Ladies and gentlemen, thank you for standing by, welcome to the BJ's Wholesale Club Q2 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance please press star zero. I would now like to hand the conference over to your speaker today, Faten Freiha. Thank you. Please go ahead. Good morning, everyone. Thank you for joining BJ's Wholesale Club second quarter fiscal 2021 earnings conference call. Bob Eddy, President and Chief Executive Officer, Laura Felice, Chief Financial Officer, and Bill Werner, Executive Vice President, Strategy and Development, are on the call. Please remember that during this call, we may make forward-looking statements within the meaning of the federal securities laws. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call. Please see the Risk Factors sections of our most recent Form 10-K and Form 10-Q filed with the SEC for a description of those risks and uncertainties. Finally, please note that on today's call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release posted on the investors section of our website for a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, I'll turn the call over to Bob. Good morning, and thank you for joining us. The second quarter was another impressive quarter for our company. I'd like to take this opportunity to thank our team throughout the chain for their execution and dedication during a dynamic and challenging period. Our stance on safety has not changed. Our highest priority continues to be the safety and wellbeing of our team members and members. As a result, we have tightened our COVID protocols around the chain in response to the resurgence of the virus, including the introduction of a vaccine mandate for our home office and field support teams. We will continue to operate in an agile manner with a focus on doing the right thing for our team members and members. When I reflect on our performance over the last year and a half, it is clear that our progress against our strategic priorities has enabled our success. We have invested into our team members, the value of our membership, our digital infrastructure, and physical footprint, all in the name of getting our flywheel going faster, and it is clear to me that we are making progress. In the first half of this year, we drove outstanding membership results and strong market share gains, particularly in our gasoline business. Furthermore, we elevated the value proposition to our team members through meaningful investments in wages and bonuses. Our team members are central to driving our strategy forward, and these investments will help us attract, retain, and motivate the best talents and help ensure that they can thrive in our business. During the second quarter, we delivered the following great results. Two-year stacked comp sales of 21%, adjusted EBITDA of $220 million, adjusted EPS of $0.82, free cash flow of $240 million, and as a result of those very strong cash flows, we ended the quarter with a leverage ratio of 0.8 x. Our team delivered these terrific results in the face of three external factors influencing our business, inflation, a fast-paced labor market, and inventory availability challenges. Let me talk a bit about how our team is managing each of those to continue to power the strong momentum we are seeing in our business. Let's start with inflation. We experienced meaningful inflation this quarter, and more is on the horizon. The increases are both deep and broad. They've impacted many categories, and some significantly. Managed appropriately, inflation can be good for our business. Historically, inflationary pressures have widened our price gaps relative to grocery, leading to market share gains and top-line growth. It does come at the price of investing in value in the initial days of cost increases, which will pressure margins as the inflation works its way through the industry. This is a trade-off we are willing to make, as value is paramount in our business. Our team has worked diligently to mitigate impact on our margins while investing in price where necessary to maintain outstanding results to our members. Next, labor challenges are impacting our industry like many others. For a long time, we have chased the labor market. Recently, we've chosen a different path, a path that calls for significant investment in our team, backed by our great financial performance, to ensure that we get ahead of market forces and better serve our growing membership. Specifically, we have made the largest increases in starting hourly wages in our history. In addition, we rewarded our club and distribution center team members this quarter with a one-time recognition bonus in appreciation of their continued hard work and commitment to serving our members. These investments were material to Q2, and we expect these investments to get larger as we go through the year. Our average hourly wage is now well above $15 per hour, and we will continue to invest in our teams so that we can recruit and retain top talent across our footprint. Finally, there are widespread challenges in the global supply chain. 90 days ago, the pressure was limited to certain general merchandise categories. Now many categories, some entirely domestic, like poultry, pet food, and juice, are having trouble meeting demand. We expect supply chain and sourcing challenges to continue for the foreseeable future. Our team's execution and ability to stay in stock at the height of the pandemic last year demonstrates the strength of our capabilities and our capacity to thrive in challenging environments. We remain intently focused on executing our strategy, validated by the strength of our performance and centered around four pillars, growing and retaining members, delivering value with an optimized assortment, improving convenience with digital, and strategically expanding our footprint. Let me provide an update on each. Membership is the foundation of our business, and we continue to enhance the size and quality of our membership base. In Q2, we grew our membership by 3% relative to the prior year, and 14% compared to 2019. Our growth this quarter was driven primarily by record renewals. We continue to experience the highest rates of renewal on the largest class of members we have ever attracted. Our first-year renewal rate and on-time renewals are at historic levels. As we noted last quarter, we are intently focused on renewals this year