including building a great team ready to take over for him. Paul, you always drove with your heart, and it showed in everything you built here. Thank you for everything. With that, let's take some questions.
分析師問答
Your first question comes from the line of Edward Kelly with Wells Fargo.
Bob, I wanted to ask you about investment. And you had the tax refund benefit, which you've been talking about playing into the business. Fuel has been strong as well. Can you just talk about how much of this is getting put back into the business? And then what you think the return on that investment is as you think about sort of like the sales and the traffic?
Yes. Thanks for your question, and thanks for everybody's attention this morning. I understand there were some technical difficulties on the beginning of the call. Just know that we were going to post a copy of our prepared remarks on our Investor Relations website to hopefully clear that up and the recording should come out clear. But I want to apologize for that. Certainly put a little bit of a damper on what I think are fantastic numbers for our company as we report those this morning with overperformance in sales and margins and gasoline and membership on the bottom line, just a wonderful quarter that our team put together. And I think, Ed, to get to your question, it is because of the investments we continue to make in our member. It's really our job to provide great products but most particularly great value on those great products. And we will take every opportunity we can to make investments in that idea. Certainly, we need to balance that with all of our other constituencies. But I know the team did a fantastic job this quarter doing so. We obviously had the tariff refunds that you mentioned for the past couple of quarters, and we're just about through those as we sit here today. And then we had a great quarter from a fuel profit perspective and invested some of those dollars in our membership as well. And the idea there is not necessarily short-term payback, it's long-term lifetime value. And the idea is the better people feel about our prices and our products and the value that they get from their membership, the more they come to see us. And we know that the frequency with which they come to see us is the biggest predictor of their ability or their willingness to renew their membership and the biggest contributor to lifetime value. And so as we continue to invest in our member, it really does become the flywheel of the company as we are trying to make sure that they enjoy their visits with us and they feel the value every single day, while we're doing other things like improving our convenience efforts and our merchandising and our real estate footprint. So we're not necessarily looking for returns within one particular quarter. Sometimes those happen, but we're looking for an effort that builds over time that really underpins the value of BJ's membership.
And it's just a follow-up, I guess, for maybe for Laura. Can you just parse out operating expense a little bit? You talked about a sale leaseback gain, but then the dollar growth in operating expense is higher than it's been in a while. So I don't know if there was some offset to that, but any color around the magnitude of the sale leaseback and what the offsets were on that?
Yes. Ed, thanks for your question. I think you brought up a good point about the sale leaseback we did this quarter. Before I get to the numbers, I would say that being able to do a transaction like that speaks to the strength of the company and how far we've come. We've spent a lot of time working on and with the strength of our balance sheet as we've paid down debt, and that has given us the opportunity to buy locations rather than enter straight leases like we historically did. In doing that, we find opportunities in our portfolio where we can create value and long-term growth to reinvest in the company. The transaction this quarter with our Ohio distribution center is an example of that. From a numbers perspective, the gain was relatively small in the grand scheme of things — about $11 million to the P&L. We're happy with the transaction, and again I think where we've come from as a company speaks to how we've been able to add transactions like that that add value and are accretive over the long term.
Your next question comes from the line of Peter Benedict with Baird.
My first question is on MFI. Membership fee income grew about 10% sequentially and has been relatively stable. You provided the member numbers, so sign-ups appear strong. With the benefits from the fee increase tailing off, we would have expected growth to slow, so is something in the core business reaccelerating? Can you comment on trends around higher-tier membership renewals or similar dynamics? That's my first question, and I have a follow-up.