because these renewing members are generally more valuable than an average new member. We're seeing both more timely renewal and incremental renewal. We continue to believe that we will finish the year with all-time high first-year renewal rates. As a reminder, although these renewal results continue to be strong, several factors could still influence the renewal rates we ultimately disclose at year-end, such as timing and behavior differences. Membership quality continues to improve. In prior quarters, we have reported higher tier penetration and Easy Renewal participation rates as evidence of increases in quality. Those same facts are present in this quarter. Higher tier penetration for the second quarter is at 33%, representing a 400 basis point improvement relative to the prior year. This group consists of our most loyal members with the strongest renewal rates and highest lifetime value. In addition, more than 74% of our members are now enrolled in Easy Renewal. As incremental evidence that the team continued to improve the value of our membership, we are seeing a notable improvement in MFI per member. Our MFI growth has outpaced member growth for the last two quarters, and that should continue in the back half. The progress we're making in membership in terms of size and quality has elevated the lifetime value of our members across the chain and will help power our future results. Assortment optimization remains key to continuing to deliver unbeatable value to our members. We remain focused on curating the best assortment of products and services to meet our members' evolving demands. Our goal is to simplify and expand into new high-demand categories. Last year, we were able to accelerate certain simplification initiatives, like expanding into better-for-you snacks, as we sold through existing center store grocery inventory at a high rate. This year, the inflationary environment has provided an impetus to simplify to ensure we can limit inflationary pressures while also allowing for the benefits of simplification, such as improved clarity of offering and the addition of new categories. Our plan is to drive these changes through various CPI initiatives. Our suppliers should note that we will be aggressive in this area in order to maintain great value for our members. Private label remains essential to providing great value to our members, to our assortment simplification initiatives, and to our category profit improvement efforts. We made great progress this quarter. Own brands penetration increased to 23% of merchandise sales, compared to 21% in the prior year. This increase was driven by strong growth in summer seasonal, recreation, and other home-related categories, as well as frozen, dairy, and perishables. We will continue to build on this progress and further expand our own brands portfolio over the long term, which will strengthen member loyalty, increase value, and improve our margins. Our services business is one of the important areas where we intend to grow our business along the lines of our club competitors. We have a tremendous opportunity to elevate the value of our membership and deliver growth by scaling and enhancing our core portfolio of services. This includes businesses such as optical, travel, home improvement, and cellular phones, where we offer our members outstanding value in the market, and the savings are easily comparable to the cost of a membership. Our focus in the near term is to scale these existing businesses to drive stronger top-line growth. For example, we've bolstered our optical services with telehealth capabilities, which are now live in 30 clubs. This will be a long-term build, and we expect services to be a meaningful source of growth to the top line and from a margin rate perspective. Let me touch briefly on our gasoline business, where we are seeing significant market share gains. Gallons in comp clubs were up 25% this quarter and are increasingly ahead of the market. Since gasoline is likely the best example of a key value item, price signs are on every corner, it's easy for us to show outstanding value. When we pair the gasoline business with the club, it drives tremendous loyalty. Members who shop us for gas renew at much higher rates, and their gasoline purchases keep BJ's top of mind for additional shopping trips in the club. We're very pleased with the performance of our gas business as we believe it drives robust member engagement. Our digital platforms continue to resonate with our members and allow us to offer convenient access to the tremendous value we provide every day. Our digitally enabled sales grew by 4% this quarter and over 300% on a stacked basis. Digital sales growth relative to the prior year was driven by strong growth in our BOPIC curbside offering. More than half of our BOPIC orders were delivered curbside this past quarter. Engagement among our members is most evident through the increased use of our app, which has been downloaded over 5 million times, and approximately a third of our members use it regularly. In addition, our app continues to receive industry-leading ratings. Digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. Finally, our plan to enable members to use EBT payment when shopping on BJs.com for ship to home, same-day delivery, in-club pickup, and curbside pickup remains on track. This capability is now live in nine states, and pending state approval, we expect digital EBT payments to become available in all additional eligible locations in the next few months. Our efforts to expand our footprint continue to progress. This quarter, we opened one new club in Seabrook, New Hampshire. While it's still very early, we are delighted with the initial membership response and sales trends. The remainder of our 2021 clubs are expected to open in the fourth quarter, including new locations in Port Charlotte, Florida, Commack, New York, Lansing, Michigan, and two clubs in Pittsburgh, Pennsylvania, which is a new market for us. We continue to expect to open as many as 10 or more new clubs in 2022. In addition, we expect to open nine gas stations this year, followed by 12 or more gas stations in 2022, which means 3/4 of our clubs will have gas stations by the end of 2022. This is a great example of continued investment into getting the flywheel going even faster, tying back to my comments earlier on gasoline driving membership. We are very excited about our expansion, and our confidence is underpinned by the strong performance we're seeing in new clubs, particularly in new markets where our brand is resonating. In our Michigan clubs and in Pensacola, Florida, first-year renewal rates are well above chain-wide averages. Overall, we are incredibly proud of our results. We capitalized on the current environment and delivered record results. Our performance exceeded our internal plans across all key metrics, increasing our confidence in the balance of this year. While there continues to be a tremendous amount of uncertainty, our ability to retain members and market share has been strong, and we continue to execute at the highest levels. The resurgence of the virus and resulting effects on plans to go back to work will likely keep food-at-home consumption high for longer. We also expect tailwinds from continued government assistance, such as the Child Tax Credit. Offsetting those tailwinds are uncertainty around inflation and inventory availability and the expected decreases in unemployment funding. When we mix all that together, our current view of the back half sales trend has improved from what we thought it would be at the end of Q1. This stronger outlook for sales will be offset by increasing expenses such as margin pressures from inflation and freight costs, along with considerable investments we are proud to make in our team and in their safety. While the impact and benefit of all these factors are far from clear, we do know that our business is extremely well-positioned and poised for further growth. Our better-than-expected results for the first half of this year continue to validate our strategy and execution. We remain confident that our membership trends, assortment initiatives, enhanced digital capabilities, and robust real estate pipeline will power a long-term algorithm that includes mid-single-digit top-line growth. Let me turn the call over to Laura to give a bit more color on our results and a view of the future. Laura? Thank you, Bob, Good morning, everyone. Let me start by thanking our team members in our clubs, distribution centers, and home office for their continued hard work in the midst of a sustained, challenging environment. We are excited to report another great quarter, anchored by strong performance and significant progress against our strategic priorities. Let me now turn to our results for the second quarter. Net sales for Q2 were $4.1 billion. Merchandise comp sales, which excludes sales of gasoline, reflected a + 21% two-year stacked comp and outpaced our internal expectations. Our performance exceeded our expectations for every month of the quarter, and we are very pleased with the results we are seeing across categories and geographies. Membership trends were strong throughout the quarter, and consumer spending habits as well as our market share gains exceeded our expectations. Digitally enabled sales grew by approximately 4% and 304% on a two-year stacked basis and drove about 4 percentage points of our 21% stacked merchandise comp. On a stacked basis, we saw robust growth across all of our digital channels, particularly in BOPIC and curbside pickup as well as same-day delivery. The nature of this growth is important because it's centered on the fulfillment methods where we have advantaged economics. As you know, we operate in a warehouse environment with a limited number of SKUs and a higher average ticket, enabling us to be more efficient. BOPIC and curbside sales tend to skew towards bigger baskets, and same-day delivery sales have the same margins as traditional sales in our clubs. As Bob noted, digitally engaged members have higher average baskets and make more trips per year than members who only shop in our clubs. As we have said before, generally, the more a member shops and spends, the more likely they are to renew. Comps in our grocery division were 21% stacked, reflecting a - 4% comp for the current quarter and a 25% comp in the prior year. On a two-year stacked basis, we saw robust growth across all divisions, particularly in grocery and perishables, where stacked comps were in the 23%-24% range. Despite the in-stock challenges we experienced in certain food and other household categories, the team delivered a strong performance, which demonstrates our continued relevance with our members. Our general merchandise and services division comps were 20% stacked, reflecting a - 2% comp for the current quarter and a 22% comp in the prior year. Our growth on a stacked basis was driven by strong sales in seasonal categories such as patio sets, apparel, and home-related categories such as furniture and consumer electronics. It's important to note that our general merchandise sales this quarter were impacted by inventory availability in certain seasonal categories. We saw strong growth across our services portfolio, where comp sales doubled relative to prior year. Although services currently represent a small portion of our business, we will continue to invest in scaling our core offerings and expect these investments to fuel future growth. In our gasoline business, we continue to see strong gallon growth and gain share. Gallons sold at comp clubs in the second quarter grew by approximately 25%, significantly outpacing overall market performance. While margins certainly contracted in the gasoline business relative to prior year, the performance of the business exceeded our internal plans. Membership fee, or MFI, grew by 8% in the second quarter to $89 million. Our MFI growth was driven primarily by strong member renewals and improved membership mix. Our renewal rates for first-year members and on-time renewals remain at historic highs. We are pleased with the progress we're making in improving the quality of our membership base. Higher-tier members now represent 33% of members, and more than 74% of our members are enrolled in Easy Renewal. Let's now move to gross margins. Excluding the gasoline business, our merchandise gross margin rate increased by 30 basis points, driven by improved private label penetration and mix of our general merchandise sales. These tailwinds were partially offset by investment in price as well as increases in freight and distribution costs. SG&A expenses for the quarter were $598 million compared to $591 million in the prior year. This quarter, we incurred approximately $8 million of expense related