Yes. Pete, look, I think our membership team continues to do a fantastic job really growing our company. It's the backbone of what we do here. It's the foundation of everything. They had a very, very strong quarter. As you know, we had about 10% growth in the quarter that pretty much mirrored what we saw in the first quarter. Our plan for the year would have seen that 10% slide down to about 6% at the end of the year, so the Q2 performance in particular was very strong. I think it highlights the value of what we're giving our members and our strength in our new clubs as well. If you think about the building blocks to MFI, the key is the number of members. We had a strong acquisition quarter, and the team continues to innovate and figure out new ways to get in front of prospective members and to come up with offer constructs that make sense to people. We certainly want to renew all those members, and we had a fantastic renewal rate performance during the quarter as well. We are now at another all-time high from an easy renewal perspective in terms of the number of members that participate in that automatic renewal program. If you think about the quality of those members, you mentioned higher tier: we're at an all-time high there as well, with about 43% of our membership being higher-tier members. That's far and away the best number we've had, and we continue to grow that cohort. They spend more, they renew at higher rates, and they are active in many categories—exactly what we like to see. I think it was a fantastic quarter for the membership team. I still do think you're going to see the benefits of the fee increase wane over the year, so we are guiding to finish the year at that 6% exit rate. But hopefully we can continue to put up good quarters as we go through, explain the value of a BJ's membership to folks, and have them join our franchise. It's been a great run for our membership team. You and I have talked a lot about the big differentiators and where we were five or ten years ago versus where we are today. The biggest differentiator I see is our ability to grow membership in comparable clubs. We once were not very good at that, and today we do it very consistently—we were up 2% to 3% during the quarter. It was a really fantastic result, and congratulations to that team.
That's great color, Bob. Good to hear. And then I guess maybe just on the traffic acceleration you talked about during the quarter. I'm curious, I mean, how much of that you think was related maybe to the price investments you started to take earlier? How quick is the response mechanism there? And as you think about the 2% to 3% merch comp plan for the year, how much of that do you think is kind of traffic versus ticket just at a high level?
Yes. No worries. Good traffic numbers during the quarter. About half of the comp was driven by traffic, which was a significant acceleration from what we saw in the first quarter. It's hard to tell whether it's directly related to the investments we made in the first quarter, though I would like to say some of it is. That's certainly the idea. We would typically see traffic before we would see sales dollar benefits given the math of lowering prices. But that is the idea of what we're trying to do: invest in our members, put the best products on the shelf for them to see, and talk to them in ways that resonate with them, and they reward us with traffic. I think the team did a nice job on all of those fronts during the quarter. As far as the 2% to 3% guide, we left that alone. I think we'll be in that bracket, hopefully toward the high end for the full year. We sit comfortably in the middle of that bracket at this point. Hopefully our traffic continues through the back half. We have some laps to think about in terms of the three-year stack on the port strike and the general merchandise build from last year in Q4. But if you think about the base of our business, it is how many members we have and how active those members are. We just talked about MFI and the number of members being fantastic, and now we're seeing great continued traffic growth, our 18th consecutive quarter, as we said in the prepared remarks. Hopefully we can keep that streak alive.
Your next question comes from the line of Kate McShane with Goldman Sachs.
Our question is just on the sustainability of some of the price investments that you have been able to make over the last 2 quarters, given that they were driven and financed by tariff refunds, how do you think about these price investments and lapping them when there aren't necessarily tariff refunds to fund them?
Yes, good question. It is our endeavor to match our investments with continuing sources of funding. While tariff refunds funded them in the first half of this year, we have other initiatives that will fund them in the back half of the year. I think the worry that margin rates will decline precipitously when we don't have that tariff funding is misplaced. I do think we've identified other places to source funding and you can think about what those might be. The tariff refunds we've talked about are all first-person tariffs. So the things that we paid and gotten refunded, we are now working with our suppliers to get our fair share of their refunds. We are working with our suppliers to figure out the optimal assortments, and in some cases that may come with margin benefits. We've got other sources of margin like retail media and some other things. And certainly, gas plays in there as well. We would always take some portion of any quarter's gas feed and invest those as well. We understand our job is to deliver margin dollars globally, not necessarily a particular rate. Within reason, I don't really care about any particular rate. I know my job is to deliver profit dollar growth, and that's frankly what our members expect from us too. They want the right prices, and that means we have to get the right cost. We will continue to find ways to invest in our membership and take every opportunity we can to do so.
And just a follow-up question is on general merchandise. I wondered if you could kind of talk through what we can expect from that category in Q3 and Q4, given what we're lapping last year and just given new leadership within merchandising.
Yes, sure. I mean Jim has been on a little bit of a run lately, which is great to see. It was once I would argue our weakest business, and now we're starting to make some progress. That progress started in our consumer electronics area, which has probably been our strongest area, and that's the easiest to impact. But our team has done a nice job improving our assortment at Home. We talked a little bit about that in our prepared remarks in some of those categories. And our seasonal business was positive comp during the quarter as well. That's a big business in the second quarter, and it was nice to see that get positive. We've got some room to improve there for sure. And we've got some room to improve in apparel and the rest of the categories. But for me, nice to see a continued positive comp trend. Nice to see the breadth of the comp. And under the covers, you mentioned the changes in merchandising leadership. Stephanie Reibling has done a fantastic job. You know general merchandise is where the core of her experience lies. She's got her fingerprints on some of these early wins, but know that they are early, we will go through this assortment ruthlessly and make sure we're offering the right products at the right value. And we've also added some talent beneath Stephanie in this area with a new DMM of General Merchandise and a couple of new DMMs as well. So it starts with the team, right? We've got a fantastic team, and they are all on the ground and working hard to make sure that the next quarter is better than Q2. And I guess I would just again say just keep in mind the big lap we have in Q4 from a GM perspective. And other than that, we're very pleased with where we landed the quarter.
Your next question comes from the line of Mike Baker with D.A. Davidson.
I wanted to focus on Texas a little bit. You said you were 30% ahead of plan. What is the plan relative to sort of company average or typical openings? How big can Texas be? What are you seeing competitively? Are others reacting to you guys moving there? Just a little bit more color on Texas, please.
Maybe I'll just say a couple of words, Mike, and then kick it over to Bill. I just wanted to thank Bill. He's done a fantastic job really creating this whole growth engine within real estate that we have. It's a big effort. His team has done fantastic work. And I couldn't be more proud of him and the team for what we've accomplished. And Texas is just one point in that journey, and it's going very well. But I just want to thank Bill publicly for all the things he's done. So Bill, tell us about Texas.
Thanks, Bob. I appreciate that. Mike, good to talk to you. Yes. So Texas, as we offered in some of the prepared remarks, we're seeing exactly what we hoped we would see. We're seeing outside membership gains. We're seeing the membership engage throughout the club across categories, and we shared some data in terms of the gas program down there and what we're seeing in terms of gas gallons. When we look at something like engagement of gas, we know that that is a strong indicator of a likelihood to renew. And so when we look at something that early on, we feel really good about the prospects of being really successful down there with the membership base. So really excited, but more to go do. We'll open up our club in Mesquite later this year. We announced our next club in Tyler, which is just outside the DFW Metroplex for early next year. And we have a lot more to come that you'll hear about in the future. And as you think about Texas, it's just part of the broader real estate story. As I reflect back on it, we're probably having the same conversation when we opened up in the Michigan market back in 2019. And as we sit here today, those investments that we've made in Michigan have led to an expanding footprint there, and we're the gateway opening up throughout the adjacent Midwest markets when I think about Nashville, Indianapolis, Columbus, Pittsburgh. And so this is just a continuation of the long-term story. And so we're really proud of what we're seeing down there. We're excited for the Q3 clubs to get our Rotterdam club relocated and open for our members as well as opening up our second Alabama club down fully on the Gulf Shores, as well as expansion in Florida, which has been an amazing market for us with our club in Ocala, with both the Q3 new clubs showing, again, great early membership results. And Bob talked about the membership engine earlier. It's certainly hitting in comp clubs, but it's certainly working super hard in our new club efforts. So Texas is really important. We're doing great. We're really proud of the results. It's a continuation of the broader new club story and all part of this engine that we've built over the last seven or eight years. So really excited about the future.
Yes. Great. I'll ask, we'll call it a follow-up, but candidly a different topic. Would you guys be willing to talk about the pace of sales throughout the quarter by month?
Mike, it was pretty ratable through the month. So nothing really to call out from a variability perspective.
Your next question comes from the line of Chuck Grom with Gordon Haskett.
So great quarter. My question is on CMP or SKU reduction. I know it's something that the company has done in the past and it's come and gone over the years. But just can maybe, Bob, just double-click on the opportunity here, how you see the SKU count in the store. Maybe give some perspective on when you're opening up these new stores in Texas and elsewhere, how many items you're opening up with relative to the total chain. It's been a long-standing opportunity, in my opinion. So just curious if you could flesh that out for us.