to the team member recognition bonus that Bob mentioned earlier. As you may recall, we incurred approximately $48 million of COVID costs in the prior year period. We have seen some deleverage in our SG&A line this quarter as we elected to invest in our business and team members. As Bob said, our team members are central to driving our strategy forward, and it is important for us to attract and retain top talent across our footprint. Our adjusted EBITDA grew by 2% to $220 million and reflects continued margin expansion and disciplined cost management. Interest expense for the quarter was $16 million and included a $3 million non-cash charge related to debt paydown. Adjusted net income in the second quarter was $113 million, or $0.82 per share, and reflected a 7% year-on-year growth on a per-share basis. Our earnings growth highlights the strength of our business and reduced interest expense as we continue to enhance our balance sheet. As a result of our solid performance, we generated $240 million of free cash flow during the quarter for a total of $431 million year to date. In addition, we paid down approximately $360 million in debt and bought back $64 million worth of shares in the first half of this year. We ended the quarter with a 0.8 x funded leverage. With this reduced level of debt, we have further increased our flexibility to continue to invest in the future. Let me now touch on our outlook for this year and provide some perspective on our long-term algorithm. As we've said in our press release, we will continue to refrain from providing formal guidance as 2021 remains difficult to forecast given the number of uncertainties, most notably the timing and size of the shift in consumer behavior away from food at home. That being said, I will share with you our best high-level view as of today. Looking at our top line and based on our current assumptions, we would expect comps for the remainder of the fiscal year to be in the negative low to mid single digits, implying a two-year stacked comp in the mid to high teens for the full year. Our assumptions are primarily based on strong membership results and the improving trend in food-at-home consumption when compared to our expectations at the end of the first quarter. From a membership standpoint, we continue to expect total member count to be flat or better during 2021, and for MFI growth to outpace member growth. MFI growth for the year is slightly ahead of our prior expectations due to stronger than expected renewals and higher tier penetration. We expect continued investments in price as well as significant increases in freight and distribution, labor and safety, and sanitation expenses. Freight and distribution costs have been increasing throughout the year, and we expect that they will be worth an incremental $10 million of margin pressure in the second half of the year. We anticipate our investments in labor and incremental COVID related safety and sanitation costs will drive an incremental SG&A burden of approximately $30 million. These costs could escalate if market conditions change. Know that we will always do our best to keep our team members safe, and we will continue to invest in our business and team, particularly in membership, digital, and geographic expansion. While external factors are impacting our near-term results, it's important to reinforce that our performance for 2021 continues to be ahead of any historical plans, and that our confidence in the long-term health of our business remains very strong. The next few quarters will likely be noisy as the trajectory of the pandemic remains uncertain. We are confident that through our enhanced membership trends, our improvements in digital, and our large real estate pipeline, and our assortment initiatives will lead to a much better comp algorithm that includes mid-single-digit top-line growth in the future. At this point, I'll hand it back to Bob to close. Bob? Thanks, Laura. I'd like to leave you with a few key messages. Our financial, operational, and strategic performance continues to be strong. Our world-class team is executing at the highest levels. Membership trends, including growth, quality of members, and renewals, are exceeding our elevated expectations. Our growing relevant and robust digital business continues to be ahead of peers on a scale adjusted basis and is resonating with our members. Our accelerated geographic expansion efforts remain on track and will fuel future comp growth. Our brand is resonating in new markets. We continue to see strong membership growth and renewals. We generated nearly $1 billion in free cash flow over the last five quarters. We've transformed our balance sheet and will use the resulting flexibility to invest in making our flywheel spin as fast as possible. I'm incredibly proud of our team and thankful for the opportunity to lead them. Now I'll turn the call back over to the operator to begin the Q&A session. At this time, ladies and gentlemen, that is star, the new number one for any audio questions. Our first question comes from the line of Edward Kelly with Wells Fargo. Hi, good morning. Morning. Thanks for taking the question. Bob, I wanted to just go back to some of the comments around costs. On the food price inflation side, just curious, what level of inflation you're seeing now, what the expectation is in the back half. The market seems like from what we can tell from others, kind of accommodative to cost pass-through. I'm just kind of curious as to how you're thinking about managing the business through all that. You have some control over what you're going to pass through. How much a level of pressure is sort of acceptable from a gross margin standpoint as you think about pass-through of inflation? Yeah. Thanks. Good morning, Ed. Listen, as I said in the prepared remarks, inflation's been a big topic for us. I'm sure it's been a big topic for everybody in our business. We've seen probably the most aggressive inflation we've seen in my career here at the company. It's a process we're managing with an extensive team and toolkit, to really make sure that we continue to provide outstanding value to our members all the time. That toolkit includes simply negotiating with our suppliers, changing pack sizes, cutting items, buying in inventory ahead of cost increases. All sorts of different things we can do to both provide that outstanding value and manage the margin rate that we put on our financial statements. I do think this is going to continue. We certainly have quite a view into the future from our suppliers, in the cost increase environments. Our team has done a really impressive job managing it as we've gone through the first half of this year here. In the second quarter, it was worth about 0.5 point of comp, so it wasn't truly enormous, but it was certainly big. As we go forward, we'll continue to use that entire toolkit to manage it. We'll continue to invest in price as value is the thing that we care most about. Look, our business is running very well, and we've got all the freedom in the world to invest into the biggest class of members we've ever had. Keeping those members happy is my first objective. We'll continue to manage it, we'll continue to invest, and hopefully continue to exceed our members' expectations. Okay. Just to follow up on the labor side and particularly the $30 million in the back half. You had $8 million in Q2, which seemed a bit more sort of like one-time in bonus. I'm kind of curious as to how much of the $30 million is more one-time-ish versus what we should carry forward into the future. It's a great question. Most of that $30 million is carry forward into the future. As I said in the script, we've chased the market for a while trying to manage what we pay our team in the context of our greater P&L. I get paid to run the business for the long term. I believe you're only as strong as your team, and we need the best team on the field every day. Wages are a big component of that, and this year has been an incredibly dynamic labor market for us as every industry really is suffering some sort of a labor shortage to one degree or another. Maintaining the team we have, we're continuing to recruit great people, continuing to service our members is really what I'm after here, and we will continue to invest in our team going forward. As one of my competitors talked about yesterday, I don't think this is going to change. I think labor pressure will continue, wage pressure will continue, and we'll continue to invest to put the best team on the field that we can. Great. Thank you. Yep. Thanks, Ed. Your next question will come from the line of Robby Ohmes with BofA Securities. Hey, good morning. Thanks, Bob. Two questions. One would be, can we talk a little more about the inventory availability in general merchandise and just how you guys are thinking about that as you set up for holiday this year? Is there anything we should think about that as we try and figure out our models? Second, how are you seeing grocery market share play out for you right now? What's your thinking on grocery market share for the back half? Yeah. Good morning, Robby. Let me take them in reverse order. Grocery has been pretty strong for us. If you look at the business through our old four-division lens, grocery led our business, was positive comp for the quarter, and that's indicative of the strength of that business. It's led by a great team member here, and the team put together a wonderful quarter. I think that strength continues. I think we've been able to maintain, if not grow market share in key categories in grocery, and that's putting the right stuff on the shelf at the right price and giving our members a great experience. That business is running very well. Inventory availability has been a challenge. It's a daily battle. Some categories are hand to mouth. I mentioned a few of them. Some of them are continuing problems like consumer electronics and apparel, things coming out of China. Some of them are new. We're doing our best and doing a great job keeping in stock for our members. It's uncertain, right? We are, like every one of our competitors, on allocation in certain key categories like consumer electronics. We're not receiving all the inventory that we're ordering in some of those categories. We have reduced visibility, meaning the supplier doesn't commit to shipping us on the timeframe that we normally get notice of shipments. It's a bit of a daily battle from that standpoint. Again, our team, throughout the last 18 months, has done yeoman's work really keeping in stock at the level or better than our key competitors. I don't see why that would change heading into holiday. I'm sure we're doing the same things that our competitors are doing. We're accelerating shipments, bringing holiday stuff in earlier. We set back to school earlier. We're trying to really think forward into next year because the supply crunch, I think will continue for the foreseeable future. We'll just manage it as aggressively and as forward-leaning as we can and keep everybody up to date as we go. That's really helpful. Just one last quick question. Any change in your customers' behavior due to the variant that you've seen so far? Yes, I would say slightly. Certainly, the growth throughout the year has been driven by the great performance in membership that we've seen and the great performance we've seen in digital and in brick and mortar. You can see more so the impact of stimulus dollars in the business, so the Child Tax Credit coming in, for instance, and EBT flows. I would argue there's a bit of a change from a Delta variant perspective going on, but I wouldn't say it's the material thing driving the business. I think it's great execution, great membership results, and the other factors that I mentioned. Got you. Really helpful. Thanks, Bob. Sure. Your next question will come from the line of Christopher Horvers with JP Morgan. Thanks, good morning. Maybe starting at a high level. If you look at the first half of this year, your operating margin was roughly flattish with a bunch of puts and takes on the gross and the SG&A side. Is the message that you're saying going forward is, look, you can think about operating margins being relatively flattish, plus or minus, versus last year, and this is really about driving that membership base, driving the top line, and flowing through those dollars to the bottom line? Yeah. Good morning, Christopher. That's precisely what we're saying. We're encouraged by the track of the business. The top line, obviously, is outperforming our plans. Actually, every metric we really care about and look at outperformed during Q2. We're pretty bullish on what we see versus where we were in Q1. The business is becoming a bit more expensive to run. Part of that is