Yes, I'd be happy to, again, everybody. Sorry for the technical difficulties. CMPs have been a good part of our strategy for the past several years. And candidly, in the last couple of quarters they've taken on a bit of a different tenor, particularly with Stephanie's arrival. I mentioned earlier we're using CMPs to source margin, but they really serve a much broader purpose than that and they get directly at what you're asking about. So we find ourselves over-SKUed, as you point out. It has been a long-standing opportunity. We have had efforts to cut SKU count in the past, and I would argue we didn't prosecute that opportunity in the right way. We just cut SKUs, which cut sales, and then we added some SKUs back. Really, what we're doing now is removing unnecessary choice — for example, reducing multiple flavors of body wash and pushing all the volume into the remaining body wash flavors while adding new innovative products and white-space categories. The addition of those new products, need states, and white-space categories is sourcing sales growth as well and giving us a formula where we can cut SKUs and see sales go up and margin dollars rise. Our goal is to take about 20% of our SKUs out over the next couple of years, and that will happen ratably. That will largely get the chain down to where we find ourselves in new clubs, maybe a little bit lower than that. Our average number of SKUs in the legacy club is about 7,500 at this point, and the new clubs come with a 6-handle on them. I would like to get it down to about 6,000 to 6,500 SKUs over time. We've seen some benefits so far. We talked about it in the prepared remarks a bit, including benefits in beverages and Active Nutrition, where we're taking out unnecessary duplication and adding some new, appealing items. For example, in traditional soda we no longer carry cans, 1-liters and 2-liters of the same product; instead we're adding healthier soda alternatives like coffee and similar items. We've set some categories in the second quarter and saw good results. We'll set some more in September, and our next wave will happen around the end of the year. This is an ongoing effort and I think it will be powerful. Stephanie has brought a great member focus to it, so we're trying to be sensitive to what members' needs are, which will influence what we cut and what we add. The early results in this wave are good, so we'll keep it going and hopefully see more positive results.
That's great. And then I guess my follow-up is just on the gas business, 10.5% gallon growth, I think you cited, which is much better than the industry. I guess how are you using that as an opportunity to acquire new customers? Obviously, the MFI was much better than expected. The underlying health is really good. But are you using gas to drive new customer growth? And can you just flesh that out for us?
Yes, of course. Let me pass that over to Bill since he runs gas for us.
Thanks, Chuck. Absolutely, we use it to drive membership. We've seen members block to us with the 10.5% comp. The value of gas that we offer to our members is just as important now as it's ever been. And so we've definitely tested acquisition offers with gas discounts that our members have responded to in an outsized way. And it's been a great partnership with our membership acquisition as we've tested and quickly learned into offers and then expanded them when we've seen great results. But Chuck, I want to take a moment just to come back to the gas business because the 10.5% comp that we delivered is certainly a testament to the team that is offering the value to our members every day, but also to the structural investments that we've made. So we've talked a bunch about this call about both short-term investments that we're making in price, but also long-term investments that we've made into something like real estate. And when we think about the overall gallon growth that we've delivered that in an environment like this allows us to deliver outsized value for our members and source outsized EPS for our shareholders. That's only because of some of these big structural long-term investments that we've made. So as I think about on the real estate side, we have 50% more stations than we did at the IPO. We couldn't have delivered the gallons that we delivered in Q2 without those continued investments over time. And then I also think about something like our co-branded credit card program, where today, we have over 2 million members that are getting either a $0.10 or $0.15 per gallon discount every day at the pumps, right? And that you don't grow it to 2 million over time without working at it every single day. And the team that does that has been extremely successful in growing the credit card base. So these big long-term decisions that we've made to invest in the value for our members come home and pay dividends in an environment like Q2. And so it's just a really cool example of where how the company invest in lifetime value can come back to payback, again, both to our members through an increased outsized value in a quarter like this as well as to our shareholders.
Your next question comes from the line of Simeon Gutman with Morgan Stanley.
This is Pedro on for Simeon. Nice quarter. I meant to ask you about merch margins and price investments. We've seen merch margin rate down 20 basis points this quarter, driven by continued price investments, some offset from tariff refund benefits. How should we think about the cadence of merch margin in the back half of the year as some of the tariff refund tailwinds potentially diminish? And how you think about price investments for the rest of the year?