COVID costs, but the big part of it is freight and labor. The freight stuff will be around for as long as the supply crunch is around, and the labor cost is really us taking the opportunity to invest in putting the best team on the field. That will continue, and as I said, probably get more expensive as we go. We think that the sales trend is improving, and we think the bottom line trend may be improving a little bit less because we are choosing to make investments in our team and choosing to make investments in the long-term health of the business through membership and value. It makes total sense, and the right thing for the long term. As you think about, I think the other part of the story is that if you look at your balance sheet, obviously, you continue to grow EBITDA, you continue to deleverage the balance sheet. You stepped up the buyback a bit here in the second quarter. Can you just talk long term about capital allocation? Obviously, we understand you're accelerating unit growth and CapEx and reinvesting in the business is the first priority. Talk about the share repurchase outlook, and also, is there a point where you start to compound to the balance sheet, maybe add a little bit of leverage, do the sort of classic AutoZone strategy in terms of really leveraging that EBITDA dollar growth to be able to enhance shareholder returns? Sure. Maybe I'll make some comments, and then Laura can chime in. As you said, our job is to grow the company, that's our first place to put cash. You'll see, you heard us talk about in the script, continuing to grow real estate and gas stations. That's an example of allocating cash towards growth. You'll probably see us do some more remodels and things from that standpoint, too. We will use that cash to invest in the business, whether it be real estate, whether it's digital, whether it's membership, whether it's in our team. All of those things come before buyback or anything else. With that said, I think Q2 provides a little bit of a hint as to what we plan to do from a cash flow perspective. We significantly amped up the buyback during the quarter, and this is an active topic with our team and with our board on how we allocate capital for the future. Maybe Laura can tag onto anything there. I think the only thing I'd add in there is you got it right on the buyback. You'll continue to see us lean into that as we head into the future after we've invested meaningfully into the business. Like Bob said, that's certainly the priority and will be the priority going forward. I'd expect that in the back half, we'll have a clearer plan on what we're doing long term. Certainly, when we have that, we'll be able to share it broader. To put a fine point to an obvious point, we're ramping the buyback up because we believe the stock is undervalued. Given our view of the strength of the company, the flywheel that we have going now, and what we think will happen in the future, we very much believe that this is a different company than it was pre-pandemic, and we will come out much stronger. That drives our desire to grow even further and to buy back shares along the way. Thanks very much. Best of luck. Thanks, Chris. Thanks. The next question will come from the line of Chuck Grom with Gordon Haskett. Hey, good morning, guys. This is John Parke on for Chuck. It seems like you guys are very pleased with the renewal rates for the COVID cohort, if you will. I guess, can you talk about what you're seeing from the frequency and spend standpoint from these new members? Sure. We are absolutely pleased with what we're seeing in membership. The strength that we saw in Q1 has continued into Q2 in terms of the size and quality of the membership, as we talked about. We planned to be a little bit negative in member count, and then towards the end of the year to get back to flat or maybe even grow a little. We're tracking ahead of that at this point as total members were flat here in Q2, and hopefully we can continue to grow them throughout the rest of the year, particularly as the new clubs come on in Q4. The quality's going up, as I said, with premium tier up 400 basis points and Easy Renewal at 74%, and MFI per member growing nicely. We're really seeing good stuff from a membership perspective. That causes us to be bullish. When you take that leap into what the members are doing, we see strong spending habits across the cohorts, and including the COVID cohort. We believe we're on track for all-time high renewal rates in first years. We've seen strong membership results, as I said. All of the cohorts are acting very well. They're visiting us often. They're spending a lot when they show up. They're buying a whole lot more gasoline, as we talked about a little bit in the script. They're interacting with our digital properties in a very strong way as well. We're encouraged by what we see in our members' behavior. That's perfect. Just kind of switching gears a little bit, I guess, can you talk about the ramp in the drive-up business or the curbside business? I guess at this point, what percent of your members do you think have actually tried some of these new services? Look, it's very encouraging, the adoption we've seen here. 50% of our BOPIC orders were delivered curbside this quarter. Remember, this is a service we launched in Q2 last year, sort of on a shoestring, into the teeth of the pandemic. Really taking advantage of perfecting that as we've gone through the last year, and really starting to advertise it a little bit to our members. We're seeing a huge portion of our members try it and reuse it once they've done it. We're seeing our teams execute very well when they do it. We've set pretty robust service levels for how fast we should get an order to somebody's car, and our team members are doing a wonderful job servicing our members in that respect. You know how retail works. Every time you give somebody a great experience, they come back and do it again. We're encouraged by what we see. Those members that interact with us digitally, and curbside is no different, are our best members. They are the most engaged. They come to see us more often. Their baskets are bigger. We're very pleased with what we're seeing from a digital perspective and particularly on curbside. Awesome. Best of luck, guys. Thank you, John. Your next question will come from the line of Rupesh Parikh with Oppenheimer. Good morning. Thanks for taking my question. I guess, Laura, just starting out with some of your commentary just on, I guess, merchandise margins and SG&A, is there any more clarity you can provide how to think about merchandise margin in the back half versus what you saw in Q2? On SG&A, I think in the first [audio distortion], your SG&A growth on a two-year basis was, exceed 17%. Is there a way to frame how to think about for that for the back half versus what we saw in the first half? Yes. Good morning, thanks for your question. From a merch margin standpoint, I think we talked a little bit about that. There's a lot of uncertainty in the back half, we will continue to do all the great things that the team's already done to manage it through the first half. We expect that they'll continue to do that. There will be some pressure on it, which we called out in the prepared remarks from freight and distribution costs continuing to rise. That will be real, but we will continue to do our best to manage it accordingly. From an SG&A standpoint, I think we framed that in the prepared remarks as well. We expect a drag on SG&A from the investments that we've made in our team members. We think those are really important. We quantified that as about $30 million in the back half, and that will certainly continue into next year. We'll have a full run rate on that going forward. Again, I think Bob already talked to that. We think that's really important for our business and meaningful. Despite the drag, we'll continue to do everything we can to manage SG&A accordingly going forward. Great. Maybe just one follow-up question. Just on store growth, just given the cost pressures that you're seeing and some of the, I think, labor availability challenges out there, does that at all impact the pace of store growth that you guys are thinking about going forward? The simple answer to that's no. It's certainly something we all think about as a team on a daily basis. It's core to our business, but we don't think it will have any impact on our store growth going forward. Yeah. Since you brought it up, Rupesh, maybe I'll ask Bill to give some comments. We're very pleased with what's going on from a real estate perspective, and so it's something we'd like to highlight. Yeah. Hey, Rupesh. Bill. We've had great results as we've leaned into the new clubs. The latest here with Seabrook and then the maturation of our Newburgh, Long Island City clubs have been really great so far. We've talked to analysts, investors a bunch about this. Our new club rollout is a 24-month window where we're making decisions today for 2023 and beyond. We'll continue to step on the gas in terms of both existing and new markets as we look to grow the footprint. Any near-term transitory pressures don't really play into how we think about the long term. We're bullish on the growth, we're bullish on the store performance, and we'll continue to lean in. Great. Thank you. Your next question will come from the line of Chuck Cerankosky with Northcoast Research. Good morning, everyone. Nice quarter. Thanks, Chuck. Bob, when you're looking at these inflationary pressures, and I guess I put them in three buckets, one from the suppliers, wage inflation, and then supplier logistics inflation. How do you think about it in terms of passing it through and the timing thereof? Yeah, it's a good question, Chuck. I guess I'll tell you what I tell the team, and that's that we need to play to win. That means being as aggressive as we can with our suppliers and battling for inventory, battling against inflation. With our team members, it's investing and providing them the great environment that we do every day to survive and thrive. We will do things that are perhaps detrimental in the short term to win in the long term. Your question on what we do with inflationary price increases is a good one. Inflation isn't a bad thing for our company or for our industry. Typically, it has allowed us to widen our price gaps against grocery. It does take some time for that to sort its way out. Our primary product that we sell isn't paper towels or perishable food, it's memberships. The key thing about selling memberships is you need to show great value. We try to do that every single day. In an inflationary environment, that means we probably lag pricing, particularly on key value items, as we go. That was true in 2008, last time we had an inflationary environment, and it's true today. We will always lag key value items just to make sure that our members see that great value every single day. That's probably tough from a margin rate perspective in the near term. It's great for us in the long term, we'll continue to do that. We can pick and choose to the core of your question, right? We don't have to invest at the same rate on every product or every category. Our merchants did a great job this quarter balancing that as you saw merchandise margin rate growth, lots of stuff in there. Inflation was probably a net drag to it. There's 1,000 different stories in there from product to product and category to category. We invest where we think it's really important to show great value in hero categories and fast-moving items and super key value items. We don't invest as much where we don't think it's as important. We'll continue to do the right thing for our members and our team members as we go forward. Thank you. Sure. Thanks, Chuck. Your next question will come from the line of Paul with Citigroup. Hey, everyone. This is Brandon Cheatham on for Paul. Thanks for taking our question. I just want to follow up on that. As you look at investing in price, is that really just to kind of smooth out any shock to your customer, or do you look actively at price gaps and competitor pricing and trying to make sure that that is maintained at a certain level before you would allocate any price increases? Yeah. Thanks, Brandon. We spend a ton of time and energy tracking what our competitors do. Just like I would expect that they do, we spend a lot of time in our competitors' stores. We spend a lot of time with data, looking at what the industry is doing as a whole. We monitor our price gaps every day, every week, every month. We have something on the order of 50,000 price checks a week. It's a pretty robust data set that we spend a lot of time analyzing and figuring out what to do. In an inflationary environment, that becomes more important. We've got