Pedro, I'll take that one. We've already discussed price investments on this call and how we view them over the long term as important to our members' lifetime value. We do not provide guidance on merchandise margins. As we move through the year, you will see us balance investments with sources of funds, managing uses and sources within quarters, while continuing to deliver value to our members. It is important to consider milestones and key metrics in our business, such as traffic in our clubs, where we are seeing continued positive momentum that indicates members are recognizing the value, and market share, where we continue to gain on both dollars and units. All of these factors matter as we look to the back half of the year, and you will see us manage for both the short term and the long term.
Okay. Great. That's helpful. And if I could ask you a follow-up about membership fee income and renewal rates. Nice job growing membership fee income this quarter. Could you break down for us the key drivers of that growth? How much is attributable to the fee increase versus member count from new clubs, member count at existing clubs?
Yes. Maybe I'll take that one, too, Pedro. Look, we don't give specific numbers on how much is coming from new clubs. But maybe I'll give you some context and a little bit more color on the things we talked about. We're really happy with the overall member base growth. We hit a milestone of 8.5 million members. And so we continue to grow our overall member count, I think, faster than we've ever seen in the history of the company. We're happy with where our members are from a higher tier penetration, our members that are engaged with the co-branded credit card. Bill just talked a little bit about that. We have over 2 million members in our co-branded credit card product. And all of that is important to the short-term MFI results as well as the long-term lifetime value of members and their propensity to renew, which is what we like. We talk about MFI as the leading indicator in our business. And so we view the results that we put up this quarter as a marker of the continued success that the membership team has made. I'd like to thank them for all their work. We're certainly in a different place than we were even 5 years ago from a membership perspective and acquiring members and the quality of members. So we'll look to continue to do that as we continue into the back half of the year.
Your next question comes from the line of Steven Zaccone with Citigroup.
Stores look great in Texas, by the way. Laura, a question for you. How do you break down the EPS guidance rates? So how much of it is the fuel exceeding plan? It seems like the sale leaseback is $0.06 if we did the math right. How do we think about the guidance raise? It seems like the second half expectations are pretty much unchanged despite you tracking towards the higher end of your same-store sales outlook.
Steve, I think you're looking at that the way we think about it. We talked a little bit about this. Bill talked a little bit about our gas business and how we view it long term, certainly successful in the quarter. And so as we step back and think about the raise on EPS, that is a result largely of our gas business. We did invest some of that in the quarter, but really just taking the beat and raising on it. So we feel great about our guidance range for the back half and where we'll land for the full year. Bob already talked about the top line and why we left the comp guidance alone, but that's the story on the EPS guide.
Okay. And then follow-up just on Texas. How do we think about the time line for these stores to reach maturity? I know it's a new market for you, but are there learnings from Michigan in the past from Nashville? Like how do we think about the time line to reach maturity?
It's been pretty consistent across both new and existing markets: we see membership growth throughout the first couple of years, and members generally grow into their sales potential over that period. Typically, within three to five years the club matures toward its regular potential and then grows with the chain from there. There’s no better proof point than the data we presented in the prepared remarks on comps for new clubs, where they continue to outperform the chain both individually and as a cohort. Look at the data point we gave that our 2024 class is comping in the double digits — that’s the math of membership growth combined with spend growth producing outsized performance for these clubs. We’ve seen this broadly and consistently. It’s a testament to the teams working on this every day, giving our members an unbelievable experience and delivering amazing value to these new communities. We see the results, and I have no doubt we’ll see the same thing whether it’s in the Texas clubs, Poly, Ocala, or any of our new openings, because we have a demonstrated history of success across the board.
Your next question comes from the line of Oliver Chen with TD Cowen.
This is Gabriella Garr on for Oliver. I have 2 questions. The first one is on the digitally enabled sales. I know you saw a nice 30% growth this quarter. I wanted to ask as digital becomes a larger part of your business, what are you seeing in terms of member spend, frequency, retention and other important metrics compared to members who shop primarily in clubs?
Gabriella, certainly a great quarter from a digital growth perspective on top of a great Q1, a great Q2 last year. I think our 2-year stack is over 60. So the team has done a nice job of putting things in front of our members that they enjoy that save them time in addition to saving them dollars. And we're investing in this. We have been for a while because of the question you're asking, the folks that engage with each of these digital properties become more valuable over time. They interact with us more. They come to see us more physically, they buy more and they renew at higher rates. And that is a compounding thing. The more digital properties they interact with, the better they are. So if they clip coupons, they become better. If they order something to be shipped to their home, they become better. If they order BOPIC or same-day delivery, they become better. If they use ExpressPay where you check out in the clubs, they become even better than that. And so the more ways we can get them to engage with us, whether it be through our desktop app or our desktop website or our app, they really change their behavior for the better over time. And so I think we're around 19% penetration of our business at this point. And I hope that, that continues to grow. It is really one of the great stories within our company at this point. And we'll continue to place investment dollars here. We'll continue to talk to our members and source ideas from them on how we do this. And we've got a concentrated effort right now to grow our ExpressPay penetration, and that's been going well as well. So good results this quarter and more to come.
That's helpful color. And then just as a follow-up question. As we think about value perception, price gaps and as well as the merchandising improvements that you guys are making, can you shed some light on how private label is playing a role in all of this, both in success today and then maybe categories where you see opportunities to expand penetration of your own brands?
Yes. We haven't talked about own brands in a while, but they are certainly a big business for us — several billion dollars of our sales are done in our two owned brands. It really comes down to quality and value. We put good quality products in front of our members and price them very competitively. That is even more relevant these days in pressured economic circumstances, where we're giving our members terrific value. Think about our Berkley Jensen paper towels, for instance; I think we're 35% lower priced than the comparable national brand on a fantastic towel, and we make a little more margin than we would if we were selling the comparable national brand. We've grown that business to about a 65% unit share. We're putting a great product in front of people at a fantastic value, and they come back to get it from us. We need to do more of that and continue to improve our own brands. As we think about the overall value we provide our members, we understand that our job is to provide terrific value, and own brands are a great way to do that. You mentioned our price gaps. We haven't talked about that recently, but our price gaps improved during the quarter, so our investments are paying off. It's a tough market from a cost-increase perspective and some of our competitors are having to raise prices faster than we are, and we've been making investments to address that. All of this comes back to the central theme of offering the right value, and we'll continue to do that day in and day out for our members. That's what they pay us to do, and we love to do it. We are always pleased to make investments in our members because we know it pays off in the long term.
Your next question comes from the line of Greg Melich with Evercore ISI.
Sorry if I missed it in the opening comments, but Laura, could you help us with the ticket expansion, which I guess was around 1.5 points. How much of that was unit growth items in basket versus inflation, which if I remember correctly, was slightly negative in 1Q?
Greg, thanks for the question. We talked a little bit about inflation in the prepared remarks. It was close to 1% in the quarter. And so certainly, a step move off of where we were in the first quarter. And so I think as we step back and think about our comps that we delivered for the quarter, we're really pleased with the 3.1% equally balanced roughly between traffic and basket. And so we like that. Our members are certainly seeing the value in what we're offering them every day.
That's super helpful. And Bob, I'd love to follow up on the openings. Given the success in Texas, just update us on how many clubs you're opening this year and next year? And do you think there's an opportunity to accelerate that going forward?
Yes. Thanks for the question, Greg. I'll kick it off and Bill can talk about the specifics. As you point out, our real estate growth has been fantastic. We've gone from not opening clubs a few years ago to opening at sort of a 12 to 15 clip at this point. And we've committed to maintaining that 25% to 30% every couple of years cadence. And we've challenged ourselves to think about going faster as well. And so that will take a couple of years to sort of make its way into the pipeline. But the more good clubs we can open, the better for us. And so we're pleased with where we are, and we'd love to go faster. But let me hand it over to Bill.
Yes. I think, Greg, that's exactly right. At this point, as we look out on the horizon, the pipeline for plus or minus the next 2 years is pretty baked, and we're working on projects for '28, '29 and '30 right now. And the great news is that the success that we've seen in the market is paying off in terms of our opportunities. As we're out in the market having conversations with developers and other parties within the real estate world, we've seen more opportunities come to us. We've seen the cap rates come down on our buildings, which improve the overall economics that are available and improve our returns. And so again, I come back to the fact that we've made a series of long-term investments over the last few years that are paying off. And the investments that we make today in a market like Texas, we're going to look back 5 years from now and be really happy that we made them. And as we look forward to the club pipeline, again, as we look a decade out now, we're going to be really proud of the footprint that we have built. So more to come in terms of the acceleration of the growth, but we feel like we're in a really great spot to continue to deliver value to the members and the communities that depend on us.
We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.