enhanced surveillance of what's going on out there right now to make sure that we're doing the right thing for our members and the right thing for our business. As I said in response to Chuck's question, every product is not the same, right? We would lag pricing longer on a key value item like bananas or bottled water, and not lag pricing as long on other things that aren't as key. Everything has its own story. It's all anchored in providing outstanding value every day so that our members are happy with us. Got it. Just one more from me. Can you talk about product mix? Just wondering about the puts and takes there. Is private label taking share and outpacing the store as a whole, or is it driven by new product launches and new categories? I'm just wondering, kind of where do you think you are in that progression? Yeah. I would say we're in the middle innings from a private label perspective, and it's one of the things I've talked to the team about playing to win on as well. We've been pretty judicious about how we've grown private label in the past because although it's probably the best thing for the business in terms of loyalty and margins, it does come with a bit of comp pressure when you trade somebody from a branded good to a private label good. In the past, when we were comping in the low singles, we were pretty judicious about that comp knock and trying to grow penetration of private label while not penalizing comps all that much. I've challenged the team to rethink that a little bit, given the strength of our business because we're strong today and private label can help us be strong tomorrow. We saw both of the things that you referenced during this past quarter, meaning improving penetrations in existing categories and products and launches of new products. That will continue. Our goal is to get private label penetration to 30% or better. That will take a few years to do so. It's very important for us in terms of showing value to our members, which again, is paramount, and driving margins and loyalty growing long term. Yeah. It'd be a comp knock, but overall improve profitability, right? Totally. Absolutely right. That's what I mean. Yeah. It's a little bit of a comp pressure when you trade somebody from branded to private label, but we get on the order of 1,000 basis points more margin. Okay. Thanks. That's helpful. Good luck. Thank you. Your next question will come from the line of Simeon Gutman with Morgan Stanley. Hey, guys. This is Michael Kessler on for Simeon. Thanks for squeezing us in here. My first question, I wanted to ask about the first year renewal rates. You mentioned they're at historic levels. Can you give us a sense of, I guess, the extent of how much higher they are than historic levels? As we've moved now several months into the kind of COVID cohort, how that's trended as more and more of those first year members that have joined since COVID, have elected to renew or not to renew? Hey, Michael. It's a great question. As I said earlier, we're very pleased with our membership metrics, including the first year renewal rates. As we talked about it in the first quarter, it was very early into the renewal of the COVID cohort. We are much farther through that today than we were at that point. We've got a much better data set to think about. In Q1, we had seen the best renewal rates that we'd ever seen on any cohort, never mind a first year cohort, as large as it was. We were early on and trying to unbundle whether it was truly incremental or just more on time, right? We've got 25 or 30 years of membership renewal rate curves. This one was running higher. We didn't know if it would come back towards the rest of them when there was a little bit more water under the bridge. That's in fact what we've seen. People are shopping us more frequently. That typically drives more on time renewal, that's exactly what we've seen. That's great. Obviously, it gets membership cash in the door a little faster. More importantly, it gets people shopping and engaged a little bit more. We're seeing incremental renewal. The curve for this COVID cohort has stayed higher than previous first year cohorts. That's obviously wonderful as well. I don't want to get into how much higher, because we still have a few more months to go to totally age through that. Again, we are on track for the highest first year renewal rates we've ever seen. Okay, great. That is helpful. My follow-up on margins and the outlook there, this is maybe the second year in a row that your margins are going to be over a point higher than the prior several years, which is a real step change given your margin profile. I guess, given the different inflationary pressures that you're facing in the business, I guess, how much better do sales need to be, or how much do sales need to be retained for your margin in the kind of a normalized post-COVID world to remain higher than what it was pre-COVID? Is that something you're expecting to see or managing to, in any sense? Thank you. Yeah. You're right. The business has gotten more profitable over time, and that's because it has scaled so much in the past two years in particular. Taking an even broader view, the changes that we've made in gross margin, the judiciousness with which we spend SG&A dollars over the last five, six, or seven years has really grown profitability, too. I think the next few periods will be noisy, as we've talked about. We don't have a perfect view on what's going to happen. I do think you can take the simple thought that the more volume we throw through the business, the better off we are. While the next few periods might be a bit noisy, we do expect the new economic algorithm that we have sort of post-COVID is higher sales, and that will drive higher profitability, particularly if we buy back more shares. We're bullish on the long-term state of the business and on the top line and the bottom line. Great. Thank you. At this time, there is no more time allotted for questions. Do we have any closing remarks, Mr. Eddy? No. Christy, thank you for hosting. Everybody, thank you for listening. We appreciate your time and interest and support of our company. We finished up a great Q2 and looking forward to the future. We will speak shortly in Q3. Thank you. Ladies and gentlemen, thank you for participating in today's BJ's Wholesale Club Q2 2021 earnings conference call. At this time, you may disconnect.